-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Rd9ZzMat8QrHbahaN3ZuF5jWl2XiMFASkVKZvy48ykEBlqW0PW3FEUjzNuVFIdXR 5bBuKmxYZpRPiuDq8ulb/A== /in/edgar/work/0000893220-00-001122/0000893220-00-001122.txt : 20001011 0000893220-00-001122.hdr.sgml : 20001011 ACCESSION NUMBER: 0000893220-00-001122 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20001010 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CHROMAVISION MEDICAL SYSTEMS INC CENTRAL INDEX KEY: 0001038223 STANDARD INDUSTRIAL CLASSIFICATION: [3826 ] IRS NUMBER: 752649072 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-53093 FILM NUMBER: 736646 BUSINESS ADDRESS: STREET 1: 33171 PASEO CORVEZA CITY: SAN JUAN CAPISTRANO STATE: CA ZIP: 92675 BUSINESS PHONE: 9494433355 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SAFEGUARD SCIENTIFICS INC ET AL CENTRAL INDEX KEY: 0000086115 STANDARD INDUSTRIAL CLASSIFICATION: [5045 ] IRS NUMBER: 231609753 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 435 DEVON PARK DR STREET 2: 800 THE SAFEGUARD BLDG CITY: WAYNE STATE: PA ZIP: 19087 BUSINESS PHONE: 6102930600 FORMER COMPANY: FORMER CONFORMED NAME: SAFEGUARD INDUSTRIES INC DATE OF NAME CHANGE: 19810525 FORMER COMPANY: FORMER CONFORMED NAME: SAFEGUARD CORP DATE OF NAME CHANGE: 19690521 SC 13D 1 w41159sc13d.txt SCHEDULE 13D CHROMAVISION MEDICAL SYSTEMS, INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO___________)* ChromaVision Medical Systems, Inc. ---------------------------------- (Name of Issuer) Common Stock, $0.01 Par Value Per Share --------------------------------------- (Title of Class of Securities) 17111P 10 4 ------------ (CUSIP Number) N. Jeffrey Klauder, Esq. 800 The Safeguard Building, 435 Devon Park Drive Wayne, PA 19087-1945 (610) 293-0600 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) September 28, 2000 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box / /. Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent. (continued on following pages) The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter the disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") or otherwise subject to the liabilities of that section of the Exchange Act but shall be subject to all other provisions of the Exchange Act. 2
CUSIP No. 17111P 10 4 1 NAME OF REPORTING PERSON Safeguard Scientifics, Inc. S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 23-1609753 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / / (b) / / 3 SEC USE ONLY 4 SOURCE OF FUNDS WC 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) / / 6 CITIZENSHIP OR PLACE OF ORGANIZATION Pennsylvania
NUMBER OF 7 SOLE VOTING POWER SHARES -0- BENEFICIALLY OWNED BY 8 SHARED VOTING POWER EACH 7,197,324 REPORTING PERSON WITH 9 SOLE DISPOSITIVE POWER -0- 10 SHARED DISPOSITIVE POWER 7,197,324
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 7,197,324 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* / x / 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 35.78% 14 TYPE OF REPORTING PERSON CO
* Excludes an aggregate of 555,780 shares of common stock held by certain executive officers and directors of Safeguard Scientifics, Inc. and 501(c)(3) foundations, trusts and limited partnerships that are either controlled by them or over which they exercise shared voting or dispositive power. Safeguard Scientifics, Inc. disclaims beneficial ownership of such shares. 3
CUSIP No. 17111P 10 4 1 NAME OF REPORTING PERSON Safeguard Delaware, Inc. S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 52-2081181 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / / (b) / / 3 SEC USE ONLY 4 SOURCE OF FUNDS WC 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) / / 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
NUMBER OF 7 SOLE VOTING POWER SHARES -0- BENEFICIALLY OWNED BY 8 SHARED VOTING POWER EACH 2,651,210 REPORTING PERSON 9 SOLE DISPOSITIVE POWER -0- 10 SHARED DISPOSITIVE POWER 2,651,210
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,651,210 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* / / 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13.18% 14 TYPE OF REPORTING PERSON CO
4
CUSIP No. 17111P 10 4 1 NAME OF REPORTING PERSON Safeguard Scientifics (Delaware), Inc. S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 51-0291171 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / / (b) / / 3 SEC USE ONLY 4 SOURCE OF FUNDS WC 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) / / 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
NUMBER OF 7 SOLE VOTING POWER SHARES -0- BENEFICIALLY OWNED BY 8 SHARED VOTING POWER EACH 3,438,721 REPORTING PERSON 9 SOLE DISPOSITIVE POWER -0- 10 SHARED DISPOSITIVE POWER 3,438,721
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,438,721 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* / / 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 17.13% 14 TYPE OF REPORTING PERSON CO
5
CUSIP No. 17111P 10 4 1 NAME OF REPORTING PERSON Safeguard 98 Capital, L.P. S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 52-2081182 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / / (b) / / 3 SEC USE ONLY 4 SOURCE OF FUNDS 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) / / 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
NUMBER OF 7 SOLE VOTING POWER SHARES -0- BENEFICIALLY OWNED BY 8 SHARED VOTING POWER EACH 324,612 REPORTING PERSON 9 SOLE DISPOSITIVE POWER -0- 10 SHARED DISPOSITIVE POWER 324,612
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON -0- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* / / 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 1.62% 14 TYPE OF REPORTING PERSON PN
6 ITEM 1. SECURITY AND ISSUER This statement on Schedule 13D relates to the common stock, $0.01 par value per share, of ChromaVision Medical Systems, Inc., a Delaware corporation (the "Company"). The principal executive offices of the Company are located at 33171 Paseo Cerveza, San Juan Capistrano, CA 92675-4824. According to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, the number of shares of the Company's common stock, $.01 par value, outstanding as of August 7, 2000,was 19,518,948. After taking into consideration the 560,293 additional shares issued in the transaction described in Item 3 below, the Reporting Persons calculated the Percent of Class based on 20,079,641 outstanding shares of the Company's common stock. ITEM 2. IDENTITY AND BACKGROUND (a) - (c) This Schedule 13D is being filed by Safeguard Scientifics, Inc. ("Safeguard"), Safeguard Delaware, Inc. ("SDI"), Safeguard Scientifics (Delaware), Inc. ("SSD"), and Safeguard 98 Capital L.P. ("Safeguard 98") (collectively, the "Reporting Persons" and, individually, a "Reporting Person"). Safeguard is a leader in developing and operating premier Internet Infrastructure companies. SSD and SDI are wholly owned subsidiaries of Safeguard. SDI is the general partner of Safeguard 98, a limited partnership organized under the laws of Delaware, and has sole voting and dispositive power over the securities owned by Safeguard 98. Set forth in Schedule I annexed hereto are the name, identity and background of each Reporting Person and set forth in Schedules II, III and IV is the information required by Item 2 of Schedule 13D about the identity and background of each Reporting Person's directors, executive officers and controlling persons, if any. (d) and (e) During the past five years, no Reporting Person nor, to the best of each Reporting Person's knowledge, no person named in Schedules II through IV to this Schedule 13D, has (i) been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which such person was or is subject to a judgment, decree or final order enjoining future violations of or prohibiting or mandating activity subject to federal or state securities laws or finding any violation with respect to such laws. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION Pursuant to the terms of the Stock Purchase Agreement dated as of September 28, 2000 among the Company, SDI and Incuvest, LLC, SDI acquired, for an aggregate purchase price of $5,000,000, 400,495 shares of common stock of the Company and a warrant to purchase 40,050 shares of common stock of the Company. The funds used in making such purchase came from the general working capital of Safeguard. ITEM 4. PURPOSE OF TRANSACTION The shares were acquired pursuant to the Stock Purchase Agreement described in Item 3 of this statement on Schedule 13D. Safeguard acquired the shares as part of its operating strategy to integrate its partner companies into a collaborative network that leverages its collective knowledge and resources. With the goal of holding its partner company interests for the long term, Safeguard uses these collective resources to actively develop the business strategies, operations and management teams of the Company and its other partner companies. Safeguard intends to review, from time to time, its interest in the Company's business, financial condition, results of operations and prospects, economic and industry conditions, as well as other developments and other acquisition opportunities. Based upon these considerations, Safeguard may seek to acquire additional shares of common stock of the Company on the open market or in privately negotiated transactions, or to dispose of all or a portion of its shares of the Company. In addition, Safeguard 98 has the option to convert debt of XL Vision, Inc. to Safeguard 98 into 324,612 shares of the Company currently owned by XL Vision, a corporation which Safeguard may be deemed to control, at an initial conversion price of $9.07 per share. Subject to XL Vision being able to have the shares registered in accordance with the registration rights granted to Safeguard 98, XL Vision may (i) require mandatory conversion of such debt as long as the closing price of a share of the Company's common stock has exceeded $18.14 for each of the previous 65 trading days or (ii) prepay up to $5 million of debt at a price equal to the lower of a 25% discount from the 7 rolling 20-day average closing price or a 20% discount from the closing price on the day before prepayment, as long as the 20-day average closing price and the last day closing price exceeds $18.14 per share. Safeguard has a strategic relationship with the Company and, accordingly, one representative of Safeguard is currently a member of the Board of Directors of the Company. Safeguard anticipates that this strategic relationship will continue. Other than as set forth in Item 3 or Item 4 of this statement on Schedule 13D, each Reporting Person currently has no plan or proposal which relates to, or may result in, any of the matters listed in Items 4(a) - (i) of Schedule 13D (although each Reporting Person reserves the right to develop such plans). ITEM 5. INTEREST IN SECURITIES OF THE ISSUER The table below sets forth the aggregate number of shares and percentage of the Company's outstanding shares beneficially owned by each Reporting Person. Except as otherwise noted, each person listed has sole voting and dispositive power over all shares listed opposite its name. Any of the aforementioned persons whose names do not appear in the table below do not, to the best of each Reporting Person's knowledge, beneficially own any shares of the Company. Unless otherwise indicated in Schedule V annexed hereto, no Reporting Person or director or executive officer of a Reporting Person listed on Schedules II through IV annexed hereto has consummated any transaction in the Company's shares during the past sixty days other than as set forth herein.
Beneficial Ownership -------------------- Number of Percentage Shares of Total(1) ------ ----------- Safeguard Scientifics, Inc. (2) 7,197,324 35.78% Safeguard Delaware, Inc. (3) 2,651,210 13.18% Safeguard Scientifics (Delaware), Inc. 3,438,721 17.13% Safeguard 98 Capital L.P. (4) 324,612 1.62%
(1) Calculations based upon 20,079,641 shares outstanding. (2) Includes the 2,286,439 shares and a warrant to purchase 40,050 shares beneficially owned by Safeguard Delaware, Inc., the 3,438,721 shares beneficially owned by Safeguard Scientifics (Delaware), Inc., and 1,432,114 shares beneficially owned by XL Vision, Inc., a corporation that Safeguard may be deemed to control. As noted in Item 4, Safeguard 98 has the option to convert debt of XL Vision to Safeguard 98 into 324,612 shares of the Company currently owned by XL Vision. Safeguard is the sole stockholder of each of SDI and SSD, and SDI is the general partner of Safeguard 98 and has sole voting and dispositive power over the securities owned by Safeguard 98. Safeguard and each of SDI and SSD have reported that Safeguard, together with each of SDI and SSD, respectively, have shared voting and dispositive power with respect to the shares beneficially owned by each of SDI and SSD, respectively. Excludes an aggregate of 555,780 shares of common stock held by certain executive officers and directors of Safeguard and 501(c)(3) foundations, trusts and limited partnerships that are either controlled by them or over which they exercise shared voting or dispositive power. Safeguard disclaims beneficial ownership of such shares. (3) Includes a warrant to purchase 40,050 shares and 324,612 shares of the Company which are owned by XL Vision and which may be acquired by Safeguard 98 upon the conversion of XL Vision debt. See Note 2. (4) Includes 324,612 shares of the Company which are owned by XL Vision and which may be acquired by Safeguard 98 upon the conversion of XL Vision debt. See Note 2. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER Other than as described in Item 4 of this statement on Schedule 13D, to each Reporting Person's knowledge, there are no contracts, arrangements, understandings or relationships (legal or otherwise) among the persons named in Item 2 and between such persons and any person with respect to any securities of the Company, including but not 8 limited to transfer or voting of any of the securities, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies. Item 7. MATERIAL TO BE FILED AS EXHIBITS
EXHIBIT NO. DESCRIPTION 99.1 Stock Purchase Agreement dated as of September 28, 2000 99.2 Registration Rights Agreement dated as of September 28, 2000 99.3 Note Purchase Agreement dated as of May 14, 1999
9 SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this schedule is true, complete and correct. Date: October 5, 2000 Safeguard Scientifics, Inc. By: /s/ N. Jeffrey Klauder ---------------------------------- N. Jeffrey Klauder Sr. Vice President Date: October 5, 2000 Safeguard Delaware, Inc. By: /s/ N. Jeffrey Klauder ---------------------------------- N. Jeffrey Klauder Vice President Date: October 5, 2000 Safeguard Scientifics (Delaware), Inc. By: /s/ N. Jeffrey Klauder ---------------------------------- N. Jeffrey Klauder Vice President Date: October 5, 2000 Safeguard 98 Capital L.P. By: Safeguard Delaware, Inc. Its: General Partner By: /s/ N. Jeffrey Klauder ---------------------------------- N. Jeffrey Klauder Vice President 10 SCHEDULE I 1. Safeguard Scientifics, Inc. Safeguard Scientifics, Inc., a Pennsylvania corporation ("Safeguard"), owns all of the outstanding capital stock of Safeguard Delaware, Inc., a Delaware corporation ("SDI"), and Safeguard Scientifics (Delaware), Inc., a Delaware corporation ("SSD"). Safeguard has an address at 800 The Safeguard Building, 435 Devon Park Drive, Wayne, PA 19087-1945. Safeguard is a leader in developing and operating premier Internet Infrastructure companies. See Schedule II with respect to the executive officers and directors of Safeguard as of the date of this Schedule 13D. 2. Safeguard Delaware, Inc. SDI is a wholly owned subsidiary of Safeguard. SDI is a holding company and has an office at 103 Springer Building, 3411 Silverside Road, P.O. Box 7048, Wilmington, DE 19803. SDI is the general partner of Safeguard 98 Capital L.P. ("Safeguard 98"), a Delaware limited partnership. Schedule III provides information about the executive officers and directors of SDI as of the date of this Schedule 13D. 3. Safeguard Scientifics (Delaware), Inc. SSD is a wholly owned subsidiary of Safeguard. SSD is a holding company and has an office at 103 Springer Building, 3411 Silverside Road, P.O. Box 7048, Wilmington, DE 19803. Schedule IV provides information about the executive officers and directors of SSD as of the date of this Schedule 13D. 4. Safeguard 98 Capital L.P. Safeguard 98 is a Delaware limited partnership with a principal place of business at 1013 Centre Road, Suite 350, Wilmington, DE 19095. 11 SCHEDULE II DIRECTORS AND EXECUTIVE OFFICERS OF SAFEGUARD SCIENTIFICS, INC. Set forth below are the name, business address, present principal occupation or employment of each director and executive officer of Safeguard Scientifics, Inc.
Name Present Principal Employment Business Address EXECUTIVE OFFICERS* Warren V. Musser Chairman of the Board and Chief Executive Officer Safeguard Scientifics, Inc. 800 The Safeguard Building 435 Devon Park Drive Wayne, PA 19087 Harry Wallaesa President and Chief Operating Officer Safeguard Scientifics, Inc. 800 The Safeguard Building 435 Devon Park Drive Wayne, PA 19087 Jerry L. Johnson Executive Vice President, Operations Safeguard Scientifics, Inc. 800 The Safeguard Building 435 Devon Park Drive Wayne, PA 19087 Stephen J. Andriole Sr. Vice President and Chief Technology Officer Safeguard Scientifics, Inc. 800 The Safeguard Building 435 Devon Park Drive Wayne, PA 19087 Gerald A. Blitstein Sr. Vice President and Chief Financial Officer Safeguard Scientifics, Inc. 800 The Safeguard Building 435 Devon Park Drive Wayne, PA 19087 Michael G. Bolton Sr. Vice President Safeguard Scientifics, Inc. 800 The Safeguard Building 435 Devon Park Drive Wayne, PA 19087 John K. Halvey Sr. Vice President Safeguard Scientifics, Inc. 800 The Safeguard Building 435 Devon Park Drive Wayne, PA 19087 N. Jeffrey Klauder Sr. Vice President Safeguard Scientifics, Inc. 800 The Safeguard Building 435 Devon Park Drive Wayne, PA 19087 Thomas C. Lynch Sr. Vice President Safeguard Scientifics, Inc. 800 The Safeguard Building 435 Devon Park Drive Wayne, PA 19087 James A. Ounsworth Sr. Vice President, General Counsel and Secretary Safeguard Scientifics, Inc. 800 The Safeguard Building 435 Devon Park Drive Wayne, PA 19087
2 12
DIRECTORS* Vincent G. Bell Jr. President and Chief Executive Officer, Verus Verus Corporation Corporation 5 Radnor Corporate Center Suite 520 Radnor, PA 19087 Walter W. Buckley III President & CEO, Internet Capital Group, Inc. Internet Capital Group 435 Devon Park Drive Building 600 Wayne, PA 19087 Robert A. Fox President, R.A.F. Industries R.A.F. Industries One Pitcairn Pl, Suite 2100 165 Township Line Road Jenkintown, PA 19046-3593 Robert E. Keith Jr. Managing Director of TL Ventures and President TL Ventures and CEO, Technology Leaders Management, Inc. 700 Building 435 Devon Park Drive Wayne, PA 19087 Michael Emmi Chairman, President and CEO, Systems & Computer Systems & Computer Technology Technology Corporation Corporation 4 Country View Road Malvern, PA 19355 Jack L. Messman President and CEO, Cambridge Technology Partners Cambridge Technology Partners (Massachusetts), Inc. 8 Cambridge Center Cambridge, MA 02142 Warren V. Musser (Same as above) (Same as above) Russell E. Palmer Chairman and CEO, The Palmer Group The Palmer Group 3600 Market Street Suite 530 Philadelphia, PA 19104 John W. Poduska Sr. Chairman of the Board, Advanced Visual Systems, Advanced Visual Systems, Inc. Inc. 300 Fifth Avenue Waltham, MA 02154 Heinz Schimmelbusch President, Safeguard International Group, Inc., Safeguard International Chairman, Allied Resource Corporation, Chairman, Group, Inc. Metallurg, Inc. and Managing Director, Safeguard 800 The Safeguard Building International Fund, L.P. 435 Devon Park Drive Wayne, PA 19087 Hubert J.P. Schoemaker Chairman of the Board and CEO, Neuronyx, Inc. Neuronyx, Inc. 200 Great Valley Parkway Malvern, PA 19355 Harry Wallaesa (Same as above) (Same as above) Carl J. Yankowski President and CEO, Palm Computing, Inc. Palm Computing, Inc. 5400 Bayfront Plaza, MS9208 Santa Clara, CA 95054
3 13 * All Executive Officers and Directors are U.S. citizens, except Heinz Schimmelbusch, who is a citizen of Austria, and Hubert J.P. Schoemaker, who is a citizen of the Netherlands. 4 14 SCHEDULE III DIRECTORS AND EXECUTIVE OFFICERS OF SAFEGUARD DELAWARE, INC. Set forth below are the name, business address, present principal occupation or employment of each director and executive officer of Safeguard Delaware, Inc.
Name Present Principal Employment Business Address EXECUTIVE OFFICERS* Harry Wallaesa President and CEO, Safeguard Scientifics, Inc., Safeguard Scientifics, Inc. 800 The Safeguard Building President , Safeguard Delaware, Inc. 435 Devon Park Drive Wayne, PA 19087 Jerry L. Johnson Executive Vice President, Operations, Safeguard Safeguard Scientifics, Inc. Scientifics, Inc. 800 The Safeguard Building 435 Devon Park Drive Vice President, Safeguard Delaware, Inc. Wayne, PA 19087 Stephen J. Andriole Sr. Vice President and Chief Technology Officer, Safeguard Scientifics, Inc. Safeguard Scientifics, Inc. 800 The Safeguard Building 435 Devon Park Drive Vice President, Safeguard Delaware, Inc. Wayne, PA 19087 Gerald A. Blitstein Sr. Vice President and CFO, Safeguard Safeguard Scientifics, Inc. Scientifics, Inc. 800 The Safeguard Building Vice President and Treasurer, Safeguard Delaware, 435 Devon Park Drive Inc. Wayne, PA 19087 Michael G. Bolton Sr. Vice President, Safeguard Scientifics, Inc. Safeguard Scientifics, Inc. 800 The Safeguard Building Vice President, Safeguard Delaware, Inc. 435 Devon Park Drive Wayne, PA 19087 John K. Halvey Sr. Vice President, Safeguard Scientifics, Inc. Safeguard Scientifics, Inc. 800 The Safeguard Building Vice President, Safeguard Delaware, Inc. 435 Devon Park Drive Wayne, PA 19087 N. Jeffrey Klauder Sr. Vice President Safeguard Scientifics, Inc. 800 The Safeguard Building Vice President and Assistant Secretary, Safeguard 435 Devon Park Drive Delaware, Inc. Wayne, PA 19087 James A. Ounsworth Sr. Vice President, General Counsel and Safeguard Scientifics, Inc. Secretary, Safeguard Scientifics, Inc. 800 The Safeguard Building 435 Devon Park Drive Vice President and Secretary, Safeguard Delaware, Wayne, PA 19087 Inc. DIRECTORS* James A. Ounsworth (Same as above) (Same as above)
* All Executive Officers and Directors are U.S. Citizens. 5 15 SCHEDULE IV DIRECTORS AND EXECUTIVE OFFICERS OF SAFEGUARD SCIENTIFICS (DELAWARE), INC. Set forth below are the name, business address, present principal occupation or employment of each director and executive officer of Safeguard Scientifics (Delaware), Inc.
Name Present Principal Employment Business Address EXECUTIVE OFFICERS* Harry Wallaesa President and CEO, Safeguard Scientifics, Inc., Safeguard Scientifics, Inc. 800 The Safeguard Building President , Safeguard Scientifics (Delaware), Inc. 435 Devon Park Drive Wayne, PA 19087 Jerry L. Johnson Executive Vice President, Operations, Safeguard Safeguard Scientifics, Inc. Scientifics, Inc. 800 The Safeguard Building 435 Devon Park Drive Vice President, Safeguard Scientifics (Delaware), Wayne, PA 19087 Inc. Stephen J. Andriole Sr. Vice President and Chief Technology Officer, Safeguard Scientifics, Inc. Safeguard Scientifics, Inc. 800 The Safeguard Building 435 Devon Park Drive Vice President, Safeguard Scientifics (Delaware), Wayne, PA 19087 Inc. Gerald A. Blitstein Sr. Vice President and CFO, Safeguard Safeguard Scientifics, Inc. Scientifics, Inc. 800 The Safeguard Building Vice President and Treasurer, Safeguard 435 Devon Park Drive Scientifics (Delaware), Inc. Wayne, PA 19087 Michael G. Bolton Sr. Vice President, Safeguard Scientifics, Inc. Safeguard Scientifics, Inc. 800 The Safeguard Building Vice President, Safeguard Scientifics (Delaware), 435 Devon Park Drive Inc. Wayne, PA 19087 John K. Halvey Sr. Vice President, Safeguard Scientifics, Inc. Safeguard Scientifics, Inc. 800 The Safeguard Building Vice President, Safeguard Scientifics (Delaware), 435 Devon Park Drive Inc. Wayne, PA 19087 N. Jeffrey Klauder Sr. Vice President Safeguard Scientifics, Inc. 800 The Safeguard Building Vice President and Assistant Secretary, Safeguard 435 Devon Park Drive Scientifics (Delaware), Inc. Wayne, PA 19087 James A. Ounsworth Sr. Vice President, General Counsel and Safeguard Scientifics, Inc. Secretary, Safeguard Scientifics, Inc. 800 The Safeguard Building 435 Devon Park Drive Vice President and Secretary, Safeguard Wayne, PA 19087 Scientifics (Delaware), Inc. DIRECTORS* James A. Ounsworth (Same as above) (Same as above)
* All Executive Officers and Directors are U.S. Citizens. 6 16 SCHEDULE V All of the following transactions were effected by the executive officers and directors of the Reporting Persons listed below, in brokers' transactions in the Nasdaq National Market.
Name Transaction Date Type of Transaction Shares Price Per Share - ---- ---------------- ------------------- ------ --------------- Vincent G. Bell Foundation 8/3/00 sale 1,000 $13.0156
7 17 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION 99.1 Stock Purchase Agreement dated as of September 28, 2000 99.2 Registration Rights Agreement dated as of September 28, 2000 99.3 Note Purchase Agreement dated as of May 14, 1999
8 EX-99.1 2 w41159ex99-1.txt STOCK PURCHASE AGREEMENT 1 EXHIBIT 99.1 STOCK PURCHASE AGREEMENT THIS AGREEMENT is made as of the 28th day of September, 2000, by and among ChromaVision Medical Systems, Inc. (the "Company"), a corporation organized under the laws of the State of Delaware, with its principal offices at 33171 Paseo Cerveza, San Juan Capistrano, California 92675-4824, and the purchasers whose names and addresses are set forth on the signature page hereof (the "Purchasers"). IN CONSIDERATION of the mutual covenants contained in this Agreement, the Company and the Purchasers agree as follows: SECTION 1. Authorization of Sale of the Shares. Subject to the terms and conditions of this Agreement, the Company has authorized the sale of the number of shares of common stock, par value $0.01 per share (the "Common Stock"), of the Company and warrants to purchase Common Stock in the amounts set forth in Section 2. SECTION 2. Agreement to Sell and Purchase the Shares and the Warrants. At the Closing (as defined in Section 3.1), the Company will sell to each Purchaser, severally and not jointly, and each Purchaser will buy from the Company, upon the terms and conditions hereinafter set forth, that number of shares of Common Stock (collectively, the "Initial Shares") determined by dividing the Aggregate Price set forth below opposite such Purchaser's name by a price per share of Common Stock equal to the average of the mean between the high and low trading prices per share of the Common Stock on the Nasdaq National Market for each of the twenty trading days immediately preceding the second trading day prior to the Closing. Each Purchaser will also be issued a Warrant in the form attached hereto as Exhibit A (collectively, the "Initial Warrants") to purchase 1/10 of the number of Initial Shares such Purchaser will purchase. "Trading day" is defined as any day that trading occurs in the Nasdaq National Market for the normal full trading day.
Purchaser Aggregate Price --------- --------------- Safeguard Delaware, Inc. $5,000,000 incuVest, LLC $2,000,000
At the Second Closing (as defined in Section 3.2), the Company will sell to incuVest LLC and incuVest will purchase from the Company, on the terms hereinafter set forth, that number of additional shares of Common Stock (the "Additional Shares") determined by dividing (a) $5,000,000 less the amount of interest that would be earned thereon at the rate of 8% per annum for the period between the Closing and the Second Closing 9 2 by (b) the same per share price used to determine the number of shares purchased at the Closing. IncuVest will also purchase at the Second Closing an additional Warrant in the form attached hereto as Exhibit A (the "Additional Warrant") to purchase 1/10 of the number of Additional Shares purchased at the Second Closing. If for any reason the Closing does not occur, the Second Closing shall not occur. The Initial Shares and the Additional Shares are referred to in this Agreement collectively as the "Shares," and the Initial Warrant and Additional Warrant are referred to in this Agreement collectively as the "Warrants." The shares of Common Stock issuable upon exercise of the Warrants are referred to in this Agreement collectively as the "Warrant Shares." SECTION 3 Closing and Second Closing 3.1. Delivery of the Initial Shares and the Initial Warrants at the Closing. The purchase and sale of the Initial Shares and the Initial Warrants shall occur at the offices of Gibson, Dunn & Crutcher LLP, 333 South Grand Avenue, Los Angeles, California 90071-3197 at 9:00 a.m. on September 28, 2000 or at such other time and place as the Company and the Purchasers mutually agree upon (which time and place are designated as the "Closing"). At the Closing, the Company shall deliver to the Purchasers (a) one or more stock certificates registered in the names of the Purchasers, or in such nominee name(s) as designated by the Purchasers in writing, representing the number of Initial Shares determined in accordance with Section 2 above and (b) the Initial Warrants registered in such names against delivery to the Company by each Purchaser of the aggregate price set forth opposite such Purchaser's name in Section 2 in cash paid by wire transfer of funds to the Company. The name(s) in which the stock certificates for the Shares and the Warrants are to be registered are set forth in the Stock Certificate Questionnaire attached hereto as part of Appendix I. 3.2 Delivery of Additional Shares and Additional Warrant at the Second Closing. The purchase and sale of the Additional Shares and the Additional Warrant shall occur at the offices of Gibson, Dunn & Crutcher LLP, 333 South Grand Avenue, Los Angeles, California 90071-3197 at 9:00 a.m. on December 29, 2000 or at such other time and place as the Company and incuVest LLC mutually agree upon (which time and place are designated as the "Second Closing"). At the Second Closing, the Company shall deliver to incuVest (a) one or more stock certificates registered in the name of incuVest, or in such nominee name(s) as designated by incuVest in writing, representing the number of Additional Shares determined in accordance with Section 2 above and (b) the Additional Warrant(s) registered in such names against delivery to the Company by incuVest of the $5,000,000 aggregate price in cash paid by wire transfer of funds to the Company. 10 3 SECTION 4. Representations, Warranties and Covenants of the Company. Except as set forth in the numbered paragraph of the Schedule of Exceptions delivered to all Purchasers concurrently with this Agreement that corresponds to the numbered section of this Section 4, the Company hereby represents and warrants to each of the Purchasers as follows: 4.1. Organization and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and the Company is qualified to do business as a foreign corporation in each jurisdiction in which qualification is required, except where failure to so qualify would not have a Material Adverse Effect (as defined herein) on the Company. The Company has three subsidiaries, ChromaVision International, Inc., a Delaware corporation, ChromaVision SARL, incorporated in France, and ChromaVision GmbH, incorporated in Germany (collectively, "Subsidiaries"). 4.2. Authorized Capital Stock. The capitalization of the Company immediately prior to the Closing consists of the following: (a) Common Stock. A total of 50,000,000 authorized shares of Common Stock, of which 19,520,181 shares are issued and outstanding. (b) Options, Warrants, Convertible Securities. Except for an aggregate of 3,200,000 shares of Common Stock reserved for issuance under the Company's 1996 Equity Compensation Plan, of which 197,081 shares have been issued and are included in the number of shares of issued and outstanding Common Stock set forth above and of which options to purchase 2,495,456 shares are outstanding and except for rights issuable pursuant to the Company's Stockholder Rights Plan, there are no outstanding options, warrants, rights (including conversion or preemptive rights), rights of first refusal or similar rights for the purchase or acquisition from the Company of any securities of the Company. (c) The issued and outstanding shares of the Company's Common Stock have been duly authorized and validly issued, are fully paid and nonassessable, have been issued in compliance with all federal and state securities laws and were not issued in violation of or subject to any preemptive rights or other rights to subscribe for or purchase securities. 4.3. Issuance, Sale and Delivery of the Shares. (a) The Shares have been duly authorized and, when issued, delivered and paid for in the manner set forth in this Agreement, will be duly authorized, validly issued, fully paid and nonassessable. No preemptive rights or other rights to subscribe for or purchase Common Stock or other securities of the Company exist with respect to the issuance and sale of the Shares, the Warrants or the Warrant Shares by the Company pursuant to this Agreement. No further approval or authority of the stockholders or the Board of Directors of the Company will be required for the issuance and sale of the Shares, the Warrants, or the Warrant Shares to be sold by the Company as contemplated herein. (b) Assuming the correctness of the representations made by the Purchasers in Section 5 hereof, the Shares, the Warrants and (assuming no change in applicable law and no unlawful distribution of Shares or the Warrants by the Purchasers or other parties), the Warrant Shares will be issued to the Purchasers in compliance with applicable exemptions from (i) the 11 4 registration and prospectus delivery requirements of the Securities Act of 1933, as amended (the "Securities Act") and (ii) the registration and qualification requirements of all applicable securities laws of the states of the United States. 4.4. Due Execution, Delivery and Performance of the Agreement. The Company has full legal right, corporate power and authority to enter into this Agreement, the Warrants and the Registration Rights Agreement attached hereto as Exhibit B (the "Registration Rights Agreement,") and perform the transactions contemplated hereby and thereby. (The Warrants and the Registration Rights Agreement are referred to in this Agreement as the "Ancillary Agreements.") This Agreement and the Ancillary Agreements have been unanimously approved and authorized by a special committee of the Board of Directors of the Company consisting of those directors who have no relationship with either of the Purchasers, and this Agreement and the Ancillary Agreements have been executed and delivered by the Company. The making and performance of this Agreement and the Ancillary Agreements by the Company and the consummation of the transactions herein and therein contemplated will not violate any provision of the Certificate of Incorporation or Bylaws of the Company, and will not result in the creation of any lien, charge, security interest or encumbrance upon any assets of the Company pursuant to the terms or provisions of, or will not conflict with, result in the breach or violation of, or constitute, either by itself or upon notice or the passage of time or both, a default under any agreement, mortgage, deed of trust, lease, franchise, license, indenture, permit or other instrument to which the Company or any of the Subsidiaries is a party or by which the Company or any of the Subsidiaries or their respective properties may be bound or affected and in each case or in the aggregate which would have a material adverse effect on the condition (financial or otherwise), properties, business, prospects or results of operations of the Company and its Subsidiaries taken as a whole (a "Material Adverse Effect") or, to the Company's knowledge, any statute or any authorization, judgment, decree, order, rule or regulation of any court or any regulatory body, administrative agency or other governmental body applicable to the Company or its Subsidiaries or their respective properties. No consent, approval, authorization or other order of any court, regulatory body, administrative agency or other governmental body is required for the execution and delivery of this Agreement or the Ancillary Agreements or the consummation of the transactions contemplated hereby or thereby, except for compliance with the Blue Sky laws and federal securities laws applicable to the offering of the Shares, the Warrants and the Warrant Shares. Upon their execution and delivery, and assuming the valid execution thereof by the respective Purchasers, this Agreement and the Ancillary Agreements will constitute valid and binding obligations of the Company, enforceable in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' and contracting parties' rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 4.5. No Defaults. Except as to defaults, violations and breaches which individually or in the aggregate would not be material to the Company and its Subsidiaries, taken as a whole, neither the Company nor its Subsidiaries are in violation or default of any provision of their certificate of incorporation or bylaws or in breach of or default with respect to any provision of any agreement, judgment, decree, order, mortgage, deed of trust, lease, franchise, license, indenture, permit or other instrument to which it is a party or by which it or any of its properties 12 5 are bound; and there does not exist any state of fact which, with notice or lapse of time or both, would constitute an event of default on the part of the Company or the Subsidiaries as defined in such documents, except such defaults which individually or in the aggregate would not be material to the Company and its Subsidiaries, taken as a whole. 4.6. Contracts. The contracts that are material to the Company are in full force and effect on the date hereof, and neither the Company nor its Subsidiaries nor, to the Company's knowledge, is any other party in breach of or default under any of such contracts which, individually or in the aggregate, would have a Material Adverse Effect. 4.7. No Actions. There are no legal or governmental actions, suits or proceedings pending or, to the Company's knowledge, threatened to which the Company or its Subsidiaries are or may be a party or of which property owned or leased by the Company or its Subsidiaries are or may be the subject, which actions, suits or proceedings, individually or in the aggregate, might prevent or might reasonably be expected to materially and adversely affect the transactions contemplated by this Agreement or result in a Material Adverse Change. No labor disturbance by the employees of the Company exists or, to the Company's knowledge, is imminent which might reasonably be expected to have a Material Adverse Effect. Neither the Company nor its Subsidiaries are a party to or subject to the provisions of any material injunction, judgment, decree or order of any court, regulatory body administrative agency or other governmental body. 4.8. Properties. Except with respect to Intellectual Property (as defined in Section 4.10), the Company and its Subsidiaries have good and marketable title to all the properties and assets reflected as owned by them in the consolidated financial statements included in the SEC Documents, subject to no lien, mortgage, pledge. charge or encumbrance of any kind except (i) those, if any, reflected in such consolidated financial statements (including the notes thereto), or (ii) those which are not material in amount and do not adversely affect the use made and promised to be made of such property by the Company or its Subsidiaries. The Company and its Subsidiaries hold their leased properties under valid and binding leases, with such exceptions as are not materially significant in relation to their business. Except as disclosed in the SEC Documents and except for the property referred to in Section 4.11, each of the Company and its Subsidiaries owns or leases all such properties as are necessary to its operations as now conducted. 4.9. No Material Change. Since June 30, 2000 (i) neither the Company nor any of its Subsidiaries has incurred any material liabilities or obligations, indirect or contingent, or entered into any material verbal or written agreement or other transaction which is not in the ordinary course of business or which could reasonably be expected to result in a material reduction in the future earnings of the Company; (ii) neither the Company nor any of its Subsidiaries has sustained any material loss or interference with its businesses or properties from fire, flood, windstorm, accident or other calamity not covered by insurance; (iii) neither the Company nor any of its Subsidiaries has paid or declared any dividends or other distributions with respect to its capital stock (excluding dividends paid by Subsidiaries to the Company) and neither the Company nor any of its Subsidiaries is not in default in the payment of principal or interest on any outstanding debt obligations; (iv) there has not been any change in the capital stock of the Company or its Subsidiaries other than the sale of the Shares hereunder and shares or options issued pursuant to employee equity incentive plans or purchase plans approved by the 13 6 Company's Directors, or indebtedness material to the Company or its Subsidiaries (other than in the ordinary course of business); and (v) there has not been a Material Adverse Change. 4.10. Intellectual Property. The Company owns or holds licenses or options for the inventions, patents, trademarks (both registered and unregistered), tradenames, copyrights and trade secrets necessary for the conduct of the Company's business as currently conducted (collectively, the "Intellectual Property"). To the Company's knowledge (for each of the following subsections (a) through (e)): (a) there are no third parties who have any ownership rights to any Intellectual Property that is owned by, or has been licensed to the Company that would preclude the Company from conducting its business as currently conducted; (b) there are currently no sales of any products that would constitute an infringement by third parties of any Intellectual Property owned, licensed or optioned by the Company; (c) there is no pending or threatened action, suit, proceeding or claim by others challenging the rights of the Company in or to any Intellectual Property owned, licensed or optioned by the Company, other than claims which cannot reasonably be expected to have a Material Adverse Effect; (d) there is no pending or threatened action, suit, proceeding or claim by others challenging the validity or scope of any Intellectual Property owned, licensed or optioned by the Company, other than claims which cannot reasonably be expected to have a Material Adverse Effect; and (e) there is no pending or threatened action, suit, proceeding or claim by others that the Company infringes or otherwise violate any patent, trademark, copyright, trade secret or other proprietary right of others, other than claims which cannot reasonably be expected to have a Material Adverse Effect. 4.11. Compliance. Neither the Company nor any of its Subsidiaries has been advised, and neither has any reason to believe, that it is not conducting its business in compliance with all applicable laws, rules and regulations of the jurisdictions in which it is conducting business, including, without limitation, all applicable local, state and federal environmental laws and regulations, except where failure to be so in compliance would not have a Material Adverse Effect. 4.12. Taxes. Each of the Company and its Subsidiaries has filed all necessary federal, state and foreign income and franchise tax returns and has paid or accrued all taxes shown as due thereon, and neither the Company nor any of its Subsidiaries has knowledge of a tax deficiency which has been or might be asserted or threatened against it which could have a Material Adverse Effect. 4.13. Transfer Taxes. On the Closing Date and the Second Closing Date, all stock transfer or other taxes (other than income taxes) which are required to be paid in connection with the sale and transfer of the Shares to be sold to the Purchasers on that date hereunder will be, or will have been, fully paid or provided for by the Company and all laws imposing such taxes will be or will have been fully complied with. 4.14. Investment Company. The Company is not an "investment company" or an "affiliated person" of, or "promoter" or "principal underwriter" for, an investment company, within the meaning of the Investment Company Act of 1940, as amended. 4.15. Insurance. The Company maintains insurance of the type and in the amount that the Company reasonably believes is adequate for its business, including, but not limited to, 14 7 insurance covering all real and personal property owned or leased by the Company against theft, damage, destruction, acts of vandalism and all other risks customarily insured against by similarly situated companies, all of which insurance is in full force and effect. 4.16. Contributions. At no time since its incorporation has the Company, directly or indirectly, (i) made any unlawful contribution to any candidate for public office, or failed to disclose fully any contribution in violation of law, or (ii) made any payment to any federal or state governmental officer or official, or other person charged with similar public or quasi-public duties, other than payments required or permitted by the laws of the United States or any jurisdiction thereof. 4.17. Additional Information. The Company represents and warrants that the information contained in the following documents (collectively, the "SEC Documents"), which the Company has furnished to the Purchasers, or will furnish prior to the Closing, is or will be true and correct in all material respects as of their respective filing dates: (a) the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999; (b) the Company's Quarterly Report on Form l0-Q for the fiscal quarter ended June 30, 2000; (c) the Company's Proxy Statement for the 2000 Annual Meeting of Stockholders; and (d) all other documents, if any, filed by the Company with the Securities and Exchange Commission after the date of this Agreement and prior to the Closing pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act). The Company has filed in a timely manner all reports, statements and notices required to be filed with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act for the 12 calendar months preceding the date of this Agreement. 4.18 Registration Rights. Except as provided in the Registration Rights Agreement, the Company is not currently subject to any agreement providing any person or entity any rights (including piggyback registration rights) to have any securities of the Company registered with the SEC or registered or qualified with any other governmental authority. 4.19. Registered Common Stock. The Common Stock is registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or delisting the Common Stock from the Nasdaq National Market, nor has the Company received any notification that the SEC or the Nasdaq National Market is contemplating any such termination of registration or delisting. 15 8 4.20 Finder's Fee. The Company neither is nor will be obligated for any finder's or broker's fee or commission in connection with this transaction. SECTION 5. Representations, Warranties and Covenants of the Purchasers. (a) Each Purchaser hereby severally represents and warrants to, and covenants with, the Company that: (i) such Purchaser is knowledgeable, sophisticated and experienced in making, and is qualified to make, decisions with respect to investments in shares constituting an investment decision like that involved in the purchase of the Shares and the Warrants, including investments in securities issued by the Company, and has requested, received, reviewed and considered all information it deems relevant in making an informed decision to purchase the Shares and the Warrants; (ii) such Purchaser is or will be acquiring the number of Shares and the Warrants set forth in Section 2 above and any Adjustment Shares referred to in Section 9.1 in the ordinary course of its business and for its own account for investment only and with no present intention of distributing any of such Shares, Warrants or Adjustment Shares or any arrangement or understanding with any other persons regarding the distribution of such Shares within the meaning of Section 2(11) of the Securities Act of 1933; (iii) such Purchaser will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any of the Shares, Warrants or Adjustment Shares except in compliance with the Act and the Rules and Regulations; (iv) such Purchaser has completed or caused to be completed the Stock Certificate Questionnaire attached hereto as Appendix I, and the answers thereto are true and correct as of the date hereof; (v) such Purchaser has, in connection with its decision to purchase the number of Shares set forth in Section 2 above, relied solely upon the SEC Documents and the representations and warranties of the Company contained herein; and (vi) such Purchaser is an "accredited investor" within the meaning of Rule 501 of Regulation D promulgated under the Securities Act. (b) Each Purchaser understands that the Shares and the Warrants to be purchased by such Purchaser hereunder, any Warrant Shares to be purchased by such Purchaser upon exercise of the Warrants and any Adjustment Shares to be issued to such Purchaser are characterized as "restricted securities" under the Securities Act, inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under the Securities Act and applicable regulations thereunder such securities may be resold without registration under the Securities Act only in certain limited circumstances. Each Purchaser is familiar with Rule 144 of the SEC, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act, including those imposed on "affiliates" of an issuer, and understands that, except as provided in the Registration Rights Agreement, the Company is under no obligation to register any of the securities sold hereunder. Each Purchaser agrees that the certificates for the Shares, the Warrants, the Warrant Shares and any Adjustment Shares shall bear the following legend (in addition to any legend required under applicable state securities laws): "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES LAWS OF ANY STATE. SUCH SHARES MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED 16 9 OR HYPOTHECATED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933 UNLESS EITHER (i) THE COMPANY RECEIVES AN OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION OR (ii) THE SALE OF SUCH SECURITIES IS EXEMPT FROM SUCH REGISTRATION PURSUANT TO SECURITIES AND EXCHANGE COMMISSION RULE 144." In addition, each Purchaser agrees that the Company may place stop transfer orders with its transfer agents with respect to such certificates. The appropriate portion of the legend and the stop transfer orders will be removed promptly upon delivery to the Company of such satisfactory evidence as reasonably may be required by the Company that such legend or stop orders are not required to ensure compliance with the Securities Act. (c) Each Purchaser further represents and warrants to, and covenants with, the Company that (i) such Purchaser has full right, power, authority and capacity to enter into this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and has taken all necessary action to authorize the execution, delivery and performance of this Agreement and the Ancillary Agreements and (ii) upon the execution and delivery of this Agreement and the Ancillary Agreements, this Agreement and the Ancillary Agreements shall constitute valid and binding obligations of such Purchaser enforceable in accordance with their terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' and contracting parties' rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). (d) The Purchasers neither are nor will be obligated for any finder's or broker's fee or commission in connection with this transaction. SECTION 6. Survival of Representations, Warranties and Agreements. Notwithstanding any investigation made by any party to this Agreement, all covenants, agreements, representations and warranties made by the Company and the Purchasers herein, in the Warrants and in the certificates for the Shares delivered pursuant hereto shall survive the execution of this Agreement, the delivery to the Purchasers of the Shares and the Warrants being purchased and the payment therefore for a period of two years. SECTION 7. Conditions to Obligations of Purchasers at Closing and Second Closing. 7.1 Conditions to the Purchasers' Obligations at Closing. The obligations of the Purchasers under this Agreement are subject to the fulfillment or waiver, at or before the Closing, of each of the following conditions: (a) Representations and Warranties True. Each of the representations and warranties of the Company contained in Section 4 shall be true and correct in all material respects on and as 17 10 of the date of the date of the Closing, with the same effect as though such representations and warranties had been made as of the Closing. (b) Performance. The Company shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing and shall have obtained all approvals, consents and qualifications necessary to complete the purchase and sale described herein. (c) Compliance Certificate. The Company will have delivered to the Purchasers at the Closing a certificate signed on its behalf by its Chief Executive Officer or Chief Financial Officer certifying that the conditions specified in (a) and (b) above have been fulfilled. (d) Securities Exemptions. The offer and sale of the Shares and the Warrants to the Purchasers pursuant to this Agreement shall be exempt from the registration requirements of the Securities Act and the registration and/or qualification requirements of all applicable state securities laws. (e) Opinion of Company Counsel. The Purchasers will have received an opinion on behalf of the Company, dated as of the date of the Closing, from Gibson, Dunn & Crutcher LLP, counsel to the Company, in the form attached as Exhibit C. (f) No Material Adverse Effect. Between the date hereof and the Closing, there shall not have occurred any Material Adverse Effect to the Company. (g) Nasdaq Requirements. All requirement of the Nasdaq National Market in connection with the transactions contemplated by this Agreement shall have been complied with by the Company. (h) Warrants. The Company will have issued the Initial Warrants substantially in the form attached hereto as Exhibit A. (i) Registration Rights Agreement. The Company will have executed and delivered the Registration Rights Agreement in the form attached hereto as Exhibit B. (j) Other Actions. The Company shall have executed such certificates, agreements, instruments and other documents, and taken such other actions, as shall be customary or reasonably requested by the Purchasers in connection with the transactions contemplated hereby. 7.2 Conditions to incuVest's Obligations at Second Closing. The obligations of incuVest LLC to purchase the Additional Shares and the Additional Warrant are subject to the fulfillment or waiver by incuVest, at or before the Second Closing, of each of the conditions in Section 7.1 except that (a) each of the references to the Closing shall be deemed to refer to the Second Closing and each of the references to the Purchasers shall be deemed to refer to incuVest, (b) subparagraph (h) shall be deemed to refer to the Additional Warrant and (c) subparagraphs (f) and (i) shall not apply. SECTION 8. Conditions to the Company's Obligations at Closing and Second Closing. 18 11 8.1 Conditions to the Company's Obligations at Closing. The obligations of the Company to the Purchasers under this Agreement are subject to the fulfillment or waiver, at or before the Closing, of each of the following conditions: (a) Representations and Warranties True. The representations and warranties of each Purchaser contained in Section 5 shall be true and correct in all material respects on and as of the date hereof and on and as of the date of the Closing with the same effect as though such representations and warranties had been made as of the Closing. (b) Performance. Each Purchaser shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing and shall have obtained all approvals, consents and qualifications necessary to complete the purchase and sale described herein. (c) Compliance Certificate. Each Purchaser will have delivered to the Company at the Closing a certificate signed on its behalf by its Treasurer certifying that the conditions specified in (a) and (b) above have been fulfilled. (d) Securities Exemptions. The offer and sale of the Shares and the Warrants to the Purchasers pursuant to this Agreement shall be exempt from the registration requirements of the Securities Act and the registration and/or qualification requirements of all applicable state securities laws. (e) Payment of Purchase Price. Each Purchaser shall have delivered to the Company the aggregate price set forth opposite such Purchaser's name in Section 2. (f) Warrants. Each Purchaser shall have executed the Warrant such Purchaser is purchasing hereunder in the form attached hereto as Exhibit A. (g) Registration Rights Agreement. Each Purchaser shall have executed and delivered the Registration Rights Agreement substantially in the form attached hereto as Exhibit B. (h) Other Actions. The Purchasers shall have executed such certificates, agreements, instruments and other documents, and taken such other actions, as shall be customary or reasonably requested by the Company in connection with the transactions contemplated hereby. 8.2 Conditions to Company's Obligations at Second Closing. The obligations of the Company to incuVest LLC under this Agreement with respect to the Additional Shares and the Additional Warrants are subject to the fulfillment or waiver, at or before the Second Closing, of each of the conditions in Section 8.1 except that (a) each of the references to the Closing shall be deemed to refer to the Second Closing and each of the references to each Purchaser and the Purchasers shall be deemed to refer to incuVest LLC, (b) subparagraph (f) shall be deemed to refer to the Additional Warrant and (c) subparagraph (g) shall not apply. SECTION 9. Subsequent Issuance of Common Stock. 19 12 9.1. Issuance of Additional Shares. Subject to the exceptions provided below, if prior to December 31, 2000 the Company issues or agrees to issue additional shares of Common Stock or other securities convertible into Common Stock for cash or cash equivalents or other property of the type contemplated by Section 9.4 in a transaction exempt from registration under Section 4(2) of the Securities Act of 1933 (a "Subsequent Transaction") at a price per share (as adjusted for stock splits, stock dividends, stock combinations, reclassifications and other similar changes in its capitalization) lower than the price per share for the Initial Shares determined in accordance with Section 2, then the Company shall issue Adjustment Shares of Common Stock to each Purchaser for no additional consideration. For the purposes of the preceding sentence, the number of "Adjustment Shares" shall be calculated for each Purchaser as follows: X = (C/A) - B, where: X = Number of Adjustment Shares A = Price per Share of subsequent issuance of Common Stock B = Number of Initial Shares initially issued to such Purchaser at the Closing plus, in the case of incuVest LLC, the number of Additional Shares issued at the Second Closing C = Aggregate price of Shares issued to such Purchaser at the Closing and Second Closing The provisions of this Section 9 shall not apply to (a) issuances to employees, directors, advisors or consultants or former employees or directors, advisors or consultants of the Company of Common Stock or options to purchase Common Stock issued pursuant to the Company's stock option plan or Stockholder Rights Plan, (b)any rights offering made to all holders of Common Stock or (c) the issuance of the Additional Shares or Additional Warrants at the Second Closing. In no event shall any adjustment pursuant to this Section 9 result in a reduction of the number of shares of Common Stock purchased by any Purchaser. In the event a Subsequent Transaction closes prior to the Second Closing, the number of Adjustment Shares issuable to incuVest LLC based upon the number of Additional Shares and Additional Warrants will be issued at the Second Closing. 9.2. Adjustment for Warrants. (a) If any Subsequent Transaction does not involve the issuance warrants to purchase additional shares of Common Stock, then the value of the Warrants issued to each Purchaser at the Closing and Second Closing (determined in accordance with the Black Scholes pricing model as of the date of the Closing) shall be subtracted from "C" in the formula set forth in Section 9.1 (the "Aggregate price of Shares issued to each Purchaser at Closing and Second Closing") as it is applied to that Purchaser and there shall be no adjustment in the exercise price or other terms of the Warrants. (b) If the Subsequent Transaction does involve the issuance of warrants to purchase Common Stock, then the value of the Warrants issued at the Closing and the Second Closing will be determined as of the day of Closing using the Black Scholes pricing model and the value of 20 13 the warrants issued in the Subsequent Transaction will be valued in the same manner as of the date of closing of the Subsequent Transaction. In each case the value of all warrants issued in the transaction will be divided by the number of shares of Common Stock issued for cash in the transaction resulting in the "Value of the Warrants Per Share Purchased." Thereafter the Value of the Warrants Per Share Purchased will be subtracted from the cash purchase price per share in each transaction, and the cash purchase price per share for each transaction so adjusted will be used in applying the formula in Section 9.1. (c) The value of the Warrants and any warrants issued in a Subsequent Transaction using the Black Scholes pricing model shall initially be determined in good faith by ChromaVision. In the event either Purchaser disagrees with ChromaVision's determination, the matter shall be submitted to KPMG LLC for determination, and its determination shall be final and binding on the parties. IF KPMG LLC is not then the independent certified public accountants that ChromaVision intends to use for its 2000 Audit, then the matter shall be submitted to another accounting firm of recognized standing selected by ChromaVision but reasonably satisfactory to both Purchasers. 9.3 Convertible Securities. If the Subsequent Transaction involves the issuance of securities convertible into Common Stock, each of the Purchasers will have the right to return to the Company, concurrently with the closing of the Subsequent Transaction and contingent upon the closing occurring, the Shares and the Warrants (and, if any of the Warrants have been exercised, the Warrant Shares or an equivalent number of shares of Common Stock), all duly endorsed in blank, in exchange for that number and kind of securities issued in the Subsequent Transaction having a value (based on what other investors are paying in the Subsequent Transaction) equal to the purchase price paid by the Purchaser pursuant to Section 2. If a Purchaser elects to exercise its rights under this Section 9.2, the Purchaser will participate in the Subsequent Transaction on the same terms as other investors in the transactions and will execute and deliver all agreements, documents and instruments as such other investors. In the event of a Subsequent Transaction, the Company will give each Purchaser written notice of the Transaction at least ten (10) days prior to the closing thereof. The notice shall set forth in reasonable detail the terms of the transaction then known to the Company and, to the extent they are available, copies of all documents and instruments expected to be executed and delivered by the investors in connection with the transaction or the latest drafts thereof. Thereafter the Company shall make available to the Purchasers copies of all such documents and instruments and the latest drafts thereof substantially concurrently with providing them to the investors expected to participate in the Subsequent Transaction or, if the Company does not prepare any such documents or instruments or drafts thereof, promptly after the Company receives the same. Each Purchaser will have until the end of the third business day before the closing to exercise its rights pursuant to this Section 9.3 by delivering written notice of its election to do so to the Company. If any Purchaser exercises its rights and thereafter any term of the transaction is changed or additional terms are added, the Purchaser will have the right to elect not to participate in the transaction at any time prior to its closing by delivering writing notice of such election to the Company. If the Subsequent Transaction closes prior to the Second Closing, incuVest LLC will have the right to make the election contemplated by this Section 9.3 with respect to all of the Initial Shares, Additional Shares, Initial Warrants and Additional Warrants (and not with respect to some of such securities but not others) prior to the end of the third business day before the closing of the Subsequent Transaction. If the election is made, the Company will deliver to 21 14 incuVest LLC at the Second Closing the number and kind of securities issued in the Subsequent Transaction having a value (based on what other investors are paying in the Subsequent Transaction) equal to $5,000,000 less the amount of interest that would be earned thereon at the rate of 8% per annum for the period between the Closing and the Second Closing. 9.4 Adjustments for Other Property. If the Company issues shares of Common Stock for cash and property (including securities of another issuer) in a single transaction or related transactions, the fair market of the property in other securities shall be added to the amount of cash paid for the Common Stock in determining "A" in the formula in Section 9.1, "Price per Share of subsequent issuance of Common Stock." Such fair market value will be determined by the Board of Directors of ChromaVision in good faith. In addition, the adjustment in Section 9.2(a) above will be made to "C" in the formula (the "Aggregate price of Shares issued to each Purchaser at Closing"). Notwithstanding the foregoing, any transaction involving the acquisition of a business (regardless of the form of the transaction) or a business joint venture or other partnering arrangement in which the Company receives cash incidental to acquiring the business or other such transaction (and not as a means of funding its operations generally) shall not result in the issuance of Additional Shares pursuant to Section 9.1. SECTION 10. Notices. All notices, requests, consents and other communications hereunder shall be in writing, shall be mailed by first-class registered or certified airmail, confirmed facsimile or nationally recognized overnight express courier postage prepaid, and shall be deemed given when so mailed and shall be delivered as addressed as follows: (a) if to the Company, to: ChromaVision Medical Systems. Inc. 33171 Paseo Cerveza San Juan Capistrano, California Attn: Kevin C. OBoyle with a copy to: Gibson, Dunn & Crutcher LLP 333 South Grand Avenue, Suite 4600 Los Angeles, CA 90071-3197 Attention: Roy Schmidt, Esq. or to such other person at such other place as the Company shall designate to the Purchasers in writing; and (b) if to the Purchasers, at the addresses as set forth at the end of this Agreement, or at such other address or addresses as may have been furnished to the Company in writing. SECTION 11. Entire Agreement and Modification. This Agreement and the Ancillary Agreements set forth the entire agreement of the parties with respect to the subject matter hereof and supersede all term sheets, discussions, comments, negotiations and other prior or contemporaneous understandings of any kind. This Agreement may not be modified or amended except pursuant to an instrument in writing signed by the Company and the Purchasers, and no 22 15 right or obligation hereunder may be waived except pursuant to a written instrument signed by the party making the waiver. SECTION 12. Headings. The headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be part of this Agreement. SECTION 13. Severability, In case any provision contained in this Agreement should be invalid, illegal or unenforceable in any respect. the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. SECTION 14. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 15. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together. shall constitute but one instrument, and shall become effective when one or more counterparts have been signed by each party hereto and delivered to the other parties. SECTION 16. Fees, Expenses. The Company shall pay in connection with the preparation, execution and delivery of this Agreement and the Ancillary Agreements and the issuance of the Shares and the Warrants a nonaccountable expense allowance of $15,000 in the aggregate for both Purchasers, which shall be allocated 100% to Safeguard. 23 16 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the day and year first above written. CHROMAVISION MEDICAL SYSTEMS. INC. By: _____________________________ Name: Title: PURCHASERS: SAFEGUARD SCIENTIFICS, INC. By: _____________________________ Name: Title: Address: INCUVEST, LLC By: _____________________________ Name: Title: Address: 24 17 INDEX OF EXHIBITS Exhibit A Form of Warrants........................................... A-1 Exhibit B Form of Registration Rights Agreement...................... B-1 Exhibit C Form of Legal Opinion...................................... C-1
25 18 EXHIBIT A FORM OF WARRANTS A-1 19 EXHIBIT B FORM OF REGISTRATION RIGHTS AGREEMENT B-1 20 EXHIBIT C FORM OF LEGAL OPINION C-1 21 Appendix I CHROMAVISION MEDICAL SYSTEMS, INC. STOCK CERTIFICATE QUESTIONNAIRE Pursuant to Section 3 of the Agreement, please provide us with the following information: 1. The exact name that your Shares and Warrants are to be registered in (this is the name that will appear on your stock certificate(s)) and Warrant(s). You may use a nominee name if appropriate: ______________________ 2. The relationship between the Purchaser of the Shares and the Registered Holder listed in response to item 1 above: ______________________ 3. The mailing address of the Registered Holder listed in response to item I above: ______________________ ______________________ ______________________ ______________________ 4. The Social Security Number or Tax Identification Number of the Registered Holder listed in response to item 1 above: ______________________
-1- EX-99.2 3 w41159ex99-2.txt REGISTRATION RIGHTS AGREEMENT 1 Exhibit 99.2 REGISTRATION RIGHTS AGREEMENT SEPTEMBER 28, 2000 THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into as of the date hereof, by and among ChromaVision Medical Systems, Inc., a Delaware corporation (the "Company"), with its principal office located at 33171 Paseo Cerveza, San Juan Capistrano, California 92675-4824, Safeguard Delaware, Inc., a Pennsylvania corporation, and incuVest, LLC, a limited liability company (collectively the "Investors"). RECITALS WHEREAS, the Company and the Investors have entered into a Stock Purchase Agreement dated as of September 28, 2000 (the "Stock Purchase Agreement"), pursuant to which the Company shall sell, and the Investors shall acquire, shares of the Company's Common Stock, par value $.01 per share (the "Common Stock") and Warrants (the "Warrants") to purchase additional shares (the "Warrant Shares") of the Company's Common Stock. WHEREAS, it is a condition to the obligations of the parties to the Stock Purchase Agreement to consummate the transactions contemplated thereby that the Company and the Investors enter into this Agreement. NOW, THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, the parties hereto agree as follows: 1. Certain Definitions. All capitalized terms used herein and not defined below shall have the meanings set forth in the Stock Purchase Agreement. The following terms shall have the following respective meanings: "Commission" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Holder" shall mean any Investor holding Registrable Securities and any person holding Registrable Securities to whom the rights under this Agreement have been transferred in accordance with Section 13 hereof. "Indemnified Party" shall have the meaning set forth in Section 10(c) of this Agreement. "Indemnifying Party" shall have the meaning set forth in Section 10(c) of this Agreement. -2- 2 The terms "register," "registered" and "registration" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement. "Registration Expenses" shall mean all expenses incurred by the Company in complying with Sections 5, 6 and 7 hereof, including, without limitation, all registration, qualification and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company, blue sky fees and expenses, the expense (as limited by Section 8 hereof) of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of the Company that shall be paid in any event by the Company), and the reasonable fees and expenses up to $10,000 of one special legal counsel to represent all Holders participating in such registration if such Holders are not represented without cost by the Company's counsel. "Registrable Securities" means (i) the Shares; (ii) the Warrant Shares; and (iii) any Common Stock of the Company issued or issuable in respect of the Shares or the Warrant Shares or other securities issued or issuable with respect to the Shares or the Warrant Shares upon any stock split, stock dividend, recapitalization or similar event, or any Common Stock otherwise issued or issuable with respect to the Shares or the Warrant Shares; provided, however, that shares of Common Stock or other securities shall only be treated as Registrable Securities if and so long as they have not been (A) sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction, or (B) sold or saleable in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof so that all transfer restrictions and restrictive legends with respect thereto are removed upon the consummation of such sale and so long as there are no volume limitations (with or without any required aggregation) on the number of shares of Common Stock so sold or saleable) "Restricted Securities" shall mean the securities of the Company required to bear the legend referring to the Securities Act set forth in Section 3 hereof. "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Selling Expenses" shall mean all underwriting discounts, selling commissions and stock transfer taxes applicable to the securities registered by the Holders and all fees and disbursements of counsel for the Holders (except for such fees and disbursements as are included in the definition of Registration Expenses). "Shares" shall mean the shares of Common Stock issued to investors pursuant to the Stock Purchase Agreement. 2. Restrictions. The Shares and the Warrant Shares shall not be sold, assigned, transferred or pledged except upon the conditions specified in this Agreement, which conditions are intended to ensure compliance with the provisions of the Securities Act. The Investors shall -3- 3 cause any proposed purchaser, assignee, transferee or pledgee of the Shares and the Warrant Shares to agree to take and hold such securities subject to the provisions and upon the conditions specified in this Agreement. 3. Restrictive Legend. Each certificate representing (i) the Shares, (ii) the Warrant Shares, and (iii) any other securities issued in respect of the securities referenced in clauses (i) and (ii) upon any stock split, stock dividend, recapitalization, merger, consolidation or similar event, shall (unless otherwise permitted by the provisions of Section 4 below) be stamped or otherwise imprinted with legends in the following form (in addition to any legend required under applicable state securities laws): "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER ANY STATE SECURITIES LAWS. SUCH SHARES MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS EITHER (i) IN THE ABSENCE OF SUCH REGISTRATION THE COMPANY RECEIVES AN OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT SUCH DISPOSITION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE REGISTRATION REQUIREMENTS OF ALL APPLICABLE STATE SECURITIES LAWS OR (ii) THE SALE IS EXEMPT FROM SUCH REGISTRATION REQUIREMENTS PURSUANT TO THE SECURITIES AND EXCHANGE COMMISSION'S RULE 144 ACT." Each Investor and Holder consents to the Company making a notation on its records and giving instructions to any transfer agent of the Restricted Securities in order to implement the restrictions on transfer established in this Section 2. 4. [Intentionally Omitted] 5. Requested Registration. (a) Request for Registration. In case the Company shall receive from Holders written request that the Company effect any registration, qualification or compliance with respect to Registrable Securities, the Company shall (A) within ten (10) days of the receipt by the Company of such notice, give written notice of the proposed registration, qualification or compliance to all other Holders and (B) as soon as practicable, use commercially reasonable efforts to effect such registration, qualification or compliance (including, without limitation, appropriate qualification under applicable blue sky or other state securities laws and appropriate compliance with applicable regulations issued under the Securities Act and any other governmental requirements or regulations) as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any Holder or Holders joining in such request as are specified in a written request received by the Company within twenty (20) days after receipt of such written notice from the Company; -4- 4 provided, however, that the Company shall not be obligated to take any action to effect any such registration, qualification or compliance pursuant to this Section 5(a): (1) In any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification or compliance unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act; (2) After the date that the Company has effected two (2) registrations pursuant to this Section 5(a) on behalf of the Holders, and such registrations have been declared or ordered effective; (3) If the number of Registrable Shares to be included in any such registration is less than 100,000; or (4) If the Company shall furnish to such Holders a certificate signed by the Chief Executive Officer of the Company stating that in the good faith judgment of the Board of Directors it would be detrimental to the Company or its stockholders for a registration statement to be filed in the near future. In the event of (4) above, the Company's obligation to use commercially reasonable efforts to register, qualify or comply under this Section 5 shall be deferred for a period not to exceed ninety (90) days from the date of receipt of written request from the Holders; provided, however, that the Company shall not exercise such right more than once in any twelve-month period. (b) Underwriting. In the event that a registration pursuant to this Section 5 is for a registered public offering involving an underwriting, the Holders shall notify the Company and the Company shall so advise the Holders as part of the notice given pursuant to Section 5(a). In such event, the right of any Holder to registration pursuant to this Section 5 shall be conditioned upon such Holder's participation in such underwriting arrangements, and the inclusion of such Holder's Registrable Securities in the underwriting to the extent requested shall be limited to the extent provided herein. The Company shall also be entitled to participate in an underwritten offering on the terms set forth herein. The Company shall (together with all Holders proposing to distribute their securities through such underwriting) enter into an underwriting agreement in reasonable and customary form with the managing underwriter selected for such underwriting by the Company and reasonably acceptable to a majority of the Holders proposing to distribute their securities through such underwriting. Notwithstanding any other provision of this Section 5, if the managing underwriter advises the Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Company shall so advise all holders of Registrable Securities and the number of shares of Registrable Securities that may be included in the registration and underwriting shall be allocated among all Holders thereof in proportion, as nearly as practicable, to the respective amounts of Registrable Securities held by such Holders at the time of filing the registration statement or in such other manner as shall be agreed to by the Company and Holders of a majority of the Registrable Securities proposed to be included in such -5- 5 registration, provided, however, that the number of shares of Registrable Securities to be included in such underwriting and registration shall not be reduced unless all other securities of the Company are first entirely excluded from the underwriting and registration. No Registrable Securities excluded from the underwriting by reason of the underwriter's marketing limitation shall be included in such registration. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest 100 shares. If any Holder of Registrable Securities disapproves of the terms of the underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the managing underwriter no later than five (5) business days prior to the date of the registration statement is declared effective. Any securities excluded or withdrawn from such underwriting shall be withdrawn from such registration, and shall not be transferred in a public distribution prior to ninety (90) days after the effective date of the registration statement relating thereto. 6. Registration on Form S-3. (a) If any Holder or Holders request that the Company file a registration statement on Form S-3 (or any successor form to Form S-3) for a public offering of at least 100,000 (in the aggregate) Shares or Warrant Shares or a combination of the two or other Registrable Securities issued or issuable with respect to that number of Shares and/or Warrant Shares (in the aggregate) held by such Holder or Holders (adjusted for stock splits, stock dividends, reclassifications and similar transactions) not involving an underwriting and the Company is a registrant entitled to use Form S-3 to register the Registrable Securities for such an offering, the Company shall use commercially reasonable efforts to cause such Registrable Securities to be registered on such form for the offering and to cause such Registrable Securities to be qualified in such jurisdictions as the Holder or Holders may reasonably request. The Company shall have no obligation to include in any such registration statement any information which is permitted to be incorporated by reference. (b) Notwithstanding the foregoing, the Company shall not be obligated to take any action pursuant to this Section 6: (i) in any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification or compliance unless the Company is already subject to service in such jurisdiction; (ii) during the period starting with the date ninety (90) days prior to the Company's estimated date of filing of, and ending on the date six (6) months immediately following the effective date of, any registration statement pertaining to securities of the Company (other than a registration of securities in a Rule 145 transaction or with respect to an employee benefit plan), provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective; or (iii) if the Company shall furnish to such Holder a certificate signed by the Chief Executive Officer of the Company stating that in the good faith judgment of the Board of Directors it would be detrimental to the Company or its stockholders for registration statements to be filed in the near future. In the event of (iii) above, the Company's obligation to use commercially reasonable efforts to file a registration statement shall be deferred for a period not to exceed ninety (90) days from the receipt of the request to file -6- 6 such registration statement by such Holder; provided, however, that the Company shall not exercise such right more than once in any twelve-month period. (c) Registration pursuant to this Section 6 shall not be deemed to be one of the two registrations referred to in Section 5(a)(2). 7. Piggyback Registration. (a) Notice of Registration. If at any time or from time to time, the Company shall determine to register any of its securities, either for its own account or the account of a security holder or holders other than Holders pursuant to Section 5 or 6 hereof, other than (i) a registration relating solely to employee benefit plans or (ii) a registration relating solely to a Commission Rule 145 transaction, the Company shall: (1) promptly give to each Holder written notice thereof, and (2) include in such registration (and any related qualification under blue sky laws or other compliance), and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests made within thirty (30) days after receipt of such written notice from the Company by any Holder, but only to the extent that such inclusion will not diminish the number of securities included by the Company. (b) Underwriting. If the registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise the Holders as a part of the written notice given pursuant to Section 7(a). In such event, the right of any Holder to registration pursuant to this Section 7 shall be conditioned upon such Holder's participation in such underwriting and the inclusion of Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company and the other holders distributing their securities through such underwriting) enter into an underwriting agreement in reasonable and customary form with the managing underwriter selected for such underwriting by the Company. Notwithstanding any other provision of this Section 7, if the managing underwriter determines that marketing factors require a limitation of the number of shares or other securities to be underwritten, the managing underwriter may limit the number of Registrable Securities to be included in the registration and underwriting, on a pro rata basis based on the total number of securities (including, without limitation, Registrable Securities) entitled to registration pursuant to registration rights granted to the participating Holders by the Company. The number of shares or other securities that may be included in the registration and underwriting shall be allocated as follows: (i) first, to the Company and (ii) second, to the Holders proposing to distribute their securities through such underwriting and to other shareholders of the Company on a pro rata basis in proportion to the number of shares which each such person or entity would otherwise have the right to have their shares registered, in proportion, as nearly as practicable, to the respective amounts of Registrable Securities held by such Holders. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder or other holder to the nearest 100 shares. If any Holder -7- 7 or other holder disapproves of the terms of any such underwriting, he or she may elect to withdraw therefrom by written notice to the Company and the managing underwriter no later than five (5) business days prior to the date of the registration statement with respect to the registration, is declared effective. Any securities excluded or withdrawn from such underwriting shall be withdrawn from such registration, and shall not be transferred in a public distribution prior to ninety (90) days after the effective date of the registration statement relating thereto. (c) Right to Terminate Registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 7 prior to the effectiveness of such registration, whether or not any Holder has elected to include securities in such registration. In such case, the Company shall be deemed not to have effected a registration pursuant to Section 7 of this Agreement. (d) Not Demand Registration. Registration pursuant to this Section 7 shall not be deemed to be a requested registration as described in Section 5 above. 8. Expenses of Registration. All Registration Expenses incurred in connection with any registration pursuant to Sections 5, 6 and 7 shall be borne by the Company, provided that the Company shall not be required to pay the Registration Expenses of any registration proceeding begun pursuant to Section 5, the request of which has been subsequently withdrawn by the Holders. In such case, at the option of the Holders of a majority of the Registrable Securities to have been registered, either: (i)(a) the Holders of Registrable Securities to have been registered shall bear all such Registration Expenses pro rata on the basis of the number of shares to have been registered, and (i)(b) the Company shall be deemed not to have effected a registration pursuant to Section 5 of this Agreement; or (ii)(a) the Company shall bear all such Registration Expenses, and (ii)(b) the Company shall be deemed to have effected a registration pursuant to Section 5 of this Agreement. Notwithstanding the foregoing, however, if at the time of the withdrawal, the Holders have learned of a material adverse change in the condition, business or prospects of the Company from that known to the Holders at the time of their request or described in a filing with the SEC which filing was made prior to the date of such request, then the Holders shall not be required to pay any of said Registration Expenses. In such case, the Company shall be deemed not to have effected a registration pursuant to Section 5 of this Agreement. Unless otherwise stated, all Selling Expenses relating to securities registered on behalf of the Holders and all other registration expenses incurred in connection with any registration pursuant to this Agreement shall be borne by the Holders of the registered securities included in such registration pro rata on the basis of the number of shares so registered. 9. Registration Procedures. In the case of each registration, qualification or compliance effected by the Company pursuant to this Agreement, the Company shall keep each Holder advised in writing as to the initiation of each registration, qualification and compliance and as to the completion thereof. At its expense the Company shall: (1) Prepare and file with the Commission a registration statement with respect to such securities and use commercially reasonable efforts to cause such registration -8- 8 statement to become and remain effective for at least one hundred eighty (180) days or until the distribution described in the registration statement has been completed; and (2) Furnish to the Holders participating in such registration and to the underwriters of the securities being registered such reasonable number of copies of the registration statement, preliminary prospectus, final prospectus and such other documents as such underwriters may reasonably request in order to facilitate the public offering of such securities. (3) Use commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (4) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. (5) Use commercially reasonable efforts to furnish, at the request of any Holder requesting registration of Registrable Securities, on the date that such Registrable Securities are delivered to the underwriter(s) for sale, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (A) an opinion, dated as of such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities and (B) subject to applicable accounting standards a "comfort" letter dated as of such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities. 10. Indemnification. (a) The Company shall indemnify each Holder, each of its officers and directors and partners, and each person controlling such Holder within the meaning of Section 15 of the Securities Act, with respect to which registration, qualification or compliance has been effected pursuant to this Agreement, and each underwriter, if any, and each person who controls any underwriter within the meaning of Section 15 of the Securities Act, against all expenses, claims, losses, damages or liabilities (or actions in respect thereof), including any of the -9- 9 foregoing incurred in settlement of any litigation, commenced or threatened, arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement or prospectus, or any amendment or supplement thereto, incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, or any violation by the Company of any rule or regulation promulgated under the Securities Act applicable to the Company in connection with any such registration, qualification or compliance, and the Company shall reimburse each such Holder, each of its officers and directors, and each person controlling such Holder, each such underwriter and each person who controls any such underwriter, for any legal and any other expenses reasonably incurred in connection with investigating, preparing or defending any such claim, loss, damage, liability or action, as such expenses are incurred, provided that the Company shall not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission or alleged untrue statement or omission is made in such registration statement or prospectus or amendment or supplement thereto in reliance upon and in conformity with written information furnished to the Company by any Holder, controlling person or underwriter and specifically for use therein; and with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary prospectus, this indemnity shall not inure to the benefit of any underwriter (or to the benefit of any person controlling any underwriter within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act) to the extent that any such loss, liability, claim, damage or expense of such underwriter or any person controlling such underwriter results from the fact that such underwriter sold shares of Common Stock to a person to whom there was not sent or given by such underwriter or on such underwriter's behalf at or prior to the written confirmation of the sale of such shares of Common Stock to such person, a copy of the prospectus (as then amended or supplemented), if required by law so to have been delivered, and if the prospectus (as so amended or supplemented) would have cured the defect giving rise to such loss, liability claim, damage or expense. This indemnity will be in addition to any liability which the Company may otherwise have. (b) Each Holder shall, if Registrable Securities held by such Holder are included in the securities as to which such registration, qualification or compliance is being effected, indemnify the Company, each of its directors and officers, each underwriter, if any, of the Company's securities covered by such a registration statement, each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act, and each other such Holder, each of its officers and directors and each person controlling such Holder within the meaning of Section 15 of the Securities Act, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement or prospectus or amendment or supplement thereto or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company, such Holders, such directors, officers, persons, underwriters or control persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, as such expenses are incurred, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such -10- 10 registration statement or prospectus or amendment or supplement thereto in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by such Holder and stated to be specifically for use therein. In no event shall any indemnity under this Section 10(b) exceed the proceeds from the offering received by such Holder. (c) Each party entitled to indemnification under this Section 10 (each, an "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such party's expense; provided, however, that an Indemnified Party (together with all other Indemnified Parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the Indemnifying Party, if representation of such Indemnified Party by the counsel retained by the Indemnifying Party would be inappropriate due to actual or potential differing interests between such Indemnified Party and any other party represented by such counsel in such proceeding. The failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 10 unless the failure to give such notice is materially prejudicial to an Indemnifying Party's ability to defend such action. (d) If the indemnification provided for in this Section 10 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any losses, claims, damages or liabilities referred to herein, the Indemnifying Party, in lieu of indemnifying such Indemnified Party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or payable by such Indemnified Party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the untrue statement or omission or alleged untrue statement or omission that resulted in such loss, claim, damage or liability, as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by a court of law by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, that in no event shall any contribution by a Holder hereunder exceed the proceeds from the Offering received by such Holder. (e) The obligations of the Company and Holders under this Section 10 shall survive completion of any offering of Registrable Securities in a registration statement and the termination of this Agreement. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the -11- 11 giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. 11. Information by Holder. The Holder or Holders of Registrable Securities included in any registration shall furnish to the Company such information regarding such Holder or Holders, the Registrable Securities held by them and the distribution proposed by such Holder or Holders as the Company may request in writing and as shall be required in connection with any registration, qualification or compliance referred to in this Section 11. 12. Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Commission that may at any time permit the sale of the Restricted Securities to the public without registration, the Company agrees (for so long as it is subject to the reporting requirements of Section 12 of the Exchange Act) to use commercially reasonable efforts to: (1) Make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times after the effective date that the Company becomes subject to the reporting requirements of the Securities Act or the Exchange Act; (2) File with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements); and (3) So long as an Investor owns any Restricted Securities, to furnish to the Investor forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of said Rule 144 (at any time after ninety (90) days after the effective date of the first registration statement filed by the Company for an offering of its securities to the general public), and of the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of the Company and other information in the possession of or reasonably obtainable by the Company as an Investor may reasonably request in availing itself of any rule or regulation of the Commission allowing an Investor to sell any such securities without registration. 13. Transfer of Registration Rights. The rights to cause the Company to register securities granted Investors under Section 5, Section 6, and Section 7 may be assigned to a transferee or assignee who is (a) a member of any Investor that is a limited liability company or any affiliate of an Investor, or (b) any trust that holds such Registrable Securities for the benefit of such Investor; provided that (a) such transfer may otherwise be effected in accordance with applicable securities laws, (b) written notice of such assignment is given to the Company and (c) the transferee agrees to be bound by the terms of this Agreement. 14. Termination of Rights. The rights of any particular Holder to cause the Company to register securities under Section 5, Section 6 and Section 7 shall terminate with respect to such -12- 12 Holder on the earlier of (i) the third (3rd) anniversary of the effective date of this Agreement or (ii) with respect to any holder of Registrable Securities, at such time as the holder is able to dispose of all of its Registrable Securities in a three-month period pursuant to Rule 144. 15. Governing Law. This Agreement shall be governed in all respects by the laws of the state of New York applicable to contracts between New York residents entered into and performed entirely within the State of New York. 16. Third Parties. Nothing in this Agreement, express or implied, is intended to confer upon any party, other than the parties hereto, and their respective successors and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein. 17. Successors and Assigns. Except as otherwise provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto. 18. Entire Agreement; Amendment. This Agreement constitutes the full and entire understanding and agreement among the parties with regard to the subject matter hereof. Neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the party against whom enforcement of any such amendment, waiver, discharge or termination is sought; provided, however, that holders of more than fifty percent (50%) of the outstanding Registrable Securities (including Warrant Shares prior to exercise of any Warrants) may waive or amend, on behalf of all Investors and other holders of Shares, any provisions hereof benefiting the Investors so long as the effect thereof will be that all such Investors and other holders of Shares will be treated equally. 19. Effect of Amendment or Waiver. The Investors and their successors and assigns acknowledge that by the operation of Section 18 hereof the holders of a majority of the outstanding Registrable Securities, acting in conjunction with the Company, will have the right and power to diminish or eliminate any or all rights or increase any or all obligations pursuant to this Agreement. 20. Rights of Holders. Each holder of Registrable Securities shall have the absolute right to exercise or refrain from exercising any right or rights that such holder may have by reason of this Agreement, including, without limitation, the right to consent to the waiver or modification of any obligation under this Agreement, and such holder shall not incur any liability to any other holder of any securities of the Company as a result of exercising or refraining from exercising any such right or rights. 21. Notices, Etc. All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, return receipt requested, or by telecopier, or otherwise delivered by hand or by messenger, addressed or telecopied (a) if to an Investor, at such Investor's address or telecopier number set forth on the signature pages hereto, or at such other address or telecopier number as such Investor shall have furnished to the Company in writing, or (b) if to any other holder of any -13- 13 Shares, at such address or telecopier number as such holder shall have furnished the Company in writing, or, until any such holder so furnishes an address or telecopier number to the Company, then to and at the address or telecopier number of the last holder of such Shares who has so furnished an address or telecopier number to the Company, or (c) if to the Company, at its address set forth on the first page of this Agreement, or at such other address or telecopier number as the Company shall have furnished to the Investors, in each case of the attention of the Chief Executive Officer. Notice shall be deemed to be given upon proper deposit with the United States mail or nationally recognized overnight courier, or personally delivered, to the address provided above, or upon confirmation by the telecopier machine of receipt of such notice telecopied to the telecopier number provided above, as the case may be. 22. Delays or Omissions. No delay or omission to exercise any right, power or remedy accruing to any holder of any Shares or to the Company upon any breach or default under this Agreement shall impair any such right, power or remedy of such holder or of the Company, nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any holder of any breach or default under this Agreement, or any waiver on the part of any holder or of the Company of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing or as provided in this Agreement. All remedies, either under this Agreement or by law or otherwise afforded to any holder, shall be cumulative and not alternative. 23. Counterparts, Facsimile. This Agreement may be executed in any number of counterparts and by facsimile, each of which may be executed by fewer than all of the Investors, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument. 24. Severability of this Agreement. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision and the parties agree to replace such provision with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such provisions; provided that no such severability will be effective against a party if it materially and adversely changes the economic benefits of this Agreement to such party. 25. Headings, Etc. The headings of the Sections of this Agreement, and the headings on the signature pages of this Agreement categorizing the signatories hereto, have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms and provisions hereof. [signature pages follow] -14- 14 IN WITNESS WHEREOF, this agreement has been duly executed by the parties hereto as of the date first written above. CHROMAVISION MEDICAL SYSTEMS, INC. By: ____________________________________ Name: Title: INVESTORS: SAFEGUARD DELAWARE, INC. By: ____________________________________ Name: Title: Address: INCUVEST, LLC By: ____________________________________ Name: Title: Address: EX-99.3 4 w41159ex99-3.txt NOTE PURCHASE AGREEMENT 1 Exhibit 99.3 NOTE PURCHASE AGREEMENT THIS NOTE PURCHASE AGREEMENT (this "AGREEMENT") is made and shall be effective as of the 14th day of May, 1999, by and among XL VISION, INC., a Delaware corporation (the "COMPANY"), SAFEGUARD 99 CAPITAL, L.P., a Delaware limited partnership ("SAFEGUARD"), WHEATLEY PARTNERS, L.P., a Delaware limited partnership ("WHEATLEY"), and each of the affiliates of Wheatley set forth on Exhibit A hereto (all of such affiliates, together with Wheatley and their respective transferees, are collectively referred to herein as the "WHEATLEY GROUP"). Unless otherwise provided in this Agreement, capitalized terms used herein shall have the meanings ascribed to them in Section 8.1 hereof. BACKGROUND The Company desires to issue certain Convertible Subordinated Notes due May 14, 2004, in the aggregate principal amount of $20,000,000, as more particularly described in Section 1.1 of this Agreement. Safeguard and each member of the Wheatley Group desire to purchase, and hereby subscribe for, a Note in the principal amount set forth next to its name on Schedule 1 hereto, pursuant to the terms and conditions set forth in this Agreement. SECTION 1. SALE AND PURCHASE OF THE NOTES; CLOSING. 1.1 Sale of Notes. (a) The Company shall authorize the issuance of its Convertible Subordinated Notes due May 14, 2004, in the aggregate principal amount of $20,000,000 (individually a "NOTE" and collectively the "NOTES"). Each Note originally issued hereunder will be dated the date of its issuance, will mature on May 14, 2004, will bear interest at the rate of 6% per annum from the date of issuance, payable at maturity, and will be subject to the other terms and conditions set forth herein and in the form of Note attached hereto as Exhibit B. (b) Subject to the terms and conditions set forth herein, the Company agrees to sell, issue and deliver to Safeguard and each member of the Wheatley Group (each a "PURCHASER," and together the "PURCHASERS"), and each Purchaser severally agrees to purchase from the Company, on the Closing Date (as defined in Section 1.3), for the Purchase Price (as defined in Section 1.2), a Note in the aggregate principal amount set forth next to its name on Schedule 1 hereto. (c) The Note to be delivered to each Purchaser on the Closing Date will be in typewritten form, and will be registered for each Purchaser's account in the Purchaser's name, or such nominee name as shall be specified by such Purchaser. The Company will bear all expenses arising in connection with the preparation and issuance to the Purchasers of the Notes. 1.2 Purchase Price. 2 (a) The aggregate purchase price of the Notes to be issued and sold to the Purchasers on the Closing Date shall be Twenty Million Dollars (US$20,000,000) (the "PURCHASE PRICE"). (b) The price for the Notes purchased by each Purchaser shall be as set forth on Schedule 1 and shall be paid by wire transfer of immediately available funds to an account designated by the Company. (c) The Purchasers and the Company shall prepare and file their respective Federal income tax returns in a manner which is consistent with the allocation of the Purchase Price to the Notes as provided in this Agreement and consistent with the treatment on the Federal income tax return of each other party of matters related to such allocation. 1.3 Closing. The closing of the issuance and sale of the Notes to the Purchasers hereunder shall be held at the offices of Safeguard located at 800 The Safeguard Building, 435 Devon Park Drive, Wayne, Pennsylvania, on May 14, 1999, subject to notification of satisfaction (or waiver) of the conditions to the Closing set forth in Sections 4 and 5 below, or such later date as is mutually agreed upon by the Company and the Purchasers. As used herein, "CLOSING" shall mean the closing of the issuance and sale of the Notes to the Purchasers hereunder and the "CLOSING DATE" shall mean the date on which such Closing takes place. 1.4 Nature of Purchasers' Obligations. In committing to purchase the Notes hereunder, each Purchaser is contracting severally (and not jointly) to purchase only the aggregate principal amount of Notes set forth next to its name on Schedule 1. SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to each of the Purchasers as follows: 2.1 Organization and Standing of the Company. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite power and authority to own and lease its properties and assets and to conduct its business as now conducted. The Company is qualified to do business as a foreign corporation and is in good standing in such states where the conduct of its business or its ownership or leasing of property requires such qualification or where the failure to so qualify would have a material adverse effect on the Company's financial condition. 2.2 Authorization. The Company has all requisite power and authority to execute and deliver this Agreement and to carry out the transactions contemplated hereby. The execution, delivery and performance of this Agreement by the Company have been duly authorized by all requisite corporate action, and this Agreement has been duly executed and delivered by the Company and constitutes its valid and binding obligation, enforceable against the Company in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, moratorium, reorganization and other similar laws relating to or affecting the enforcement of creditors, rights generally, and except that the availability of specific performance, injunctive relief or other equitable remedies is subject to the discretion of the court before which any such proceeding may be brought. 2.3 No Conflict with Law or Documents. The execution, delivery and performance of this Agreement by the Company will not violate any provision of law, any rule or regulation of any governmental authority, or any judgment, decree or order of any court binding on the Company, and will not conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute a 3 default under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the properties, assets or outstanding stock of the Company under its Certificate of Incorporation or bylaws or any indenture, mortgage, lease, agreement or other instrument to which the Company is a party or by which it or any of its properties is bound. 2.4 Capitalization; Capital Stock; Affiliate Stock. (a) As of the Closing, the Company will have an authorized capitalization consisting of 10,000,000 shares of common stock, $.0l par value ("COMMON STOCK"). As of the Closing, 6,178,792 shares of Common Stock will be issued and outstanding. All the outstanding shares of Common Stock of the Company have been duly authorized, and are validly issued, fully paid and non-assessable. (b) There are no restrictions on the transfer of shares of Common Stock other than those imposed by relevant federal and state securities laws and as otherwise contemplated by this Agreement. Except as set forth on Schedule 2.4(b) hereof, there are no agreements, written or oral, understandings, trusts or other collaborative arrangements or understandings concerning the voting or transfer of the Common Stock, or which obligate the Company to effect the registration of any of its securities under the 1933 Act, except as contemplated by this Agreement. (c) The Company currently owns the number of shares of Affiliate Stock (as defined in Section 8.1) set forth on Schedule 2.4(c) hereof, free and clear of any and all liens and encumbrances of any nature whatsoever, and all of such shares of Affiliate Stock are duly authorized, validly issued, fully paid and non-assessable shares of each respective Affiliate. None of such shares of Affiliate Stock owned by the Company are subject to any rights of redemption, repurchase, rights of first refusal, preemptive rights or other similar rights, whether contractual, statutory or otherwise, for the benefit of any Person. There are no restrictions on the transfer of shares of Affiliate Stock other than those imposed by relevant federal and state securities laws and as otherwise contemplated by this Agreement. Except as set forth on Schedule 2.4(c) hereof, there are no agreements, understandings, trusts or other collaborative arrangements or understandings concerning the voting or transfer of the Affiliate Stock , or which obligate the Company to effect the registration of any of its securities under the 1933 Act, except as contemplated by this Agreement. 2.5 The Notes and Conversion Shares. The Notes, when issued and delivered against payment therefor in accordance with this Agreement, will be duly authorized and executed by the Company and will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, except as such enforcement may be limited by bankruptcy, insolvency, moratorium, reorganization and other similar laws relating to or affecting the enforcement of creditors, rights generally, and except that the availability of specific performance, injunctive relief or other equitable remedies is subject to the discretion of the court before which any such proceeding may be brought. The requisite number of shares of duly authorized and unissued Common Stock of the Company have been, or will be, duly authorized and reserved for issuance upon the conversion of the Notes in accordance with the terms of this Agreement, and no further corporate action is, or will be, required for the valid issuance of Common Stock of the Company upon the conversion of the Notes. The Company owns (or will own), will continue to own, free and clear of any and all liens and encumbrances of any nature whatsoever, and will not dispose of the requisite number of shares of duly authorized and validly issued stock of each Conversion Affiliate in order to satisfy any and all of the Company's obligations hereunder with respect to the conversion of the Notes into shares of Affiliate Stock. The Conversion Shares will, at the time of the Closing and thereafter, not be subject to preemptive or similar rights of any person and, when issued against payment therefor in accordance with the terms of this Agreement and the Notes, will be duly and validly issued, fully paid and non-assessable. 4 2.6 Consents and Approvals. Except for filings under Federal and applicable state securities laws, no permit, consent, approval or authorization of, or declaration to or filing with, any governmental or regulatory authority or other person, not made or obtained, is required in connection with the execution or delivery of this Agreement by the Company, the offer, issuance, sale or delivery of the Notes or Conversion Shares, or the carrying out by the Company of the other transactions contemplated hereby. 2.7 Private Offering. The offer, issuance and delivery to the Purchasers pursuant to the terms of this Agreement of the Notes and, assuming compliance by the Purchasers with the terms of this Agreement and applicable law, the Conversion Shares, are exempt from registration under the Securities Act of 1933, as amended (the "1933 ACT"), and neither the registration of the Notes nor the qualification of an indenture with respect thereto under the Trust Indenture Act of 1939, as amended, is required in connection with such transaction. Based on the representations of the Purchasers contained in Section 3, it is not necessary, under the circumstances contemplated by this Agreement, to register the Notes or Conversion Shares under the 1933 Act. Neither this Agreement nor any representation or warranty made by the Company in this Agreement or in any document delivered to the Purchasers pursuant hereto contain an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading. 2.8 Use of Proceeds. The proceeds from the sale of the Notes will be used by the Company to satisfy, in part, certain indebtedness of the Company owing to PNC Bank, N.A. and to Safeguard Scientifics, Inc., and for various working capital needs. 2.9 Financial Statements. (a) The unaudited balance sheet and related statements of income, cash flow and stockholders' equity of the Company as at and for the year ended December 31, 1998, together with the notes thereto, copies of which have heretofore been furnished to the Purchasers, present fairly in all material respects the financial position of the Company at such dates and the results of its operations for the periods then ended, in conformity with generally accepted accounting principles, consistently applied ("GAAP"). (b) The unaudited balance sheet and related unaudited statements of income, cash flows and stockholders' equity of the Company, as at and for the three (3) months ended March 31, 1999, present fairly in all material respects the financial position of the Company at such dates and the results of its operations for the periods then ended, in conformity with GAAP. (c) Since December 31, 1998, there has been no material adverse change in the business, properties, assets or condition (financial or otherwise) or prospects of the Company. The Company has not taken any steps, and does not currently expect to take any steps, to seek protection pursuant to any bankruptcy law, nor does the Company have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings. 2.10 Absence of Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its subsidiaries, threatened against or affecting the Company, its subsidiaries or any Conversion Affiliate or their respective directors or officers, or the Common Stock, wherein an unfavorable decision, ruling or finding would (i) have a material adverse effect on the transactions contemplated hereby, (ii) adversely affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under, this Agreement or any of the documents contemplated herein, or (iii) have a material adverse effect on the 5 business, operations, properties, financial condition, results of operations or prospects of the Company and its subsidiaries taken as a whole. 2.11 Intellectual Property Rights. The Company and its subsidiaries own or possess adequate rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights (collectively, "Intellectual Property Rights") necessary to conduct their respective businesses as now conducted. None of the Intellectual Property Rights have expired or terminated, or are expected to expire or terminate in the immediate future. The Company and its subsidiaries do not have any knowledge of any event, fact or circumstance relating to (i) any infringement by the Company or its subsidiaries or any Conversion Affiliate of any trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets or other similar rights of others, or of any such development of similar or identical trade secrets or technical information by others or (ii) any person or entity now infringing any Intellectual Property Rights or other similar rights or any such development of similar or identical trade secrets or technical information owned or used by the Company or any of its subsidiaries or any Conversion Affiliate and, there is no claim, action or proceeding being made or brought against, or to the Company's knowledge, being threatened against, the Company or its subsidiaries or any Conversion Affiliate regarding any trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets or other similar rights of others, or of any such development of similar or identical trade secrets or technical information by others or (ii) any person or entity now infringing any Intellectual Property Rights or other similar rights or any such development of similar or identical trade secrets or other infringement; and the Company and its subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing. The Company and its subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their Intellectual Property Rights. 2.12 Regulatory Permits. The Company and its subsidiaries and, to the Company's knowledge the Conversion Affiliates, possess all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, and neither the Company nor any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit. 2.13 1934 Act Compliance. To the extent any Conversion Affiliate is subject to the reporting requirements of the Securities and Exchange Act of 1934, as amended (the "1934 ACT"), such Conversion Affiliate has timely filed any and all reports and documents required thereunder with the Securities and Exchange Commission and such reports are correct and complete in all material respects. 2.14 Disclosure. No representation by the Company in this Agreement, nor any statement contained in any certificate, schedule, list or other writing furnished or to be furnished by the Company to the Purchasers pursuant to this Agreement (a) contains or shall contain any untrue statement of a material fact, or (b) omits or shall omit to state a material fact necessary in order to make the statements contained herein or therein not misleading. SECTION 3. PURCHASERS' REPRESENTATIONS AND WARRANTIES. The Purchasers understand that the Notes and Conversion Shares will not be registered under the 1933 Act, on the grounds that the sales provided for in this Agreement are exempt pursuant to Section 4(2) of the 1933 Act and/or Regulation D promulgated under Section 3(b) and/or Section 4(2) of the 1933 Act, and that the reliance of the Company on such exemptions is predicated in part on the 6 representations, warranties, covenants and acknowledgments of the Purchasers set forth in this Section 3. The representations and warranties of the Purchasers are made severally, and not jointly, and neither Purchaser is responsible for the accuracy of the other's representations and warranties hereunder. 3.1 Pre-Existing Entity. Each Purchaser represents and warrants to the Company that it was not organized for the specific purpose of purchasing the Note subscribed for by it hereunder. 3.2 Principal Place of Business. Each Purchaser represents and warrants to the Company that the address of its principal place of business is as set forth on Schedule 1 hereto. 3.3 Purchase Without View to Distribute. Each Purchaser represents and warrants to the Company that the Note to be purchased by such Purchaser is being, and any Conversion Shares acquired upon exercise of such Notes will be, acquired by such Purchaser for its own account, not as a nominee or agent, and not with a view to resale or distribution within the meaning of the 1933 Act, and the rules and regulations thereunder, and such Purchaser will not distribute the Note or Conversion Shares in violation of the 1933 Act. 3.4 Restrictions on Transfer. Each Purchaser (i) acknowledges that the Notes and Conversion Shares are not registered under the 1933 Act and that the Note and Conversion Shares (if any) to be acquired by it must be held indefinitely by it unless they are subsequently registered under the 1933 Act or an exemption from registration is available, (ii) is aware that any routine sales under Rule 144 of the Securities and Exchange Commission under the 1933 Act of Notes and Conversion Shares may be made only in limited amounts and in accordance with the terms and conditions of that Rule and that in such cases where the Rule is not applicable, compliance with some other registration exemption will be required, (iii) is aware that Rule 144 is not presently available for use by such Purchaser for resale of any such Notes and Conversion Shares, and (iv) is aware that, except as provided in Section 6.8, the Company is not obligated to register under the 1933 Act any sale, transfer or other disposition of the Notes or Conversion Shares. 3.5 Access to Information. Each Purchaser confirms that the Company has made available to it the opportunity to ask questions of and receive answers from the Company's officers and directors concerning the terms and conditions of the offering and the business and financial condition of the Company and the Conversion Affiliates, and to acquire, and the Purchaser has received to its satisfaction, such additional information, in addition to that set forth herein, about the business and financial condition of the Company and the Conversion Affiliates and the terms and conditions of the offering as it has requested. 3.6 Additional Representations of the Purchasers. (a) Each Purchaser represents that (i) it is an "accredited investor" as such term is defined in Rule 501 promulgated under the 1933 Act, (ii) its financial situation is such that it can afford to bear the economic risk of holding the Notes and Conversion Shares for an indefinite period of time and suffer complete loss of its investment in the Notes and Conversion Shares, (iii) its knowledge and experience in financial and business matters are such that it is capable of evaluating the merits and risks of its purchase of the Notes and Conversion Shares as contemplated by this Agreement, (iv) it understands that the Notes and Conversion Shares are a speculative investment, (v) it understands and has taken cognizance of all the risk factors related to the purchase of the Notes and Conversion Shares, (vi) in making its decision to purchase the Notes and Conversion Shares hereunder, the Purchaser has relied upon independent investigations made by it and, to the extent believed by it to be appropriate, the Purchaser's representatives, including the Purchaser's own professional tax and other advisors, (vii) no representations have been made to the Purchaser concerning the Notes, Conversion Shares or the Company except as set forth herein, in the Schedules hereto and the Exhibits hereto or in a document delivered pursuant hereto or thereto, (viii) the purchase of the Notes and 7 Conversion Shares by it has been duly and properly authorized and this Agreement has been duly executed by it or on its behalf; (ix) the purchase of Notes and Conversion Shares does not violate its charter, Bylaws or any law, regulation or court order applicable to it; and (x) the purchase of Notes and Conversion Shares does not impose any penalty or other onerous condition on such Purchaser under or pursuant to any applicable law or governmental regulation. 3.7 Blue Sky Requirements. Safeguard represents and warrants to the Company that it is an "institutional investor" within the meaning of the Pennsylvania Securities Act of 1972 and the regulations promulgated thereunder. SECTION 4. CONDITIONS PRECEDENT TO PURCHASERS' OBLIGATIONS. Each Purchaser's obligation to purchase and make payment for the Note subscribed for hereunder by it on the Closing Date is subject, at its option, to the satisfaction of each of the following conditions: 4.1 Proceedings and Certain Documents. All proceedings to be taken in connection with the transactions contemplated by this Agreement to be consummated on or prior to the Closing Date, and all documents incident thereto, shall be reasonably satisfactory in form and substance to each Purchaser. 4.2 Representations and Warranties. On the Closing Date, the representations and warranties contained in Section 2 hereof shall be true and correct in all material respects with the same effect as though made on and as of the Closing Date. 4.3 Performance. All the covenants, agreements and conditions contained in this Agreement to be performed or complied with by the Company on or prior to the Closing Date shall have been performed or complied with in all material respects. 4.4 Pledge Agreement. (a) On or prior to the Closing Date, the Company shall have entered into a certain Pledge Agreement in the form attached hereto as Exhibit C with Safeguard, pursuant to which the Company shall pledge, assign and grant to Safeguard, as agent for the Purchasers, a first priority lien on, and security interest in and to, the Affiliate Stock and all additions, replacements and substitutions thereto as security for the full and faithful performance of all of Company's obligations to the Purchasers hereunder (the "PLEDGE AGREEMENT"). (b) Each Purchaser hereby irrevocably appoints and authorizes Safeguard to serve as its agent under the Pledge Agreement for the purposes described therein, and to take such action on its behalf and to exercise such powers as are delegated to Safeguard thereunder. The duties of Safeguard under the Pledge Agreement shall be mechanical and administrative in nature and it shall not be deemed a fiduciary or trustee for any Purchaser. As agent under the Pledge Agreement, Safeguard shall not be required to take any action or exercise any discretion, but shall be required to act or refrain from acting (and shall be fully protected in so acting or refraining) upon the election and instructions made by holders of a majority in aggregate principal amount of the Notes then outstanding, and such election and instructions shall be binding upon all Purchasers. Notwithstanding the foregoing, upon the occurrence and continuation of an Event of Default under Sections 12.1(a)(i) or 12.1(a)(ii) of this Agreement, Safeguard shall be required, as agent under the Pledge Agreement, to pursue the remedies set forth in Section 6 of the Pledge Agreement upon the written request of any holder of a Note, in the manner described and subject to the provisions of Section 12 of this Agreement. As agent under the 8 Pledge Agreement, neither Safeguard nor any of its officers, directors, employees or agents shall be liable to any Purchaser for any action taken or omitted to be taken by it or them under or in connection with the Pledge Agreement, absent gross negligence or willful misconduct. Safeguard may resign as agent at any time upon thirty (30) days prior written notice to the Purchasers, at which time the Purchasers shall have the right to appoint a successor agent thereunder. 4.5 Consent of PNC Bank, N.A. On or prior to the Closing Date, the Company shall have obtained from PNC Bank, N.A. (i) acknowledgement and consent as to the transactions contemplated by this Agreement, and (ii) documentation satisfactory to Purchasers with respect to the release of the Affiliate Stock of ChromaVision as collateral securing certain existing indebtedness of the Company. 4.6 Certified Copies. Each Purchaser shall have received such certified copies or other copies of such documents as it may reasonably request. 4.7 No Proceedings or Litigation. No suit, action, or other proceeding seeking to restrain, prevent or change the transactions contemplated hereby or otherwise questioning the validity or legality of such transactions shall have been instituted and be pending. 4.8 Legal Opinion/Board Resolutions. Each Purchaser shall have received an opinion of Company counsel dated as of the Closing Date, in form, scope and substance reasonably satisfactory to such Purchaser and in substantially the form set forth as Exhibit D hereto. In addition, Company shall provide Purchaser with a copy of the resolutions of the Board of Directors of the Company authorizing and approving the transactions contemplated by this Agreement, certified as true and correct by the Secretary or other authorized officer of the Company. SECTION 5. CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS. The Company's obligation to sell the Notes subscribed for by the Purchasers on the Closing Date is subject, at the Company's option, to the satisfaction of each of the following conditions: 5.1 Representations and Warranties. On the Closing Date, the representations and warranties contained in Section 3 hereof shall be true and correct with the same effect as though made on and as of the Closing Date. 5.2 Performance. All the covenants, agreements and conditions contained in this Agreement to be performed or complied with by the Purchasers on or prior to the Closing Date shall have been performed or complied with in all material respects. 5.3 No Proceeding or Litigation. No suit, action, or other proceeding seeking to restrain, prevent or change the transactions contemplated hereby or otherwise questioning the validity or legality of such transactions shall have been instituted and be pending. SECTION 6. COVENANTS OF THE COMPANY. 6.1 Rule 144. The Company covenants that (i) at all times after the Company first becomes subject to the reporting requirements of Section 13 or 15(d) of the 1934 Act, the Company will use its best efforts to comply with the current public information requirements of Rule 144(c) (1) under the 1933 Act; (ii) if prior to becoming subject to such reporting requirements an over-the-counter market develops for the Common Stock of the Company, the Company will use its best efforts to make publicly available the information required by Rule 144(c) (2); and (iii) at all such times as Rule 144 is available 9 for use by the holders of the Notes or Conversion Shares, the Company will furnish each such holder upon request with all information within the possession of the Company required for the preparation and filing of Form 144. 6.2 Financial Statement; Budgets. Until such time as the Company is required to register its Common Stock pursuant to Section 12(g) of the 1934 Act, the Company shall furnish to the holders of the Notes and Conversion Shares of Common Stock then outstanding within sixty (60) days of the end of each fiscal year an unaudited, and within one hundred fifty (150) days of the end of each fiscal year an audited, consolidated balance sheet, and related, audited consolidated statements of income, cash flows, and stockholders', equity of the Company and its subsidiaries as at the end of and for such fiscal year prepared in accordance with generally accepted accounting principles, consistently applied, and accompanied by the opinion of an independent public accountant, and shall also furnish to the holders of the Notes and Conversion Shares of Common Stock then outstanding (i) within forty-five (45) days after the end of each of the first three fiscal quarters of each fiscal year, a consolidated balance sheet and consolidated statements of income, cash flow and stockholders' equity of the Company and its subsidiaries as at the end of and for such quarter and the year to date and as at the end of and for the corresponding periods of the preceding fiscal year; (ii) within thirty (30) days of the end of each calendar month, a consolidated statement of income for such month and a consolidated balance sheet as of the end of such month; (iii) no later than thirty (30) days before the commencement of each fiscal year, capital and operating expense budgets, projections of cash flows, balance sheets and profit and loss projections, all for such fiscal year, all itemized in reasonable detail, and any material revisions made in the budgets, projections or other information furnished pursuant to this subsection within ten (10) days after adoption of such revisions; and (iv) subject to the provision in Section 6.3 hereof, from time to time such other information concerning the Company and its subsidiaries as any of the holders of the Notes or Conversion Shares of Common Stock then outstanding may reasonably request. The interim statements described in clauses (i) and (ii) above shall be unaudited, but prepared in accordance with generally accepted accounting principles, consistently applied, subject only to normal year-end audit adjustments. 6.3 Inspection. Except to the extent prohibited by contracts with a governmental agency or body and by law, from and after the Closing Date, the Company shall permit each holder of the Notes or Conversion Shares of Common Stock then outstanding and its representatives, at such holder's expense, to visit and inspect the properties of the Company during normal business hours, to examine its books of account and records, and to discuss its affairs, finances, and accounts with its executive officers in each case for any purpose reasonably related to such holder's investment in the Company; provided, however, that the Company shall not be obligated to disclose any trade secret or other proprietary information unless such holder signs a non-disclosure agreement reasonably satisfactory to the Company. 6.4 Key-Man Insurance. The Company shall maintain in effect, for so long as there are any Notes outstanding, not less than $4,000,000 of key-man life insurance on the life of John Scott, $3,000,000 of the proceeds of which will be payable to the Company and $1,000,000 of the proceeds of which will be payable to a designee of John Scott. The Company represents and warrants to the Purchasers that to the best of the Company's knowledge, John Scott is insurable at regular rates on the date hereof. The Company shall at all times retain all the incidents of ownership of such insurance and shall not borrow upon or otherwise impair its right to receive the proceeds of such insurance. 6.5 Payment of Expenses. The Company shall (i) pay the expenses incurred by it in connection with the issuance and sale of the Notes and the execution, delivery and performance of this Agreement; and (ii) pay the legal fees incurred by the Purchasers in consulting with their respective counsel with respect to the negotiation, preparation, execution, performance, amendment or enforcement of this Agreement, whether or not the Closing shall have occurred. 10 6.6 Maintenance of Existence; Insurance. The Company will keep its corporate existence, rights and franchises in full force and effect; will keep its properties in good repair, working order and condition, normal wear and tear excepted; and will maintain public liability, property damage and workmen's compensation insurance and insurance on all its insurable property against fire and other hazards with responsible insurance carriers to substantially the same extent presently maintained. 6.7 Participation in Private Equity Offerings. (a) The Purchasers shall have the right and option to participate in the initial private offering of equity (e.g. common stock, preferred stock, subordinated debt and other similar types of financing commonly utilized in venture financing) securities made by any future Conversion Affiliate from time to time in an aggregate amount not to exceed 500,000 common-equivalent shares per such Conversion Affiliate (the "PARTICIPATION RIGHTS"). The Company covenants and agrees to provide for such rights in connection with its creation and organization of all future Conversion Affiliates. The Participation Rights of each Purchaser shall remain in full force and effect for a period of five (5) years from the date of this Agreement and shall survive any prepayment or conversion of the Notes hereunder. (b) The Participation Rights shall (i) be issued by the Conversion Affiliate in a written offering document delivered to each Purchaser, (ii) remain exercisable for a period of no greater than twenty-one (21) days after the commencement of the offering, and (iii) shall be transferable by the holder thereof during such period to affiliates only. The Company shall bear all costs and expenses of any Participation Rights offering other than the fees and expenses of counsel for the Purchasers. The Participation Rights granted hereunder shall be on the same terms and conditions as those issued with respect to all other participants in such offerings. (c) The Participation Rights afforded each respective Purchaser hereunder shall bear the same ratio to the aggregate Participation Rights offered to all Purchasers as the principal amount of Notes purchased by such Purchaser pursuant to this Agreement (as set forth on Schedule 1 hereto) bears to the aggregate principal amount of all Notes issued hereunder; provided, however, that in the event either Purchaser elects not to exercise its respective share of the Participation Rights granted hereunder in the entirety, the other shall have the right to exercise all or any portion of such unexercised Participation Rights. Each Purchaser agrees to promptly notify the others in writing of its election not to exercise any or all of its Participation Rights hereunder. 6.8 Registration Rights. Within thirty (30) days from the date of this Agreement, the Company shall cause each Purchaser to be granted certain demand and piggyback registration rights with respect to shares of Common Stock of the Company, which rights may be exercised upon any conversion of the Notes into Common Stock of the Company, on substantially the same, and not less favorable in any material respect, terms and conditions as those granted pursuant to that certain Registration Rights Agreement dated as of November 20, 1998, by and between Integrated Visions, Inc. and certain stockholders named therein, a copy of which is attached hereto as Exhibit E (the "REGISTRATION RIGHTS AGREEMENT"). The Company covenants and agrees that it currently has, or will obtain prior to any conversion of the Notes into any Affiliate Stock and prior to the exercise of any Participation Rights, demand and piggyback registration rights with respect to such Affiliate Stock and the equity securities issuable upon exercise of any Participation Rights, on substantially the same, and not less favorable in any material respect, terms and conditions as those granted to the Purchasers by the Company pursuant to the Registration Rights Agreement. Such demand and piggyback registration rights shall be freely transferable by the Company to the holders of the Notes. The Company covenants agrees to utilize its best efforts to obtain such demand and piggyback rights from each Conversion Affiliate as soon as practicable, with time being of the essence. 11 6.9 Securities Law Compliance. The Company shall take such action as the Company shall reasonably determine is necessary to qualify the Notes and the Conversion Shares for, or obtain exemption for the Notes and the Conversion Shares for, sale to the Purchasers pursuant to this Agreement under applicable securities and "Blue Sky" laws of states of the Unites States. 6.10 Board Observation Rights. For a period of one (1) year from the date of this Agreement, or until such time as the Wheatley Group no longer holds at least ten percent (10%) in aggregate principal amount of the Notes, whichever is greater, the Wheatley Group shall be entitled to receive reasonable prior notice of meetings of the Board of Directors of the Company and shall have the right to select one (1) individual to observe such meetings on behalf of the Wheatley Group, and to receive a copy of any materials distributed to Company directors in connection therewith. Such individual shall enter into a confidentiality agreement with the Company, on terms and conditions reasonably satisfactory to the Company, as a condition precedent to his or her observation rights hereunder. SECTION 7. THE NOTES. 7.1 Registration, Transfer and Exchange of the Notes. (a) The Company shall keep at its principal offices a register in which it shall provide for the registration of ownership of the Notes and for the transfer of the Notes. The ownership of the Notes shall be proved by reference to the register and, prior to due presentment for registration of transfer, the Company may treat the person in whose name any of the Notes shall be registered as the absolute owner thereof for the purpose of receiving payment of amounts of principal of and interest on such Note and for all other purposes. All payments made to any registered holder or upon its order shall be valid and, to the extent of the amount or amounts so paid, effectual to satisfy and discharge the liability for monies payable upon any such Note. Any demand, request, waiver, consent or vote of the registered holder of any of the Notes shall be conclusive and binding upon such holder and upon all future holders and owners of such Note or any Note issued in exchange therefor or in place thereof. (b) Upon surrender for registration of transfer of any of the Notes at the principal offices of the Company and compliance with Sections 7 and 10 hereof, the Company shall execute and register in the name of the designated transferee or transferees, one or more new Notes in such denomination or denominations (in minimum amounts of $100,000), as may be requested, in aggregate principal amount equal to the unpaid principal amount of the Note so surrendered and substantially in the form thereof, with appropriate insertions and variations, and dated and bearing interest from, the date to which interest has been paid on the Note so surrendered unless no interest has been paid on the Note so surrendered, in which case the new Note shall be dated the date of the Note surrendered and the Company shall, in the same manner aforesaid, issue a new Note to the transferor in an amount equal to the untransferred unpaid principal amount of the Note surrendered for transfer. (c) At any time upon the request of the holder of any of the Notes and upon surrender of such Note for such purpose at the principal offices of the Company, the Company will execute and register in the holder's name in exchange therefor new Notes, in such denomination or denominations (in minimum amounts of $100,000), as may be requested, in aggregate principal amount equal to the unpaid principal amount of the Note so surrendered and substantially in the form thereof, with appropriate insertions and variations, and dated, and bearing interest from, the date to which interest has been paid on the Note so surrendered unless no interest has been paid on the Note so surrendered, in which case the new Notes shall be dated the date of the Note so surrendered. 12 (d) Upon receipt by the Company of evidence reasonably satisfactory to it that any of the Notes has been mutilated, destroyed, lost or stolen, and, in the case of any destroyed, lost or stolen Note, a bond of indemnity reasonably satisfactory to the Company, or in the case of a mutilated Note, upon surrender and cancellation thereof, the Company shall execute and register in the holder's name a new Note in exchange and substitution for the Note so mutilated, destroyed, lost or stolen in an aggregate principal amount equal to the unpaid principal amount of the Note so mutilated, destroyed, lost or stolen and substantially in the form thereof, with appropriate insertions and variations, and dated and bearing interest from the date to which interest has been paid on the Note so mutilated, destroyed, lost or stolen unless no interest has been paid on the Note so mutilated, destroyed, lost or stolen, in which case the new Note shall be dated the date of the Note so mutilated, destroyed, lost or stolen. (e) All Notes presented or surrendered for exchange or transfer as provided in this Section 7.1 shall, if required by the Company, be accompanied by a written instrument or instruments of transfer, duly executed by the registered holder thereof or its attorney duly authorized in writing. No charge shall be made by the Company in respect of any transfer or exchange of Notes, but the holder shall bear any applicable transfer tax. (f) All Notes issued pursuant to this Section 7.1 shall contain the restrictive legends on the Note surrendered for transfer or exchange or which has been mutilated, lost, destroyed or stolen, unless such legends may be removed under Section 10.4 hereof. 7.2 Transfer Taxes. The Company will pay, and hold the Purchasers harmless against, liability for the payment of any transfer or similar taxes payable in connection with the issuance and sale of the Notes and Conversion Shares pursuant hereto. 7.3 Payment of Principal and Interest. The Company will make all payments of principal and interest on the Notes at the time the same shall become due thereunder or hereunder. 7.4 Notice of Default. The Company shall promptly notify each Purchaser of the occurrence of any default under any instrument evidencing or pursuant to which there shall be issued any Senior Indebtedness of the Company (as defined in Section 11.1) that has resulted in the holder of such Senior Indebtedness declaring a default thereunder or exercising any remedy with respect thereto. 7.5 Method of Payment. The Company will promptly and punctually pay the principal of and interest on the Notes to the holders thereof without any presentment thereof and without any notation of such payment being made thereon (except that presentment shall be required for payment of the Notes at maturity). The Company will pay all amounts payable to such holder in respect of principal of (other than the final payment of principal at maturity) and interest on the Notes by check mailed to such holder, if a Purchaser, at the address specified on Schedule 1 and, if a holder other than a Purchaser, at an address designated by such holder to the Company in writing, or at such other place as a holder may from time to time designate to the Company in writing. In the case of any sale or transfer of the Note by a Purchaser (which sale or transfer is subject to the restrictions set forth in Sections 3, 7 and 10 hereof ), such Purchaser shall notify the Company of the name and address of the transferee of such Note and prior to the delivery of any Note sold or transferred by such Purchaser, such Purchaser shall make a notation thereon of the date to which interest has been paid on the Note, and, if not theretofore made, a notation of the extent to which any payment has been made on account of the principal thereof. Payment of interest or principal pursuant to this Section 7.5 shall constitute satisfaction in full of the obligation of the Company in respect thereof notwithstanding any prior transfer by a Purchaser of the Note on which interest or principal shall have been so paid unless and until notice of such transfer shall have been given to the Company as herein provided. 13 SECTION 8. CONVERSION. 8.1 Optional Conversion. (a) At any time and from time to time after the date hereof, and subject to the provisions of this Section 8, at the election of either the holders of a majority in aggregate principal amount of the Notes then outstanding, or the holders of a majority in aggregate principal amount of the Notes then outstanding held by the Wheatley Group (the "WHEATLEY NOTES"), by written notice to the Company and to all other Purchasers, the Purchasers or the Wheatley Group, following the expiration of a fifteen (15) day waiting period following delivery of such written notice, may convert all or any portion of the then outstanding principal balance and interest under the Notes, or the Wheatley Notes, as the case may be, into fully paid and non-assessable shares of (i) common stock of any of the Conversion Affiliates (as defined below) owned by the Company as of the conversion date (the "AFFILIATE STOCK"), and/or (ii) Common Stock of the Company; provided, however, that in no event may any portion of the Notes be converted: (A) into greater than one-third (1/3) of the total number of shares, up to a maximum of 500,000 shares, of Affiliate Stock of any one (1) Conversion Affiliate issued or sold by the Conversion Affiliate to the Company from time to time (excluding any such shares granted by the Company or specifically reserved by the Company's Board of Directors for grant to Company employees or management under the benefit or incentive plans of the Company from time to time (the "RESERVED AFFILIATE STOCK"), which Reserved Affiliate Stock shall not, at any time exceed, in the aggregate, greater than sixty percent (60%) of the total number of shares of Affiliate Stock of such Conversion Affiliate issued or sold by the Conversion Affiliate to the Company); (B) during any underwriter lockup period affecting the Common Stock or the Affiliate Stock, as applicable, relating to a registration of the Common Stock or Affiliate Stock under the 1933 Act; or (C) into shares of the Common Stock of the Company prior to the Company's IPO (as defined below). Upon request, the Company's Chief Financial Officer shall provide each Purchaser with a schedule identifying the maximum number of shares of each Conversion Affiliate reserved for conversion and shall regularly update such schedule upon any changes to the information set forth thereon. The initial conversion price shall be equal to seventy-five percent (75%) of the initial gross selling price to the public per share of common stock of the applicable Conversion Affiliate pursuant to its IPO with respect to each share of Affiliate Stock other than (I) shares of ChromaVision Medical Systems, Inc. ("ChromaVision"), for which the initial conversion price shall be $9.07 per share, and (II) shares of any Conversion Affiliate for which an IPO is consummated pursuant to the Safeguard rights offering program, for which the initial conversion price shall equal the rights offering price relating thereto (each of the foregoing being referred to herein as the "AFFILIATE CONVERSION PRICE"), and the initial conversion price with respect to shares of Common Stock shall be $7.27 per share ("COMPANY CONVERSION PRICE," and collectively with the Affiliate Conversion Price, the "CONVERSION PRICE"), each subject to adjustment as described below. The number of shares issuable upon conversion of the Note shall be determined by dividing the principal amount to be converted by the Conversion Price in effect on the conversion date. Upon conversion, no payment or adjustment for accrued interest on the Notes (other than the payment of interest to the Purchasers upon conversion if the Notes have been called for full prepayment pursuant to Section 9 hereof) or for cash dividends or distributions on the Common Stock or Affiliate Stock will be made. The Company will deliver a check in lieu of any fractional share issuable upon conversion. 14 (b) The principal amount of the Notes to be converted hereunder shall be allocated as nearly as may be possible among the respective Notes and holders thereof so that the principal amount converted by each holder shall bear the same ratio to the aggregate principal amount then to be converted as the unpaid principal amount of Notes then held by such holder bears to the aggregate unpaid principal amount of all Notes then outstanding held by the converting holders. (c) EACH NOTE HOLDER, OTHER THAN THE WHEATLEY NOTE HOLDERS, HEREBY AGREES TO BE BOUND BY EACH CONVERSION ELECTION MADE BY HOLDERS OF A MAJORITY IN AGGREGATE PRINCIPAL AMOUNT OF THE NOTES THEN OUTSTANDING. SIMILARLY, EACH WHEATLEY NOTE HOLDER HEREBY AGREES TO BE BOUND BY EACH CONVERSION ELECTION MADE BY HOLDERS OF A MAJORITY IN AGGREGATE PRINCIPAL AMOUNT OF THE WHEATLEY NOTES THEN OUTSTANDING. EACH NOTE HOLDER, OR WHEATLEY NOTE HOLDER, AS THE CASE MAY BE, HEREBY SPECIFICALLY CONSENTS TO ALL SUCH ELECTIONS AND AGREES NOT TO TAKE ANY ACTION INCONSISTENT THEREWITH, EXCEPT AS OTHERWISE AUTHORIZED UNDER THIS AGREEMENT. (d) The terms listed below shall have the following meanings for purposes of this Agreement: (i) "CONVERSION AFFILIATES" shall mean Integrated Vision, Inc., Who?Vision Systems, Inc., eMerge Vision Systems, Inc. and ChromaVision, and each future corporation created by the Company, collectively, and each such entity individually is sometimes referred to herein as a "CONVERSION AFFILIATE." (ii) "CONVERSION SHARES" shall mean Common Stock, Affiliate Stock or any other securities issued or issuable upon the conversion or prepayment of the Notes. (iii) "IPO" means a company's initial public offering of its common stock pursuant to an effective registration statement filed pursuant to the 1933 Act (other than on Form S-4 or S-8 or any successor forms thereto) in an underwritten public offering on a firm commitment basis in which the gross proceeds of the offering will equal or exceed $15,000,000 (calculated before deducting underwriters' discounts and commissions and other offering expenses), and in which the public offering price per share of common stock (calculated before deducting underwriters' discounts and commissions) results in a valuation of the total number of outstanding shares of capital stock immediately prior to the closing of the public offering of at least $75,000,000. (iv) "TRADING DAY" means any day on which the stock market listing such security is open for business and a trade was made in the applicable security. 8.2 Mandatory Conversion. At any time and from time to time beginning eighteen (18) months after the completion date of the IPO of any Conversion Affiliate, and subject at all times to the provisions of this Section 8, the Company may, pursuant to written notice delivered to each Purchaser in the manner described herein, require the Purchasers to convert all or any portion of the then outstanding principal balance and interest under the Notes into fully paid and non-assessable shares of the Affiliate Stock of such Conversion Affiliate in accordance with and in the maximum amount permitted by Section 8.1 above; provided, however, that the Purchasers shall have no obligation to convert hereunder in the event that either (i) the closing price of the Affiliate Stock to be received in connection with such conversion failed to exceed a price equal to two (2) times the applicable Conversion Price per share in any of the immediately preceding sixty-five (65) Trading Days, or (ii) the Company fails or is otherwise 15 unable to deliver to the Purchasers, as of the date of conversion, the registration rights described in Section 6.8 hereof with respect to the shares of Affiliate Stock into which the Notes are to be converted. 8.3 Conversion. To convert Note principal hereunder, each Purchaser must (a) complete and sign the conversion notice included with each Note, (b) surrender their respective Notes to the Company, (c) furnish appropriate endorsements and transfer documents, if required by the Company, and (d) pay any transfer or similar tax, if required. 8.4 Reserve for Conversion; Delivery of Stock Certificates. The Company shall reserve at all times and keep available free from preemptive rights, out of its authorized but unissued Common Stock, enough shares of Common Stock to permit the maximum conversion of principal amount of the Notes permissible under this Agreement. If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the maximum conversion of the Notes or otherwise to comply with the terms of this Agreement, the Company shall promptly take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes. The Company shall reserve at all times the Affiliate Stock and shall not sell, transfer, pledge or otherwise encumber the Affiliate Stock currently held by it (except in connection with a transfer of Reserved Affiliate Stock in accordance with the terms of this Agreement or with respect to that number of shares of Affiliate Stock in excess of the number required to permit the maximum conversion of the Notes permissible under this Agreement), and shall retain enough shares of Affiliate Stock to permit the maximum conversion of the Notes permissible under this Agreement. The Company will obtain any authorization, consent, approval or other action by, or make any filing with, any court or administrative body that may be required under applicable federal and state securities laws in connection with the issuance of shares of Common Stock and Affiliate Stock upon conversion of the Notes. The Company shall take any and all action necessary or appropriate in order to effectuate any authorized conversion of any Note hereunder in accordance with the terms and conditions of this Agreement. As soon as practicable on or after the conversion date, and not less than ten (10) business days thereafter, the Company shall deliver to Purchasers a certificate for the number of full shares of Company Stock or Affiliate Stock issuable upon the conversion of the Notes. 8.5 PURCHASERS ACKNOWLEDGE THAT THE COMMON STOCK AND AFFILIATE STOCK ISSUED UPON CONVERSION OF THE NOTE MAY BE RESOLD, ASSIGNED, PLEDGED OR OTHERWISE TRANSFERRED ONLY PURSUANT TO AN EXEMPTION FROM REGISTRATION IN ACCORDANCE WITH RULE 144 (IF AVAILABLE) UNDER THE SECURITIES ACT OR AS OTHERWISE MAY BE AVAILABLE UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS IN THE OPINION OF COUNSEL FOR THE COMPANY OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT WITH RESPECT TO SUCH SHARES AND IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES. 8.6 Dilution. The Conversion Price with respect to shares of Common Stock and Affiliate Stock issuable upon conversion of the Note shall be subject to adjustment from time to time as follows: (a) On any recapitalization through the subdivision or combination of the outstanding Common Stock or Affiliate Stock into a greater or smaller number of shares for no consideration, the Conversion Price shall be appropriately decreased or increased to reflect such recapitalization; provided, however, that, with respect to shares of any Conversion Affiliate, such decrease or increase shall only apply in the event that such recapitalization occurs subsequent to the IPO with respect to such shares. 16 (b) If the Company or a Conversion Affiliate takes a record of the holders of its common stock for the purpose of entitling them to receive a stock dividend or other distribution payable in Common Stock or Affiliate Stock, or in securities convertible into or exchangeable for Common Stock or Affiliate Stock, the maximum number of shares of Common Stock or Affiliate Stock, as applicable, issuable in payment of such dividend or distribution, or on conversion of or in exchange for the securities convertible into or exchangeable for Common Stock or Affiliate Stock, shall be deemed to have been issued and to be outstanding as of such record date, and the Conversion Price shall be appropriately decreased, provided that if the dividend or distribution is subsequently canceled such that the Company or the Conversion Affiliate shall have no liability therefor then the Conversion Price shall be appropriately increased to reflect such cancellation. (c) The adjustments described in the preceding paragraphs shall become effective immediately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a subdivision, combination or other recapitalization. Appropriate adjustments shall be made in the application of the foregoing provisions so that such provisions shall be applicable, as nearly as reasonably may be, in relation to any securities or other assets thereafter deliverable on conversion of the Notes. (d) No adjustment in the Conversion Price shall be required in the case of the issuance or granting by the Company or any Conversion Affiliate of Common Stock, Affiliate Stock or other equity securities of Company for fair value for any valid corporate purpose including, but not limited to, financing, capital, employee or officer incentive programs, or conversion of warrants or other equity securities of the Company or any Affiliate outstanding as of the date hereof or as may be hereafter issued. (e) In case of any reclassification of the Common Stock or Affiliate Stock (other than a subdivision or combination referred to in Subsection (a) above), or in case of any consolidation of the Company or a Conversion Affiliate with, or merger of the Company or a Conversion Affiliate into, another corporation (other than a consolidation or merger in which the Company or a Conversion Affiliate, as applicable, is the continuing corporation and which does not result in a reclassification or exchange of the Common Stock or Affiliate Stock, as applicable), or in case of any sale or conveyance to another corporation of the property of the Company or a Conversion Affiliate as an entirety or substantially as an entirety, Company, or such successor or purchasing corporation or person, as the case may be, shall execute (or, in the case of a Conversion Affiliate, the Company shall use its best efforts to obtain) and deliver to Purchasers a legally enforceable supplemental agreement providing that the Purchasers shall thereafter have the right to convert the Note into the kind and amount of shares of stock and other securities and property receivable upon such consolidation, merger, sale or conveyance by Purchasers of the number of shares of Common Stock or Affiliate Stock into which the Note might have been converted immediately prior to such consolidation, merger, sale or conveyance. Such agreement shall provide for adjustments in the Conversion Price which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 8; provided, however, that, with respect to the shares of any Conversion Affiliate, in the event that such consolidation, merger, sale or conveyance occurs prior to the IPO with respect to such shares, then the applicable Affiliate Conversion Price shall be $5.00 per share. The provisions of this Subsection (e) shall similarly apply to succeeding reclassifications, consolidations, mergers, sales or conveyances. (f) The Company shall promptly notify each Purchaser in writing upon the occurrence of any event requiring an adjustment to the Conversion Price under this Agreement. Whenever the Conversion Price is adjusted as herein provided, the Company shall promptly provide each Purchaser with written notice of such change, indicating its nature and stating the new Conversion Price. 17 SECTION 9. PREPAYMENT OF NOTES. 9.1 Prepayment in Cash. Subject to the terms set forth in this Section 9, the Company may prepay all or any portion of the principal and interest due under the Notes in cash at any time on or after May 1, 2001, at the prepayment prices (expressed in percentages of principal amount) set forth in the following table, plus accrued interest to, but not including, the prepayment date set forth in Section 9.3, if prepaid during the twelve (12) month period beginning May 1 of the years set forth in the following table:
YEAR PERCENTAGE 2001 104% 2002 102% 2003 and thereafter 100%
Any such payments shall only be made in integral multiples of $100 by check payable in a manner consistent with payments of principal and interest under this Agreement. Any such payment shall be applied first against any accrued and unpaid interest and then against outstanding principal amounts. 9.2 Prepayment in Stock. The Company may prepay a portion of the principal and interest due under the Notes at any time with shares of Affiliate Stock of any of the Conversion Affiliates at a price equal to the lesser of (i) seventy-five percent (75%) of the average closing price per share of the applicable Affiliate Stock for the twenty (20) Trading Days immediately preceding the date of prepayment, or (ii) eighty percent (80%) of the closing price per share of the applicable Affiliate Stock on the Trading Day immediately preceding the date of prepayment; provided, however, the Company shall have no right to prepay any principal or interest on the Notes with Affiliate Stock unless (x) the average closing price of such Affiliate Stock for the twenty (20) Trading Days immediately preceding the date of repayment, and the closing price per share of such applicable Affiliate Stock on the Trading Day immediately preceding the date of prepayment, is at least equal to two (2) times the applicable Conversion Price per share, (y) either eighteen (18) months have elapsed since the IPO completion date for such Conversion Affiliate or ninety (90) days have elapsed since the completion date of a second public offering of the common stock of such Conversion Affiliate pursuant to a Form S-1, S-2 or S-3 registration statement under the 1933 Act, and (z) the registration rights described in Section 6.8 shall be in effect with respect to the holders of the Notes. In addition, in no event may the Company prepay more than $5,000,000 in the aggregate of principal under the Notes through the conversion into Affiliate Stock of any one (1) Conversion Affiliate, or prepay principal under the Notes through the issuance of greater than 500,000 shares in the aggregate of Affiliate Stock in any one (1) Conversion Affiliate. Any prepayments hereunder shall be made in accordance with the procedures set forth in Section 8.3 above. Any such payment shall be applied first against any accrued and unpaid interest and then against outstanding principal amounts. 9.3 Prepayment Procedures. Any prepayment of Notes under this Section 9 shall be made by giving the holders of the Notes not less than thirty (30) days prior written notice thereof at its registered address. If there is more than one holder of the Notes, the principal amount of the Notes so to be prepaid shall be allocated as nearly as may be possible among the respective Notes and holders thereof so that the principal amount prepaid to each holder shall bear the same ratio to the aggregate principal amount then to be prepaid as the unpaid principal amount of Notes then held by such holder bears to the aggregate unpaid principal amount of all Notes then outstanding. If any Note is to be prepaid only in part, upon the surrender of the Note to the Company for prepayment, the Company shall execute and deliver to the holder of the Note so surrendered a new Note equal in principal amount to the unpaid portion of the 18 surrendered Note, dated the most recent date to which interest shall have been paid on the surrendered Note and bearing the restrictive legends, if any, on the surrendered Note. Upon the fixing of a date for prepayment pursuant to this Section 9.3, the Notes or portions to be prepaid shall cease to bear interest and cease to be convertible on the date fixed for prepayment unless the Company shall default in making such prepayment. SECTION 10. COMPLIANCE WITH 1933 ACT; RESTRICTIONS ON TRANSFERABILITY OF NOTES AND CONVERSION SHARES. 10.1 Compliance with 1933 Act. The Notes and Conversion Shares shall not be transferable, except upon the conditions specified in this Section 10, which conditions are intended to insure compliance with the provisions of the 1933 Act and applicable state securities laws in respect of any such transfer. 10.2 Restrictive Legend. The Notes and each certificate representing the Conversion Shares and any shares of common stock or other securities issued in respect of such Conversion Shares upon any stock split, stock dividend, recapitalization, merger, consolidation or similar event, shall (unless otherwise permitted by the provisions of Section 10.4 below) be stamped or otherwise imprinted with the following legend: "[THIS NOTE HAS] OR [THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE] NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW AND THE TRANSFERABILITY [T]HEREOF IS SUBJECT TO THE PROVISIONS OF A CERTAIN NOTE PURCHASE AGREEMENT DATED AS OF MAY 14, 1999, BY AND AMONG XL VISION, INC. AND THE PURCHASERS NAMED THEREIN" 10.3 Restrictions on Transferability. The Company shall not be required to register the transfer of the Notes or any Conversion Shares of Common Stock on the books of the Company unless registration under the 1933 Act or any applicable state securities law is not required in connection with the transaction resulting in such transfer. Each Note or certificate for Conversion Shares of Common Stock issued upon any transfer as above provided shall bear the restrictive legend set forth in Section 10.2 above, except that such restrictive legend shall not be required if such legend is not required in order to establish compliance with the provisions of the 1933 Act and any applicable state securities law, or if the transfer is made in accordance with the provisions of Rule 144(k) under the 1933 Act. The Company agrees to provide each Note holder with any and all information reasonably requested in connection with its efforts to remove such legend from any Affiliate Stock certificate. 10.4 Termination of Restrictions on Transferability. The conditions precedent imposed by this Section 10 upon the transferability of the Notes and Conversion Shares shall cease and terminate as to any of the Notes or Conversion Shares when (i) such securities shall have been registered under the 1933 Act and sold or otherwise disposed of in accordance with the intended method of disposition by the seller or sellers thereof set forth in the registration statement covering such securities, (ii) at such time as an opinion of counsel satisfactory to the Company shall have been rendered to the effect that the restrictive legend on such securities is no longer required, or (iii) when such securities are transferred in accordance with the provisions of Rule 144(k) promulgated under the 1933 Act. Whenever the conditions imposed by this Section 10 shall terminate as provided herein with respect to any of the Notes or Conversion Shares, the holder of any such securities bearing the legend set forth in this Section 10 as to which such conditions shall have terminated shall be entitled to receive from the Company, without expense (except for the payment of any applicable transfer tax) and as expeditiously as possible, 19 new Notes in accordance with Section 7.1(b) or (c) hereof or new stock certificates not bearing such legend. SECTION 11. SUBORDINATION OF NOTES. 11.1 Subordination. The indebtedness evidenced by, and the payment of the principal of and interest on, the Notes is hereby expressly subordinated and made junior, to the extent and in the manner set forth in this Agreement, to the prior payment in full of all Senior Indebtedness of the Company and will rank pari passu in all respects with other subordinated indebtedness of the Company. The Company hereby covenants and agrees that it will not, without the prior consent of the holders of a majority in aggregate principal amount of the Notes then outstanding, incur in excess of Five Million Dollars ($5,000,000) of parri passu indebtedness at any time for so long as any principal of or interest on the Notes remains outstanding hereunder. As used herein, "Senior Indebtedness" means any indebtedness, including interest and collection charges, of the Company, whether now existing or hereafter created, and all refinancings thereof, to any bank, trust company, pension or profit-sharing trust (other than such a trust for the benefit of employees of the Company), insurance company or other financial institution, except any such indebtedness which by its express terms is not senior in right of payment to the Notes. As used in the foregoing definition, "indebtedness" means (i) all obligations for borrowed money or for the deferred portion of the purchase price of any asset, (ii) all rental obligations under leases which, in accordance with generally accepted accounting principles, are shown as capitalized obligations on the Company's balance sheet as of the date as of which indebtedness is to be determined, and (iii) indebtedness secured by any mortgage, pledge, lien or security interest existing on property owned by the Company whether or not the indebtedness secured thereby shall have been assumed. 11.2 Insolvency. In the event of any insolvency or bankruptcy proceedings, or any receivership, liquidation, reorganization or other similar proceedings in connection therewith, relative to the Company or to its creditors as such, or to its property, or in the event of any proceedings for voluntary liquidation, dissolution or other winding-up of the Company, whether or not involving insolvency or bankruptcy, then the holders of Senior Indebtedness shall be entitled to receive payment in full of all principal, premium, if any, and interest on all Senior Indebtedness before the holder or holders of the Notes are entitled to receive any payment on account of principal of or interest on the Notes and the holders of Senior Indebtedness shall be entitled to receive, ratably according to the aggregate amounts remaining unpaid on account of the Senior Indebtedness held by each such holder, to the extent necessary to make payment in full of all Senior Indebtedness remaining unpaid after giving effect to any concurrent payment or distribution (or provision therefor) to the holders of Senior Indebtedness, for application in payment thereof, any payment or distribution of any kind or character, whether in cash or property or securities, which may be payable or deliverable in any such proceedings in respect of the Notes, except securities which are subordinate and junior in right of payment to the payment of all Senior Indebtedness then outstanding. 11.3 Maturity of or Default on Senior Indebtedness. (a) Upon the maturity of any Senior Indebtedness by lapse of time, acceleration or otherwise, and the giving of written notice thereof to the holders of the outstanding Notes by the holder or holders of such Senior Indebtedness, all principal thereof (and premium, if any) and interest due thereon shall first be paid in full, or such payment duly provided for in cash or in a manner satisfactory to the holder or holders of such Senior Indebtedness, before any payment is made on account of the principal of or interest on the Notes or to purchase any of the Notes. (b) Upon the happening of an event of default with respect to any Senior Indebtedness, as such event of default is defined therein or in the instrument under which it is 20 outstanding, permitting the holders to accelerate the maturity thereof, and upon written notice thereof given to the Company and the holders of any outstanding Notes by the holder or holders of such Senior Indebtedness or their representative or representatives, then, unless and until such event of default shall have been cured or waived or shall have ceased to exist, no payment thereafter shall be made by the Company with respect to the principal of or interest on the Notes or to purchase any of the Notes. In the event that, notwithstanding the foregoing, following any such event of default in respect of Senior Indebtedness and the giving of written notice thereof to the Company and the holders of any outstanding Notes, any such payment or distribution shall be received by any holder of the Notes before all Senior Indebtedness is paid in full, such payment or distribution shall be held in trust for the benefit of and shall be paid over to the holders of the Senior Indebtedness or their representative or representatives, ratably according to the aggregate amounts remaining unpaid on account of the Senior Indebtedness held by each such holder, to the extent necessary to make payment in full of the principal of (and premium, if any) and interest on, all Senior Indebtedness. (c) Any payment or distribution received by any holder of Notes prior to (i) written notice of maturity of Senior Indebtedness given to such holder under paragraph (a) above or (ii) an event of default with respect to the Senior Indebtedness and written notice given to such holder under paragraph (b) above, may be retained by such holder. 11.4 Rights. No right of any present or future holder of any Senior Indebtedness of the Company to enforce the subordination of the Notes as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act by any such holder, by the Company, or by any holder of any Note, or by any noncompliance by the Company with the terms, provisions and covenants of this Agreement or of any Note. The provisions of this Section 11 with respect to subordination shall not affect the obligations of the Company to make, or prevent the Company from making, at any time, except as provided in Sections 11.2 and 11.3, payments of principal of or interest on the Notes when the same shall be due and payable. The provisions of this Section 11 in regard to subordination are solely for the purpose of defining the relative rights of the holders of Senior Indebtedness on the one hand, and the holders of the Notes on the other hand, and nothing herein shall impair, as between the Company, its creditors other than the holders of Senior Indebtedness, and the holders of the Notes, the obligation of the Company, which is unconditional and absolute, to pay to the holder of any Note the principal thereof and interest thereon in accordance with its terms, or affect the relative rights of the holders of the Notes and creditors of the Company other than holders of the Senior Indebtedness, nor shall anything in this Agreement or the Notes prevent the holders of the Notes from exercising all remedies otherwise permitted by applicable law or under this Agreement or the Notes upon default thereunder, subject to the rights, if any, under this Section 11 of holders of Senior Indebtedness to receive cash, property or securities otherwise payable or deliverable to the holders of the Notes. Upon any payment or distribution of assets of the Company referred to in this Section 11, the holders of the Notes shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which dissolution, winding-up, liquidation, reorganization or other similar proceedings are pending or upon a certificate of the liquidating trustee or agent or other person making any distribution to the holders of the Notes for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Section 11. The holders of the Senior Indebtedness may extend, renew, modify or amend the terms of the Senior Indebtedness or any security therefor and may release, sell or exchange such security and otherwise deal freely with the Company, all without notice to or consent of the holders of the Notes and without affecting the liabilities and obligations of the holders of the Notes. 11.5 Subrogation. In the event that cash, securities or other property otherwise payable or deliverable to the holders of the Notes shall have been applied pursuant to this Section 11 to 21 the payment of Senior Indebtedness, then, subject to the payment in full of all principal of (and premium, if any) and interest on Senior Indebtedness and to any applicable preference period relating thereto, the holders of the Notes (a) shall be entitled to receive from the holders of Senior Indebtedness at the time outstanding any payments or distributions received by such holders of Senior Indebtedness in excess of the amount sufficient to pay all principal of (and premium, if any) and interest on Senior Indebtedness in full and (b) shall be subrogated to all rights of any holders of Senior Indebtedness to receive payments or distributions of cash, property or assets of the Company applicable to the Senior Indebtedness, until all principal of and interest on the Notes shall be paid in full. No such payments or distributions received by the holders of the Notes shall, as between the Company and its creditors, if any, other than the holders of Senior Indebtedness, on the one hand, and the holders of the Notes, on the other hand, be deemed to have been made as a payment by the Company to or on account of the Notes, it being understood that the provisions of this Section are and are intended solely for the purpose of defining the relative rights of the holders of the Notes, on the one hand, and the holders of the Senior Indebtedness, on the other hand. 11.6 Binding Effect. The Company covenants and agrees, and each holder of any Note, by acceptance thereof, likewise covenants and agrees that the Notes shall be issued subject to the provisions of this Section 11, and each holder of any Note, whether upon original issue or upon transfer or assignment thereof, accepts and agrees to be bound thereby. 11.7 Pledge Agreement and Conversion Rights. Notwithstanding the provisions of this Section 11, the Purchasers shall be entitled to (i) the benefit of any and all available remedies arising under the Pledge Agreement, and (ii) exercise any and all conversion rights arising under Section 8 hereof, at any time in accordance with the terms and conditions thereof. SECTION 12. EVENTS OF DEFAULT. 12.1 Events of Default. (a) If any one or more of the following events (herein called "EVENTS OF DEFAULT") shall occur and be continuing: (i) default shall be made in the payment of any installment of interest on any of the Notes when and as the same shall become due and payable, and such default shall have continued for a period of ten (10) days after notice from the holder thereof; (ii) default shall be made in the payment of the principal of any of the Notes or any part thereof when and as the same shall become due and payable, either at maturity or at a date fixed for prepayment or by acceleration or otherwise and such default shall have continued for a period of three (3) days after notice from the holder thereof; (iii) default in any material respect shall be made in the due performance or observance of any other covenant, agreement or provision herein or in the Notes to be performed or observed by the Company or a material breach shall exist in any representation or warranty herein contained and such default or breach shall have continued for a period of thirty (30) days after written notice thereof to the Company from the holder of any Note; (iv) the Company shall (A) apply for or consent to the appointment of a receiver, trustee or liquidator of the Company or any of its property, (B) admit in writing its inability to pay its debts as they mature, (C) make a general assignment for the benefit of creditors, (D) be adjudicated a bankrupt or insolvent or (E) file a voluntary petition in bankruptcy, a petition or answer seeking reorganization or an arrangement with creditors to take advantage of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute, or an answer admitting the material allegations of a petition filed against it in any proceeding under any such law or (F) corporate 22 action shall be taken by the Company for the purpose of effecting any of the foregoing; or (G) an order, judgment or decree shall be entered, without the application, approval or consent of the Company, by any court of competent jurisdiction, approving a petition seeking reorganization of the Company or of all or a substantial part of the assets of the Company and such order, judgment or decree shall continue unstayed and in effect for a period of sixty (60) days; or (v) a default shall occur under or with respect to any Senior Indebtedness of the Company having an outstanding aggregate principal balance of more than $50,000, which default has resulted in the holder of such Senior Indebtedness declaring a default thereunder and exercising any remedy with respect thereto; then and in each and every such case of (x) an Event of Default under Sections 12.1(a)(i) or 12.1(a)(2) any holder of a Note then outstanding may by notice in writing to the Company declare the unpaid principal of its Note, with accrued interest, to be forthwith due and payable whereupon such principal and interest shall be due and payable without presentation, protest or further demand or notice of any kind, all of which are hereby expressly waived, and (y) any other Event of Default (other than pursuant to Sections 12.1(a)(i) and 12.1(a)(2)), the holders of a majority in aggregate principal amount of the Notes then outstanding, may by notice in writing to the Company declare the unpaid principal of its Note(s), with accrued interest, to be forthwith due and payable whereupon such principal and interest shall be due and payable without presentation, protest or further demand or notice of any kind, all of which are hereby expressly waived. EACH NOTE HOLDER HEREBY AGREES TO BE BOUND BY EACH EVENT OF DEFAULT ELECTION MADE BY HOLDERS OF A MAJORITY IN AGGREGATE PRINCIPAL AMOUNT OF THE NOTES THEN OUTSTANDING. EACH NOTE HOLDER HEREBY SPECIFICALLY CONSENTS TO ALL SUCH ELECTIONS AND AGREES NOT TO TAKE ANY ACTION INCONSISTENT THEREWITH, EXCEPT AS OTHERWISE AUTHORIZED UNDER THIS AGREEMENT. (b) If a holder of a Note shall demand payment thereof or take any other action provided for hereunder (of which the Company has actual knowledge) in respect of an Event of Default, the Company will forthwith give written notice thereof, specifying such action and the nature of such event, to each holder of record of the Notes then outstanding. The Company will also give prompt written notice to each holder of record of the Notes at the time outstanding of any written instrument of rescission or annulment filed with it as aforesaid. (c) The Company covenants that, if default be made in any payment of principal of or interest on any Note, it will pay to the holder thereof such further amount as shall be sufficient to cover the reasonable costs and expenses of collection, including reasonable counsel fees. (d) No course of dealing between the Company and any holder of a Note or any delay on the part of the holder of a Note in exercising any rights thereunder or hereunder shall operate as a waiver of any rights of any such holder. (e) Prior to the declaration of acceleration of the maturity of the Notes, the holders of a majority in aggregate principal amount of the Notes at the time outstanding may waive on behalf of all the Note holders any default, except a default pursuant to Sections 12.1(a)(i) and 12.1(a)(2)). SECTION 13. INDEMNIFICATION; SURVIVAL. 13.1 Indemnification. In consideration of each Purchaser's execution and delivery of this Agreement and acquiring the Notes hereunder and in addition to all of the Company's other obligations under this Agreement, the Company shall defend, protect, indemnify and hold harmless each 23 Purchaser and each other holder of Securities and all of their officers, directors, employees and agents (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the "PURCHASER INDEMNITIES") from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Purchaser Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys' fees and disbursements (the "PURCHASER INDEMNIFIED LIABILITIES"), incurred by any Purchaser Indemnitee (and shall advance the same) as a result of, or arising out of, or relating to (a) any material misrepresentation or breach of any representation or warranty made by the Company in this Agreement, the Pledge Agreement, the Notes or any other certificate, instrument or document contemplated hereby or thereby, (b) any material breach of any covenant, agreement or obligation of the Company contained in this Agreement, the Pledge Agreement, the Notes, or any other certificate, instrument or document contemplated hereby or thereby, or (c) any cause of action, suit or claim brought or made against such Purchaser Indemnitee and arising out of or resulting from the execution, delivery, performance or enforcement by the Company of this Agreement or any other instrument, document or agreement executed pursuant hereto by any of the Purchaser Indemnitiees, or any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Notes. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Purchaser Indemnified Liabilities which is permissible under applicable law. 13.2 Survival. All covenants, agreements, representations and warranties made herein and in the certificates delivered pursuant hereto shall survive the execution and delivery of this Agreement and the issuance and sale of the Notes hereunder. SECTION 14. MISCELLANEOUS. 14.1 Owner of Conversion Shares. The Company may deem and treat the person in whose name the Conversion Shares, as the case may be, are registered as the absolute owner thereof for all purposes whatsoever, and the Company shall not be affected by any notice to the contrary. 14.2 Successors. This Agreement shall be binding upon and except as provided herein, shall inure to the benefit of the respective successors, executors, personal representatives, heirs and assigns of each of the parties hereto. 14.3 Broker or Finder. Each party to this Agreement represents and warrants that, to the best of its knowledge, no broker or finder has acted for such party in connection with this Agreement or the transactions contemplated by this Agreement and that no broker or finder is entitled to any broker's or finder's fee or other commission in respect thereof based in any way on agreements, arrangements or understandings made by such party. The Company shall indemnify each Purchaser against, and hold it harmless from, any liability, cost, or expense (including reasonable attorneys' fees and expenses) resulting from any agreement, arrangement, or understanding made by the Company, and each Purchaser shall indemnify the Company against, and hold the Company harmless from, any liability, cost, or expense (including reasonable attorneys fees and expenses) resulting from any agreement, arrangement, or understanding made by such Purchaser with any third party, for brokerage or finders fees or other commissions in connection with this Agreement or any of the transactions contemplated hereby. 14.4 Governing Law; Arbitration. (a) This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Florida. 24 (b) None of the parties to this Agreement shall institute an arbitration proceeding pursuant to this Section to resolve a dispute between the parties hereunder before the parties have sought to resolve the dispute through direct negotiation with the other parties. If the dispute is not resolved within three (3) weeks after a demand for direct negotiation, the parties shall attempt to resolve the dispute through mediation. If the parties do not promptly agree on a mediator, then either party may notify the J.A.M.S/Endispute, 345 Park Avenue, 8th floor, New York, New York, to initiate selection of a mediator from J.A.M.S/Endispute's panel of neutrals. The fees and expenses of the mediator shall be shared equally by each party to the dispute. If the mediator is unable to facilitate a settlement of the dispute within a reasonable period of time, as determined by the mediator, the mediator shall issue a written statement to the parties to that effect and the aggrieved party may then seek relief through arbitration, which shall be binding pursuant to the Commercial Arbitration Rules of the American Arbitration Association (the "ASSOCIATION"). The place of arbitration shall be Philadelphia, Pennsylvania. Arbitration may be commenced at any time by any party thereto after giving written notice in the manner described in this Agreement. A single arbitrator or arbitrators shall be selected by the joint agreement of the parties, but if they do not so agree within twenty (20) days after the date of the notice referred to above, the selection of the arbitrator(s) shall be made pursuant to the rules from the panels of the arbitrators maintained by such Association. The arbitrator(s) shall render his decision within one hundred eighty (180) days of appointment. Any award rendered by the arbitrator(s) shall be conclusive and binding upon the parties hereto; provided, however, that any such award shall be accompanied by a written opinion of the arbitrator(s) giving the reasons for the award. This provision for arbitration shall be specifically enforceable by the parties and the decision of the arbitrator(s) in accordance herewith shall be final and binding and there shall be no right of appeal therefrom. Judgment upon the award rendered by the arbitrator(s) may be entered by any court having jurisdiction thereof. The costs and expenses of arbitration, including attorneys' fees and expenses of the arbitrator(s) shall be apportioned between the parties as the arbitrator(s) may assess. The arbitrator(s) shall not be permitted to award punitive or similar type damages under any circumstances. This arbitration provision shall constitute the sole and exclusive remedy for any dispute under this Agreement. 14.5 Notice. Any notice or other communications required or permitted hereunder shall be deemed given when delivered personally, or upon receipt by the party entitled to receive the notice when sent by registered or certified mail, postage prepaid, addressed as follows or to such other address or addresses as may hereafter be furnished in writing by notice similarly given by one party to the other: To the Company: XL Vision, Inc. 10300 102 Terrace Sebastian, FL 32958 Attention: Chief Financial Officer To Safeguard: Safeguard 99 Capital, L.P. 800 The Safeguard Building 435 Devon Park Drive Wayne, PA 19087 Attention: Steven J. Rosard, Esquire To Wheatley or the Wheatley Group: 25 Wheatley Partners, L.P. 80 Cuttermill Road, Suite 311 Greatneck, NY 11021 Attention: Barry Rubenstein With a copy to: GEO Capital Corp. 767 Fifth Avenue, 45th Floor New York, NY 10153 Attention: Jonathan Lieber 14.6 Full Agreement. This Agreement together with the Notes and Exhibits and Schedules attached hereto or delivered herewith sets forth the entire understanding of the parties with respect to the transactions contemplated hereby. 14.7 Headings. The headings of the sections of this Agreement are inserted for convenience of reference only and shall not be considered a part hereof. 14.8 Business Days. Should any installment of interest on or principal of any of the Notes become due and payable upon other than a business day, the maturity thereof shall be extended to the succeeding business day and, in the case of an installment of principal, interest shall be payable thereon at the rate per annum specified in such Note during such extension. 14.9 Amendment. This Agreement may not be modified, amended or changed without the written consent of the Company and the Purchasers. 14.10 Counterparts. This Agreement may be executed in one or more counterparts which, taken together, shall constitute one and the same original document. 26 IN WITNESS WHEREOF, each of the parties hereto has fully executed this Agreement as of the date first set forth above. XL VISION, INC. By:____________________________ Name: David Szostak Title: Chief Financial Officer SAFEGUARD 98 CAPITAL, L.P. By: SAFEGUARD DELAWARE, INC. Title: General Partner By:_____________________________ Name: Title: 27 WHEATLEY GROUP: WHEATLEY PARTNERS, L.P. By: Wheatley Partners, LLC Title: General Partner By:_____________________________ Name: Barry Rubenstein Title: CEO WHEATLEY FOREIGN PARTNERS, L.P. By: Wheatley Partners, LLC Title: General Partner By:_____________________________ Name: Barry Rubenstein Title: CEO WOODLAND PARTNERS By:____________________________ Name: Barry Rubenstein Its: General Partner WOODLAND VENTURE FUND By:____________________________ Name: Barry Rubenstein Its: General Partner SENECA VENTURES By:____________________________ Name: Barry Rubenstein Its: General Partner 28 SCHEDULE 1 PRINCIPAL AMOUNT OF NOTES
NOTE PURCHASER AND ADDRESS PRINCIPAL AMOUNT OF NOTE Safeguard 99 Capital, L.P. $13,600,000 800 The Safeguard Building 435 Devon Park Drive Wayne, PA 19087 Wheatley Partners, L.P. $3,128,000 80 Cuttermill Road, Suite 311 Greatneck, NY 11021 Wheatley Foreign Partners, L.P. $272,000 80 Cuttermill Road, Suite 311 Greatneck, NY 11021 Woodland Partners $500,000 68 Wheatley Road Brookville, NY 11545 Woodland Venture Fund $1,500,000 68 Wheatley Road Brookville, NY 11545 Seneca Ventures $1,000,000 68 Wheatley Road Brookville, NY 11545 Total: $20,000,000
29 SCHEDULE 2.4(b) COMMON STOCK AGREEMENTS 1. The Company agreed, by action of its Board of Directors, to repurchase certain shares of Company common stock currently held by Company management upon the completion of the IPO with respect to either eMerge Vision Systems, Inc. or Who?Vision Systems, Inc. 2. Stock Restriction Agreement by and between the Company and certain Company common stockholders. 30 SCHEDULE 2.4(c) AFFILIATE STOCK
Affiliate Affiliate Stock - --------- --------------- Integrated Vision, Inc. 1,348,750 shares, Common Stock, representing approximately 13.1% of the issued and outstanding shares Who?Vision Systems, Inc. 1,869,031 shares, Common Stock, representing approximately 10.0% of the issued and outstanding shares eMerge Vision Systems, Inc. 2,293,458 shares, Common Stock, representing approximately 16.0% of the issued and outstanding shares ChromaVision Medical Systems, Inc. 1,432,114 shares, Common Stock, representing approximately 4.0% of the issued and outstanding shares
31 EXHIBIT A WHEATLEY GROUP Name and Address: - ---------------- Wheatley Partners, L.P. (a Delaware limited partnership) The Wheatley Group 80 Cuttermill Road, Suite 311 Greatneck, NY 11021 Wheatley Foreign Partners, L.P. (a Delaware limited partnership) 80 Cuttermill Road, Suite 311 Greatneck, NY 11021 Woodland Partners (a New York general partnership) 68 Wheatley Road Brookville, NY 11545 Woodland Venture Fund (a New York general partnership) 68 Wheatley Road Brookville, NY 11545 Seneca Ventures (a New York general partnership) 68 Wheatley Road Brookville, NY 11545 32 EXHIBIT B FORM OF NOTE THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW AND THE TRANSFERABILITY THEREOF IS SUBJECT TO THE PROVISIONS OF A CERTAIN NOTE PURCHASE AGREEMENT DATED AS OF MAY ___, 1999, BY AND AMONG XL VISION, INC. AND THE PURCHASERS NAMED THEREIN. 6% CONVERTIBLE SUBORDINATED NOTE DUE MAY 14, 2004 $_________________ May 14, 1999 FOR VALUE RECEIVED, XL VISION, INC., a Delaware corporation (the "COMPANY"), promises to pay to ____________________________________, or registered assigns ("PAYEE"), on May 14, 2004, at the principal office of the Company, 10300 102nd Terrace, Sebastian, Florida, the principal sum of __________________________________ and 00/100 Dollars ($__________), as noted on the Payee's books and records, which books and records shall be conclusive absent manifest error, in lawful money of the United States of America, together with interest (calculated on the basis of the actual number of days elapsed in a year consisting of 365 days) from the date hereof on the unpaid balance of said principal sum, at the rate of six percent (6%) per annum payable at maturity and interest on any overdue principal or interest (to the extent lawful), at the rate of nine percent (9%) per annum until paid. Presentation, demand, protest and notice of dishonor are hereby waived by the Company. This Note is one of a duly authorized issue of Notes of the Company, limited in aggregate principal amount to $20,000,000 and known as its Convertible Subordinated Notes due May 14, 2004 (the "NOTES"). The Notes are issued pursuant to a certain Note Purchase Agreement dated as of May 14, 1999, by and among the Company, Safeguard 99 Capital, L.P., and the Wheatley Group, as defined therein (the "NOTE PURCHASE AGREEMENT"). The Notes are subject to the provisions and entitled to the benefits of the Note Purchase Agreement, including without limitation, provisions subordinating the Notes to the prior payment in full of principal of, premium, if any, and interest on, all Senior Indebtedness of the Company, and Payee assents to and expressly agrees to be bound by such subordination. In case an Event of Default, as defined in the Note Purchase Agreement, shall occur, the maturity of this Note may be accelerated in the manner and with the effect provided in the Note Purchase Agreement. The Company may prepay this Note in whole or in part in certain circumstances in the manner and as and to the extent permitted under the Note Purchase Agreement. The holder of this Note may, at its option, as and to the extent provided in the Note Purchase Agreement, apply all or any portion of the outstanding principal amount of this Note to the payment of an equal dollar amount of the purchase price of the common stock of the Company or a Conversion Affiliate (as defined in the Note Purchase Agreement) issuable to the holder upon the conversion of this Note in accordance with the terms and conditions of the Note Purchase Agreement. The Company may, at its option, as and to the extent provided in the Note Purchase Agreement, apply all or any portion of the outstanding principal amount of this Note to the payment of an 33 equal dollar amount of the purchase price of the common stock of the Company or a Conversion Affiliate (as defined in the Note Purchase Agreement) issuable to the holder upon the prepayment of this Note in accordance with the terms and conditions of the Note Purchase Agreement. This Note shall be binding upon and inure to the benefit of the Company and its successors and assigns, and the registered holder of this Note and its successors and registered assigns. This Note is made and delivered in the Commonwealth of Pennsylvania, and shall be construed and enforced in accordance with, and shall be governed by, the laws of the Commonwealth of Pennsylvania. This Note is further subject to the dispute resolution and arbitration provisions set forth in the Note Purchase Agreement. INTENDING TO BE LEGALLY BOUND, XL Vision, Inc. has caused this Note to be executed in its corporate name by its duly authorized officers under its corporate seal, and to be dated as of the day and year first above written. XL VISION, INC. By: ------------------------------ Name: David Szostak Its: Chief Financial Officer 34 EXHIBIT C FORM OF PLEDGE AGREEMENT See attached. EXHIBIT D FORM OF LEGAL OPINION OF COMPANY COUNSEL See attached. EXHIBIT E FORM OF REGISTRATION RIGHTS AGREEMENT See attached. -----END PRIVACY-ENHANCED MESSAGE-----