-----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, L49ZUlxmGfZtH7aiCfhgG+SZmDu2jc6UvXBM8n74R46AUSKfrwatRPzwCL7IRJbd bCPq7c9/5nnEuAm9d98SfQ== 0000929624-98-001704.txt : 19981026 0000929624-98-001704.hdr.sgml : 19981026 ACCESSION NUMBER: 0000929624-98-001704 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19981023 SROS: CSX SROS: NYSE SROS: PCX SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ADVANCED MACHINE VISION CORP CENTRAL INDEX KEY: 0000795445 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INSTRUMENTS FOR MEASUREMENT, DISPLAY, AND CONTROL [3823] IRS NUMBER: 330256103 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-48049 FILM NUMBER: 98729756 BUSINESS ADDRESS: STREET 1: 3709 CITATION WAY STREET 2: STE 102 CITY: MEDFORD STATE: OR ZIP: 97504 BUSINESS PHONE: 5417767700 MAIL ADDRESS: STREET 1: 3709 CITATION WAY STREET 2: STE 102 CITY: MEDFORD STATE: OR ZIP: 97504 FORMER COMPANY: FORMER CONFORMED NAME: ARC CAPITAL DATE OF NAME CHANGE: 19951222 FORMER COMPANY: FORMER CONFORMED NAME: APPLIED LASER SYSTEMS /CA DATE OF NAME CHANGE: 19930825 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: FMC CORP CENTRAL INDEX KEY: 0000037785 STANDARD INDUSTRIAL CLASSIFICATION: CHEMICALS & ALLIED PRODUCTS [2800] IRS NUMBER: 940479804 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 200 E RANDOLPH DR CITY: CHICAGO STATE: IL ZIP: 60601 BUSINESS PHONE: 3128616000 FORMER COMPANY: FORMER CONFORMED NAME: BEAN SPRAY PUMP CO DATE OF NAME CHANGE: 19670706 FORMER COMPANY: FORMER CONFORMED NAME: FOOD MACHINERY & CHEMICAL CORP DATE OF NAME CHANGE: 19670706 SC 13D 1 SCHEDULE 13D SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 ----------------------------------------- SCHEDULE 13D Under the Securities Exchange Act of 1934 ADVANCED MACHINE VISION CORPORATION (Name of issuer) Class A Common Stock, No Par Value ---------------------------------- (Title of class of securities) 00753B104 --------- (CUSIP number) Steven H. Shapiro FMC Corporation 200 East Randolph Drive Chicago, Illinois 60601 (312) 861-6783 with a copy to: Laura L. Gabriel Latham & Watkins 505 Montgomery Street, Suite 1900 San Francisco, CA 94111 (415) 391-0600 ---------------------------------------- (Name, address and telephone number of person authorized to receive notices and communications) October 15, 1998 ---------------------------------------- (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 statement because of Rule 13d-1(b)(3) or (4), check the following box: [ ] SCHEDULE 13D CUSIP No. 00753B104 --------- 1. Name of Reporting Person FMC Corporation 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 7. Sole Voting Power 2,789,342 (Constituting 1,191,060 shares of Class A Common Stock issuable upon Conversion of Series B Preferred Stock and 1,598,282 shares of Class A Common Stock issuable upon exercise of an option.) Number of 8. Shared Voting Power Shares -0- Beneficially Owned By 9. Sole Dispositive Power Each 2,789,342 (Constituting 1,191,060 shares of Class Reporting A Common Stock issuable upon Conversion of Series Person B Preferred Stock and 1,598,282 shares of Class A With Common Stock issuable upon exercise of an option.) 10. Shared Dispositive Power -0- 11. Aggregate Amount Beneficially Owned by Each Reporting Person 2,789,342 12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares [ ] 13. Percent of Class Represented by Amount in Row (11) 26% 14. Type of Reporting Person CO 2 ITEM 1. SECURITY AND ISSUER This statement relates to the Class A Common Stock, no par value per share (the "Class A Common Stock"), of Advanced Machine Vision Corporation, a California corporation (the "Issuer"). The principal executive offices of the Issuer are located at 2067 Commerce Drive, Medford, Oregon 97504. ITEM 2. IDENTITY AND BACKGROUND (a)-(e). This Schedule 13D is being filed by FMC Corporation, a Delaware corporation ("FMC"). The address of FMC's principal business and principal office is 200 East Randolph Drive, Chicago, Illinois 60601. The principal business of FMC is the manufacture and sale of chemicals and machinery for industry and agriculture. During the last five years, FMC has not (i) been convicted in a criminal proceeding or (ii) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, Federal or State securities laws or finding any violation with respect to such laws. The following sets forth as to each executive officer and director of FMC: (a) name; (b) residence or business address; (c) present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is conducted; (d) whether or not, during the last five years, the person has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors); (e) whether or not, during the last five years, the person was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, Federal or State securities laws or finding any violation with respect to such laws; and (f) citizenship. 1. (a) Robert N. Burt - executive officer and director (b) 200 East Randolph Drive, Chicago, Illinois 60601 (c) Chairman of the Board and Chief Executive Officer of FMC (d) No (e) No (f) United States of America 2. (a) Larry D. Brady - executive officer (b) 200 East Randolph Drive, Chicago, Illinois 60601 (c) President and director of FMC (d) No (e) No (f) United States of America 3. (a) Michael J. Callahan - executive officer (b) 200 East Randolph Drive, Chicago, Illinois 60601 (c) Executive Vice President and Chief Financial Officer (d) No (e) No (f) United States of America 4. (a) William J. Kirby - executive officer (b) 200 East Randolph Drive, Chicago, Illinois 60601 (c) Senior Vice President and Vice President-Administration (d) No (e) No (f) United States of America 3 5. (a) J. Paul McGrath - executive officer (b) 200 East Randolph Drive, Chicago, Illinois 60601 (c) Senior Vice President, General Counsel and Corporate Secretary (d) No (e) No (f) United States of America 6. (a) Charles H. Cannon, Jr. - executive officer (b) 200 East Randolph Drive, Chicago, Illinois 60601 (c) Vice President and Group Manager of FMC Food Tech, a division of FMC (d) No (e) No (f) United States of America 7. (a) W. Kim Foster - executive officer (b) 200 East Randolph Drive, Chicago, Illinois 60601 (c) Vice President and General Manager-Agricultural Products Group of FMC (d) No (e) No (f) United States of America 8. (a) Robert I. Harries - executive officer (b) 200 East Randolph Drive, Chicago, Illinois 60601 (c) Vice President and Group Manager-Chemical Products Group of FMC (d) No (e) No (f) United States of America 10. (a) Henry Kahn - executive officer (b) 200 East Randolph Drive, Chicago, Illinois 60601 (c) Vice President and Treasurer of FMC (d) No (e) No (f) United States of America 11. (a) Ronald D. Mambu - executive officer (b) 200 East Randolph Drive, Chicago, Illinois 60601 (c) Vice President and Controller of FMC (d) No (e) No (f) United States of America 12. (a) James A. McClung - executive officer (b) 200 East Randolph Drive, Chicago, Illinois 60601 (c) Vice President-Worldwide Marketing of FMC (d) No (e) No (f) United States of America 13. (a) Joseph H. Netherland - executive officer (b) 200 East Randolph Drive, Chicago, Illinois 60601 (c) Executive Vice President of FMC (d) No (e) No (f) United States of America 4 14. (a) William H. Schumann - executive officer (b) 200 East Randolph Drive, Chicago, Illinois 60601 (c) Vice President-Corporate Development of FMC (d) No (e) No (f) United States of America 15. (a) William J. Wheeler - executive officer (b) 200 East Randolph Drive, Chicago, Illinois 60601 (c) Vice President of FMC (d) No (e) No (f) United States of America 16. (a) William G. Walter - executive officer (b) 200 East Randolph Drive, Chicago, Illinois 60601 (c) Vice President and General Manager-Specialty Chemicals Group of FMC (d) No (e) No (f) United States of America 17. (a) B.A. Bridgewater, Jr. - director (b) Brown Group, Inc., 8300 Maryland Avenue, St. Louis, MO 63105 (c) Chairman of the Board, President and Chief Executive Officer of Brown Group, Inc., a diversified marketer and retailer of footwear, 8300 Maryland Avenue, St. Louis, MO 63105 (d) No (e) No (f) United States of America 18. (a) Paul L. Davies, Jr. - director (b) Lakeside Corporation, 50 Fremont St., Suite 3520, San Francisco, CA 94105 (c) President of Lakeside Corporation, a real estate investment company, 50 Fremont St., Suite 3520, San Francisco, CA 94105 (d) No (e) No (f) United States of America 19. (a) William F. Reilly - director (b) PRIMEDIA Inc., 745 Fifth Avenue, Fl 23, New York, NY 10151 (c) Chairman and Chief Executive Officer of PRIMEDIA Inc., a diversified media company, 745 Fifth Avenue, Fl 23, New York, NY 10151 (d) No (e) No (f) United States of America 20. (a) James R. Thompson - director (b) Winston & Strawn, 35 West Wacker Drive, Chicago, Illinois 60601 (c) Chairman, Chairman of the Executive Committee and Partner of Law Firm of Winston & Strawn, 35 West Wacker Drive, Chicago, Illinois 60601 (d) No (e) No (f) United States of America 5 21. (a) Jean A. Francois-Poncet - director (b) President de la Commission des Affairs Economique et du Plan Le Senat, 15, rue de Vaugirard, 75006 Paris, France (c) Member of the French Senate. President de la Commission des Affairs Economique et du Plan Le Senat, 15, rue de Vaugirard, 75006 Paris, France (d) No (e) No (f) United States of America 22. (a) General Edward C. Meyer - director (b) MITRETEK Systems, 7525 Colshire Dr., McLean, VA 22102-7492 (c) Chairman of MITRETEK Systems, an information technology company, 7525 Colshire Dr., McLean, VA 22102-7492. Managing Partner of Cilluffo Associates, L.P., a private investment group, 181 Pleasant St., Portsmouth, NH 03801 (d) No (e) No (f) United States of America 23. (a) Edward J. Mooney - director (b) Nalco Chemical Company, One Nalco Center, Naperville, IL 60563-1198 (c) Chairman and Chief Executive Officer of Nalco Chemical Company, a specialty chemicals company, One Nalco Center, Naperville, IL 60563- 1198 (d) No (e) No (f) United States of America 24. (a) Patricia A. Buffler - director (b) University of California at Berkeley, 140 Earl Warren Hall, Berkeley, CA 94720-7360 (c) Dean and Professor of Epidemiology at the University of California, Berkeley School of Health, 140 Earl Warren Hall, Berkeley, CA 94720- 7360 (d) No (e) No (f) United States of America 25. (a) Albert J. Costello - director (b) W.R. Grace & Co., 1750 Clint Moore Rd., Boca Raton, FL 33487 (c) Chairman, President and Chief Executive Officer of W.R. Grace & Co., a supplier of flexible packaging and specialty chemicals, 1750 Clint Moore Rd., Boca Raton, FL 33487 (d) No (e) No (f) United States of America 26. (a) Clayton Yeutter - director (b) Hogan & Hartson L.L.P., Columbia Square, 555 Thirteenth Street NW, Washington, D.C. 20004-1109 (c) Of Counsel, Law Firm of Hogan & Hartson L.L.P., Columbia Square, 555 Thirteenth Street NW, Washington, D.C. 20004-1109 (d) No (e) No (f) United States of America 6 ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. The 2,789,342 shares of Class A Common Stock beneficially owned by FMC are comprised of 1,191,060 shares of Class A Common Stock issuable upon conversion of 119,106 shares of the Issuer's Series B Preferred Stock, no par value per share (the "Series B Preferred Stock"), held by FMC and 1,598,282 shares (the "Option Shares") of Class A Common Stock currently issuable upon exercise of an option (the "Option") to purchase the number of shares of Class A Common Stock equal to 15% of the Issuer's outstanding shares of Class A Common Stock at the time of exercise, subject to adjustment. FMC paid an aggregate of $2,620,332 for the Series B Preferred Stock, the source of which was FMC's general working capital. Pursuant to the Option Agreement for the Purchase of Class A Common Stock attached as Exhibit 1 hereto and incorporated herein by reference (the --------- "Option Agreement"), FMC has the right to purchase the Option Shares for an exercise price of the greater of $2.20 and the average closing bid price of a share of Class A Common Stock for the forty-five (45) days immediately preceding the day on which FMC sends the Issuer a notice of exercise, subject to adjustment. ITEM 4. PURPOSE OF TRANSACTION. FMC acquired the Series B Preferred Stock and the Option for the purpose of investing in the Issuer and its technology. FMC currently intends to review its investment position in the Issuer periodically and, depending on such review and factors including market conditions and share prices, the Issuer's business prospects, technology, future developments and applicable legal requirements, FMC may seek to acquire additional securities of the Issuer from time to time in the open market or in negotiated transactions. Pursuant to the Series B Preferred Stock Purchase Agreement entered into as of October 14, 1998 between the Issuer and FMC, included as Exhibit 2 hereto and incorporated herein by --------- reference, and the Certificate of Determination of the Series B Preferred Stock, included as Exhibit 3 hereto and incorporated herein by reference, FMC has the --------- right to elect one (1) of the Issuer's eight (8) directors. This director was elected effective as of October 15, 1998. Pursuant to a side letter between the Issuer and FMC dated October 14, 1998, included as Exhibit 4 hereto and --------- incorporated herein by reference, if FMC exercises the Option, the Issuer has agreed to fill a vacancy on its board of directors with one (1) additional designee chosen by FMC or, if no such vacancy exists, to increase the size of its board of directors by one (1) in order to create such vacancy. Except as set forth above, FMC has no present plans or proposals which may be related to or would result in: (a) The acquisition by any person of additional securities of the Issuer, or the disposition of securities of the Issuer; (b) An extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Issuer or any of its subsidiaries; (c) A sale or transfer of a material amount of assets of the Issuer or any of its subsidiaries; (d) Any change in the present board of directors or management of the Issuer, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the Issuer's board of directors; (e) Any material change in the present capitalization or dividend policy of the Issuer; (f) Any other material change in the Issuer's business or corporate structure; (g) Changes in the Issuer's charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Issuer by any person; (h) Causing a class of securities of the Issuer to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (i) A class of equity securities of the Issuer becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Act; or 7 (j) Any action similar to any of those enumerated above. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. FMC beneficially owns 2,789,342 shares of Class A Common Stock, constituting 26% of the outstanding shares of the Issuer's Class A Common Stock as disclosed by the Issuer on Exhibit D to the Purchase Agreement. To the best knowledge of FMC, none of the other persons listed in Item 2 hereof owns any securities of the Issuer. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. Pursuant to the Certificate of Determination, the Issuer has agreed that so long as any shares of Series B Preferred Stock remain outstanding, without the consent of a majority of the outstanding shares of Series B Preferred Stock, it will not, among other things, (i) increase or decrease the authorized number of shares of Series B Preferred Stock or create any class or series of shares having rights, preferences or privileges senior to or on a parity with the Series B Preferred Stock, (ii) redeem or repurchase or enter into any agreement for the redemption or repurchase of any shares of its capital stock (with certain exceptions), (iii) prior to October 14, 2002, merge with any other entity or enter into any other reorganization, recapitalization, sale of control or any transaction that results in the transfer of all or substantially all of the Issuer's assets or (iv) issue or distribute any additional equity securities other than pursuant to employee stock options or employee stock plans in effect as of October 14, 1998 and, with the approval of the Issuer's board of directors, no more than 100,000 shares of Class A Common Stock to unrelated third parties in any fiscal year. FMC is currently the only holder of the Issuer's Series B Preferred Stock. Pursuant to the Purchase Agreement, so long as FMC holds any capital stock of the Issuer, the Issuer has agreed not to take any of the actions specified in (iii) above prior to October 14, 2002 without FMC's consent. Pursuant to the Purchase Agreement, (i) if the Issuer issues additional shares of capital stock, FMC will have the right to purchase the portion of such shares necessary for FMC to maintain its percentage interest in the Issuer and (ii) FMC has given the Issuer a right of first refusal to purchase its shares of Series B Preferred Stock. Pursuant to a Registration Rights Agreement dated as of October 14, 1998 by and between the Issuer and FMC, included as Exhibit 5 --------- hereto and incorporated herein by reference, the Issuer has granted FMC certain registration rights with respect to the Class A Common Stock issuable upon conversion of the Series B Preferred Stock and exercise of the Option. Except as described herein, neither FMC nor, to the best knowledge of FMC, any of the other persons listed in Item 2 hereof, has entered into any contracts, arrangements, understandings or relationships with any person with respect to any securities of the Issuer. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. Exhibit 1 Option Agreement for the Purchase of Class A Common Stock. Exhibit 2 Series B Preferred Stock Purchase Agreement entered into as of October 14, 1998 between the Issuer and FMC. Exhibit 3 Certificate of Determination of the Series B Preferred Stock. Exhibit 4 Side letter between the Issuer and FMC dated October 14, 1998. Exhibit 5 Registration Rights Agreement dated as of October 14, 1998 by and between the Issuer and FMC. 8 SIGNATURE After reasonable inquiry and to the best of the undersigned's knowledge and belief, the undersigned certify that the information set forth in this statement is true, complete and correct. Dated: October 22, 1998 FMC Corporation By: /s/ Charles H. Cannon, Jr. ----------------------------- Name: Charles H. Cannon, Jr. Title: Vice President 9 EXHIBIT INDEX Exhibit 1 Option Agreement for the Purchase of Class A Common Stock. Exhibit 2 Series B Preferred Stock Purchase Agreement entered into as of October 14, 1998 between the Issuer and FMC. Exhibit 3 Certificate of Determination of the Series B Preferred Stock. Exhibit 4 Side letter between the Issuer and FMC dated October 14, 1998. Exhibit 5 Registration Rights Agreement dated as of October 14, 1998 by and between the Issuer and FMC. 10 EX-1 2 OPTION AGREEMENT OPTION FOR THE PURCHASE OF CLASS A COMMON STOCK OF ADVANCED MACHINE VISION CORPORATION -------------------------------------- THE OPTION (AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE THEREOF) REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT"), AND MAY NOT BE OFFERED OR SOLD IN THE ABSENCE OF SUCH REGISTRATION OR THE AVAILABILITY OF AN EXEMPTION FROM SUCH REGISTRATION. THIS OPTION MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED EXCEPT UPON COMPLIANCE WITH THE REQUIREMENTS FOR TRANSFER SET FORTH HEREIN. THIS IS TO CERTIFY THAT, for value received, FMC CORPORATION or its registered assigns (collectively, the "Holder"), is the registered owner of the Option set forth above, which entitles the Holder, subject to the terms and conditions set forth hereinafter, to purchase shares of Class A Common Stock, without par value ("Common Stock"), of Advanced Machine Vision Corporation, a California corporation (the "Company"), at a purchase price per share equal to the "Exercise Price" (as defined below). The number of shares of Common Stock that may be received upon the exercise of this certificate (this "Option Certificate") shall be equal to fifteen percent (15%) of the then issued and outstanding shares of Common Stock of the Company. Each share of Common Stock issuable upon the exercise of the Option (collectively, the "Option Shares") when issued and paid for pursuant to the provisions of this Option shall be validly issued, fully paid and nonassessable, shall be free from all taxes, liens and charges with respect to the issuance thereof and shall be free of any preemptive or similar rights. This Option is the Option issued in connection with the Series B Preferred Stock Purchase Agreement of even date herewith, between the Company and the Holder, and other good and valuable consideration (the receipt, adequacy and sufficiency of which is hereby acknowledged). The Option is subject to the following terms and provisions: 1 Section 1. Exercise of Option. ------------------- (a) Subject to the provisions hereof, the Option evidenced hereby may be exercised at the discretion of the Holder in whole (but not in part) at any time on or before October 14, 2003 or, if such day is not a Trading Day (as defined in Section 14), then on the next succeeding Trading Day, by presentation and surrender hereof to the Company at its principal place of business (the "Option Office"), with the Notice of Election to Exercise (the "Exercise Notice") attached hereto duly executed and accompanied by payment to the Company of the Exercise Price for the number of Option Shares specified in such Exercise Notice. (b) The Exercise Price for each share of Common Stock shall be the average closing bid price of a share of Common Stock for the forty-five (45) days immediately preceding the day on which the Exercise Notice is sent or $2.20 (the "Exercise Price", whichever is greater). The Exercise Price set forth in the preceding sentence is subject to adjustment as set forth in Sections 5 ---------- and 8. - (c) Payment of the Exercise Price shall be made in cash or by check, certified bank check or wire transfer, at the option of the Holder. (d) Upon receipt by the Company of this Option Certificate at the Option Office, together with a properly completed Exercise Notice and payment of the Exercise Price as provided above, the Holder shall be deemed to be the holder of record of the Option Shares issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such shares shall not then be actually delivered to the Holder. The Company shall deliver such certificates to the Holder as promptly as possible thereafter, but in any event within five (5) Trading Days of receipt of the Exercise Notice. The Company shall pay all expenses, and any and all United States federal, state and local taxes and other charges that may be payable in connection with the preparation, issue and delivery of stock certificates under this Section 1, except that the Company --------- shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of the Option Shares in a name other than that of the Holder of the Option evidenced hereby who shall have surrendered the same in exercise of the subscription right evidenced hereby. If Option Shares are issued prior to the time that an appropriate registration statement with respect to the Option Shares has become effective under the Securities Act, the Option Shares so issued shall have stamped or imprinted thereon a legend in the form of Exhibit A. Any holder of Option Shares so --------- legended shall be entitled to have such legend removed, upon surrender of Option Shares to the Company or the transfer agent for the Common Stock, upon effectiveness of such a registration statement or upon receipt by the 2 Company of an opinion of counsel to the effect that such legend is no longer required. (e) Upon any partial exercise of the number of Option Shares to which this Option Certificate entitles the Holder, there shall be issued to the Holder hereof a new Option Certificate in respect of the percentage of shares of Common Stock as to which this Option Certificate shall not have been exercised, subject to the provisions of Section 3. Such new Option Certificate shall be identical to this Option Certificate, except as to the percentage of shares of Common Stock covered thereby. Section 2. Exchange, Transfer, Assignment or Loss of Option Certificate; Temporary Option Certificates. ------------------------------------------------ (a) If this Option Certificate shall be mutilated, lost, stolen, or destroyed, the Company may, in its discretion, issue and deliver in exchange and substitution for and upon cancellation of the mutilated Option Certificate, or in lieu of and substitution for the Option Certificate lost, stolen, or destroyed, a new Option Certificate of like tenor and representing an equivalent right or interest, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and indemnification reasonably satisfactory to it. An applicant for such a substitute Option Certificate shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. (b) This Option Certificate shall be numbered and shall be registered in a Option Register maintained by the Company as they are issued. The registered owner on the Option Register may be treated by the Company and all other Persons and entities dealing with the Option evidenced hereby as the absolute owner hereof for any purpose and as the Person entitled to exercise the right represented hereby, or to the transfer hereof on the books of the Company, any notice to the contrary notwithstanding and, until such transfer on such books, the Company may treat the registered owner on the Option Register as the owner for all purposes. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any registration of transfer of Option Certificates. (c) This Option Certificate may be subdivided or combined with other Option Certificates evidencing the same rights as the rights evidenced hereby and thereby upon presentation and surrender hereof to the Company, together with a written notice signed by the Holder hereof specifying the denominations in which new Option Certificates are to be issued. Upon presentation and surrender of the Option Certificates, together with such written notice, for subdivision or combination, the Company will issue a new Option Certificate or Certificates, in the denominations requested, entitling the holders 3 thereof to purchase the same aggregate number of shares of Common Stock as the Option Certificate or Certificates so surrendered. Such new Option Certificates will be registered in the name of the Holder submitting such request and delivered to such Holder. The Option Certificate surrendered for subdivision or combination shall be cancelled promptly upon the issuance of such new Option Certificate(s). The term "Option Certificate" as used herein includes the Option Certificate into which this Option Certificate may be subdivided, combined or exchanged. Section 3. Fractional Interests. --------------------- (a) The Company shall not be required to issue fractions of Option or to issue Option Certificates which evidence fractional Option. (b) The Company shall not be required to issue fractions of shares of Common Stock in the exercise of Option. If any fraction of a Option Share would, except for the provisions of this Section, be issuable on the exercise of the Option (or specified portion thereof), the Company shall purchase such fraction for an appropriate amount in cash. (c) The Holder, by the acceptance of this Option Certificate, expressly waives his right to receive any fractional Option or any fractional share upon exercise of a Option. Section 4. Reservation of Option Shares, etc. ---------------------------------- The Company hereby agrees that at all times there shall be reserved for issuance and/or delivery upon exercise of the Option evidenced by this Option Certificate, free from pre-emptive rights, such number of shares of authorized but unissued or treasury shares of Common Stock, or other stock or securities deliverable pursuant to Section 5, as shall be required for issuance --------- or delivery upon exercise of the Option evidenced hereby. The Company further agrees: (a) that it shall not, by amendment of its Articles of Incorporation or through reorganization, consolidation, merger, dissolution or sale of assets, or by any other voluntary act, avoid or seek to avoid the observance or performance of any of the covenants, stipulations or conditions to be observed or performed hereunder by the Company; and (b) to promptly take all action as may from time to time be reasonably required in order to permit the Holder to exercise the Option evidenced hereby and the Company duly and effectively to issue the Option Shares as provided herein upon the exercise hereof. Without limiting the generality of the foregoing, the Company shall not take any action which would result in Option Shares when issued not being validly and legally issued and fully paid and nonassessable. The Company shall not increase the par value of the Common Stock while the Option evidenced hereby is outstanding except to an amount no greater than $.01 per share. The Company 4 hereby represents that, as of the date hereof, it has sufficient shares of Common Stock reserved for issuance upon exercise in full of the Option. Section 5. Anti-Dilution. ------------- The Exercise Price and the number of shares of Common Stock purchasable upon the exercise hereof shall be subject to adjustment from time to time as provided in this Section. Unless otherwise indicated, all calculations under this Section 5 shall be made to the nearest $0.01 or 1/100th of a share, --------- as the case may be. (a) If the Company shall: (i) declare a dividend or make a distribution on the outstanding shares of Common Stock in shares of capital stock of the Company; (ii) subdivide or reclassify the outstanding shares of Common Stock into a greater number of shares (or into other securities or property); or (iii) combine or reclassify the outstanding shares of Common Stock into a smaller number of shares (or into other securities or property), the number of Option Shares issuable upon the exercise of the Option shall be adjusted so that the Holder of the Option shall be entitled to purchase the kind and number of shares of Common Stock or other securities or property of the Company determined by multiplying the number of Option Shares issuable upon exercise of the Option immediately prior to such event by a fraction, the numerator of which shall be the total number of outstanding shares of Common Stock immediately after such event, and the denominator of which shall be the total number of outstanding shares of Common Stock immediately prior to such event. An adjustment made pursuant to this paragraph (a) shall become ------------- effective immediately after the effective date of such event, retroactive to the record date, if any, for such event. Adjustments pursuant to this paragraph shall be made successively whenever any event specified above shall occur. Whenever the number of Option Shares issuable upon exercise of a Option is adjusted pursuant to this paragraph, the Exercise Price payable upon exercise of the Option shall be adjusted by multiplying the Exercise Price in effect immediately prior to such adjustment by a fraction, the numerator of which shall be the number of Option Shares issuable upon the exercise of the Option immediately prior to such adjustment, and the denominator of which shall be the number of Option Shares issuable immediately thereafter. (b) [Intentionally Omitted.] (c) In any case in which this Section shall require that an adjustment shall become effective immediately after a record date for an event, the Company may defer until the occurrence of such event: (i) issuing to the Holder of the Option exercised after such record date and before the occurrence of such event the additional shares of Common Stock issuable upon such exercise by reason of the adjustment required by such event over 5 and above the shares of Common Stock issuable upon such exercise before giving effect to such adjustment; and (ii) paying to such Holder an amount in cash in lieu of a fractional share of Common Stock pursuant to Section 3; provided, --------- -------- however, that the Company shall deliver to such Holder a due bill or other - ------- appropriate instrument evidencing such Holder's rights to receive such additional shares of Common Stock, and such cash, upon the occurrence of the event requiring such adjustment. (d) No adjustment in the Exercise Price shall be required with respect to shares of Common Stock issued upon exercise of the Option unless such adjustment would require a decrease of at least $.02; provided, however, that -------- ------- any such adjustment which is not required to be made shall be carried forward and taken into account in any subsequent adjustment. (e) The Company may make such reductions in the Exercise Price, in addition to those required pursuant to other paragraphs of this Section, as it considers to be advisable in order that any event treated for federal income tax purposes as a dividend of stock or stock rights shall not be taxable to the recipients. (f) In case of any consolidation with or merger of the Company into another corporation in which the Company is not the surviving entity, or in case of any sale, lease or conveyance of assets to another corporation of the property of the Company as an entirety or substantially as an entirety, such successor, leasing or purchasing corporation, as the case may be, shall execute and deliver to the Holder hereof simultaneously therewith a new Option Certificate, reasonably satisfactory in form and substance to such Holder, providing that the Holder of the Option then outstanding shall have the right thereafter to exercise such Option solely for the kind and amount of shares of stock, other securities, property or cash or any combination thereof receivable upon such consolidation, merger, sale, lease or conveyance by a holder of the number of shares of Common Stock for which such Option might have been exercised immediately prior to such consolidation, merger, sale or conveyance. (g) In case of any reclassification or change of the shares of Common Stock issuable upon exercise of the Option (other than a change in par value, from no par value to par value or from par value to no par value, or as a result of a subdivision or combination, but including any change in the shares of Common Stock into two or more classes or series of shares), or in case of any consolidation or merger of another corporation into the Company in which the Company is the continuing corporation and in which there is a reclassification or change (including a change to the right to receive cash or other property) of the shares of Common Stock (other than a change in par value, from no par value to par value or from par value to no par value, or as a result of a subdivision or combination, but including any change in the shares of 6 Common Stock into two or more classes or series of shares), the Company shall execute and deliver to the Holder hereof simultaneously therewith a new Option Certificate, satisfactory in form and substance to such Holder, providing that the Holder of the Option then outstanding shall have the right thereafter to exercise such option solely for the kind and amount of shares of Common Stock, other securities, property or cash or any combination thereof receivable upon such reclassification, change, consolidation or merger by a holder of the number of shares of Common Stock for which such Option might have been exercised immediately prior to such reclassification, change, consolidation or merger. (h) The foregoing paragraphs (f) and (g), however, shall not in any -------------- --- way affect the rights a Holder may otherwise have, pursuant to this Section, to receive securities, evidences of indebtedness, assets, property rights or Option upon exercise of a Option. (i) Whenever there shall be any change in the Exercise Price under any paragraph of this Section, and no specific means of adjusting the number of Option Shares issuable upon exercise of the Option is provided in such paragraph, then there shall be an adjustment (to the nearest hundredth of a share) in the number of shares of Common Stock purchasable upon exercise of this Option Certificate, which adjustment shall become effective at the time such change in the Exercise Price becomes effective and shall be made by multiplying the number of shares of Common Stock purchasable upon exercise of this Option Certificate immediately before such change in the Exercise Price by a fraction, the numerator of which is the Exercise Price immediately before such change, and the denominator of which is the Exercise Price immediately after' such change. If, following the declaration of a record date for the distribution of any securities or property to be distributed to holders of Common Stock, such securities or property are not so issued, the Exercise Price then in effect shall be readjusted, effective as of the date when the Board of Directors determines not to issue such securities or property, to the Exercise Price which would then be in effect if a record date for such issuance had not been fixed. (j) If any event occurs as to which the foregoing provisions of this Section are not strictly applicable or, if strictly applicable, would not, in the good faith judgment of the Board of Directors of the Company, fairly protect the purchase rights of the Option in accordance with the essential intent and principles of such provisions, then such Board shall make such adjustments in the application of such provisions, in accordance with such essential intent and principles, as shall be reasonably necessary, in the good faith opinion of such Board, to protect such purchase rights as aforesaid. (k) If, after one or more adjustments to the Exercise Price pursuant to this Section 5, the Exercise Price cannot be reduced further without --------- 7 falling below the greater of (i) $.01 or (ii) the lowest positive exercise price legally permissible for Option Holder to acquire shares of Common Stock, the Company shall make further adjustment to compensate the holder, consistent with the foregoing principles, as the Board of Directors, acting in good faith, deems necessary, including an increase in the number of Option Shares issuable upon exercise of outstanding Option and/or a cash payment to the Holder. Section 6. Notice of Adjustment. -------------------- (a) Prior to the earlier to occur of: (i) the declaration of a record date for; or (ii) the announcement and/or consummation of, any event or action that would result in an adjustment pursuant to this Section or Section 7, --------- the Company shall notify the Holder of such intended record date, announcement, event or action. Such notice must be reasonably calculated to be delivered not less than ten (10) nor more than ninety (90) days prior to the applicable event. (b) Whenever the Exercise Price is adjusted as provided in Section 5: - --------- (i) the Company shall compute the adjusted Exercise Price in accordance with Section 5 and shall prepare a certificate signed by --------- the chief financial officer of the Company setting forth the adjusted Exercise Price and showing in reasonable detail the facts upon which such adjustment is based; and (ii) a notice stating that the Exercise Price and number of shares for which the Option may be exercised have been adjusted and setting forth the adjusted Exercise Price and number of shares for which the Option may be exercised shall be communicated by telegram, facsimile, telecopier or any other means of electronic communication capable of producing a written record, or shall be delivered by hand or mailed as soon as practicable by the Company to the Holder at its last address as it shall appear upon the Option Register provided for in Section 2. --------- Section 7. No Rights as Shareholders; Notice to Holder. --------------------------------------------- Nothing contained herein shall be construed as conferring upon the Holder the right to vote or to receive dividends or to receive notice as shareholders in respect of the meetings of shareholders for the election of directors of the Company or any other matter, or any rights whatsoever as shareholders of the Company. If, however, at any time prior to the expiration of the Option and prior to their exercise, any of the following shall occur: 8 (a) The Company shall authorize the issuance to all holders of Common Stock of rights, warrants or options to subscribe for or purchase Common Stock, or of any other subscription rights or Option; or (b) The Company shall authorize the distribution to all holders of Common Stock of evidences of its indebtedness or assets (other than cash dividends or cash distributions payable out of consolidated earnings or earned surplus or dividends payable in Common Stock); or (c) The Company shall propose any consolidation or merger to which the Company is a party and for which approval of any stock of the Company is required, or the conveyance or transfer of properties and assets of the Company substantially as an entirety (whether by sale, lease or other disposition), or any reclassification or change of outstanding Common Stock issuable upon exercise of the Option (other than a change in par value, from no par value to par value or from par value to no par value); or (d) The Company shall propose the voluntary or involuntary dissolution, liquidation or winding up of the Company; then the Company shall cause to be given to the Holder at its address appearing on the Option Register, at least ten (10) days prior to the applicable record date hereinafter specified, by first class mail, postage prepaid, a written notice stating (i) the date as of which the holders of record of shares of Common Stock entitled to receive any such rights, warrants, options or distribution are to be determined, or (ii) the date on which any such consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up is expected to become effective or consummated, and the date as of which it is expected that the holders of record of shares of Common Stock shall be entitled to exchange their shares for securities or other property, if any, deliverable upon such reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up. The failure to give the notice required by this Section or any defect therein shall not affect the legality or validity of any distribution, right, warrants, options, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up, or the vote upon any action. 9 Section 8. Restrictions on Transfer of the Option and Option Shares. -------------------------------------------------------- Until such time as an appropriate registration statement covering the Option or the Option Shares has become effective under the Securities Act, the Holder will not dispose of either the Option evidenced hereby or the Option Shares, as the case may be, except for a transfer by the Holder to an Affiliate (as defined in Section 14). In addition, the Company shall have received an ---------- opinion of counsel to Purchaser to the effect that the sale or other proposed disposition of the Option or Option Shares may be accomplished without such registration (or perfection of an exemption) under the Securities Act, which opinion may be conditioned upon: (i) acceptance by the transferee of a Option Certificate or Certificates or Option Shares bearing a legend similar to that set forth in Exhibit A; and (ii) a certificate of the transferee stating that ---------- the Option(s) or Option Share(s) being acquired by such transferee are being acquired by such transferee for its own account and not with a view to, or for resale in connection with, the distribution thereof in violation of the Securities Act. Section 9. [Intentionally Omitted.] Section 10. No Voting Rights. ----------------- No Holder shall be entitled to any voting rights as a stockholder of the Company by virtue of such Holder's ownership of Option; provided that -------- Holders who also hold voting securities of the Company, including Option Shares, shall be entitled to vote such securities on any matter upon which other holders of such class of securities are entitled to vote. Section 11. Execution of Option Certificates. --------------------------------- The Option Certificate shall be executed on behalf of the Company by the manual or facsimile signature of the present or any future Chairman of the Board of Directors, President or Vice President of the Company. Section 12. Severability. ------------- In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality, and enforceability of any such provision in every other respect and the other remaining provisions hereof shall not be in any way impaired or affected, it being intended that all of the Holder's rights and privileges shall be enforceable 10 to the fullest extent permitted by law. Section 13. Governing Law. -------------- The Option shall be governed by and construed in accordance with the laws of the State of Illinois. Section 14. Definitions. ------------ For all purposes of this Option Certificate, in addition to the other terms defined elsewhere herein, unless the context otherwise requires: "Affiliate" of any specified Person means any other Person directly or --------- indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. "Board of Directors" means either the Board of Directors of the ------------------ Company or any duly authorized committee of that board. "Common Stock" means the Class A Common Stock of the Company which has ------------ no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, and which is not subject to redemption by the Company. However, subject to Section 5, shares issuable on exercise of the Option evidenced hereby, as contemplated by the first paragraph of this Option Certificate, shall include only shares of the class designated as Common Stock of the Company as of the date of this Option or shares of any class or classes resulting from any reclassification or reclassifications thereof and which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and which are not subject to redemption by the Company; provided that if at any time there shall be more than one such resulting -------- class, the shares of each such class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications. As used in this Option Certificate, "shares" shall include fractions thereof to the extent that fractional shares of the Company are outstanding. "Person" shall mean any individual, firm, partnership, association, ------ 11 group (as such term is used in Rule 13d-5 under the Securities Exchange Act of 1934, as amended, as in effect on the date of this Option), corporation or other entity. "Subsidiary" means any subsidiary of the Company, a majority of whose ---------- capital stock with voting power, under ordinary circumstances, to elect directors is at the time, directly or indirectly owned by the Company, by one or more subsidiaries of the Company or by the Company and one or more subsidiaries of the Company. "Trading Day" shall mean each Monday, Tuesday, Wednesday, Thursday and ----------- Friday, other than any day on which securities are not traded on the exchange or market where the Common Stock is listed or sold. Section 15. Fees and Expenses. ------------------ All fees and expenses incurred by the Holder in connection with the Holder's ownership of Option and securities or other property received upon exercise thereof which relate to: (a) any required regulatory filings by the Company; and (b) stock exchange listing fees in connection with the foregoing shall be paid by the Company. Section 16. Contest and Appraisal Rights. ----------------------------- Upon each determination of fair market value or other valuation required hereunder, the Company shall promptly give notice thereof to all Holders, setting forth in reasonable detail the calculation of such fair market value or valuation and the method and basis of determination thereof, as the case may be. Dated: October 14, 1998 ADVANCED MACHINE VISION CORPORATION By: /s/ Alan R. Steel ----------------------------- Name Alan R. Steel --------------------------- Title: Chief Financial Officer -------------------------- 12 NOTICE OF ELECTION TO EXERCISE ------------------------------ The undersigned hereby irrevocably elects to exercise the within Option to the extent of purchasing ___________________ shares of Class A Common Stock and hereby makes payment of the Exercise Price in the amount of ____ Dollars ($________). NAME OF HOLDER: _____________________________ ( Please Print ) By:__________________________ Date: ___________________. * * * * * * * * Instructions for Registration of Stock -------------------------------------- Name_________________________________________________________ (please type or print in block letters) Address______________________________________________________ 13 EXHIBIT A --------- THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED OR SOLD IN THE ABSENCE OF SUCH REGISTRATION OR THE AVAILABILITY OF AN EXEMPTION FROM SUCH REGISTRATION. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED EXCEPT UPON COMPLIANCE WITH THE REQUIREMENTS FOR TRANSFER SET FORTH HEREIN. 14 EX-2 3 SERIES B PREFERRED STOCK PURCHASE AGREEMENT SERIES B PREFERRED STOCK PURCHASE AGREEMENT ------------------------------------------- This SERIES B PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is entered into as of October 14, 1998 by and between ADVANCED MACHINE VISION CORPORATION, a California corporation (the "Company"), and FMC CORPORATION, a Delaware corporation ("Purchaser"). RECITALS: --------- WHEREAS, the Company has authorized the sale and issuance of an aggregate of one hundred, nineteen thousand, one hundred, six (119,106) shares of Series B Preferred Stock (the "Shares"); WHEREAS, Purchaser desires to purchase the Shares on the terms and conditions set forth herein; and WHEREAS, the Company desires to issue and sell the Shares to Purchaser on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the foregoing recitals, the mutual promises hereinafter set forth and other good and valuable consideration (the receipt, sufficiency and adequacy of which are acknowledged), the parties hereto agree as follows: 1. AGREEMENT TO SELL AND PURCHASE. 1.1 Authorization of Shares. On or prior to the Closing (as defined in ----------------------- Section 2 below), the Company shall have authorized: (i) the sale and issuance to Purchaser of the Shares and (ii) the issuance of shares of Common Stock to be issued upon conversion the Shares (the "Conversion Shares"). The Shares shall have the rights, preferences, privileges and restrictions set forth in the Certificate of Determination of the Company in the form attached hereto as Exhibit A (the "Certificate of Determination"). - --------- 1.2 Sale and Purchase. Subject to the terms and conditions hereof, at ----------------- the Closing (as hereinafter defined) the Company hereby agrees to issue and sell to Purchaser and Purchaser agrees to purchase from the Company the Shares, at a purchase price of twenty-two dollars ($22.00) per share. Page 1 2. CLOSING, DELIVERY AND PAYMENT. 2.1 Closing. The closing of the sale and purchase of the Shares under ------- this Agreement (the "Closing") shall take place at 5:00 p.m. at such time or place as the Company and Purchaser mutually agree (such date is hereinafter referred to as the "Closing Date"). 2.2 Delivery. At the Closing, subject to the terms and conditions -------- hereof, the Company will deliver to Purchaser certificates representing the number of Shares to be purchased at the Closing by Purchaser, against payment of the purchase price therefor by wire transfer made payable to the order of the Company. 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth on a Schedule of Exceptions delivered by the Company to Purchaser at the Closing, the Company hereby represents and warrants to Purchaser as of the date of this Agreement as follows: 3.1 Organization, Good Standing and Qualification. The Company is a --------------------------------------------- corporation duly organized, validly existing and in good standing under the laws of the State of California. The Company has all requisite corporate power and authority to own and operate its properties and assets, to execute and deliver this Agreement, the Option Agreement in the form attached hereto as Exhibit B, ---------- the Registration Rights Agreement in the form attached hereto as Exhibit C (the --------- "Registration Rights Agreement") and all other documents, instruments, agreements and certificates executed in connection herewith and therewith (collectively, the "Related Agreements"), to issue and sell the Shares and the Conversion Shares and to carry out the provisions of this Agreement, the Related Agreements and the Certificate of Determination and to carry on its business as currently conducted and as currently proposed to be conducted. The Company is duly qualified and is authorized to do business and is in good standing as a foreign corporation in all jurisdictions in which the nature of its activities and of its properties (both owned and leased) makes such qualification necessary, except for those jurisdictions in which failure to do so would not have a material adverse effect on the business, assets, condition, affairs or prospects of the Company or any of its subsidiaries, financially or otherwise ("Material Adverse Effect"). 3.2 Subsidiaries. The Company owns no equity securities of any other ------------ corporation, limited partnership or similar entity, except as set forth in Schedule 3.2. The Company is not a participant in any joint venture, - ------------ partnership or similar arrangement. Page 2 3.3 Capitalization; Voting Rights. The authorized capital stock of ----------------------------- the Company, immediately prior to the Closing, is set forth in Exhibit D. All --------- issued and outstanding shares of the Company's Common Stock: (i) have been duly authorized and validly issued; and (ii) are fully paid and nonassessable; and (iii) were issued in compliance with all applicable state and federal laws concerning the issuance of securities. The rights, preferences, privileges and restrictions of the Shares are as stated in the Certificate of Determination. The Shares are initially convertible into Common Stock on a ten (10)-for-one (1) basis. The Conversion Shares have been duly and validly reserved for issuance. Except as set forth on Exhibit D or may be granted pursuant to the Related --------- Agreements, there are no outstanding options, warrants, rights (including, without limitation, conversion or preemptive rights and rights of first refusal), convertible debt instruments, proxy or shareholder agreements, or agreements of any kind for the purchase or acquisition from the Company of any of its securities. When issued in compliance with the provisions of this Agreement and the Certificate of Determination, the Shares and the Conversion Shares will be validly issued, fully paid and nonassessable, and shall be free of any liens or encumbrances; provided, however, that the Shares and the Conversion Shares may be subject to restrictions on transfer under state and/or federal securities laws as set forth herein or as otherwise required by such laws at the time a transfer is proposed. Except as set forth on Exhibit D, no --------- stock plan, stock purchase, stock option or other agreement or understanding between the Company and any holder of any equity securities or rights to purchase equity securities provides for acceleration or other changes in the vesting provisions or other terms of such agreement or understanding as the result of any merger, consolidated sale of stock or assets, change in control or other similar transaction by the Company. 3.4 Authorization; Binding Obligations. All corporate action on the ---------------------------------- part of the Company, its officers and directors necessary for the authorization of this Agreement and the Related Agreements, the performance of all obligations of the Company hereunder and thereunder at the Closing and the authorization, sale, issuance and delivery of the Shares pursuant hereto and the Conversion Shares pursuant to the Certificate of Determination has been taken or will be taken prior to the Closing. The Agreement and the Related Agreements, when executed and delivered, will be valid and binding obligations of the Company enforceable in accordance with their terms, except: (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors' rights, (b) general principles of equity that restrict the availability of equitable remedies, and (c) to the extent that the enforceability of the indemnification provisions in Section 5 of --------- the Registration Rights Agreement may be limited by applicable laws. The sale Page 3 of the Shares and the subsequent conversion of the Shares into Conversion Shares are not and will not be subject to any preemptive rights or rights of first refusal that have not been properly waived or complied with. 3.5 Financial Statements. The Company has delivered to Purchaser: (a) -------------------- its audited balance sheet as at December 31, 1997 and audited statement of income and cash flows for the twelve months ending December 31, 1997; and (b) its unaudited balance sheet as at June 30, 1998 (the "Statement Date") and unaudited consolidated statement of income and cash flows for the three month period ending on the Statement Date (collectively, the "Financial Statements"). The Financial Statements, together with the notes thereto, are complete and correct in all material respects, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated, except as disclosed therein, and present fairly the financial condition and position of the Company as of December 31, 1997 and the Statement Date; provided, however, that the unaudited financial statements do not contain all disclosures and footnotes required under generally accepted accounting principles. 3.6 Liabilities. The Company has no material liabilities and, to the ----------- best of its knowledge, knows of no material contingent liabilities not disclosed in the Financial Statements, except current liabilities incurred in the ordinary course of business subsequent to the Statement Date that might result in, either in any individual case or in the aggregate, a Material Adverse Effect. 3.7 Agreements; Action. ------------------ (a) Except for the agreements contemplated by this transaction, the Representative Agreement dated April 16, 1998, or as set forth in filings with the Securities and Exchange Commission (the "SEC Filings"), there are no agreements, understandings or proposed transactions between the Company and any of its officers, directors, affiliates or any affiliate thereof. (b) Except as set forth in the SEC Filings, there are no material agreements, understandings, instruments, contracts, proposed transactions, judgments, orders, writs or decrees to which the Company is a party or to its knowledge by which it is bound which may involve (i) obligations (contingent or otherwise) of, or payments to, the Company (other than obligations of, or payments to, the Company arising in the ordinary course of business); (ii) the license of any patent, copyright, trade secret or other proprietary right to or from the Company; (iii) provisions restricting or affecting the development, manufacture or distribution of the Page 4 Company's products or services, or (iv) indemnification by the Company with respect to infringements of proprietary rights (other than indemnification obligations arising from purchase or sale agreements entered into in the ordinary course of business). (c) Except as set forth in the SEC Filings, the Company has not: (i) declared or paid any dividends, or authorized or made any distribution upon or with respect to any class or series of its capital stock; (ii) incurred any indebtedness for money borrowed or any other liabilities (other than with respect to indebtedness and other obligations incurred in the ordinary course of business or as disclosed in the Financial Statements) individually in excess of $10,000 or, in the case of indebtedness and/or liabilities individually less than $10,000, in excess of $10,000 in the aggregate; (iii) made any loans or advances to any person, other than ordinary advances for travel expenses except as set forth in Schedule 3.7(c)(iii); or (iv) sold, exchanged or otherwise disposed of any of its assets or rights, other than the sale of its inventory in the ordinary course of business. (d) For the purposes of subsections (b) and (c) above, all indebtedness, liabilities, agreements, understandings, instruments, contracts and proposed transactions involving the same person or entity (including persons or entities the Company has reason to believe are affiliated therewith) shall be aggregated for the purpose of meeting the individual minimum dollar amounts of such subsections. (e) Except for the transaction contemplated in this Agreement, the Company has not engaged in the past three (3) months in any discussion: (i) with any representative of any corporation or corporations regarding the consolidation or merger of the Company with or into any such corporation or corporations; (ii) with any corporation, partnership, association or other business entity or any individual regarding the sale, conveyance or disposition of all or substantially all of the assets of the Company, or a transaction or series of related transactions in which more than fifty percent (50%) of the voting power of the Company is disposed of; or (iii) regarding any other form of acquisition, liquidation, dissolution or winding up of the Company. 3.8 Obligations to Related Parties. Except for debt owed to the former ------------------------------ owners of Ventec, Inc., there are no obligations of the Company to officers, directors, shareholders, or employees of the Company other than: (a) for payment of salary for services rendered, (b) reimbursement for reasonable expenses incurred on behalf of the Company and (c) for other standard employee benefits made generally available to all employees (including stock option agreements outstanding under any stock option plan Page 5 approved by the Board of Directors of the Company). Except as disclosed in Schedule 3.7(c)(iii) none of the officers, directors or shareholders of the - -------------------- Company, or any members of their immediate families, are indebted to the Company or have any direct or indirect ownership interest in any firm or corporation with which the Company is affiliated or with which the Company has a business relationship, or any firm or corporation which competes with the Company, except that officers, directors and/or shareholders of the Company may own stock in publicly traded companies which may compete with the Company. No officer, director or shareholder, or any member of their immediate families, is, directly or indirectly, interested in any material contract with the Company (other than such contracts as relate to any such person's ownership of capital stock or other securities of the Company). Except as may be disclosed in the Financial Statements, the Company is not a guarantor or indemnitor of any indebtedness of any other person, firm or corporation. 3.9 Changes. Since the Statement Date, there has not been: ------- (a) Any change in the assets, liabilities, financial condition or operations of the Company from that reflected in the Financial Statements, other than changes in the ordinary course of business, none of which individually or in the aggregate has had or is expected to have a Material Adverse Effect; (b) Any resignation or termination of any key officers of the Company and the Company, to the best of its knowledge, does not know of the impending resignation or termination of employment of any such officer; (c) Any material change in the contingent obligations of the Company by way of guaranty, endorsement, indemnity, warranty or otherwise; (d) Any damage, destruction or loss, whether or not covered by insurance, that might result in a Material Adverse Effect; (e) Any waiver by the Company of a valuable right or of a material debt owed to it; (f) Any direct or indirect loans made by the Company to any shareholder, employee, officer or director of the Company, other than advances made in the ordinary course of business; Page 6 (g) Any material change in any compensation arrangement or agreement with any employee, officer, director or shareholder; (h) Any declaration or payment of any dividend or other distribution of the assets of the Company; (i) Any labor organization activity; (j) Any debt, obligation or liability incurred, assumed or guaranteed by the Company, except for current liabilities incurred in the ordinary course of business; (k) Any sale, assignment or transfer of any patents, trademarks, copyrights, trade secrets or other intangible assets; (1) Any change in any material agreement to which the Company is a party or by which it is bound that might result in a Material Adverse Effect; or (m) Any other event or condition of any character that, either individually or cumulatively, might result in a Material Adverse Effect. 3.10 Title to Properties and Assets; Liens, etc. The Company has good ------------------------------------------ and marketable title to its properties and assets, including, without limitation, the properties and assets reflected in the most recent balance sheet included in the Financial Statements, and good title to its leasehold estates, in each case subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than: (a) those resulting from taxes which have not yet become delinquent; (b) minor liens and encumbrances which do not materially detract from the value of the property subject thereto or materially impair the operations of the Company; and (c) those that have otherwise arisen in the ordinary course of business. All facilities, machinery, equipment, fixtures, vehicles and other properties owned, leased or used by the Company are in good operating condition and repair and are reasonably fit and usable for the purposes for which they are being used. The Company is in compliance with all material terms of each lease to which it is a party or is otherwise bound. 3.11 Patents and Trademarks The Company owns or possesses sufficient ---------------------- legal rights to all "Intellectual Property" (as defined below) for its business as now conducted and as currently proposed to be conducted, without any known infringement of the rights of others. There are no outstanding options, licenses or agreements of any kind relating to Page 7 the foregoing, nor is the Company bound by or a party to any options, licenses or agreements of any kind with respect to the Intellectual Property of any other person or entity other than such licenses or agreements arising from the purchase of "off the shelf" or standard products or the license agreement with Key Technology. The Company has not violated or, by conducting its business, shall not violate any of the patents, trademarks, service marks, trade names, copyrights or trade secrets or other proprietary rights of any other person or entity. The Company is not aware that any of its employees is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with their duties to the Company or that would conflict with the Company's business as currently proposed to be conducted. Neither the execution nor delivery of this Agreement, nor the carrying on of the Company's business by the employees of the Company, nor the conduct of the Company's business as currently proposed, will, to the Company's knowledge, conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant or instrument under which any employee is now obligated. The Company does not believe it is or will be necessary to utilize any inventions, trade secrets or proprietary information of any of its employees made prior to their employment by the Company, except for inventions, trade secrets or proprietary information that have been assigned to the Company. To the knowledge of the Company, no third party has interfered with, infringed upon, misappropriated or violated any material Intellectual Property of the Company. "Intellectual Property" means (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications, and patent disclosures, together with all reissuances, continuations, continuations- in-part, revisions, extensions, and reexaminations thereof, (b) all trademarks, service marks, trade dress, logos, trade names, and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all good-will associated therewith, and all applications, registrations, and renewals in connection therewith, (c) all copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith, (d) all mask works and all applications, registrations, and renewals in connection therewith, (e) all trade secrets and confidential business information (including ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals), (f) all computer software (including data and related documentation), (g) all other proprietary rights, and (h) all copies and tangible embodiments thereof (in whatever form or medium). Page 8 3.12 Compliance with Other Instruments. The Company is not in violation --------------------------------- or default of any term of its Restated Articles of Incorporation or By-laws, or of any provision of any mortgage, indenture, contract, agreement, instrument or contract to which it is party or by which it is bound or of any judgment, decree, order, writ or, to its knowledge, any statute, rule or regulation applicable to the Company that might result in a Material Adverse Effect. The execution, delivery, and performance of and compliance with this Agreement, and the Related Agreements, and the issuance and sale of the Shares pursuant hereto and of the Conversion Shares pursuant to the Certificate of Determination, will not, with or without the passage of time or giving of notice, result in any such material violation, or be in conflict with or constitute a default under any such term, or result in the creation of any mortgage, pledge, lien, encumbrance or charge upon any of the properties or assets of the Company or the suspension, revocation, impairment, forfeiture or nonrenewal of any permit license, authorization or approval applicable to the Company, its business or operations or any of its assets or properties. 3.13 Litigation. Except as set forth in Schedule 3.13, or disclosed in ---------- ------------- any SEC Filing, there is no action, suit, proceeding or investigation pending, or to the Company's knowledge, currently threatened against the Company that questions the validity of this Agreement or the Related Agreements or the right of the Company to enter into any of such agreements, or to consummate the transactions contemplated hereby or thereby, or that might result, either individually or in the aggregate, in a Material Adverse Effect, or any change in the current equity ownership of the Company, nor is the Company aware that there is any basis for the foregoing. The foregoing includes, without limitation, actions pending or threatened (or any basis therefor known to the Company) involving the prior employment of any of the Company's employees, their use in connection with the Company's business of any information or techniques allegedly proprietary to any of their former employers, or their obligations under any agreements with prior employers. The Company is not a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. There is no action, suit, proceeding or investigation by the Company currently pending or which the Company intends to initiate. 3.14 Tax Returns and Payments. The Company has timely filed all tax ------------------------ returns (federal, state and local) required to be filed by it. All taxes shown to be due and payable on such returns, any assessments imposed, and to the Company's knowledge all other taxes due and payable by the Company on or before the Closing have been paid or will be paid prior to the time they become delinquent. The Company has not been advised (a) that any of its returns, federal, state or other, have been or are Page 9 being audited as of the date hereof, or (b) of any deficiency in assessment or proposed judgment to its federal, state or other taxes. The Company has no knowledge of any liability of any tax to be imposed upon its properties or assets as of the date of this Agreement that is not adequately provided for. 3.15 Employees. The Company has no collective bargaining agreements --------- with any of its employees. There is no labor union organizing activity pending or, to the Company's knowledge, threatened with respect to the Company. Except as set forth in Schedule 3.15, no employee has any agreement or contract, written or verbal, regarding his employment. Except as set forth in Schedule 3.15, the Company is not a party to or bound by any currently effective employment contract, deferred compensation arrangement, bonus plan, incentive plan, profit sharing plan, retirement agreement or other employee compensation plan or agreement. To the Company's knowledge, no employee of the Company, nor any consultant with whom the Company has contracted, is in violation of any term of any employment contract, proprietary information agreement or any other agreement relating to the right of any such individual to be employed by, or to contract with, the Company because of the nature of the business to be conducted by the Company; and to the Company's knowledge the continued employment by the Company of its present employees, and the performance of the Company's contracts with its independent contractors, will not result in any such violation. The Company has not received any notice alleging that any such violation has occurred. Except as set forth in Schedule 3.15 or disclosed in any SEC Filing, ------------- no employee of the Company has been granted the right to continued employment by the Company or to any material compensation following termination of employment with the Company. The Company is not aware that any officer or key employee, or that any group of key employees, intends to terminate their employment with the Company, nor does the Company have a present intention to terminate the employment of any officer, key employee or group of key employees. 3.16 Proprietary Information and Inventions Agreements. Each former ------------------------------------------------- employee who joined SRC Vision, Inc. within the immediately preceding 36 months and each current employee, officer and consultant of the Company's SRC Vision, Inc. subsidiary has executed an Employee Proprietary Rights and Non-Disclosure Agreement and Confidentiality Agreement in the form of Exhibit E attached --------- hereto. No current employee, officer or consultant of the Company has excluded works or inventions made prior to his or her employment with the Company from his or her assignment of inventions pursuant to such employee, officer or consultant's Employee Proprietary Rights and Non-Disclosure Agreement and Confidentiality Agreement Page 10 3.17 Obligations of Management. Each officer of the Company is currently ------------------------- devoting one hundred percent (100%) of his or her business time to the conduct of the business of the Company. The Company is not aware of any officer or key employee of the Company planning to work less than full time at the Company in the future. 3.18 Registration Rights. Except as required pursuant to the ------------------- Registration Rights Agreement and the Stock Option Agreements, dated as of August 5, 1998, between the Company and Lyon Securities, Inc. and SRG & Associates, Ltd., and possible registration resulting from the Company's Stock Rights Plan, the Company is currently not under any obligation, and has not granted any rights, to register any of the Company's current outstanding securities or any of its securities that may hereafter be issued. 3.19 Compliance with Laws; Permits. The Company is not in violation of ----------------------------- any applicable statute, rule, regulation, order or restriction of any domestic or foreign government or any instrumentality or agency thereof in respect of the conduct of its business or the ownership of its properties which violation would result in a Material Adverse Effect. No governmental orders, permissions, consents, approvals or authorizations are required to be obtained and no registrations or declarations are required to be filed by the Company in connection with the execution and delivery of this Agreement and the issuance of the Shares or the Conversion Shares, except such as has been duly and validly obtained or filed, or with respect to any filings that must be made after the Closing, as will be filed in a timely manner. The Company has all franchises, permits, licenses and any similar authority necessary for the conduct of its business as now being conducted by it, the lack of which might result in a Material Adverse Effect. The Company believes it can obtain, without undue burden or expense, any similar authority for the conduct of its business as planned to be conducted. 3.20 Environmental and Safety Laws. The Company is not in material ----------------------------- violation of any applicable statute, law or regulation relating to the environment or occupational health and safety, and to its knowledge, no material expenditures are or will be required in order to comply with any such existing statute, law or regulations. 3.21 Offering Valid. Assuming the accuracy of the representations and -------------- warranties of Purchaser contained in Section 4.2 hereof, the offer, sale and ----------- issuance of the Shares and the Conversion Shares are exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), and will have been registered or qualified (or are exempt from registration and qualification) under the registration, permit or qualification requirements of all applicable state Page 11 securities laws. Neither the Company nor any agent on its behalf has solicited or will solicit any offers to sell or has offered to sell or will offer to sell all or any part of the Shares to any person or persons so as to bring the sale of such Shares by the Company within the registration provisions of the Securities Act or any state securities laws. 3.22 Full Disclosure. This Agreement, the Exhibits hereto, the Related --------------- Agreements and all other documents delivered by the Company to Purchaser or their attorneys or agents in connection herewith or therewith or with the transactions contemplated hereby or thereby, do not contain any untrue statement of a material fact nor, to the Company's knowledge, omit to state a material fact necessary in order to make the statements contained herein or therein not misleading. 3.23 Insurance. The Company has fire and casualty insurance policies --------- with coverage customary for companies similarly situated to the Company. 4. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby represents and warrants to the Company as follows (such representations and warranties do not lessen or obviate the representations and warranties of the Company set forth in this Agreement): 4.1 Requisite Power and Authority. Purchaser has all necessary power ----------------------------- and authority under all applicable provisions of law to execute and deliver this Agreement and the Related Agreements and to carry out their provisions. All action on Purchaser's part required for the lawful execution and delivery of this Agreement and the Related Agreements have been or will be effectively taken prior to the Closing. Upon their execution and delivery, this Agreement and the Related Agreements will be valid and binding obligations of Purchaser, enforceable in accordance with their terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors' rights, (b) general principles of equity that restrict the availability of equitable remedies, and (c) to the extent that the enforceability of the indemnification provisions of Section 5 of --------- the Registration Rights Agreement may be limited by applicable laws. 4.2 Investment Representations. Purchaser understands that neither the -------------------------- Shares nor the Conversion Shares have been registered under the Securities Act. Purchaser also understands that the Shares are being offered and sold pursuant to an exemption from registration contained in the Securities Act based in part upon Purchaser's representations Page 12 contained in the Agreement. Purchaser hereby represents and warrants as follows: (a) Purchaser Bears Economic Risk. Purchaser has substantial ----------------------------- experience in evaluating and investing in transactions of securities so that it is capable of evaluating the merits and risks of its investment in the Company and has the capacity to protect its own interests. Purchaser must bear the economic risk of this investment indefinitely until the Shares (or the Conversion Shares) are registered pursuant to the Securities Act, or an exemption from registration is available and the Shares or Conversion Shares are subsequently sold. Purchaser also understands that there is no assurance that any exemption from registration under the Securities Act will be available and that, even if available, such exemption may not allow Purchaser to transfer all or any portion of the Shares or the Conversion Shares under the circumstances, in the amounts or at the times Purchaser might propose. (b) Acquisition for Own Account. Purchaser is acquiring the Shares --------------------------- and the Conversion Shares for Purchaser's own account for investment only, and not with a view towards their distribution. (c) Purchaser Can Protect Its Interest. Purchaser represents that by ---------------------------------- reason of its, or of its management's, business or financial experience, Purchaser has the capacity to protect its own interests in connection with the transactions contemplated in this Agreement, and the Related Agreements. Further, Purchaser is aware of no publication of any advertisement in connection with the transactions contemplated in the Agreement. Purchaser has carefully reviewed and understands the risks of, and other considerations relating to, a purchase of Shares and the Conversion Shares, including, but not limited to, the risks set forth under "Risk Factors" in the Company's Form 10-K/A dated March 9, 1998 and Form 10-Q dated August 4, 1998. Purchaser has been afforded the opportunity to obtain any information necessary to make an informed investment decision and has had all inquiries to the Company answered, and has been furnished all requested materials relating to the Company and the offering and sale of the Shares and the Conversion Shares. (d) Accredited Investor. Purchaser represents that it is an ------------------- accredited investor within the meaning of Regulation D under the Securities Act. (e) Rule 144. Purchaser acknowledges and agrees that the Shares, -------- and, if issued, the Conversion Shares must be held Page 13 indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Purchaser has been advised or is aware of the provisions of Rule 144 promulgated under the Securities Act as in effect from time to time, which permits limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions, including, among other things: the availability of certain current public information about the Company, the resale occurring following the required holding period under Rule 144 and the number of shares being sold during any three-month period not exceeding specified limitations. 4.3 Transfer Restrictions. Purchaser acknowledges and agrees that the --------------------- Shares and, if issued, the Conversion Shares are subject to restrictions on transfer as set forth in the Registration Rights Agreement. 5. COVENANTS. For as long as the Shares are outstanding and held by Purchaser, the Company (and, with respect to Sections 5.1 and 5.2, Ventec, Inc. and SRC Vision, Inc.) hereby covenant and agree that, without the consent of Purchaser, it (and, with respect to Sections 5.1 and 5.2, they) shall not: 5.1 Consolidations, Mergers or Acquisitions. Until October 14, 2002, --------------------------------------- merge with or into any entity or enter into any reorganization, recapitalization, consolidation, sale of control or any transaction that, directly or indirectly results in all or substantially all of the assets or properties of the Company, Ventec, Inc. or SRC Vision, Inc. being sold, licensed, leased, transferred, conveyed or otherwise disposed of. 5.2 Intellectual Property. Until October 14, 2002, sell, license, --------------------- lease, transfer, convey or otherwise dispose of the Intellectual Property of the Company, SRC Vision, Inc. or Ventec, Inc. (as the case may be). 5.3 Issuance of Stock. Issue or distribute any additional equity ----------------- securities or other securities convertible or exchangeable into equity securities (other than issuance of shares pursuant to employee stock options or other stock plans in effect in effect on the date hereof and, with the approval of the Board of Directors, shares to unrelated third parties, that do not exceed 100,000 for any fiscal year. 5.4 Amendment of Charter or By-laws. Amend its charter or By-laws. ------------------------------- 6. CONDITIONS TO CLOSING. Page 14 6.1 Conditions to Purchaser Obligations at the Closing. Purchaser's -------------------------------------------------- obligations to purchase the Shares at the Closing are subject to the satisfaction, at or prior to the Closing Date, of the following conditions: (a) Representations and Warranties True; Performance of Obligations. --------------------------------------------------------------- The representations and warranties made by the Company in Section 3 hereof shall --------- be true and correct in all material respects as of the Closing Date with the same force and effect as if they had been made as of the Closing Date, and the Company shall have performed all obligations and conditions herein required to be performed or observed by it on or prior to the Closing. (b) Legal Investment. On the Closing Date, the sale and issuance of ---------------- the Shares and the proposed issuance of the Conversion Shares shall be legally permitted by all laws and regulations to which Purchaser and the Company are subject. (c) Consents, Permits, and Waivers. The Company shall have obtained ------------------------------ any and all consents, permits and waivers necessary or appropriate for consummation by the Company of the transactions contemplated by the Agreement and the Related Agreements (except for such as may be properly obtained subsequent to the Closing). (d) Filing of Certificate of Determination. The Certificate of -------------------------------------- Determination shall have been filed with the Secretary of State of California. (e) Corporate Documents. The Company shall have delivered to ------------------- Purchaser or its counsel, copies of all corporate documents of the Company as Purchaser shall reasonably request. (f) Reservation of Conversion Shares. The Conversion Shares issuable -------------------------------- upon conversion of the Shares shall have been duly authorized and reserved for issuance upon such conversion. (g) Compliance Certificate. The Company shall have delivered to ---------------------- Purchaser a Compliance Certificate, executed by the Chairman of the Company, dated the Closing Date, to the effect that the conditions specified in subsections (a), (c), (d) and (f) of this Section 6.1 have been satisfied. ----------- (h) Option Agreement. An Option Agreement substantially in the form ---------------- attached hereto as Exhibit B shall have been executed and delivered by the --------- parties thereto. Page 15 (i) Registration Rights Agreement. A Registration Rights Agreement ----------------------------- substantially in the form attached hereto as Exhibit C shall have been executed ---------- and delivered by the parties thereto. (j) Collateral Documents. All documents necessary to grant Purchaser -------------------- a perfected security interest in the Intellectual Property of the Company and its subsidiaries shall have been executed and delivered by the parties thereto. (k) Board of Directors. Upon the Closing, the authorized size of the ------------------ Board of Directors of the Company shall be eight (8) members, and Marc Giles, John Hartner or another person designated by Purchaser shall have been elected to the Board. (l) Legal Opinion. Purchaser shall have received from legal counsel ------------- to the Company an opinion addressed to it, dated as of the Closing Date, in substantially the form attached hereto as Exhibit F. --------- (m) Proceedings and Documents. All corporate and other proceedings ------------------------- in connection with the transactions contemplated at the Closing hereby and all documents and instruments incident to such transactions shall be reasonably satisfactory in substance and form to Purchaser and its counsel, and Purchaser and its counsel shall have received all such counterpart originals or certified or other copies of such documents as they may reasonably request. 6.2 Conditions to Obligations of the Company. The Company's obligation ---------------------------------------- to issue and sell the Shares at each Closing is subject to the satisfaction, on or prior to such Closing, of the following conditions: (a) Representations and Warranties True. The representations and ----------------------------------- warranties made by Purchaser acquiring Shares in Section 4 hereof shall be true --------- and correct in all material respects at the date of the Closing, with the same force and effect as if they had been made on and as of said date. (b) Performance of Obligations. Purchaser shall have performed and -------------------------- complied with all agreements and conditions herein required to be performed or complied with by Purchaser on or before the Closing. (c) Wire Transfer. Purchaser shall have paid to the Company the ------------- amount of $2,620,332 in immediately available funds. Page 16 (d) Option Agreement. An Option Agreement substantially in the form ---------------- attached hereto as Exhibit B shall have been executed and delivered by --------- Purchaser. (e) Registration Rights Agreement. A Registration Rights Agreement ----------------------------- substantially in the form attached hereto as Exhibit C shall have been executed --------- and delivered by Purchaser. (f) Consents, Permits, and Waivers. The Purchaser shall have ------------------------------ obtained any and all consents, permits and waivers necessary or appropriate for consummation by Purchaser of the transactions contemplated by the Agreement and the Related Agreements (except for such as may be property obtained subsequent to the Closing). 7. TRANSFERS OF STOCK. 7.1 Right of First Refusal. If (a) Purchaser has received a bona fide ---------------------- ---- ---- offer to purchase any of the Shares from a third party unaffiliated with Purchaser (the "Third Party") and (b) Purchaser intends to sell such Shares to such Third Party, Purchaser shall notify the Company in writing (the "Written Notice") of such proposed sale no less than sixty (60) days prior to the closing (the "Proposed Closing") for such proposed sale. The Written Notice shall contain all material terms of the proposed sale, including, without limitation, the proposed price and the date of the Proposed Closing (the "Proposed Closing Date"). Unless: (i) Purchaser receives from the Company on or before the day occurring thirty (30) days prior to the Proposed Closing, a written offer from the Company to purchase the Shares; and (ii) such offer by the Company to purchase the Shares (A) is for a price equal to or greater than the purchase price of the Shares set forth in the Written Notice; (B) provides for the payment to Purchaser for the Shares of such amount in the form and in accordance with the same payment schedule as set forth in the Written Notice; and (C) otherwise contains the same terms for purchasing the Shares as is provided for in the Written Notice ("Written Offer"), then Purchaser may sell the Shares to the Third Party on the terms provided for in the Written Notice on the Proposed Closing Date. If Purchaser receives a Written Offer from the Company on or before the day occurring thirty (30) days before the Proposed Closing Date, then Purchaser shall accept the Written Offer and Purchaser shall sell, and the Company shall purchase, the Shares on the terms provided for in the Written Offer on the Proposed Closing Date. 7.2 Purchaser Issuance of Shares. For as long as the Shares are ---------------------------- outstanding and are owned by Purchaser, if the Company intends to issue or sell any shares of its capital stock, or any securities convertible or exchangeable into such shares, except for securities issued or sold (i) in any Page 17 merger or acquisition, (ii) to Purchaser; and (iii) securities permitted under Section 5.3; provided that such securities are sold and issued in accordance with the terms of this Agreement (collectively "Permitted Securities"), it shall notify Purchaser in writing no less than forty-five (45) days prior to such issuance or sale, which notice shall contain the terms of the proposed securities. Purchaser shall then have the right to purchase a portion of such securities on the same terms so that, after such proposed issuance, Purchaser retains the right to own, convert or exchange the same percentage of shares of the Company's capital stock it had immediately preceding such issuance or sale minus Permitted Securities. Purchaser shall notify the Company of its intention to purchase such securities no later than thirty (30) days after its receipt of such notice. 7.3 Sale of Shares Upon Change in Control. If a "Change of Control" (as ------------------------------------- defined below) occurs, Purchaser may notify the Company that Purchaser intends to sell all or any portion of the shares of Series B Preferred Stock that Purchaser holds ("Selling Shares"). Subject to California General Corporation Law Chapter 5, the Company shall purchase such Selling Shares on the fifteenth (15th) day after the date of such notice. On such day, Purchaser shall deliver the stock certificates for the Selling Shares, and in exchange for such delivery, the Company shall pay Purchaser in immediately available funds an amount equal to: (a) the number of Selling Shares being sold, multiplied by (b) ------------- the greater of: (i) $22.00; and (ii) the average closing bid of the Common Stock of the Company for the consecutive forty-five day period immediately preceding the day before the date of such purchase and sale. "Change of Control" means the occurrence of any of the following: (1) the sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Corporation, (2) the adoption of a plan relating to the liquidation or dissolution of the Corporation; (3) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any person or entity becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person", such "person" shall be deemed to have Page 18 beneficial ownership of all securities that such person has the right to acquire, whether such right it currently exercisable or is exercisable only upon the occurrence of a subsequent condition), directly or indirectly, of more than 37.5% of the Voting Stock of the Corporation (measured by voting power rather than number of shares); (4) the first day on which a majority of the members of the Board of Directors of the Corporation are not Continuing Directors (as defined below); or (5) the shareholders of the Corporation approve a consolidation of the Corporation with, or a merger of the Corporation with or into, any entity, or the shareholders of the Corporation (if required) or the shareholders of any entity approve a consolidation of such entity with, or merger of such entity with or into, the Corporation, other than any such transaction whether the Corporation's shareholders of record immediately prior to such transaction hold more than 80% of the Voting Stock of the surviving corporation or entity immediately after giving effect to such issuance. A Change of Control shall not be deemed to have occurred if any of the above events occur by virtue of transactions effected by FMC or its affiliates. "Continuing Director" means any member of the Board of Directors of the Corporation who (i) was a member of such Board of Directors on the date on which a share of Series B Preferred Stock is first issued (the "Original Issue Date") or (ii) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. 8. MISCELLANEOUS. 8.1 Governing Law. This Agreement shall be governed in all respects by ------------- the internal laws of the State of Illinois. 8.2 Survival. The representations, warranties, covenants and agreements -------- made herein shall not survive the Closing. All statements as to factual matters contained in any certificate or other instrument delivered by or on behalf of the Company pursuant hereto in connection Page 19 with the transactions contemplated hereby shall be deemed to be representations and warranties by the Company hereunder solely as of the date of such certificate or instrument. 8.3 Successors and Assigns. Except as otherwise expressly 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 and shall inure to the benefit of and be enforceable by the holder of 100% of the Shares from time to time. 8.4 Indemnity. The Company agrees to defend, protect, indemnify and --------- hold harmless Purchaser and each and all of its respective officers, directors, employees, attorneys and agents ("Indemnified Parties") from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including without limitation the fees and disbursements of counsel for the Indemnified Parties in connection with any investigative, administrative or judicial proceeding, whether or not the Indemnified Parties shall be designated by a party thereto), which may be imposed on, incurred by, or asserted against any Indemnified Party (whether direct, indirect or consequential and whether based on any federal or state laws or other statutory regulations, including without limitation securities, environmental and commercial laws and regulations, under common law or at equitable cause, or on contract or otherwise) in any manner relating to or arising out of the operation of the businesses operated by the Company, or any act, event or transaction related or attendant thereto; provided, that the Company shall not have any obligation to any Indemnified Party hereunder with respect to matters caused by or resulting from the willful misconduct or gross negligence of such Indemnified Party; provided further, that this indemnity shall not be deemed to obligate the Company for any liability arising in connection with products manufactured by Purchaser. To the extent that the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, the Company shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law, to the payment and satisfaction of all matters incurred by the Indemnified Parties. 8.5 Entire Agreement. This Agreement, the Exhibits and Schedules ---------------- hereto, the Related Agreements and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and no party shall be liable or bound to any other in any manner by any representations, warranties, covenants and agreements except as specifically set forth herein and therein. Page 20 8.6 Severability. In case any provision of the Agreement shall be ------------ invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 8.7 Amendment. This Agreement may be amended or modified only upon the --------- written consent of the Company and Purchaser. 8.8 Delays or Omissions. It is agreed that no delay or omission to ------------------- exercise any right, power or remedy accruing to any party, upon any breach, default or noncompliance by another party under this Agreement, the Related Agreements or the Certificate of Determination, shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of or in any similar breach, default or noncompliance thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character on Purchaser's part of any breach, default or noncompliance under this Agreement, the Related Agreements or under the Certificate of Determination or any waiver on such party's part of any provisions or conditions of the Agreement, the Related Agreements, or the Certificate of Determination must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement, the Related Agreements, the Certificate of Determination, by law, or otherwise afforded to any party, shall be cumulative and not alternative. 8.9 Notices. All notices required or permitted hereunder shall be in ------- writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified; (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day; (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (d) one (1) day after deposit with Federal Express or other nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the parties at the addresses as set forth on the signature page hereof or at such other address as the Company or Purchaser, as the case may be, may designate by ten (10) days advance written notice to the other parties hereto. 8.10 Expenses. Each party shall pay all costs and expenses that it -------- incurs with respect to the negotiation, execution, delivery and performance of the Agreement. 8.11 Titles and Subtitles. The titles of the sections and subsections -------------------- of the Agreement are for convenience of reference only and are not to be considered in construing this Agreement. Page 21 8.12 Counterparts. This Agreement may be executed in any number of ------------ counterparts, each of which shall be an original, but all of which together shall constitute one instrument. 8.13 Broker's Fees. Each party hereto represents and warrants that no ------------- agent, broker, investment banker, person or firm acting on behalf of or under the authority of such party hereto is or will be entitled to any broker's or finder's fee or any other commission directly or indirectly in connection with the transactions contemplated herein. Each party hereto further agrees to indemnify each other party for any claims, losses or expenses incurred by such other party as a result of the representation in this Section 8.13 being untrue. 8.14 Pronouns. All pronouns contained herein, and any variations -------- thereof, shall be deemed to refer to the masculine, feminine or neutral, singular or plural, as to the identity of the parties hereto may require. 8.15 California Corporate Securities Law. THE SALE OF THE SECURITIES ----------------------------------- WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION OR IN THE ABSENCE OF AN EXEMPTION FROM SUCH QUALIFICATION IS UNLAWFUL. PRIOR TO ACCEPTANCE OF SUCH CONSIDERATION BY THE COMPANY, THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION FROM SUCH QUALIFICATION BEING AVAILABLE. Page 22 IN WITNESS WHEREOF, the parties have executed this SERIES B PREFERRED STOCK PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof. ADVANCED MACHINE VISION CORPORATION FMC CORPORATION By /s/ William J. Young By /s/ Charles H. Cannon, Jr. ------------------------ -------------------------- William J. Young Charles H. Cannon, Jr. Chief Financial Officer Vice President The undersigned acknowledge and agree to Sections 5.1 and 5.2 above. SRC VISION, INC. VENTEC, INC. By /s/ Alan R. Steel By /s/ Alan R. Steel ------------------------ -------------------------- Alan R. Steel Alan R. Steel Chief Financial Officer Chief Financial Officer Page 23 EXHIBIT D Capitalization; Voting Rights
Class A Shares Reserved Shares for Outstanding Security Authorized Issuance Shares -------- ---------- -------------- ----------- Advanced Machine Vision Corporation: Class A Common Stock 60,000,000 10,655,218 Class B Common Stock 3,000,000 64,335 Series A Preferred Stock 400,000 Series B Preferred Stock 119,106 1,191,060 119,106 Issuable upon exercise or conversion: Stock Option Plans (A) Options outstanding 3,088,501 Available for grant 138,817 Non-plan options 631,538 FMC 15% option 1,598,282 Ventek convertible note 1,000,000 Ventek stock note 1,800,000 6.75% convertible debt 423,529 Class G & I Warrants 540,000 Ventek warrants 250,000 1997 restricted stock plan (B) 1,800,000 SRC Vision, Inc.: (C) Options outstanding 317,425 Available for grant 78,575
(A) Includes 1991, 1994 and 1997 stock option plans. (B) Excludes 200,000 issued shares included in Class A Common Stock outstanding. (C) The SRC Vision Plan was established on 1/10/97. Vesting of options will accelerate if SRC Vision or its parent (currently Advanced Machine Vision Corporation) consummates an agreement to sell a majority of SRC Vision's business or assets, or merge with another entity that is not at least 50% owned by its parent company or other affiliated entity owned by its parent company. Exhibit E - --------- Proprietary Information Agreement - --------------------------------- EMPLOYEE PROPRIETARY RIGHTS AND NON-DISCLOSURE AGREEMENT I recognize that Advanced Machine Vision, SRC VISION(R), Inc., ARC Netherlands b.v. and each of their current or future subsidiaries, divisions, affiliated entities, successor entities or assigns, (hereafter called "the Company") must initiate, make and develop technological innovations and inventions, develop valuable information, and trade secrets, and protect its legal rights in such matters. Therefore, in consideration of my employment by the Company, I hereby agree: To maintain in strictest confidence, both during the term of my employment and thereafter, all confidential technical and business information, trade secrets, inventions and innovations of the Company, its successors or assigns, and my co- workers, either learned or developed by me during the term of my employment; and To promptly disclose and assign to the Company all rights to any and all inventions or innovations that are conceived or first actually reduced to practice by me, either alone or jointly with others, during my term of employment by the Company; except that I need not assign to the Company title in any invention for which no equipment, supplies, facility, or trade secret information of the Company was used and which was developed entirely on my own time, and (a) which does not relate (1) to the business of the Company or (2) to the Company's actual or demonstrably anticipated research or development, or (b) which does not result from any work performed by me for the Company, unless full title in the United States or any other country to the invention is required by contract between the Company and the United States or any other country or any of their agencies. I understand that all those disclosures of my inventions and innovations made to the Company under this paragraph for which I need not assign title to the Company shall be held in confidence by the Company. To advise the Company prior to entering into a consulting agreement with any outside agency while in the Company's employ, and to exercise my best judgment before accepting such consulting agreement as not to compromise the Company. I understand that a breach of any of the above clauses may cause termination of my employment, in addition to giving rise to claims for remedies or damages as provided by applicable law. - --------------------------- -------------------------------------- Date Employee (please type or print) - --------------------------- -------------------------------------- Place of Signing Employee's signature CONFIDENTIALITY AGREEMENT 1. COMPANY AND JURISDICTION 1.1 Definition of Company. As used in this agreement, the term "Company" means Advanced Machine Vision (AMV), SRC VISION(R), Inc., ARC Netherlands b.v. and each of their current or future subsidiaries, divisions, affiliated entities, successor entities or assigns. This agreement shall be governed by the laws of the Employee's country of employment, whether it be the United States of America, the Netherlands, or any other country. Notwithstanding the previous sentence, the parties to this agreement agree to submit to the laws of any jurisdiction in which a breach of this agreement may occur. 2. CONFIDENTIALITY 2.1 Definition of Confidential Information. As used in this agreement, the term "Confidential Information" means: (a) proprietary information of the Company; (b) information marked or designated by the Company as confidential; (c) information, whether or not in written form and whether or not designated as confidential, which is known to me ("Employee") as being treated by the Company as confidential; and (d) information provided to the Company by third parties which the Company is obligated to keep confidential. Confidential Information includes, but is not limited to, know-how, customer lists, marketing plans, financial and technical information, prospect lists and data base, development plans, business plans, project development plans, long range and strategic plans, budgets and compensation information. 2.2 Acknowledgment of Receipt of Confidential Information. Employee acknowledges that in the course of performing duties for the Company, he or she will have access to Confidential Information, the ownership and confidential status of which are highly important to the Company, and Employee agrees in addition to the specific covenants contained herein, to comply with all Company policies and procedures for the protection of such Confidential Information. 2.3 Ownership. Employee acknowledges that all Confidential Information is and shall continue to be the exclusive property of the Company, whether or not prepared in whole or part by Employee and whether or not disclosed to or entrusted to Employee in connection with employment by the Company. 2.4 Acknowledgment of Irreparable Harm. Employee acknowledges that any disclosure of Confidential Information will cause irreparable harm to the Company. 2.5 Covenant of Nondisclosure. Employee agrees not to disclose Confidential Information, directly or indirectly, under any circumstances or by any means, to any third person without the express written consent of the Company. 2.6 Covenant of Nonuse. Employee agrees that Employee will not copy, transmit, reproduce, summarize, quote or make any commercial or other use whatsoever of the Confidential Information, except as may be necessary to perform work done by Employee for the Company. 2.7 Safeguard of Confidential Information. Employee agrees to exercise the highest degree of care in safeguarding Confidential Information against loss, theft, or other inadvertent disclosure and agrees generally to take all steps necessary or requested by the Company to ensure maintenance of confidentiality. 2.8 Exclusions. This section shall not apply to the following information: (a) information now and hereafter voluntarily disseminated by the Company to the public or which otherwise becomes part of the public domain through lawful means; (b) information already known or acquired by Employee other than in conjunction with Employment by the Company and as documented by written records which predate this Agreement; (c) information subsequently and rightfully received from third parties and not subject to any obligation of confidentiality; (d) information independently developed by Employee after termination of employment. 2.9 Prior Employment. Employee acknowledges and understands that the Company is not employing Employee to obtain any information which is the property of any previous employers or any other person for whom Employee has performed services. Employee also acknowledges that the Company expects that the product of any services performed hereunder, or knowledge or information, such as trade secrets, trade lists, plans, or other confidential information developed in the course of or as a result of service hereunder will be the property of the Company in accordance with the terms hereof. Accordingly, Employee warrants and represents to the Company that Employee will not, in performing services hereunder, make use of information which is the property of and/or confidential to any previous employer or other person or entity for whom services have been furnished and that Employee has disclosed to the Company all prior employment agreements which may impose restrictions on Employee's activities. 3. DELIVERY OF MATERIALS Upon termination of employment status, Employee will deliver to the Company all materials, including without limitation customer lists, documents, records, drawings, prototypes, models and schematic diagrams, which describe, depict, contain, constitute, reflect, record or in any way relate to inventions or Confidential Information, which are in Employee's possession or under Employee's control, whether or not the materials were prepared by Employee. 4. SUBPOENAS If Employee, during and after employment, is served with any subpoena or other compulsory judicial or administrative process calling for production of Confidential Information or if Employee is otherwise required by law or regulation to disclose Confidential Information, Employee will immediately, and prior to production or disclosure, notify the Company and provide it with such information as may be necessary in order that the Company may take such action as it deems necessary to protect its interest. 5. REMEDIES Employee acknowledges that breach of the obligations imposed by this Agreement will cause irreparable harm to the Company and, in that event, if Employee fails to abide by these obligations, the Company will be entitled to specific performance, including immediate issuance of temporary restraining order or preliminary injunction enforcing this Agreement, and to judgment for damages caused by Employee's breach, and to other remedies provided by applicable law. 6. DURATION The obligations set forth in this Agreement will continue beyond the terms of Employee's employment by the Company. I understand and agree to the terms of this Confidentiality Agreement. - -------------------------------------- Employee's signature - -------------------------------------- Date EXHIBIT F [LETTERHEAD OF TROY & GOULD] October 14, 1998 FMC Corporation 200 E. Randolph Drive Chicago, IL 60601 Ladies and Gentlemen: We have acted as special counsel to Advanced Machine Vision Corporation, a California corporation (the "Company") in connection with the issuance on the date hereof by the Company of 119,106 shares (the "Shares") of the Company's Series B Preferred Stock, without par value (the "Series B Preferred Stock") pursuant to a Series B Preferred Stock Purchase Agreement of even date herewith (the "Purchase Agreement") between the Company and FMC Corporation, a Delaware corporation ("FMC"). This opinion is rendered to you pursuant to Section 6.1(1) of the Purchase Agreement. As such counsel, we have made such legal and factual examinations and inquiries as we have deemed necessary or appropriate for purposes of this opinion, except where a statement is qualified as to knowledge or awareness, in which case we have made no or limited inquiry as specified below. In connection with this transaction, we have examined the following: (a) The Purchase Agreement; (b) The Registration Rights Agreement of even date herewith between the Company and FMC (the "Registration Rights Agreement"); (c) The Option of even date herewith, issued by the Company; (d) The Intellectual Property Security Agreement of even date herewith between the Company and FMC; (e) The Certificate of Determination of the Company (the "Certificate"); (f) The agreements listed on Schedules to the Purchase Agreement (the "Material Agreements"). FMC Corporation October 14, 1998 Page 2 The documents described in subsections (a), (b), (c), (d) and (e) above are referred to herein collectively as the "Transaction Documents." In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity to authentic original documents of all documents submitted to us as copies. As to facts material to the opinions, statements and assumptions expressed herein, we have, with your consent, relied upon written representations of officers of the Company and others. In addition, we have obtained and relied upon such certificates and assurances from public officials as we have deemed necessary. Except as set forth above, we have made no independent investigation of factual information contained in any of the documents reviewed by us. We are opining herein as to the effect on the subject transaction only of the federal securities laws of the United States and the laws of the State of California, and we express no opinion with respect to the applicability thereto, or the effect thereon, of the laws of any other jurisdiction, or as to any matters of municipal law or the laws of any local agencies within any state. Whenever a statement herein is qualified by "to our knowledge" or a similar phrase, it is intended to indicate that those attorneys in this firm who have rendered legal services in connection with the above transaction do not have current actual knowledge of the inaccuracy of such statement. However, except as otherwise expressly indicated, we have not undertaken any independent investigation to determine the accuracy of any such statement, and no inference that we have any knowledge of any matters pertaining to such statement should be drawn from our representation of the Company. Subject to the foregoing and the other matters set forth herein, it is our opinion that, as of the date hereof: 1. The Company has been duly incorporated and is validly existing and in good standing under the laws of the State of California with corporate power and authority to enter into the Transaction Documents and perform its obligations thereunder and to carry on its business as presently conducted. 2. The execution, delivery and performance of the Transaction Documents have been duly authorized by all necessary corporate action of the Company, and the Transaction Documents have been duly executed and delivered by the Company. 3. Each of the Transaction Documents constitutes a legally valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. FMC Corporation October 14, 1998 Page 3 4. The execution, delivery and performance by the Company of the Transaction Documents do not (i) violate any federal or California statute, rule or regulation; (ii) violate the provisions of the Company's Articles of Incorporation or By-laws; (iii) to our knowledge result in the breach of or a default under any of the Material Agreements; (iv) to our knowledge require any consents, approvals, authorizations or filings by the Company under any federal or California statute, rule or regulation, except under federal or state securities or Blue Sky laws or (v) to our knowledge, based solely on a certificate of an officer of the Company, violate the terms of any judgment, writ or court order applicable to the Company. No opinion is expressed in this paragraph 4 as to the application of any antifraud laws, antitrust laws or trade regulation laws. 5. The authorized capital stock of the Company consists or 60,000,000 shares of authorized Class A Common Stock (the "Common Stock"), of which 10,655,218 are issued and outstanding; 3,000,000 authorized shares of Class B Common Stock, of which 64,335 shares are issued and outstanding; 400,000 authorized shares of Series A Preferred Stock, of which no shares are issued and outstanding; and 119,106 authorized shares of Series B Preferred Stock, of which 119,106 are issued and outstanding as of the closing of the transactions set forth in the Purchase Agreement. The Shares have been duly and validly authorized and are validly issued, fully paid and nonassessable. 6. The Shares have been duly and validly authorized, and, when issued and delivered against payment therefor pursuant to the Purchase Agreement, will be validly issued, fully paid and nonassessable. 7. Subject to the accuracy of FMC's representations as set forth in the Purchase Agreement and assuming that FMC's principal executive offices are located outside the State of California and that payment for and delivery of the shares takes place outside of California, the Shares, upon issuance, delivery and payment therefor in the manner described in the Purchase Agreement, will be issued in a transaction exempt from the registration requirements of the Securities Act and the qualification requirements of Section 25110 of the California Corporate Securities Law. 8. The shares of Common Stock of the Company issuable upon conversion of the Shares have been duly reserved for issuance and when issued in compliance with the provisions of the Certificate, will be validly issued, fully paid and nonassessable. 9. The certificates representing the Shares are in compliance with the requirements of the California General Corporations Law and have been duly and validly executed by the officers of the Company named thereon. The opinions expressed in paragraph 3 and paragraph 4 are subject to the following limitations, qualifications and exceptions: FMC Corporation October 14, 1998 Page 4 (a) the effect of bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights of creditors, including, without limitation, section 548 of the federal Bankruptcy Code and section 547 of the federal Bankruptcy Code and comparable provisions of state law; (b) the effect of any antifraud laws, antitrust or trade regulation laws; (c) the effect of general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing and the possible unavailability of specific performance or injunctive relief regardless of whether considered in a proceeding in equity or at law; (d) certain rights, remedies and waivers contained in the Transaction Documents may be limited or rendered ineffective by applicable California laws or juridical decisions governing such provisions, but such laws or judicial decisions do not render the Transaction Documents invalid or unenforceable as a whole; (e) the unenforceability under certain circumstances under law or court decisions of provisions in Section 5 of the Registration Rights Agreement and Section 8.4 of the Purchase Agreement providing for the indemnification of or contribution to a party with respect to a liability where such indemnification or contribution is contrary to public policy or prohibited by law; (f) the effect of Section 1717 of the California Civil Code, which provides that, where a contract permits one party to the contract to recover attorneys' fees, the prevailing party in any action to enforce any provision of the contract shall be entitled to recover its reasonable attorneys' fees; and (g) the effect of California law, which provides that a court may refuse to enforce, or may limit the application of, a contract or any clause thereof which the court finds as a matter of law to have been unconscionable at the time it was made or contrary to public policy. In addition, with respect to our opinion expressed in paragraph 2 as to authorization by all necessary corporate action of the Company, we call your attention to the fact that in conversations with the Nasdaq Stock Market ("Nasdaq"), we have been informed by Nasdaq that it will not require shareholder approval for the issuance of the Shares or the Option. However, Nasdaq has indicated that in the event any additional shares are issued to FMC by the Company, Nasdaq will "link the transactions" (quoted from conversation with Nasdaq) and require shareholder approval for such additional issuance of shares. In rendering the opinions expressed in paragraph 3 and paragraph 4 insofar as they require interpretation of the Material Agreements (i) we have assumed with your permission the FMC Corporation October 14, 1998 Page 5 application of all internal laws of the State of California without giving effect to any choice of law provisions contained therein or any choice of law principles which would result in application of the internal laws of any other state and (ii) to the extent that any questions or legality or legal construction have arisen in connection with our review, we have applied the laws of the State of California in resolving such questions. We advise you that certain of the Material Agreements may be governed by other laws, that such laws may vary substantially from the law assumed to govern for purposes of this opinion, and that this opinion may not be relied upon as to whether or not a breach or default would occur under the law actually governing such Material Agreements. We express no opinion as to the title of any property subject to the Intellectual Property Security Agreement, the adequacy of any description of the collateral, or the perfection or priority of any security interests granted pursuant to such agreement. To the extent that the obligations of the Company may be dependent upon such matters, we assume for purposes of this opinion that: all parties to the Transaction Documents other than the Company have complied with all applicable requirement to file returns and pay taxes under the Franchise Tax Law of the State of California; all parties to the Transaction Documents other than the Company are duly incorporated or formed, and are validly existing and in good standing under the laws of their respective jurisdictions of incorporation or formation, all parties to the Transaction Documents other than the Company have the requisite power to perform their respective obligations under the Transaction Documents; and the Transaction Documents have been duly authorized, executed and delivered by all parties to the Transaction Documents other than the Company and constitute their legally valid and binding obligations, enforceable against them in accordance with their terms. We express no opinion as to compliance by any party to the Transaction Documents other than the Company with any state or federal law or regulations applicable to the subject transactions because of the nature of their business. This opinion is rendered only to you and is solely for your benefit in connection with the transactions covered hereby. This opinion may not be relied upon by you for any other purpose, or furnished to, quoted to, or relied upon by any other person, firm or corporation for any purpose, without our prior written consent. Very truly yours, TROY & GOULD Professional Corporation EX-3 4 CERTIFICATE OF DETERMINATION CERTIFICATE OF DETERMINATION OF SERIES B PREFERRED STOCK OF ADVANCED MACHINE VISION CORPORATION, A CALIFORNIA CORPORATION William J. Young and Alan R. Steel each certifies that: 1. They are the duly elected and acting Chairman of the Board and Chief Financial Officer, respectively, of Advanced Machine Vision Corporation, a corporation organized and existing under the General Corporation Law of the State of California (the "Corporation"). 2. The number of shares of Series B Preferred Stock is 119,106, none of which has been issued. 3. The Board of Directors duly adopted the following resolution creating a series of its Preferred Stock designated as Series B Preferred Stock: WHEREAS, the Articles of Incorporation of the Corporation authorize the Preferred Stock of the Corporation to be issued in series and authorize the Board of Directors to determine the rights, preferences, privileges and restrictions granted to or imposed upon any wholly unissued series Preferred Stock and to fix the number of shares and designation of any such series; NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby establish a series of the class of authorized preferred stock, no par value, of the Corporation ("Preferred Stock"), and that the designation and amount thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof, are as follows: 1. Designation and Amount. The shares of the series of Preferred ---------------------- Stock hereby established shall be designated as "Series B Preferred Stock" and the number of shares constituting such series shall be 119,106. 2. Dividends. The holders of the Series B Preferred Stock shall have --------- no right to receive dividends. 3. Liquidation Preference. ---------------------- (a) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of the Series B Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the holders of the Corporation's common stock, no par value ("Common Stock") or Series A Preferred Stock by reason of their ownership thereof, the amount 1 of $22.00 per share (as adjusted for any stock dividends, combinations or splits with respect to such shares) (the "Liquidation Preference"). If upon the occurrence of such event, the assets and funds thus distributed among the holders of the Series B Preferred Stock shall be insufficient to permit the payment to such holders of the full Liquidation Preference, then the entire assets and funds of the Corporation legally available for distribution shall be distributed ratably among the holders of the Series B Preferred Stock in proportion to the preferential amount each such holder is otherwise entitled to receive. (b) After the payment or distribution to the holders of the Series B Preferred Stock of the full Liquidation Preference set forth above, the holders of the Series B Preferred Stock shall receive no further distribution with respect to such shares. (c) For purposes of this Section 3, (i) any acquisition of the Corporation by means of merger or other form of corporate reorganization in which outstanding shares of the Corporation are sold or exchanged for securities or other consideration issued, or caused to be issued, by the acquiring corporation or its subsidiary (other than a mere reincorporation transaction) or (ii) a sale of all or substantially all of the assets of the Corporation, shall, at the option of the holders of a majority of the outstanding shares of Series B Preferred Stock, be treated as a liquidation, dissolution or winding up of the Corporation and shall entitle the holders of Series B Preferred Stock to receive at the closing in cash, securities or other property (valued as provided in Section 3(d) below) amounts as specified in Section 3(a) above; provided, -------- however, that, in each such case, the applicable transaction shall not be - ------- treated as a liquidation, dissolution or winding up of the Corporation and shall not entitle the holders of Series B Preferred Stock to receive such amounts unless the Corporation's shareholders of record as constituted immediately prior to such acquisition or sale hold less than a majority of the Voting Stock (as defined below) of the surviving corporation or acquiring entity immediately after such acquisition or sale. "Voting Stock" means the capital stock of an entity that is entitled to vote in the election of the Board of Directors of such entity. (d) Whenever the distribution provided for in this Section 3 shall be payable in securities or property other than cash, the value of such distribution shall be the fair market value of such securities or other property as determined in good faith by the Board of Directors. 4. Repurchase at the Option of the Series B Preferred Shareholders. --------------------------------------------------------------- Upon the occurrence of a Change of Control (as defined below), each holder of shares of Series B Preferred Stock shall have the right to require the Corporation to repurchase all or any part of such holder's shares of Series B Preferred Stock at a price in cash equal to the greater of (a) $22.00 per share (as adjusted for any stock dividends, combinations or splits with respect to such shares) or (b) the market value of the shares of Class A Common Stock issuable upon conversion of such shares of Series B Preferred Stock, calculated as the average of the closing bid price of the Class A Common Stock for the forty-five (45) consecutive trading days immediately preceding the date of repurchase, subject to the Corporation's ability to legally do so under California General Corporation Law, Chapter 5. The Corporation shall repurchase such 2 shares within 30 days of the receipt of notice by the Corporation that such shareholder has elected to have the Corporation repurchase its shares pursuant to this Section 4. "Change of Control" means the occurrence of any of the following: (i) the sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Corporation, (ii) the adoption of a plan relating to the liquidation or dissolution of the Corporation, (iii) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any person or entity becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person," such "person" shall be deemed to have beneficial ownership of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition), directly or indirectly, of more than 37.5% of the Voting Stock of the Corporation (measured by voting power rather than number of shares), (iv) the first day on which a majority of the members of the Board of Directors of the Corporation are not Continuing Directors (as defined below) or (v) the shareholders of the Corporation approve a consolidation of the Corporation with, or a merger of the Corporation with or into, any entity, or the shareholders of the Corporation (if required) or the shareholders of any entity approve a consolidation of such entity with, or merger of such entity with or into, the Corporation, other than any such transaction where the Corporation's shareholders of record immediately prior to such transaction hold more than 80% of the Voting Stock of the surviving corporation or entity immediately after giving effect to such issuance. A Change of Control shall not be deemed to have occurred if any of the above events occur by virtue of transactions effected by FMC Corporation or its affiliates. "Continuing Director" means any member of the Board of Directors of the Corporation who (i) was a member of such Board of Directors on the date on which a share of Series B Preferred Stock is first issued (the "Original Issue Date") or (ii) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. 5. Voting Rights. ------------- (a) Each holder of shares of the Series B Preferred Stock shall be entitled to the number of votes equal to the number of shares of Class A Common Stock into which such shares of Series B Preferred Stock could then be converted and shall have voting rights and powers equal to the voting rights and powers of the Class A Common Stock (except in the election of directors, which shall be governed by Section 5(c), and except as otherwise expressly provided herein or as required by law, voting together with the Common Stock as a single class) and shall be entitled to notice of any shareholders' meeting in accordance with the By-laws of the Corporation. Fractional votes shall not, however, be permitted and any fractional voting rights resulting from the above formula (after aggregating all shares into which shares of Series B Preferred Stock held by each holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded upward). 3 (b) So long as any shares of Series B Preferred Stock remain outstanding (or, in the case of (vi) and (vii) below, until October 14, 2002 and have not been transferred by the original holder of such Series B Preferred Stock), the Corporation shall not, without the vote or written consent by the holders of at least a majority of the then outstanding shares of the Series B Preferred Stock, voting or acting together as a single class, take any of the following actions: (i) take any action which adversely alters or changes or may adversely alter or change the rights, preferences or privileges of the Series B Preferred Stock; (ii) increase or decrease the authorized number of shares of Series B Preferred Stock; (iii) create (by reclassification or otherwise) any class or series of shares having rights, preferences or privileges senior to or on a parity with the Series B Preferred Stock; (iv) redeem or repurchase any shares of capital stock (other than repurchases from employees upon termination of employment pursuant to written employment agreements with such employees in effect on the Original Issue Date); (v) enter into any agreement for the redemption or repurchase of any shares of capital stock except pursuant to repurchases permitted pursuant to (iv) above; (vi) merge with or into any other entity or enter into any other corporate reorganization, recapitalization, sale of control or any transaction that, directly or indirectly, results in the sale, license, lease, transfer, conveyance or other disposition of all or substantially all of the assets or properties of the Corporation; (vii) sell, license, lease, transfer, convey or otherwise dispose of the Corporation's Intellectual Property, as defined below; (viii) amend or waive any provision of the Corporation's Articles of Incorporation or By-laws; (ix) purchase, lease or acquire assets or securities of another person or entity, in one or more related or unrelated transactions, if the aggregate consideration paid or payable in all such transactions (other than those in the ordinary course of business) combined exceeds two million dollars ($2,000,000) or any one such transaction exceeds five hundred thousand ($500,000) dollars; (x) issue or distribute any additional equity securities or any other securities convertible or exchangeable into equity securities (other than issuance of shares of Class A Common Stock pursuant to employee stock options or other employee stock plans in effect as of the Original Issue Date and, with the approval of the Board of Directors, shares of Class A Common Stock to unrelated third parties, in arms-length transactions, in consideration for the payment of fair value, that do not exceed 100,000 shares for any fiscal year); or 4 (xi) approves the liquidation, dissolution or winding up of the Corporation. "Intellectual Property" means (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications, and patent disclosures, together with all reissuances, continuations, continuations-in- part, revisions, extensions, and reexaminations thereof, (b) all trademarks, service marks, trade dress, logos, trade names, and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all good-will associated therewith, and all applications, registrations, and renewals in connection therewith, (c) all copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith, (d) all mask works and all applications, registrations, and renewals in connection therewith, (e) all trade secrets and confidential business information (including ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals), (f) all computer software (including data and related documentation), (g) all other proprietary rights, and (h) all copies and tangible embodiments thereof (in whatever form or medium). (c) The holders of Series B Preferred Stock, voting as a separate class, shall be entitled to elect one (1) member of the Board of Directors. 6. Conversion. The holders of the Series B Preferred Stock shall ---------- have conversion rights as follows (the "Conversion Rights"): (a) Right to Convert. Each share of Series B Preferred Stock shall ---------------- be convertible, at the option of the holder thereof, at any time after the date of issuance of such share at the office of the Corporation or any transfer agent for such stock, into such number of fully paid and nonassessable shares of the Corporation's Class A Common Stock, no par value ("Class A Common Stock") as is determined by dividing $22.00 by the Series B Conversion Price (as defined below) applicable to such share, determined as hereinafter provided, in effect on the date the certificate is surrendered for conversion. The "Series B Conversion Price" shall initially be $2.20 per share of Class A Common Stock. Such initial Series B Conversion Price shall be adjusted as hereinafter provided. (b) Automatic Conversion. Each share of Series B Preferred Stock -------------------- shall automatically be converted into shares of Class A Common Stock at the then-effective Series B Conversion Price, upon the later of (i) the third anniversary of the date of issuance or (ii) the sixtieth day after the termination of that certain Representative Agreement between the Corporation and the initial holder of the Series B Preferred Stock. (c) Mechanics of Conversion. ----------------------- (i) Before any holder of Series B Preferred Stock shall be entitled to convert the same into shares of Class A Common Stock, such holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any 5 transfer agent for such stock, and shall give written notice to the Corporation at such office that such holder elects to convert the same and shall state therein the name or names in which such holder wishes the certificate or certificates for shares of Class A Common Stock to be issued. The Corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series B Preferred Stock, a certificate or certificates for the number of shares of Class A Common Stock to which such holder shall be entitled as aforesaid. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of surrender of the shares of Series B Preferred Stock to be converted, and the person or persons entitled to receive the shares of Class A Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Class A Common Stock on such date. (d) Adjustment to Series B Conversion Price for Certain Diluting ------------------------------------------------------------ Issues - ------ (i) Special Definitions. For purposes of this Section 6(d), ------------------- the following definitions apply: (1) "Options" shall mean rights, options, or warrants to ------- subscribe for, purchase or otherwise acquire Common Stock, Series B Preferred Stock or Convertible Securities (defined below). (2) "Convertible Securities" shall mean any evidences of ---------------------- indebtedness, shares (other than Common Stock or Series B Preferred Stock) or other securities convertible into or exchangeable for Common Stock. (3) "Additional Shares of Common Stock" shall mean all --------------------------------- shares of Common Stock issued (or, pursuant to Section 6(d)(iii), deemed to be issued) by the Corporation after the Original Issue Date, other than shares of Common Stock issued or issuable: (A) upon conversion of shares of Series B Preferred Stock; (B) to officers, directors or employees of, or consultants to, the Corporation pursuant to stock option or stock purchase plans or agreements on terms approved by the Board of Directors and shares to unrelated third parties with approval of the Board of Directors (provided that the amount of such shares issued does not exceed 100,000 shares of Common Stock in any fiscal year) (net of any repurchases of such shares, but including all shares issuable upon exercise of Options), subject to adjustment for all subdivisions and combinations; (C) as a dividend or distribution on Series B Preferred Stock; or (D) for which adjustment of the Series B Conversion Price is made pursuant to Section 6(e). 6 (ii) No Adjustment of Series B Conversion Price. Any provision ------------------------------------------ herein to the contrary notwithstanding, no adjustment in the Series B Conversion Price for Series B Preferred Stock shall be made in respect of the issuance of Additional Shares of Common Stock unless the consideration per share (determined pursuant to Section 6(d)(v) hereof) for an Additional Share of Common Stock issued or deemed to be issued by the Corporation is less than the Series B Conversion Price in effect on the date of, and immediately prior to such issue. (iii) Deemed Issuance of Additional Shares of Common Stock. In ---------------------------------------------------- the event the Corporation at any time or from time to time after the Original Issue Date shall issue any Options (excluding the option granted pursuant to the Series B Preferred Stock Purchase Agreement to FMC Corporation of even date herewith) or Convertible Securities or shall fix a record date for the determination of holders of any class of securities then entitled to receive any such Options or Convertible Securities, then the maximum number of shares (as set forth in the instrument relating thereto without regard to any provisions contained therein designed to protect against dilution) of Common Stock issuable upon the exercise of such Options or, in the case of Convertible Securities and Options for Convertible Securities or for Series B Preferred Stock, the conversion or exchange of such Convertible Securities or Series B Preferred Stock, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date, provided further that in any such case in which Additional Shares of Common Stock are deemed to be issued: (1) no further adjustments in the Series B Conversion Price shall be made upon the subsequent issue of Convertible Securities, or Series B Preferred Stock or shares of Common Stock upon the exercise of such Options or conversion or exchange of such Convertible Securities or Series B Preferred Stock; (2) if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any increase or decrease in the consideration payable to the Corporation, or decrease or increase in the number of shares of Common Stock issuable, upon the exercise, conversion or exchange thereof, the Series B Conversion Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon any such increase or decrease becoming effective, be recomputed to reflect such increase or decrease insofar as it affects such Options or the rights of conversion or exchange under such Convertible Securities (provided, however, that no such adjustment of the Series B Conversion Price shall affect Common Stock previously issued upon conversion of the Series B Preferred Stock); (3) upon the expiration of any such Options or any such Options or any rights of conversion or exchange under such Convertible Securities which shall not have been exercised, the Series B Conversion Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon such expiration, be recomputed as if: 7 (A) in the case of Convertible Securities or Options for Common Stock the only Additional Shares of Common Stock issued were the shares of Common Stock, if any, actually issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities and the consideration received therefor was the consideration actually received by the Corporation for the issue of all such Options, whether or not exercised, plus the consideration actually received by the Corporation upon such exercise, or for the issue of all such Convertible Securities which were actually converted or exchanged, plus the additional consideration, if any, actually received by the Corporation upon such conversion or exchange and (B) in the case of Options for Convertible Securities or Series B Preferred Stock only the Convertible Securities or Series B Preferred Stock, if any, actually issued upon the exercise thereof were issued at the time of issue of such Options, and the consideration received by the Corporation for the Additional Shares of Common Stock deemed to have been then issued was the consideration actually received by the Corporation for the issue of all such Options, whether or not exercised, plus the consideration deemed to have been received by the Corporation (determined pursuant to Section 6(d)(v)) upon the issue of the Convertible Securities or Series B Preferred Stock with respect to which such Options were actually exercised; (4) no readjustment pursuant to clause (2) or (3) above shall have the effect of increasing the Series B Conversion Price to an amount which exceeds the lower of (a) the Series B Conversion Price on the original adjustment date, or (b) the Series B Conversion Price that would have resulted from any issuance of Additional Shares of Common Stock between the original adjustment date and such readjustment date; (5) in the case of any Options which expire by their terms not more than 30 days after the date of issue thereof, no adjustment of the Series B Conversion Price shall be made until the expiration or exercise of all such Options, whereupon such adjustment shall be made in the same manner provided in clause (3) above. (iv) Adjustment of Series B Conversion Price Upon Issuance of -------------------------------------------------------- Additional Shares of Common Stock. In the event the Corporation, at any time - --------------------------------- after the Original Issue Date shall issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Section 6(d)(iii) without consideration or for a consideration per share less than the Series B Conversion Price as in effect immediately prior to such issue, then and in such event, the Series B Conversion Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) determined by multiplying such Series B Conversion Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue plus the number of shares of Common Stock which the aggregate consideration received by the Corporation for the total number of Additional Shares of Common Stock so issued would purchase at such Series B Conversion Price in effect immediately prior to such issuance, and the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue plus the number of such Additional Shares of Common Stock so issued. For the purpose of the above calculation, the number of shares of Common Stock outstanding immediately prior to such issue shall be calculated on a fully diluted basis, as if all shares of Series B Preferred Stock and all 8 Convertible Securities had been fully converted into shares of Common Stock immediately prior to such issuance and any outstanding warrants, options or other rights for the purchase of shares of stock or convertible securities had been fully exercised (and the resulting securities fully converted into shares of Common Stock, if so convertible) as of such date. (v) Determination of Consideration. For purposes of this ------------------------------ Section 6(d), the consideration received by the Corporation for the issue of any Additional Shares of Common Stock shall be computed as follows: (1) Cash and Property: Such consideration shall: ----------------- (A) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation excluding amounts paid or payable for accrued interest or accrued dividends; (B) insofar as it consists of property other than cash, be computed at the fair value thereof at the time of such issue, as determined in good faith by the Board; and (C) in the event Additional Shares of Common stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (A) and (B) above, as determined in good faith by the Board. (2) Options and Convertible Securities. The consideration ---------------------------------- per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Section 6(d)(iii), relating to Options and Convertible Securities shall be determined by dividing: (A) the total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein designed to protect against dilution) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities or Series B Preferred Stock, the exercise of such Options for Convertible Securities or Series B Preferred Stock and the conversion or exchange of such Convertible Securities or Series B Preferred Stock by (B) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein designed to protect against the dilution) issuable upon the exercise of such Options or conversion or exchange of such Convertible Securities. (e) Adjustments to Series B Conversion Price for Stock Dividends ------------------------------------------------------------ and for Combinations or Subdivisions of Common Stock. In the event that the - ---------------------------------------------------- Corporation at any time 9 or from time to time after the Original Issue Date shall declare or pay, without consideration, any dividend on the Common Stock payable in Common Stock or in any right to acquire Common Stock for no consideration, or shall effect a subdivision of the outstanding shares of Common Stock into a greater number of shares of Common Stock (by stock split, reclassification or otherwise than by payment of a dividend in Common Stock or in any right to acquire Common Stock), or in the event the outstanding shares of Common Stock shall be combined or consolidated, by reclassification or otherwise, into a lesser number of shares of Common Stock, then the Series B Conversion Price in effect immediately prior to such event shall, concurrently with the effectiveness of such event, be proportionately decreased or increased, as appropriate. In the event that the Corporation shall declare or pay, without consideration, any dividend on the Common Stock payable in any right to acquire Common Stock for no consideration then the Corporation shall be deemed to have made a dividend payable in Common Stock in an amount of shares equal to the maximum number of shares issuable upon exercise of such rights to acquire Common Stock. (f) Adjustments for Reclassification and Reorganization. If --------------------------------------------------- the Class A Common Stock issuable upon conversion of the Series B Preferred Stock shall be changed into the same or a different number of shares of any other class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares provided for in Section 6(e) above or a merger or other reorganization referred to in Section 3(c) above), the Series B Conversion Price then in effect shall, concurrently with the effectiveness of such reorganization or reclassification, be proportionately adjusted so that the Series B Preferred Stock shall be convertible into, in lieu of the number of shares of Class A Common Stock which the holders would otherwise have been entitled to receive, a number of shares of such other class or classes of stock equivalent to the number of shares of Class A Common Stock that would have been subject to receipt by the holders upon conversion of Series B Preferred Stock immediately before that change. (g) No Impairment. The Corporation will not, by amendment of ------------- its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 6 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Series B Preferred Stock against impairment. (h) Certificate as to Adjustment. Upon the occurrence of each ---------------------------- adjustment or readjustment of the Series B Conversion Price pursuant to this Section 6, the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Series B Preferred Stock a certificate executed by the Corporation's President or Chief Financial Officer setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Series B Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the Series B Conversion Price at the time in effect, and 10 (iii) the number of shares of Class A Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of the Series B Preferred Stock. Notwithstanding anything herein to the contrary, no adjustment of the conversion price shall be made unless all such adjustments, cumulatively, would require an in crease or a decrease of at least $.02. (i) Notices of Record Date. In the event that the Corporation ---------------------- shall propose at any time: (i) to declare any dividend or distribution upon its Common Stock, whether in cash, property, stock or other securities, whether or not a regular cash dividend and whether or not out of earnings or earned surplus; (ii) to offer the subscription pro rata to the holders of any class or series of its stock any additional shares of stock of any class or series or other rights; (iii) to effect any reclassification or recapitalization of its Common Stock outstanding involving a change in the Common Stock; or (iv) to merge or consolidate with or into any other corporation, or sell, lease or convey all or substantially all of its assets, or to liquidate, dissolve or wind up; Then, in connection with each such event, the Corporation shall send to the holders of Series B Preferred Stock: (1) at least twenty (20) days prior written notice of the date on which a record shall be taken for such dividend, distribution or subscription rights (and specifying the date on which the holders of Class A Common Stock shall be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (iii) and (iv) above; and (2) in the case of the matters referred to in (iii) and (iv) above, at least twenty (20) days prior written notice of the date when the same shall take place (and specifying the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon the occurrence of such event). (j) Issue Taxes. The Corporation shall pay any and all issue ----------- and other taxes that may be payable in respect of any issue or delivery of shares of Class A Common Stock on conversion of shares of Series B Preferred Stock pursuant hereto; provided, however, that the Corporation shall not be -------- ------- obligated to pay any transfer taxes resulting from any transfer requested by any holder in connection with any such conversion. (k) Reservation of Stock Issuable Upon Conversion. The Corporation --------------------------------------------- shall at all times reserve and keep available out of its authorized but unissued shares of Class A Common Stock, solely for the purpose of effecting the conversion of the shares of Series B Preferred Stock, such number of its shares of Class A Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series B Preferred Stock; and if at any time the number of authorized but unissued shares of Class A Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Series B Preferred Stock, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Class A Common Stock to such number of shares as shall be sufficient for such purpose, including, without limitation, engaging in reasonable efforts to obtain the requisite shareholder approval of any necessary amendment to this Certificate. 11 (l) Fractional Shares. No fractional share shall be issued upon ----------------- the conversion of any share or shares of Series B Preferred Stock. All shares of Class A Common Stock (including fractions thereof) issuable upon conversion of more than one share of Series B Preferred Stock by a holder thereof shall be aggregated for purposes of determining whether the conversion would result in the issuance of any fractional share. If, after the aforementioned aggregation, the conversion would result in the issuance of a fraction of a share of Class A Common Stock, the Corporation shall, in lieu of issuing any fractional share, pay the holder otherwise entitled to such fraction a sum in cash equal to the fair market value of such fraction on the date of conversion (as determined in good faith by the Board of Directors). (m) Notices. Any notice required by the provisions of this Section ------- 6 to be given to the holders of shares of Series B Preferred Stock shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each holder of record at his address appearing on the books of the Corporation. 7. No Reissuance of the Series B Preferred Stock. No share or shares --------------------------------------------- of the Series B Preferred Stock acquired by the Corporation by reason of redemption, purchase, conversion or otherwise shall be reissued. 12 VERIFICATION BY WRITTEN DECLARATION William J. Young and Alan R. Steel each declares under penalty of perjury under the laws of the State of California that he has read the foregoing certificate and knows the contents thereof and that the same is true of his own knowledge. Dated: October 14, 1998 /s/ William J. Young ------------------------------ Name: William J. Young Title: Chairman of the Board /s/ Alan R. Steel ------------------------------ Name: Alan R. Steel Title: Chief Financial Officer EX-4 5 SIDE LETTER BETWEEN THE ISSUER AND FMC 10-14-98 October 14, 1998 Advanced Machine Vision Corporation 2067 Commerce Drive Medford, OR 97504 Attention: Mr. Alan Steel Dear Alan: Reference is made to the Series B Preferred Stock Purchase Agreement of even date herewith between Advanced Machine Vision Corporation, a California corporation ("AMV"), and FMC Corporation, a Delaware corporation ("FMC"), and the documents, instruments and agreements executed in connection therewith (collectively, the "Executed Documents"). In furtherance of the Executed Documents, and notwithstanding anything to the contrary contained therein, subject to compliance with applicable laws and the Nasdaq Stock Market requirements, the parties agree that if FMC exercises its option to acquire fifteen percent (15%) of the then issued and outstanding shares of AMV, AMV will fill a vacancy on the Board with one designee chosen by FMC Corporation or, if no such vacancy exists, AMV will increase the size of its board by one (1) in order to create such vacancy. FMC and AMV agree to cooperate with each other in effectuating the terms of this letter and to execute and deliver such further documents or instruments and take such further actions as shall be necessary, appropriate and desirable in order to carry out the full intent and purposes of the terms of this Letter. FMC Corporation By: /s/ Charles H. Cannon, Jr. ---------------------------- Its: Vice President --------------------------- Advanced Machine Vision Corporation By: /s/ Alan R. Steel -------------------------- Its: Chief Financial Officer ------------------------- EX-5 6 REGISTRATION RIGHTS AGREEMENT DATED 10-14-98 REGISTRATION RIGHTS AGREEMENT ----------------------------- This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is dated as of October 14, 1998, by and between ADVANCED MACHINE VISION CORPORATION, a California corporation (the "Company"), and FMC CORPORATION, a Delaware corporation, along with its successors and assigns ("Purchaser"). WHEREAS, pursuant to that certain Series B Preferred Purchase Agreement of even date herewith (the "Purchase Agreement") between the Company and Purchaser, the Company issued One Hundred Nineteen Thousand One Hundred Six (119,106) shares of Series B Preferred Stock ("Series B Preferred") to Purchaser; WHEREAS, in consideration of its purchase of Series B Preferred, Purchaser has received an option (the "Option") to acquire "Common Shares" (as defined below); and WHEREAS, in order to induce Purchaser to enter into the Purchase Agreement, the Company has agreed to provide registration rights to Purchaser on the terms and subject to the conditions provided herein. NOW THEREFORE, in consideration of the premises contained herein and for other good and valuable consideration (the receipt, sufficiency and adequacy of which are hereby acknowledged), and intending to be legally bound hereby, the parties hereto agree as follows: Section 1. Definitions. ----------- (a) As used in this Agreement, the following terms shall have the following meanings: "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated --------- under the Exchange Act. "Business Day" shall mean any day other than a Saturday or Sunday that ------------ banks are open for business in Illinois and California. "Common Shares" shall mean shares of Class A Common Stock, without par ------------- value of the Company. Page 1 "Company" shall have the meaning set forth in the preamble and shall ------- also include the Company's successors. "Exchange Act" shall mean the Securities Exchange Act of 1934, as ------------ amended from time to time. "Incidental Registration" shall mean a registration required to be ----------------------- effected by the Company pursuant to Section 2(b). ----------- "Incidental Registration Statement" shall mean a registration --------------------------------- statement of the Company, as provided in Section 2(b), which covers any of the ----------- Registrable Securities on an appropriate form in accordance with the Securities Act and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "NASD" shall mean the National Association of Securities Dealers, Inc. ---- "NASDAQ" shall mean the NASDAQ Stock Market of the NASD. ------ "Option" shall mean the Option issued to Purchaser in connection with ------ the Purchase Agreement. "Permitted Transferee" shall mean any Person which would be a -------------------- "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act. "Person" shall mean any individual, limited or general partnership, ------ corporation, trust, joint venture, association, joint stock company, limited liability company or unincorporated organization. "Prospectus" shall mean the prospectus included in a Registration ---------- Statement, including any preliminary Prospectus, and any such Prospectus as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities and by all other amendments and supplements to such Prospectus, including post-effective amendments, and in each case including all material incorporated by reference therein. "Purchaser" shall have the meaning set forth in the preamble. --------- "Registrable Securities" shall mean any Common Shares held by ---------------------- Purchaser, but shall not include the Option or any Common Share (i) which has been effectively registered under the Securities Act and disposed of in accordance with a Registration Statement covering such security or (ii) which has been distributed to the Page 2 public pursuant to Rule 144 under the Securities Act. "Registration Expenses" shall mean any and all expenses incident to --------------------- performance of or compliance with this Agreement by the Company and its subsidiaries, including, without limitation: (i) all SEC, stock exchange, NASD and other registration, listing and filing fees, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws and compliance with the rules of the NASDAQ or any stock exchange (including, without limitation, reasonable fees and disbursements of counsel in connection such compliance and the preparation of a Blue Sky Memorandum and legal investment survey), (iii) all expenses of any Persons in preparing or assisting in preparing, printing, distributing, mailing and delivering any Registration Statement, any Prospectus, any underwriting agreements, transmittal letters, securities sales agreements, securities certificates and other documents relating to the performance of and compliance with this Agreement, (iv) the reasonable fees and disbursements of (A) counsel for the Company, (B) counsel for Purchaser (other than in-house counsel) in connection with such registration and (C) the independent public accountants of the Company, including, without limitation, the expenses of any "cold comfort" letters required by or incident to such performance and compliance, (v) the fees and expenses of any trustee, transfer agent, registrar, escrow agent or custodian, (vi) the fees and expenses of any special experts or other persons retained by the Company in connection with any Registration Statement, (vii) the expenses incurred in connection with making road show presentations and holding meetings with potential investors to facilitate the distribution and sale of Registrable Securities which are customarily borne by the issuer, and (viii) all internal expenses of the Company (including all salaries and expenses of officers and employees performing legal or accounting duties); provided, however, -------- Registration Expenses shall not include discounts and commissions and accountable expense allowances payable to underwriters, selling brokers, managers or other similar Persons engaged in the distribution of any of the Registrable Securities. "Registration Statement" shall mean any registration statement of the ---------------------- Company which covers any Registrable Securities and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Required Registration" shall mean a registration required to be --------------------- effected pursuant to Section 2(a). ----------- "Required Registration Statement" shall mean a Registration Statement ------------------------------- which covers the Registrable Securities requested to be included therein pursuant to the provisions of Section 2(a) on an appropriate form (in accordance ----------- with Section 4(a) hereof) pursuant to the Securities Act, and which form shall ----------- be available for the sale of Page 3 the Registrable Securities in accordance with the intended method or methods of distribution thereof, and all amendments and supplements to such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "SEC" shall mean the Securities and Exchange Commission. --- "Securities Act" shall mean the Securities Act of 1933, as amended -------------- from time to time. "Underwriter" shall have the meaning set forth in Section 5(a). ----------- ----------- "Underwritten Offering" shall mean a sale of securities of the Company --------------------- to an Underwriter or Underwriters for reoffering to the public. Section 2. Registration Under the Securities Act. ------------------------------------- (a) Required Registration. At any time and from time to time after --------------------- the execution of the Purchase Agreement, Purchaser shall have the right to request in writing (a "Request") (which request shall specify the Registrable Securities intended to be disposed of by such Purchaser and the intended method of distribution thereof) that the Company register Purchaser's Registrable Securities by filing with the SEC a Required Registration Statement. Upon the receipt of such a Request, the Company shall, as soon as practicable (but no later than 120 days, which period may be extended by a written extension signed by one or more Purchasers holding a majority of the Registrable Securities) after the receipt of such a Request by the Company, cause to be filed with the SEC a Required Registration Statement covering the Registrable Securities that the Company has been so requested to register in such Request, and shall use its best efforts to have such Required Registration Statement declared effective by the SEC as soon as practicable thereafter. The Company shall keep such Required Registration Statement effective for a period of at least three hundred sixty (360) days (and, within such period, continuously effective for a period of at least one hundred eighty (180) days) following the date on which such Required Registration Statement is declared effective (or such shorter period that will terminate when all of the Registrable Securities covered by such Required Registration Statement have been sold pursuant thereto), including, if necessary, by filing with the SEC a post-effective amendment or a supplement to the Required Registration Statement or the related Prospectus or any document incorporated therein by reference or by filing any other required document or otherwise supplementing or amending the Required Registration Statement, if required by the rules, regulations or instructions applicable to the registration form used by the Company for such Required Registration Statement or by the Securities Act, the Exchange Act, any state securities or blue sky laws, or any rules and regulations thereunder. Page 4 (b) Incidental Registration. ----------------------- (i) Right to Include Registrable Securities. If at any time after --------------------------------------- the execution of this Agreement the Company proposes to register any of its Common Shares under the Securities Act (other than (A) any registration of public sales or distributions solely by and for the account of the Company of securities issued (x) pursuant to any employee benefit or similar plan or any dividend reinvestment plan or (y) in any acquisition by the Company, or (z) pursuant to its shareholder rights plan or (B) pursuant to Section 2(a) hereof), ------------ either in connection with a primary offering for cash for the account of the Company or a secondary offering, the Company will, each time it intends to effect such a registration, give written notice to Purchaser at least thirty- five (35) Business Days (which period may be reduced by written agreement of one or more Purchasers holding a majority of the Registrable Securities) prior to the initial filing of a Registration Statement with the SEC pertaining thereto, informing Purchaser of its intent to file such Registration Statement and of Purchaser's rights to request the registration of the Registrable Securities held by Purchaser under this Section 2(b) (the "Company Notice"). Upon the ----------- written request of Purchaser made within seven (7) Business Days after any such Company Notice is given (which request shall specify the Registrable Securities intended to be disposed of by Purchaser and the intended method of distribution thereof), the Company shall use all good faith reasonable efforts to include in the Registration Statement all Registrable Securities that the Company has been so requested to register by Purchaser to the extent required to permit the disposition (in accordance with the intended methods of distribution thereof or, in the case of a registration which is intended to effect a primary offering for cash for the account of the Company, in accordance with the Company's intended method of distribution) of the Registrable Securities so requested to be registered, including, if necessary, by filing with the SEC a post-effective amendment or a supplement to the Incidental Registration Statement or the related Prospectus or any document incorporated therein by reference or by filing any other required document or otherwise supplementing or amending the Incidental Registration Statement, if required by the rules, regulations or instructions applicable to the registration form used by the Company for such Incidental Registration Statement or by the Securities Act, any state securities or blue sky laws, or any rules and regulations thereunder; provided, however, -------- ------- that if, at any time after giving written notice of its intention to register any securities and prior to the effective date of the Incidental Registration Statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to Purchaser and, thereupon, (A) in the case of a determination not to register, the Company shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay the Registration Expenses incurred in connection therewith), and (B) in the case of a determination to delay such registration, the Company shall be relieved Page 5 of its obligation to register any Registrable Securities requested to be included in such Incidental Registration Statement unless Purchaser elects to continue such registration as a Required Registration. The registration rights granted pursuant to the provisions of this Section 2(b) shall be in addition to the registration rights granted pursuant to - ------------ the other provisions of this Section. (ii) Priority in Incidental Registrations. If a registration ------------------------------------ pursuant to this Section 2(b) involves an Underwritten Offering of the ------------ securities so being registered, whether or not for sale for the account of the Company, and the sole Underwriter or the lead managing Underwriter, as the case may be, of such Underwritten Offering shall advise the Company in writing (with a copy to Purchaser on or before fifteen (15) days prior to the date then scheduled for such offering that, in its opinion, the amount of securities (including Registrable Securities) requested to be included in such registration exceeds the amount which can be sold in (or during the time of) such offering without adversely affecting the distribution of the securities being offered, then the Company shall include in such registration first, (x) in the case of a ----- sale for the account of the Company, all the securities to be sold by the Company pursuant to such Incidental Registration Statement without reference to the incidental registration rights of Purchaser, and (y) in the case of a sale other than for the account of the Company, all of the securities requested to be sold pursuant to such registration statement by any Seller exercising a demand registration right, and then by Purchaser; second, (x) in the case of a sale for ------ the account of the Company, the amount of other securities (including Registrable Securities) requested by Purchaser to be included in such registration that the Company is so advised can be sold in (or during the time of) such offering, and (y) in the case of a sale other than for the account of the Company, the amount of other securities requested to be included by the Company for its own account in such registration that the Company is so advised can be sold in (or during the time of) such offering; and third, in all cases, ----- the amount of other securities requested to be included in such registration that the Company is so advised can be sold in (or during the time of) such offering. (c) Expenses. The Company shall pay all Registration Expenses in -------- connection with (i) each registration requested pursuant to Section 2(a) and ------------ (ii) each registration as to which Purchaser request inclusion of Registrable Securities pursuant to Section 2(b). Purchaser shall pay all discounts and ----------- commissions payable to underwriters, selling brokers, managers or other similar Persons related to the sale or disposition of Purchaser's Registrable Securities pursuant to any registration pursuant to this Section and the fees and expenses of its legal counsel. (d) Effective Registration Statement; Suspension. A Registration -------------------------------------------- Statement pursuant to Section 2(a) will not be deemed to have become effective ----------- (and Page 6 the related registration will not be deemed to have been effected) unless it has been declared effective by the SEC; provided, however, that if, after it has -------- ------- been declared effective, the offering of any Registrable Securities pursuant to such Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, such Registration Statement will be deemed not to have become effective and the related registration will not be deemed to have been effected. Any period during which the Company fails to keep any Required Registration Statement effective and usable for resale of Registrable Securities shall be referred to as a "Suspension Period." A Suspension Period shall commence on and include the date that the Company gives notice that any Required Registration Statement is no longer effective or usable for resale of Registrable Securities and shall continue until and including the date when Purchaser either receives the copies of the supplemented or amended Prospectus contemplated by Section 4(j) or is advised in writing by the Company that the ------------ use of the Prospectus may be resumed. In the event of one or more Suspension Periods, the applicable time period referenced in the first paragraph of Section ------- 2(a) shall be extended by the number of days included in each such Suspension - ---- Period, and, in the event any Suspension Period occurs sooner than thirty (30) days after the end of the previous Suspension Period or thirty (30) days after the initial effectiveness of any Required Registration Statement, none of the days between such Suspension Periods or prior to such Suspension Period shall be included in computing such applicable time period. (e) Selection of Underwriters. At any time or from time to time, ------------------------- Purchaser may elect to have such Registrable Securities sold in an Underwritten Offering and may select the investment banker or investment bankers and manager or managers that will serve as lead managing Underwriter or sole Underwriter with respect to the offering of such Registrable Securities as long as such Underwriter or Underwriters are reasonably acceptable to the Company. Purchaser may not participate in any Underwritten Offering hereunder unless Purchaser (i) agrees to sell such Purchaser's securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, custody agreements, indemnities, underwriting agreements and other documents required under the terms of such Underwritten Offering. Section 3. Holdback Arrangements. --------------------- (a) Restrictions on Public Sale by Purchaser. (i) Purchaser agrees, ---------------------------------------- if the applicable offering is a primary Underwritten Offering of Common Shares for cash for the account of the Company as to which Purchaser is eligible to participate pursuant to Section 2(b), the requirements of the immediately ----------- following sentence are satisfied, and Page 7 the sole Underwriter or lead managing Underwriter in such Offering so requests, not to effect any public sale or distribution of Registrable Securities (including any sales pursuant to Rule under the Securities Act) during the period commencing on date Purchaser receives the Company Notice pursuant to Section 2(b) and continuing until ninety (90) days after the effective date of - ----------- the Registration Statement or any shorter period which the sole or lead managing Underwriter shall request (except to the extent permitted for sales of Purchaser's Registrable Securities pursuant to the Registration Statement). Purchaser shall not be obligated to agree to the restrictions set forth in this Section 3(a)(i) (A) unless the registration statement for the offering by the - ------------------ Company is filed with the SEC within twenty (20) days after giving the Company Notice and relates to a primary offering for cash of Common Shares for net proceeds of at least ten million dollars ($10,000,000) for the account of the Company or a Company subsidiary or a newly formed holding company (based upon the closing price of the Common Shares in the principal trading market therefor as of the close of trading on the trading date immediately preceding the date of the Company Notice with respect to such offering), the Company uses all good faith reasonable efforts to have such registration statement declared effective by the SEC as soon as practicable after filing and such registration statement is declared effective no later than the ninetieth (90th) day after giving the Company Notice, and (B) unless at least one hundred eighty (180) days have elapsed since the expiration or termination of Purchaser's agreement pursuant to this Section 2(a) with respect to any prior Company registration to which the ----------- restrictions of this Section 3(a)(i) apply (except in the case of the initial -------------- such Company registration). (b) Restrictions on Public Sale by the Company. The Company shall ------------------------------------------ not effect any public sale or distribution (other than public sales or distributions solely by and for the account of the Company of securities issued pursuant to any employee benefit or similar plan or any dividend reinvestment plan) of any securities during the period commencing on the date the Company receives a Request from Purchaser and continuing until one hundred twenty (120) days after the commencement of an Underwritten Offering, if requested by the sole Underwriter or lead managing Underwriter in such Underwritten Offering, or for such shorter period as the sole or lead managing Underwriter shall request. Section 4. Registration Procedures. ----------------------- In connection with the obligations of the Company pursuant to Section ------- 2, the Company shall use all good faith reasonable efforts to effect or cause to - - be effected the registration of the Registrable Securities under the Securities Act to permit the sale of such Registrable Securities by Purchaser in accordance with their intended method or methods of distribution, and the Company shall: (a) (i) prepare and file a Registration Statement with the SEC which: (A) shall be on Form S-3 (or any successor to such form), if available, or a form Page 8 selected by Purchaser for which the Company qualifies and which the Company approves (such approval not to be unreasonably withheld), (B) shall be available for the sale or exchange of the Registrable Securities in accordance with the intended method or methods of distribution by Purchaser thereof, and (C) shall comply as to form with the requirements of the applicable form and include all financial statements required by the SEC to be filed therewith and all other information reasonably requested by the lead managing Underwriter or sole Underwriter, if applicable, to be included therein: (ii) use all good faith reasonable efforts to cause such Registration Statement to become effective and remain effective in accordance with Section 2; (iii) use all good faith --------- reasonable efforts to not take any action that would cause a Registration Statement to contain a material misstatement or omission or to be not effective and usable for resale of Registrable Securities during the period that such Registration Statement is required to be effective and usable; and (iv) cause each Registration Statement and the related Prospectus and any amendment or supplement thereto, as of the effective date of such Registration Statement, amendment or supplement (A) to comply with any requirements of the Securities Act and the rules and regulations of the SEC and (B) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (b) subject to paragraph (j) of this Section 4, prepare and file with ------------ --------- the SEC such amendments and post-effective amendments to each such Registration Statement, as may be necessary to keep such Registration Statement effective for the applicable period; cause each such Prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by each Registration Statement during the applicable period in accordance with the intended method or methods of distribution by Purchaser thereof, as set forth in such registration statement; (c) furnish to Purchaser and to each Underwriter of an Underwritten Offering of Registrable Securities, if any, without charge, as many copies of each Prospectus, including each preliminary Prospectus, and any amendment or supplement thereto and such other documents as Purchaser or Underwriter may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities. The Company hereby consents to the use of the Prospectus, including each preliminary Prospectus, by Purchaser and each Underwriter of an Underwritten Offering of Registrable Securities, if any, in connection with the offering and sale of the Registrable Securities covered by the Prospectus or the preliminary Prospectus (Purchaser hereby agreeing not to make a broad public dissemination of a form of preliminary Prospectus which is designed to be a "quiet filing" without the Company's consent, such consent not to be withheld unreasonably); (d) (i) use all good faith reasonable efforts to register or qualify the Page 9 Registrable Securities, no later than the time the applicable Registration Statement is declared effective by the SEC, under all applicable state securities or blue sky laws of such jurisdictions as each Underwriter, if any, or if Purchaser covered by a Registration Statement, reasonably requests; (ii) use all good faith reasonable efforts to keep each such registration or qualification effective during the period such Registration Statement is required to be kept effective; and (iii) do any and all other acts and things which may be reasonably necessary or advisable to enable each such Underwriter, if any, and Purchaser to consummate the disposition in each such jurisdiction of Registrable Securities owned by Purchaser; provided, however, that the Company -------- ------- shall not be obligated to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to consent to be subject to general service of process (other than service of process in connection with such registration or qualification or any sale of Registrable Securities in connection therewith) in any such jurisdiction; (e) notify Purchaser promptly, and, if requested by Purchaser, confirm such advice in writing: (i) when a Registration Statement has become effective and when any post-effective amendments and supplements thereto become effective; (ii) of the issuance by the SEC or any state securities authority of any stop order, injunction or other order or requirement suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose; (iii) if, between the effective date of a Registration Statement and the closing of any sale of securities covered thereby pursuant to any agreement to which the Company is a party, the representations and warranties of the Company contained in such agreement cease to be true and correct in all material respects or if the Company receives any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose; and (iv) of the happening of any event during the period a Registration Statement is effective as a result of which such Registration Statement or the related Prospectus contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading; (f) furnish counsel for each such Underwriter, if any, and for Purchaser copies of any comments received from or any request by the SEC or any state securities authority for amendments or supplements to a Registration Statement and Prospectus or for additional information; (g) use all good faith reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement at the earliest possible time; (h) upon request, furnish to the sole Underwriter or lead managing Underwriter of an Underwritten Offering of Registrable Securities, if any, without charge, Page 10 at least one signed copy of each Registration Statement and any post-effective amendment thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits; and furnish to Purchaser, without charge, at least one conformed copy of each Registration Statement and any post-effective amendment thereto (without documents incorporated therein by reference or exhibits thereto, unless requested); (i) cooperate with Purchaser and the sole Underwriter or lead managing Underwriter of an Underwritten Offering of Registrable Securities, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends; and enable such Registrable Securities to be in such denominations (consistent with the provisions of the governing documents thereof) and registered in such names as Purchaser or the sole Underwriter or lead managing Underwriter of an Underwritten Offering of Registrable Securities, if any, may reasonably request at least three business days prior to any sale of Registrable Securities; (j) upon the occurrence of any event contemplated by paragraph (e)(iv) ---------------- of this Section, use all good faith reasonable efforts to prepare a supplement or post-effective amendment to a Registration Statement or the related Prospectus, or any document incorporated therein by reference, or file any other required document so that, as thereafter delivered to Purchaser, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (k) enter into customary agreements (including, in the case of an Underwritten Offering, underwriting agreements in customary form, and including provisions with respect to indemnification and contribution in customary form and consistent with the provisions relating to indemnification and contribution contained herein) and take all other customary and appropriate actions in order to expedite or facilitate the disposition of such Registrable Securities and in connection therewith: (i) make such representations and warranties to Purchaser and the Underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in similar underwritten offerings; (ii) obtain opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the lead managing Underwriter, if any, and Purchaser) addressed to Purchaser and the Underwriters, if any, covering the matters customarily covered in opinions requested in sales of securities or underwritten offerings and such other matters as may be reasonably requested by Purchaser and Page 11 Underwriters; (iii) use best efforts to obtain "cold comfort" letters and updates thereof from the Company's independent certified public accountants addressed to Purchaser, if permissible, and the Underwriters, if any, which letters shall be customary in form and shall cover matters of the type customarily covered in "cold comfort" letters to underwriters in connection with primary underwritten offerings; (iv) to the extent requested and customary for the relevant transaction, enter into a securities sales agreement with Purchaser covered by any Registration Statement relating to the Registration and providing for, among other things, the appointment of such representative as agent for Purchaser for the purpose of soliciting purchases of Registrable Securities, which agreement shall be customary in form, substance and scope and shall contain customary representations, warranties and covenants; and (v) deliver such customary documents and certificates as may be reasonably requested by Purchaser being sold or by the managing Underwriters, if any. The above shall be done (A) at the effectiveness of such Registration Statement (and each post-effective amendment thereto) in connection with any registration, and (B) at each closing under any underwriting or similar agreement as and to the extent required thereunder; (l) make available for inspection by representatives of Purchaser and any Underwriters participating in any disposition pursuant to a Registration Statement and any counsel or accountant retained by Purchaser or Underwriters (subject to the terms of customary confidentiality agreements, if any), all relevant financial and other records, pertinent corporate documents and properties of the Company and cause the respective officers, directors and employees of the Company to supply all information reasonably requested by any such representative, Underwriter, counsel or accountant in connection with a Registration Statement; (m) (i) within a reasonable time prior to the filing of any Registration Statement, any Prospectus, any amendment to a Registration Statement or amendment or supplement to a Prospectus: provide copies of such document to Purchaser and to counsel to such Purchaser and to the Underwriter or Underwriters of an Underwritten Offering of Registrable Securities, if any; (B) fairly consider such reasonable changes in any such document prior to or after the filing thereof as the counsel to Purchaser or the Underwriter or the Underwriters may request; and (C) not file any such document in a form to which Purchaser or any Underwriter shall Page 12 reasonably object; and make such of the representatives of the Company as shall be reasonably requested by Purchaser being registered or any Underwriter available for discussion of such document; (ii) within a reasonable time prior to the filing of any document that is to be incorporated by reference into a Registration Statement or a Prospectus: (A) provide copies of such document to counsel for Purchaser; (B) fairly consider such reasonable changes in such document prior to or after the filing thereof as counsel for Purchaser or such Underwriter shall request; and (C) make such of the representatives of the Company as shall be reasonably requested by such counsel available for discussion of such document; (n) cause all Registrable Securities to be qualified for inclusion in or listed on the NASDAQ; (o) otherwise use all good faith reasonable efforts to comply with all applicable rules and regulations of the SEC, including making available to Purchaser an earnings statement covering at least twelve (12) months which shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; (p) cooperate and assist in any filings required to be made with the NASDAQ, NASD or any other exchange and in the performance of any due diligence investigation by any Underwriter in an Underwritten Offering and Purchaser; and (q) use all good faith reasonable efforts to facilitate the distribution and sale of any Registrable Securities to be offered pursuant to this Agreement, including, without limitation, by making road show presentations, holding meetings with potential investors and taking such other actions as shall be reasonably requested by Purchaser or the lead managing Underwriter of an Underwritten Offering. Purchaser shall, as a condition to the registration obligations with respect to such Purchaser provided herein, furnish to the Company such information regarding Purchaser required to be included in the Registration Statement, the ownership of Registrable Securities by Purchaser and the proposed distribution by Purchaser of such Registrable Securities as the Company may from time to time reasonably request in writing. Purchaser shall, upon receipt of any notice from the Company of the happening of any event of the kind described in paragraph (e)(iv) of this ----------------- Section, discontinue disposition of Registrable Securities pursuant to the affected Registration Statement until Purchaser's receipt of the copies of the supplemented or amended Prospectus contemplated by paragraph (j) of this ------------ Section, and, if so directed by the Company, Purchaser shall deliver to the Company (at the expense of the Company), all Page 13 copies in its possession, other than permanent file copies then in Purchaser's possession, of the Prospectus covering such Registrable Securities which was current at the time of receipt of such notice. Section 5. Indemnification; Contribution. ----------------------------- (a) Indemnification by the Company. The Company shall indemnify and ------------------------------ hold harmless each Person who participates as an underwriter (any such Person being an "Underwriter"), Purchaser and their respective directors, officers and employees and each Person, if any, who controls or is controlled by Purchaser or Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act as follows: (i) against any and all losses, liabilities, claims, damages, judgments and reasonable expenses whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement pursuant to which Registrable Securities were registered under the Securities Act, including, without limitation, all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact contained in any Prospectus, including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all losses, liabilities, claims, damages, judgments and reasonable expenses whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, investigation or proceeding by any governmental agency or body, commenced or threatened, or of any other claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, if such settlement is effected with the written consent of the Company; and (iii) against any and all reasonable expense whatsoever, as incurred (including fees and disbursements of counsel), incurred in investigating, preparing or defending against any litigation, investigation or proceeding by any governmental agency or body, commenced or threatened, in each case whether or not such Person is a party, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under paragraph (i) or (ii) above; ------------- --- provided, however, that this indemnity agreement does not apply to Purchaser or - -------- ------- any Page 14 Underwriter with respect to any loss, liability, claim, damage, judgment or expense to the extent arising out of any untrue statement or alleged untrue statement of a material fact contained in any Prospectus, or the omission or alleged omission therefrom of a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, in any such case made in reliance upon and in conformity with written information furnished to the Company by Purchaser or such Underwriter expressly for use in a Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto). (b) Indemnification by Purchaser. (i) Purchaser shall indemnify and ---------------------------- hold harmless the Company and each Underwriter, and each of their respective partners, directors, officers and employees (including each officer of the Company who signed the Registration Statement), and each Person, if any, who controls the Company or any Underwriter within the meaning of Section 15 of the Securities Act, against any and all losses, liabilities, claims, damages, judgments and expenses described in the indemnity contained in paragraph (a) of ------------ this Section as incurred, but only with respect to untrue statements or alleged untrue statements of a material fact contained in any Prospectus or the omissions, or alleged omissions therefrom of a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, in any such case made in reliance upon and in conformity with written information furnished to the Company by Purchaser expressly for use in such Registration Statement (or any amendment thereto) or such Prospectus (or any amendment or supplement thereto). (c) Conduct of Indemnification Proceedings. Each indemnified party or -------------------------------------- parties shall give reasonably prompt notice to each indemnifying party or parties of any action or proceeding commenced against it in respect of which indemnity may be sought hereunder, but failure so to notify an indemnifying party or parties shall not relieve it or them from any liability which it or they may have under this indemnity agreement, except to the extent that the indemnifying party is materially prejudiced by such failure to give notice. If the indemnifying party or parties so elects within a reasonable time after receipt of such notice, the indemnifying party or parties may assume the defense of such action or proceeding at such indemnifying party's or parties' expense with counsel chosen by the indemnifying party or parties and approved by the indemnified party defendant in such action or proceeding, which approval shall not be unreasonably withheld; provided, however, that, if such indemnified party -------- ------- or parties determine in good faith that a conflict of interest exists and that therefore it is advisable for such indemnified party or parties to be represented by separate counsel or that, upon advice of counsel, there may be legal defenses available to it or them which are different from or in addition to those available to the indemnifying party, then the indemnifying party or parties shall not be entitled to assume such defense and the indemnified party or parties shall be entitled to separate counsel (limited in each jurisdiction to one counsel for all Underwriters and another counsel for all other Page 15 indemnified parties under this Agreement) at the indemnifying party's or parties' expense. If an indemnifying party or parties is not so entitled to assume the defense of such action or does not assume such defense, after having received the notice referred to in the first sentence of this paragraph, the indemnifying party or parties will pay the reasonable fees and expenses of counsel for the indemnified party or parties (limited in each jurisdiction to one counsel for all Underwriters and another counsel for all other indemnified parties under this Agreement). No indemnifying party or parties will be liable for any settlement effected without the written consent of such indemnifying party or parties, which consent shall not be unreasonably withheld. If an indemnifying party is entitled to assume, and assumes, the defense of such action or proceeding in accordance with this paragraph, such indemnifying party or parties shall not, except as otherwise provided in this subsection (c), be liable for any fees and expenses of counsel for the indemnified parties incurred thereafter in connection with such action or proceeding. (d) Contribution. (i) In order to provide for just and equitable ------------ contribution in circumstances in which the indemnity agreement provided for in this Section is for any reason held to be unenforceable by the indemnified parties although applicable in accordance with its terms in respect of any losses, liabilities, claims, damages, judgments and expenses suffered by an indemnified party referred to therein, each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, liabilities, claims, damages, judgments and expenses in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and Purchaser (including, in each case, that of its officers, directors, employees and agents) on the other in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages, judgments or expenses, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and Purchaser on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, on the one hand, or by or on behalf of Purchaser, on the other, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, liabilities, claims, damages, judgments and expenses referred to above shall be deemed to include, subject to the limitations set forth in paragraph (c) of this Section, ------------ any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. (ii) The Company and Purchaser agree that it would not be just and equitable if contribution pursuant to this paragraph (d) were determined by pro ------------ --- rata allocation or by any other method of allocation which does not take account - ---- of the equitable considerations referred to in sub-paragraph (i) above. Notwithstanding the Page 16 provisions of this paragraph (d), in the case of distributions to the public, ------------- Purchaser shall not be required to contribute any amount in excess of the amount by which (A) the total price at which the Registrable Securities sold by Purchaser and its Affiliates and distributed to the public were offered to the public exceeds (B) the amount of any damages which such indemnifying Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. Section 6. Miscellaneous. ------------- (a) No Inconsistent Agreements. The Company will not on or after the -------------------------- date of this Agreement enter into any agreement that conflicts with the provisions of this Agreement or which grants registration or similar rights without the consent of the Purchaser. The Company represents and warrants that there are no other holders of registration rights relating to the Company`s securities other than those certain Stock Option Agreements, dated as of August 5, 1998, between the Company and Lyon Securities, Inc. and SRG & Associates, Ltd. (b) Amendments and Waivers. The provisions of this Agreement, ---------------------- including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Company has obtained the written consent of Purchaser. (c) Notices. All notices and other communications provided for or ------- permitted hereunder shall be made in writing by hand delivery, telex, telecopier, or any courier guaranteeing overnight delivery (i) if to Purchaser, to: FMC FoodTech, Attn: John Hartner Business Development Manager 200 W. Madison Street Chicago, IL 60606 T: 312/861-6705 F: 312/861-6496 (ii) and if to the Company, to: Advanced Machine Vision Corporation Attn: Alan R. Steel Vice President, Finance & CFO 2067 Commerce Drive Medford, OR 97504 T: 541/776-7700 F: 541/779-6838 Page 17 All such notices and communications shall be deemed to have been duly given: at the time delivered, if delivered by hand, if personally delivered; when receipt is acknowledged, if faxed; and on the next business day if timely delivered to federal express or other courier guaranteeing overnight delivery.. (d) Successors and Assigns. This Agreement shall inure to the benefit ---------------------- of and be binding upon the successors, assigns and transferees of each of the parties. If any successor, assignee or transferee of Purchaser shall acquire Registrable Securities in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement and to receive the benefits hereof. For purposes of this Agreement, "successor" for any entity other than a natural person shall mean a successor to such entity as a result of such entity's merger, consolidation, liquidation, dissolution, sale of substantially all of its assets, or similar transaction. (e) Recapitalizations, Exchanges, etc., Affecting Registrable --------------------------------------------------------- Securities. The provisions of this Agreement shall apply, to the full extent - ---------- set forth herein with respect to the Registrable Securities, to any and all securities or capital stock of the Company or any successor or assign of the Company (whether by merger, consolidation, sale of assets or otherwise) which may be issued in respect of, in exchange for, or in substitution of such Registrable Securities, by reason of any dividend, split, issuance, reverse split, combination, recapitalization, reclassification, merger, consolidation or otherwise. Upon the occurrence of any of such events, Common Share amounts hereunder shall be appropriately adjusted if necessary. (f) Counterparts. This Agreement may be executed in two or more ------------ counterparts, each of which, when so executed and delivered, shall be deemed to be an original, but all of which counterparts, taken together, shall constitute one and the same instrument. (g) Descriptive Headings, Etc. The headings in this Agreement are for ------------------------- convenience of reference only and shall not limit or otherwise affect the meaning of terms contained herein. Unless the context of this Agreement otherwise requires: (1) words of any gender shall be deemed to include each other gender; (2) words using the singular or plural number shall also include the plural or singular number, respectively; (3) the words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular Page 18 provision of this Agreement, and Article, Section and paragraph references are to the Articles, Sections and paragraphs to this Agreement unless otherwise specified; (4) the word "including" and words of similar import when used in this Agreement shall mean "including, without limitation," unless otherwise specified; (5) "or" is not exclusive; and (6) provisions apply to successive events and transactions. (h) Severability. In the event that any one or more of the ------------ provisions, paragraphs, words, clauses, phrases or sentences contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision, paragraph, word, clause, phrase or sentence in every other respect and of the other remaining provisions, paragraphs, words, clauses, phrases or sentences hereof shall not be in any way impaired, it being intended that all rights, powers and privileges of the parties hereto shall be enforceable to the fullest extent permitted by law. (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED ------------- IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS (WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES THEREOF). (j) Specific Performance. The parties hereto acknowledge that there -------------------- would be no adequate remedy at law if any party fails to perform in any material respect any of its obligations hereunder, and accordingly agree that each party, in addition to any other remedy to which it may be entitled at law or in equity, shall be entitled to seek to compel specific performance of the obligations of any other party under this Agreement in accordance with the terms and conditions of this Agreement in any court of the United States or any State thereof having jurisdiction. (k) Entire Agreement. This Agreement is intended by the parties as a ---------------- final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. This Agreement supersedes all prior agreements and understandings between the Company and the other parties to this Agreement with respect to such subject matter. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above. ADVANCED MACHINE VISION CORPORATION FMC CORPORATION By: /s/ Alan R. Steel By: /s/ Charles H. Cannon, Jr. ------------------------------ -------------------------------- Name: Alan R. Steel Name: Charles H. Cannon, Jr. Title: Chief Financial Officer Title: Vice President Page 19 -----END PRIVACY-ENHANCED MESSAGE-----