EXHIBIT 10.19
RSI SYSTEMS, INC.
SELLING AGENCY AGREEMENT
MINIMUM OFFERING: $1,500,000 OF COMMON STOCK
MAXIMUM OFFERING: $3,250,000 OF COMMON STOCK
Xxxxxx Xxxxxxx & Xxxxx Incorporated Minneapolis, Minnesota
0000 Xxxxxxx Xxxxxxxxx December 29, 0000
Xxxxx 000 - 0xx Xxxxx
Xxxxxxxxxxx, XX 00000
Gentlemen:
The undersigned, RSI Systems, Inc., (the "Company") hereby confirms its
agreement with you (the "Selling Agent") as follows:
1. DESCRIPTION OF OFFERING. The Company proposes to offer and sell to
private investors through you, as its exclusive agent (the "Offering"), a
minimum of $1,500,000 of Common Stock (the "Minimum Offering") and a maximum of
$3,250,000 of Common Stock (the "Maximum Offering"). The shares of Common Stock
(the "Shares") will be sold at a per share price of $1.65. Purchases will be
made pursuant to a Subscription Agreement between the Company and each investor.
The terms of the Subscription Agreement shall be reasonably acceptable to the
Company and the Selling Agent.
2. APPOINTMENT OF AGENT. On the basis of the warranties,
representations and agreements of the parties hereto, the Company hereby
appoints the Selling Agent, and the Selling Agent hereby accepts such
appointment, to act as the Company's exclusive agent in connection with the
offer and sale of the Shares to private investors, on a best efforts basis. The
Selling Agent will use its best efforts to sell the Shares, but there is no
commitment by the Selling Agent to purchase or sell all or any of the Shares.
The Selling Agent may utilize the services of sub-agents, but the use of
sub-agents shall not increase the compensation payable by the Company hereunder.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Selling Agent as follows:
(a) The Company will prepare a disclosure document or package
consisting of a description of the Offering, intended use of the
proceeds from the Offering, recent developments and risk factors
regarding the Company, and other information including the Company's
most recent annual report on Form 10-KSB, the Company's most recent
quarterly report on Form 10-QSB, the Company's most recent definitive
Proxy Statement and the Company's press releases released since January
1, 1997 (which, together with any supplements or amendments thereto
including any documents incorporated by reference therein is herein
defined as the "Disclosure Package"). The Company will also prepare and
file a Form D, if applicable, with the Securities and Exchange
Commission (the "Commission"). The Disclosure Package and Form D will
be subject to your approval, which will not be unreasonably withheld.
The Company has not taken, or omitted to take, any action and will not
take, or omit to take, any action which would have the result of making
the exemptions from registration provided by Section 4(2) of the
Securities Act of 1933, as amended (the "Securities Act") or Regulation
D thereunder unavailable for the offer and sale of the Shares. The
Company and the Selling Agent shall mutually determine whether to issue
a press release under Rule 135c of the Securities Act and the contents
of such release.
(b) As of the commencement date of the Offering and until and
as of the date of any Closing (as hereinafter defined), the Disclosure
Package will (i) fairly present all material information regarding the
Company; and (ii) not include any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances under which they were made; provided, that the
representations and warranties in this paragraph shall not apply to
statements or omissions made in reliance upon written information
furnished to the Company by the Selling Agent expressly for use in
preparation of the Disclosure Package.
(c) The financial statements (including all related schedules
and notes) set forth in the Disclosure Package will fairly present the
financial condition and results of operations of the Company as of the
dates and for the periods indicated; such statements will have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods indicated; and, in the
event the Disclosure Package shall include a report of a public
accountant, such report shall be by an independent public accountant
within the meaning of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and the rules and regulations promulgated
thereunder.
(d) The Company is duly incorporated and validly existing as a
corporation in good standing under the laws of the State of Minnesota,
with power and authority to own its properties and conduct its
business, as will be described in the Disclosure Package. The Company
has no subsidiaries.
(e) The Company is duly qualified to do business as a foreign
corporation and is in good standing in all states or jurisdictions in
which the ownership or leasing of its property or the conduct of its
business requires such qualification and the failure to be so qualified
would have a material, adverse effect on the Company's business.
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(f) The Company has full legal power, right and authority to
enter into this Agreement and the Agent's Warrant (as defined herein).
This Agreement and such Agent's Warrant have been duly authorized, and
this Agreement has been and as of the date of Closing such Agent's
Warrant will be executed and delivered on behalf of the Company and
this Agreement is, and such Agent's Warrant when delivered will be, the
valid and binding obligation of the Company, subject, as to
enforcement, to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws affecting the rights of creditors generally,
to the exercise of judicial discretion as to the availability of
equitable remedies such as specific performance and injunction and
subject, as to enforcement of the indemnification provisions, to
limitations under applicable securities laws.
(g) The Shares, when issued and delivered to the purchasers
against payment therefor in accordance with the Purchase Agreement,
will conform in all material respects to all statements made in
relation thereto contained in the Disclosure Package, and will be
validly issued, fully paid and non-assessable.
4. FURTHER AGREEMENTS OF THE COMPANY. The Company covenants and agrees
as follows:
(a) The Company will promptly deliver to the Selling Agent and
its counsel a number of copies of the Disclosure Package and each
amendment or supplement thereto as may reasonably be requested by the
Selling Agent. The Selling Agent is authorized on behalf of the Company
to use and distribute copies of the Disclosure Package in connection
with the sale of the Shares as, and to the extent, permitted by this
Agreement and Federal and applicable state securities laws.
(b) The Company will promptly notify the Selling Agent, by
telephone and in writing of (i) the issuance of any stop order
suspending the sale of securities of the Company, or of the institution
or notice of intended institution of any action or proceeding for that
purpose and (ii) any other communication directed to and received by
the Company by any public authority relating to the possible suspension
of the qualification of the offer and sale of the securities of the
Company in any state.
(c) Until the Closing (as hereinafter defined) of the Maximum
Offering or the earlier termination of this Agreement, if any event
relating to or affecting the Company, or of which the Company shall be
advised in writing by the Selling Agent, shall occur as a result of
which it is necessary, in the opinion of counsel for the Company or the
Selling Agent, to supplement or amend the Disclosure Package in order
to make the Disclosure Package not misleading in light of the
circumstances existing at the time it is delivered to a purchaser of
the Shares, the Company will forthwith prepare an amended or
supplemented Disclosure Package (in form satisfactory to counsel for
the Selling Agent) so that the amended or supplemented Disclosure
Package will not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances existing at the
time the Disclosure Package is delivered to such purchaser, not
misleading.
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(d) The Company shall pay, or cause to be paid, all expenses
incident to the performance of its obligations under this Agreement,
including all expenses incident to the delivery of the Shares; the fees
and expenses of counsel and accountants for the Company; the cost of
filing the Form D and amendments thereto; and the cost of all blue sky
filings, including legal expenses related thereto. The payment of all
such fees and expenses shall not be conditioned upon the sale of any
Shares. The Company shall also pay to the Selling Agent a
nonaccountable expense allowance equal to 1% of the gross proceeds from
the sale of the Shares (including Shares for which no commission is
paid or a reduced commission is paid) and, at each Closing hereunder,
the fees and expenses of counsel to the Selling Agent. If no Closing is
held prior to the termination of this Agreement, then promptly after
any such termination the Company shall pay the actual expenses of the
Selling Agent and the fees and expenses of its counsel.
(e) The Company will apply the net proceeds from the sale of
the Shares substantially in the manner set forth in the Disclosure
Package.
(f) Within thirty (30) days of the final Closing, the Company
shall file a registration statement covering the resale of the Shares
in accordance with the provisions of Exhibit A attached hereto. In the
event that (i) the Company shall fail to file with the Commission the
Registration Statement described in Exhibit A (the "Registration
Statement") by the thirtieth day after the final Closing hereunder;
(ii) the Company shall fail to use its diligent, good faith efforts to
have the Registration Statement declared effective by the Commission;
or (iii) the Registration Statement is not declared effective by the
ninetieth day after the final Closing hereunder, then, on the date of
the first to occur of (i), (ii) or (iii) above (the "Extra Warrant
Date") and on each monthly anniversary of the Extra Warrant Date
thereafter until the earlier of the effective date of the Registration
Statement ("Effective Date") or the twentieth monthly anniversary of
the Extra Warrant Date, the Company shall issue to each investor in the
offering warrants ("Extra Warrants") to purchase a number of shares of
common stock equal to 5% of the number of Shares purchased by such
investor in the offering. Each Extra Warrant shall be substantially in
the form of the Agent's Warrant attached hereto as Exhibit F. Each
Extra Warrant shall entitle the holder thereof to purchase one share of
common stock during the five-year period commencing on the date of
issuance. The exercise price of the Extra Warrants shall be equal to
the price per share paid by such investor hereunder. The exercise price
and number of Extra Warrants shall be subject to adjustment in the
event of a merger, acquisition, recapitalization or stock split or
reverse stock split of shares of the Company, the issuance by the
Company of a stock dividend or any similar event. Upon issuance of the
Extra Warrants, the Company shall include the shares underlying the
Extra Warrants in the registration pursuant to the Registration
Statement.
5. OFFERING PERIOD. Subject to applicable law, the Selling Agent shall
commence the offer and sale of the Shares to investors on or as soon as is
reasonably practicable following the date hereof and, unless otherwise
terminated hereunder shall continue to offer and sell the Shares to investors
until the earlier of (i) the date on which all of the Shares are sold, (ii)
February 27, 1998 (unless extended up to 60 days by the Company and the Selling
Agent at their discretion and without notice to investors); (iii) such earlier
date as the Selling Agent and the Company mutually
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agree to terminate the offering; or (iv) on such date as the Selling Agent
terminates its obligations under this Agreement as provided in Section 11
hereof. "Termination Date," as used herein, shall refer to the date on which the
offering is terminated in accordance with the preceding sentence. In the event
of any such termination, the parties shall have no further obligations to each
other except (i) as set forth in Section 4(d) hereof and (ii) with respect to
provisions which survive termination of this Agreement.
6. DELIVERY; PAYMENT AND CLOSING.
(a) A closing of the sale of Shares shall be held as soon as
practicable after the Minimum Offering has been sold at a mutually
agreeable time at the offices of Xxxxxxx, Street and Deinard
Professional Association, Minneapolis, Minnesota, unless some other
time and place is mutually agreed upon by the Company and the Selling
Agent. It is anticipated that such closing will be held no later than
January 6, 1998. Additional closings may be held from time to time
until the maximum number of Shares are sold (in any such case, a
"Closing.")
(b) All checks and other funds received by the Selling Agent
in subscription for the Shares shall be held by Selling Agent in
accordance with Rule 15c2-4 under the Exchange Act until the Closing of
the sale of such Shares. If the Minimum Offering has not been
subscribed for on or before February 27, 1998 (unless extended up to 60
days by the Company and the Selling Agent), then all sums so held shall
be returned to the subscribers thereof, without interest or deduction.
All subscriptions are subject to the reasonable approval of the
Company.
7. CONDITIONS TO CLOSING. The obligation of the Selling Agent to close
the Offering shall be conditioned upon the satisfaction of the following at each
Closing:
(a) The receipt by the Selling Agent of an opinion of counsel
to the Company, in the form of Exhibit B hereto.
(b) The receipt by the Selling Agent of a certificate of the
President and Chief Financial Officer of the Company, stating that the
representations and warranties contained in Section 3 hereof are true
and correct in all respects as of the date of the Closing, that the
Company has performed all of its agreements and obligations to be
performed under this Agreement and that the Disclosure Package, as of
the date of Closing, contains all material statements which are
required to be made therein, does not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made, substantially in
the form attached hereto as Exhibit C, and acceptable to the Selling
Agent.
(c) The receipt by the Selling Agent of a certificate of the
Secretary of the Company substantially in the form attached hereto as
Exhibit D, and acceptable to the Selling Agent.
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(d) The receipt by the Selling Agent of a certificate of the
Company substantially in the form attached hereto as Exhibit E, and
acceptable to the Selling Agent.
(e) The receipt by Selling Agent of the commissions and
warrants referred to in Section 8 hereof.
(f) Such other documents, opinions and certificates as the
Selling Agent may reasonably request.
The obligation of the Company to close the Offering shall be
conditioned upon the satisfaction of the following at each closing:
(a) At each Closing, the receipt by the Company of payment in
full of the proceeds from the sale of the Shares.
(b) The receipt by the Company of executed copies of all
Subscription Agreements received by the Selling Agent from subscribers
acceptable to the Selling Agent (it being understood that the Selling
Agent and the Company have the right to reject any subscriptions in
whole or in part), for review and acceptance by the Company.
(c) The receipt by the Company of a certificate of the Selling
Agent substantially in the form attached hereto as Exhibit H, and
acceptable to the Company.
8. SALES COMMISSIONS.
(a) At each Closing, and conditioned thereon, the Selling
Agent shall receive from the Company as a commission 10% of the gross
proceeds received from the sale of the Shares at such Closing. The
commissions shall be payable to or upon the order of the Selling Agent
in immediately available Minneapolis funds and may together with any
expense allowance or payment due hereunder, at the option of the
Selling Agent, be netted against the gross proceeds to be delivered by
the Selling Agent to the Company. Notwithstanding the foregoing, (i)
the Selling Agent shall receive a 5% commission with respect to sales
to persons listed on Schedule 1 hereto and (ii) shall receive no
commission with respect to sales to the current members of the
Company's Board of Directors.
(b) If, during the period commencing on the Termination Date,
as defined herein, and ending on the first anniversary thereof, the
Company shall sell any securities (including, but not limited to,
shares of common stock, debentures or warrants) to any purchaser who
was contacted by the Selling Agent in connection with the offer and
sale of the Shares, the Selling Agent shall be entitled to receive upon
the sale of such securities a commission consisting of a cash amount
equal to 10% of the purchase price paid for such securities by such
purchaser (5% if such person is listed on Schedule 1 hereto and no
commission if such person is a director on the date hereof). Upon any
termination of this Agreement, the Selling Agent will provide the
Company with a list of persons and entities whom the Selling Agent
contacted.
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(c) At each Closing, for the sum of $50.00 the Selling Agent
shall receive a warrant (the "Agent's Warrant") to purchase a number of
shares of the Company's common stock equal to 10% of the total number
of Shares which have been sold in the Offering (including Shares for
which no commission has been paid), in the form of Exhibit F hereto
with an exercise price per share equal to the per share price paid by
investors at such Closing. The Agent's Warrant shall be exercisable for
a period of ten years from the date of the Closing subject to the
exceptions contained therein.
9. INDEMNIFICATION.
(a) The Company shall indemnify and hold harmless the Selling
Agent, and each person who controls (as such term is defined by Rule
405 under the Securities Act) the Selling Agent within the meaning of
the Securities Act, against any losses, claims, damages or liabilities,
joint and several, to which the Selling Agent or such controlling
persons may become subject, under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
Disclosure Package, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Selling Agent and each such
controlling person for any legal or other expenses reasonably incurred
by such Selling Agent or such controlling person (including in
settlement of any litigation, if such settlement is effected with the
written consent of the Company) in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the Company will not be liable in any such case to the
extent that such loss, claim, damage or liability arises out of or is
based upon any untrue statement or alleged untrue statement or omission
or alleged omission made in reliance upon and in conformity with
written information furnished to the Company by or on behalf of the
Selling Agent specifically for use in the preparation of the Disclosure
Package or any additions or supplements thereto. This indemnity
agreement will be in addition to any liability which the Company may
otherwise have.
(b) The Selling Agent will indemnify and hold harmless the
Company, each person who controls (as such term is defined under Rule
405 under the Securities Act) the Company within the meaning of the
Securities Act, each of its directors, and each of its officers,
against any losses, claims, damages or liabilities, joint and several,
to which the Company, any such controlling person, director or officer
may become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Disclosure
Package, or any amendment or supplement thereto, or arise out of or are
based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement
or omission or alleged omission is made in the Disclosure Package or
any additions or supplements thereto, or such amendment or such
supplement, in reliance upon and in conformity with written information
furnished to the Company by the Selling Agent specifically for use in
the preparation thereof; and will
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reimburse the Company, any such controlling person, director or officer
for any legal or other expenses reasonably incurred by them (including
in settlement of any litigation, if such settlement is effected with
the written consent of the Selling Agent) in connection with
investigating or defending any such loss, claim, damage, liability or
action. This indemnity agreement will be in addition to any liability
which the Selling Agent may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action by a third party,
such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section, notify each
indemnifying party in writing of the commencement thereof. The
indemnification provided for in this Section 9 shall not be available
to any party who fails to so notify each indemnifying party to the
extent that the indemnifying party to whom notification was not given
was unaware of the action to which the notification would have related
and was prejudiced by the failure to notify; provided, however, that
the omission to so notify each indemnifying party will not relieve any
indemnifying party from any liability which it may have to any
indemnified party otherwise than under this section. In case any such
action is brought against any indemnified party, and it seeks or
intends to seek indemnity from an indemnifying party and notifies an
indemnifying party of the commencement thereof, the indemnifying party
will be entitled to participate in, and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel chosen by the indemnifying
party and reasonably satisfactory to the indemnified party; provided,
however, if the defendants in any such action (including any impleaded
parties) include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there
may be a conflict between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or
that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party or parties
shall have the right to select separate counsel (but the indemnifying
party shall not be liable for the expenses of more than one such
separate counsel), to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified
party or parties. Upon receipt of notice from the indemnifying party to
such indemnified party of its election so to assume the defense of such
action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under
this section for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof unless
(i) the indemnified party shall have employed separate counsel in
connection with the assumption of legal defenses in accordance with the
above proviso or (ii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after notice of
commencement of the action, in each of which cases the fees and
expenses of counsel shall be at the expense of the indemnifying party.
In no event shall any indemnifying party be liable in respect of any
amounts paid in settlement of any action unless the indemnifying party
shall have approved the terms of such settlement.
(d) As an interim measure during the pendency of any claim,
action, investigation, inquiry or other proceeding as to which
indemnification hereunder is sought,
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commencing on the one hundred eightieth day after the service of a
summons and complaint on the Selling Agent with respect to an action
for which indemnification is sought, the Company will reimburse the
Selling Agent on a monthly basis for all reasonable legal fees or other
reasonable expenses incurred in connection with investigating or
defending any such claim, action, investigation, inquiry or other
proceeding, notwithstanding the absence of a judicial determination as
to the propriety and enforceability of the Company's obligation to
reimburse the Selling Agent for such expenses and the possibility that
such payments might later be held to have been improper by a court of
competent jurisdiction. To the extent that any such interim
reimbursement payment is ultimately held to have been improper, the
Selling Agent shall promptly return it to the party or parties that
made such payment, together with interest, determined on the basis of
the base rate (or other commercial lending rate for borrowers of the
highest credit standing) announced from time to time by Norwest Bank
Minnesota, N.A., ("Prime Rate"). Any such required interim
reimbursement payments which are not made to the Selling Agent within
30 days of a request for reimbursement shall bear interest at the Prime
Rate from the date of such request.
(e) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in Sections
9(a) or 9(b) is for any reason held, by a court of competent
jurisdiction, to be unenforceable as to any party entitled to
indemnity, the Company and the Selling Agent, or any controlling person
of the foregoing, shall contribute to the aggregate losses, claims,
damages and liabilities (including any investigation, legal and other
expenses incurred in connection with, and any amount paid in settlement
of, any action, suit or proceeding or any claims asserted) to which the
Company and the Selling Agent, or any controlling person of the
foregoing, may be subject (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company, on the one hand,
and the Selling Agent on the other from the offering contemplated
hereby or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above
but also the relative fault of the Company, on the one hand, and of the
Selling Agent on the other in connection with the statements or
omissions which resulted in such loss, claim, damage, liability or
expense, as well as any other relevant equitable considerations. The
relative benefits received by the Company, on the one hand, and the
Selling Agent on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses)
received by the Company bear to the total sales commissions received by
the Selling Agent. The relative fault of the Company, on the one hand,
and of the Selling Agent 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 or by the
Selling Agent and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. No person guilty of fraudulent misrepresentation or guilty of
misstating or misrepresenting a material fact or failing to state a
material fact shall be entitled to contribution, as to any liability
arising from such fraudulent misrepresentation or omission, from any
person who was not guilty of such fraudulent or other misrepresentation
or omission.
10. TERMINATION.
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Each party hereto shall have the right to terminate its
obligations under this Agreement by giving notice to the other party as
hereinafter specified at any time on or prior to the Closing if such
other party shall have failed, refused or been unable, at or prior to
the Closing, to perform any material agreement on its part to be
performed; if there shall have been a breach of any material warranty
or representation of such other party contained herein, or because any
other material conditions of the terminating party's obligations set
forth herein are not fulfilled. Any such termination shall be without
liability of any party to any other party, except for the Company's
obligations under Section 4(d) hereof.
11. REPRESENTATIONS AND AGREEMENTS TO SURVIVE. The respective
covenants, agreements, representations and warranties of the Company and the
Selling Agent hereunder, as set forth in, or made pursuant to this Agreement,
shall remain in full force and effect regardless of any investigation made by or
on behalf of any such party or any of its directors or officers or any
controlling person, and shall survive delivery of and payment for the Shares for
the statutory statute of limitations time period; and the indemnification
agreements contained in Section 10 shall also survive any termination of this
Agreement.
12. NOTICES. Except as otherwise expressly provided in this Agreement
or duly noticed hereunder, all notices and other communications hereunder shall
be in writing and, if given to the Selling Agent, shall be mailed, delivered or
telegraphed and confirmed to Xxxxxx Xxxxxxx & Xxxxx Incorporated, 0000 Xxxxxxx
Xxxxxxxxx, Xxxxx 000 - 0xx Xxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000, Attention: Xxxxx
X. Xxxxxxx, with a copy to its counsel, Xxxxxxx, Street and Deinard, 000 Xxxxx
Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxxxx, Xxxxxxxxx 00000, Attention: Xxxx X. Xxxxx
or, if given to the Company, shall be mailed, delivered or telegraphed and
confirmed to RSI Systems, Inc., 0000 Xxxxx Xxxxxxxxx, Xxxxx, Xxxxxxxxx 00000,
Attention: Xxxxxx Lies, with a copy to its counsel, Xxxxxxx & Xxxxxxxxxx, 000
Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxxx, XX 00000, Attention: Xxxxxx Xxxxxxx.
13. MISCELLANEOUS. This Agreement shall inure to the benefit of and be
binding upon the successors of the Selling Agent and of the Company. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any person or corporation, other than the parties hereto and their
successors, and the controlling persons and directors and officers referred to
in Section 10 hereof, any legal or equitable right, remedy or claim under or in
respect to this Agreement or any provision hereof. The term "successors" shall
not include any purchaser of the Shares merely by reason of such purchase. No
subrogee of a benefited party shall be entitled to any benefits hereunder.
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If the foregoing expresses our agreement with you, kindly confirm by
signing the acceptance on the enclosed counterpart hereof and return the same to
us, whereupon this letter and your acceptance shall become and constitute a
binding agreement between the Company and the Selling Agent in accordance with
its terms.
Very truly yours,
RSI SYSTEMS, INC.
By
-------------------------------------
Xxxxxx Lies, President
The terms set forth in the foregoing Selling Agency Agreement between
RSI Systems, Inc. and Xxxxxx Xxxxxxx & Xxxxx Incorporated are hereby accepted
and confirmed.
XXXXXX, XXXXXXX & XXXXX INCORPORATED
By
----------------------------------
Xxxxx X. Xxxxxxx, Vice President
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Exhibit A
REGISTRATION RIGHTS
1. Required Registration.
As soon as practicable but in no event later than the thirtieth day
after the final Closing, the Company shall file a Registration Statement under
the Securities Act covering the resale of the Shares purchased by persons in the
Offering (the "Investors"), and will diligently proceed to use its diligent,
good faith efforts to have such Registration Statement become effective with the
Securities and Exchange Commission (the "Commission") as soon as possible
thereafter and in any event no later than the ninetieth day after the final
Closing.
2. Registration - General Provisions.
(a) Whenever the Company is required to effect the registration of
Shares under the Securities Act, the Company will:
(i) Prepare and file with the Commission a registration
statement with respect to such securities, and use its diligent, good
faith efforts to cause such registration statement to become effective
and remain effective until the earlier of the date on which (i) all
Shares have been sold by the Investors or (ii) the Shares may be sold
by the Investors without restriction pursuant to Rule 144(k) under the
Securities Act;
(ii) prepare and file with the Commission such amendments to
such registration statement and supplements to the prospectus contained
therein as may be necessary to keep such registration statement
effective for the period required by Section 2(a)(i) above;
(iii) provide Investors' counsel with reasonable opportunities
to review and comment on, and otherwise participate in, the preparation
of such registration statement;
(iv) furnish to the Investors participating in such
registration and to the underwriters of the securities being registered
such reasonable number of copies of the registration statement,
preliminary prospectus, final prospectus and such other documents as
the Investors and underwriters may reasonably request in order to
facilitate the public offering of such securities;
(v) use its diligent, good faith efforts to register or
qualify the securities covered by such registration statement under
such state securities or blue sky laws of such jurisdictions as any
such Investor may reasonably request, except that the Company shall not
for any purpose be required to execute a general consent to
1
service of process (which shall not include a "Uniform Consent to
Service of Process" or other similar consent to service of process
which relates only to actions or proceedings arising out of or in
connection with the sale of securities, or out of a violation of the
laws of the jurisdiction requesting such consent) or to qualify to do
business as a foreign corporation in any jurisdiction wherein it is not
so qualified;
(vi) notify the Investors, promptly after it shall receive
notice thereof, of the time when such registration statement has become
effective or a supplement to any prospectus forming a part of such
registration statement has been filed;
(vii) notify the Investors promptly of any request by the
Commission for the amending or supplementing of such registration
statement or prospectus or for additional information;
(viii) prepare and file with the Commission, promptly upon the
request of any Investor, any amendments or supplements to such
registration statement or prospectus which, in the opinion of counsel
for such Investor (and concurred in by counsel for the Company), is
required under the Securities Act or the rules and regulations
thereunder in connection with the distribution of the Shares by such
Investor;
(ix) prepare and promptly file with the Commission and
promptly notify the Investors of the filing of such amendment or
supplement to such registration statement or prospectus as may be
necessary to correct any statements or omissions if, at the time when a
prospectus relating to such securities is required to be delivered
under the Securities Act, any event shall have occurred as the result
of which any such prospectus or any other prospectus as then in effect
would include an untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein, in the
light of the circumstances in which they were made, not misleading;
(x) advise the Investors, and the Investors' counsel, if any,
promptly after it shall receive notice or obtain knowledge thereof, of
the issuance of any stop order by the Commission suspending the
effectiveness of such registration statement or the initiation or
threatening of any proceeding for that purpose and promptly use its
best efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued;
(xi) not file any amendment or supplement to such registration
statement or prospectus to which a majority in interest of the
Investors shall have reasonably objected on the grounds that such
amendment or supplement does not comply in all material respects with
the requirements of the Securities Act or the rules and regulations
thereunder, after having been furnished with a copy thereof at least
five business days prior to the filing thereof, unless in the opinion
of counsel for the Company the filing of such amendment or supplement
is reasonably necessary to
2
protect the Company from any liabilities under any applicable federal
or state law and such filing will not violate applicable law; and
(xii) at the request of any such Investor, furnish on the
effective date of the registration statement and, if such registration
includes an underwritten public offering, at the closing provided for
in the underwriting agreement: (i) opinions, dated such respective
dates, of the counsel representing the Company for the purposes of such
registration, addressed to the underwriters, if any, and to the
Investor or Investors making such request, covering such matters as
such underwriters may reasonably request; and (ii) letters, dated such
respective dates, from the independent certified public accountants of
the Company, addressed to the underwriters, if any, and to the Investor
or Investors making such request, covering such matters as such
underwriters or Investors making such request may reasonably request.
(b) The Company shall pay all Registration Expenses (as defined below)
in connection with the inclusion of Shares in any Registration Statement, or
application to register or qualify Shares under state securities laws, filed by
the Company hereunder, other than as set forth herein. For purposes of this
Agreement, the term "Registration Expenses" means the filing fees payable to the
Commission, any state agency and the National Association of Securities Dealers,
Inc.; the fees and expenses of the Company's legal counsel and independent
certified public accountants in connection with the preparation and filing of
the Registration Statement (and all amendments and supplements thereto) with the
Commission; and all expenses relating to the printing of the Registration
Statement, prospectuses and various agreements executed in connection with the
Registration Statement. Notwithstanding the foregoing, the Investors will pay
the fees and expenses of any legal counsel the Investors may engage, as well as
the Investors' proportionate share of any custodian fees or commission or
discounts which may be payable to any underwriter.
(c) The Investors acknowledge that there may occasionally be times when
the Company must suspend the use of the prospectus forming a part of the
Registration Statement, when there exists material non-public information
relating to the Company (including, but not limited to, an acquisition, merger,
recapitalization, consolidation, reorganization or similar transaction (or
negotiations with respect thereto)) which in the reasonable opinion of the
Company's Board of Directors should not be disclosed. Accordingly, the Company
may suspend resales pursuant to such Registration Statement for a period not to
exceed ninety (90) days in any twenty-four (24) month period if the Company has
been advised by counsel and the Board of Directors reasonably concurs that the
information the Board reasonably believes should not be disclosed is material
and therefore the prospectus forming a part of the Registration Statement is not
current. Each Investor agrees that it shall not sell any Shares pursuant to said
prospectus during the period commencing at the time at which the Company gives
the Investor notice of the suspension of the use of such prospectus and ending
at the time the Company gives the Investor notice that the Investor may
thereafter effect sales pursuant to such prospectus. The Investors shall comply
with the applicable provisions of the Securities Act and of such other
securities or blue sky laws as may be applicable in connection with the use of
such prospectus forming a part of the Registration Statement.
3
(d) The Company hereby indemnifies the holder of the Shares, its
officers and directors, and any person who controls such holder within the
meaning of Section 15 of the Securities Act of 1933, against all losses, claims,
damages and liabilities caused by any untrue statement of a material fact
contained in any registration statement, prospectus, notification or offering
circular (and as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) or any preliminary prospectus or caused by
any omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances under which they were made except insofar as such losses, claims,
damages or liabilities are caused by any untrue statement or omission contained
in information furnished in writing to the Company by such holder expressly for
use therein, and each such holder severally agrees that it will indemnify and
hold harmless the Company and each of its officers who signs such registration
statement and each of its directors and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act of 1933 with
respect to losses, claims, damages or liabilities which are caused by any
material untrue statement or omission contained in information furnished in
writing to the Company by such holder expressly for use therein.
4
Exhibit B
MATTERS TO BE COVERED IN OPINION
OF RSI'S COUNSEL
(1) The Company has been duly incorporated and is validly existing
in good standing under the laws of the State of Minnesota; has
the requisite corporate power to own, lease and operate its
properties and conduct its business as described in the
Disclosure Package; and is duly qualified to do business as a
foreign corporation in good standing in all jurisdictions
where the ownership or leasing of its properties or the
conduct of its business requires such qualification and in
which the failure to be qualified or in good standing would
have a material adverse effect on its business;
(2) The Company has the corporate power to enter into the Selling
Agency Agreement, and the Selling Agency Agreement has been
duly and validly authorized, executed and delivered by or on
behalf of the Company and is the valid and binding obligation
of the Company, enforceable in accordance with its terms.
(3) The number of shares authorized and the number of outstanding
shares of capital stock of the Company set forth in the
Disclosure Package under the caption "Description of Shares"
are correct as of the date of the Disclosure Package and as of
the date hereof.
(4) All outstanding capital stock of the Company has been duly
authorized and validly issued, and is fully paid, and
nonassessable.
(5) To its knowledge, no preemptive rights, contractual or
otherwise, of securities holders of the Company exist with
respect to the issuance or sale of the Shares by the Company
pursuant to this Agreement.
(6) The Shares conform as to matters of law in all material
respects to the description concerning them made in the
Disclosure Package.
(7) The Shares have been duly authorized and, upon delivery to the
investors against payment therefor, will be validly issued,
fully paid and nonassessable. The Agent's Warrants have been
duly authorized and are the valid and binding obligation of
the Company, enforceable in accordance with their terms, and a
sufficient number of shares of the Company's common stock has
been reserved for the issuance upon exercise of the Agent's
Warrants and the shares of common stock to be issued upon
exercise of the Agent's Warrants, upon delivery on exercise
and payment therefor, will be validly issued, fully paid and
nonassessable.
1
(8) To its knowledge, the execution, delivery, and performance of
the Agreement will not violate or conflict with the charter or
bylaws of the Company, nor will the execution, delivery and
performance of the Agreement be in material contravention of
any of the provisions of any note, indenture, mortgage, deed
of trust, joint venture agreement, agreement or other
instrument known to such counsel to which the Company is a
party or by which it is bound and which is material to the
business of the Company as a whole, or of any material law,
rule or regulation of the United States or the State of
Minnesota or any order, writ, injunction or decree of any
government, governmental agency, or court having jurisdiction
over the Company or any of its properties.
(9) To its knowledge, (A) there are no material statutes,
agreements, contracts, leases, or other documents or material
legal or governmental proceedings of a character required by
the Act and the Rules and Regulations to be described or
referred to in the Disclosure Package which are not so
described and (B) all descriptions of legal or governmental
proceedings and of agreements, contracts and leases contained
in the Disclosure Package constitute fair and accurate
summaries of such proceedings, agreements, contracts and
leases and fairly present the information called for with
respect to the same.
(10) No authorization, approval or consent of any governmental
authority or agency is necessary in connection with any
issuance and sale of the Shares, as contemplated under the
Agreement, except such as may be required under the Act or
under state or other securities laws in connection with any
purchase and distribution of such securities by the Selling
Agent.
(11) Assuming the accuracy of the representations and warranties of
the purchasers in the Subscription Agreements, the offer and
sale of the Shares are exempt from registration under the
Securities Act of 1933.
(12) To its knowledge, the Company is not in default of its charter
or bylaws or of any material agreements to which the Company
is a party.
(13) Although it is not opining as to, and cannot guarantee the
accuracy and completeness of the statements contained in the
Disclosure Package, in the course of its representation of the
Company nothing has come to its attention which causes it to
believe that the Disclosure Package (except as to the
financial statements and supporting financial data included or
incorporated therein, as to which such counsel need express no
opinion) contains an untrue statement of a material fact or
omits to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading;
provided, however, that such statement does not require any
statement concerning statements in, or omissions from, the
Disclosure Package which are based upon and conform to written
information furnished to the Company by the Selling Agent.
2
Exhibit C
OFFICERS' CERTIFICATE
CERTIFICATE
OF
CHIEF EXECUTIVE OFFICER
AND CHIEF FINANCIAL OFFICER
Pursuant to Section 7(b) of the Selling Agency Agreement, dated
December ___, 1997, (the "Agency Agreement") between RSI Systems, Inc. (the
"Company") and Xxxxxx, Xxxxxxx & Xxxxx, Incorporated, the undersigned, being the
duly elected Chief Executive Officer and Chief Financial Officer, respectively,
of the Company, hereby certify that:
1. Each of the representations and the warranties of the Company
set forth in Section 3 of the Agency Agreement are true and
correct on this date as if made by the Company on this date.
2. The Company has performed all of its agreements and
obligations to be performed on or prior to the Closing under
the Agency Agreement.
3. The Disclosure Package of the Company, dated ____________,
1997, does 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 light of the
circumstances under which they were made, not misleading.
Dated: ____________, 1997
------------------------------------
Chief Executive Officer
------------------------------------
Chief Financial Officer
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Exhibit D
SECRETARY'S CERTIFICATE
I, ______________________, the duly elected and acting Secretary of RSI
Systems, Inc., a Minnesota corporation (the "Company"), do hereby certify as
follows:
1. Attached hereto as Exhibit A is a true, complete and correct copy of
the Articles of Incorporation of the Company, as amended. There have been no
amendments to such Articles of Incorporation of the Company and no amendments
have been authorized or contemplated as of the date hereof.
2. Attached hereto as Exhibit B is a true, correct and complete copy of
the Bylaws of the Company.
3. Attached hereto as Exhibit C is a true, correct and complete copy of
resolutions duly adopted by unanimous written action of the Board of Directors
of the Company, effective _______________, 1997, which resolutions have not been
amended or repealed and are in full force and effect on the date hereof.
4. The following persons are the duly qualified and acting officers of
the Company duly elected or appointed to the offices set forth opposite their
respective names, and the signatures set forth opposite their names are their
true and genuine signatures:
Name Office Signature
---- ------ ---------
President and Chief Executive
Officer _________________________
Treasurer and Chief Financial
Officer _________________________
Secretary _________________________
1
IN WITNESS WHEREOF, I have executed this Certificate the ____ day of
_________, 1997.
___________________________________
___________________, Secretary
I, _______________________, do hereby certify that I am the duly
elected, qualified and acting President and Chief Executive Officer of the
Company, and do further certify that ____________________, is the duly elected,
qualified and acting Secretary of the Company and that the foregoing signature
is his true and genuine signature.
Dated: ____________, 1997
_________________________________
2
Exhibit E
ISSUER BAD BOY CERTIFICATE
1. Neither the Issuer, any of its predecessors nor any affiliated
issuer:
(a) has filed a registration statement which is the subject of
any pending proceeding or examination under Section 8 of the Securities Act of
1933 (the "1933 Act") or is the subject of any refusal order or stop order
thereunder within the past five years;
(b) is subject to any pending proceeding under Rule 258
promulgated under the 1933 Act or any similar rule adopted under Section 3(b) of
the 1933 Act, or to an order entered thereunder within the past five years;
(c) has been convicted within the past five years of any
felony or misdemeanor in connection with the purchase or sale of any security or
involving the making of any false filing with the United States Securities and
Exchange Commission (the "SEC");
(d) is subject to any order, judgment, or decree of any court
of competent jurisdiction temporarily or preliminary restraining or enjoining,
or is subject to any order, judgment, or decree of any court of competent
jurisdiction, entered within the past five years, permanently restraining or
enjoining, such person from engaging in or continuing any conduct or practice in
connection with the purchase or sale of any security or involving the making of
any false filing with the SEC; or
(e) is subject to a United States Postal Service false
representation order entered under Section 3005 of Title 39, United States Code,
within the past five years; or is subject to a temporary restraining order or
preliminary injunction entered under Section 3007 of Title 39, United States
Code, with respect to conduct alleged to have violated Section 3005 of Title 39,
United States Code.
2. None of the Issuer's directors, officers, general partners, or
beneficial owners of 10% or more of any class of its equity securities
("Beneficial Owner" means a person having the power to vote or direct the vote
and/or the power to dispose or direct the disposition of such securities), nor
any of its promoters presently connected with it in any capacity:
(a) has been convicted within the past ten years of any felony
or misdemeanor in connection with the purchase or sale of any security,
involving the making of a false filing with the SEC, or arising out of the
conduct of the business of an underwriter, broker, dealer, municipal securities
dealer, or investment advisor;
(b) is subject to any order, judgment, or decree of any court
of competent jurisdiction temporarily or preliminarily enjoining or restraining,
or is subject to any order, judgment, or decree of any court of competent
jurisdiction, entered within the past five years, permanently enjoining or
restraining such person from engaging in or continuing any conduct or
1
practice in connection with the purchase or sale of any security or involving
the making of a false filing with the SEC, or arising out of the conduct of the
business of an underwriter, broker, dealer, municipal securities dealer, or
investment advisor;
(c) is subject to an order of the SEC entered pursuant to
Section 15(b), Section 15(B)(a) or 15(B)(c) of the Securities Exchange Act of
1934 (the "1934 Act"); or is subject to an order of the SEC entered pursuant to
Section 203(e) or (f) of the Investment Advisors Act of 1940;
(d) is suspended or expelled from membership in, or suspended
or barred from association with a member of, an exchange registered as a
national securities exchange pursuant to Section 6 of the 1934 Act, an
association registered as a national securities association under Section 15A of
the 1934 Act, or a Canadian securities exchange or association for any act or
omission to act constituting conduct inconsistent with just and equitable
principles of trade; or
(e) is subject to a United States Postal Service false
representation order entered under Section 3005 of Title 39, United States Code,
within the past five years; or is subject to a restraining order or preliminary
injunction entered under Section 3005 of Xxxxx 00, Xxxxxx Xxxxxx Code.
3. Neither the Issuer, any of its predecessors or any affiliated issuer
nor any of the Issuer's affiliates, directors, officers, general partners,
Beneficial Owners of 10% or more of any class of the Issuer's equity securities
or promoters presently connected with the Issuer in any capacity:
(a) has filed a registration statement which (i) is the
subject of a currently effective stop order or refusal order entered pursuant to
any state's law within the past five years, (ii) is the subject of an effective
order entered against the Issuer, its officers, directors, general partners,
controlling persons or affiliates, pursuant to any state's law within the past
five years denying effectiveness to or suspending or revoking the effectiveness
of the registration statement or (iii) is the subject of any pending proceeding
or examination under the securities laws of any jurisdiction;
(b) has been convicted within the past ten years of any felony
or misdemeanor in connection with the offer, purchase or sale of any security,
franchise or commodity or involving the making of any false filing relating to
any security or offering or any felony or misdemeanor involving fraud, deceit or
intentional wrongdoing, including but not limited to forgery, embezzlement,
obtaining money under false pretenses, larceny, conspiracy to defraud,
racketeering or a transaction in securities, or of which fraud is an essential
element;
(c) is subject to any state's administrative or enforcement
order or judgment procured or entered by the state's securities administrator
within the past five years or is subject to any state's administrative or
enforcement order or judgment in which fraud, deceit or intentional wrongdoing,
including but not limited to making untrue statements of material facts or
omitting to state material facts, was found or upon which such order or judgment
was based and the order or judgment was entered within the past five years;
2
(d) is subject to (i) any state's administrative or
enforcement order or judgment which (A) prohibits, denies or revokes the use of
any exemption from registration in connection with the offer, purchase or sale
of securities or (B) prohibits the transaction of business by such party as a
securities broker-dealer or securities agent or (ii) any pending proceeding in
any jurisdiction relating to the exemption from registration of any security or
offering;
(e) is subject to any order, judgment or decree of any court
of competent jurisdiction entered within the past five years temporarily,
preliminary or permanently restraining or enjoining such party from engaging in
or continuing any conduct or practice (including making use of any exemption) in
connection with the offer, purchase or sale of any security or commodity or
involving the making of any false filing whether or not relating to any security
or offering, or arising out of the conduct of the business of an underwriter,
broker, dealer, municipal securities dealer or investment advisor;
(f) is subject to an order, judgment or decree of a court of
competent jurisdiction entered within the past five years, enjoining or
restraining such party from engaging in or continuing any conduct or practice in
connection with the sale or purchase of securities, or involving fraud, deceit
or racketeering;
(g) has been subject to any state administrative order or
judgment in connection with the purchase or sale of securities entered within
the past five years;
(h) is subject to an order of the SEC denying or revoking
registration as a broker or dealer in securities under the 1934 Act, or is
subject to an order denying or revoking membership in a national securities
association registered under the 1934 Act, or has been suspended for a period
exceeding six months or expelled from membership in a national securities
registered under the 0000 Xxx.
4. If subject to the requirements of Sections 13, 14, or 15(d) of the
1934 Act, the Issuer has filed all reports required by those sections during the
past 12 calendar months (or for such shorter period that the Issuer was required
to file such reports).
RSI SYSTEMS, INC.
By: _____________________________________
Its: _____________________________________
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Exhibit F
COMMON STOCK WARRANT
To Purchase _________
Shares of Common Stock of
RSI Systems, Inc.
___________, 1997
THE SECURITIES EVIDENCED BY THIS CERTIFICATE WERE ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL (WHICH SHALL BE
IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY) THAT SUCH REGISTRATION IS NOT
REQUIRED.
THIS CERTIFIES THAT, in consideration for $50.00 and other valuable
consideration, Xxxxxx, Xxxxxxx & Xxxxx, Incorporated ("MJK") or its registered
assigns is entitled to subscribe for and purchase from RSI Systems, Inc. (the
"Company"), a Minnesota corporation, at any time after the date hereof to and
including the Expiration Date (as defined in Section 1 hereof),
________________________ (_______) fully paid and nonassessable shares of the
Company's Common Stock, $.01 par value, at a price of $_______ per share:
This Warrant is subject to the following provisions, terms and
conditions:
1. Expiration; Exercise; Transferability.
(a) This Warrant may be exercised in whole or in part, at any
time after the date hereof to and including the Expiration Date. As used herein
"Expiration Date" shall mean _______, 2008.
(b) The rights represented by this Warrant may be exercised by
the holder hereof, in whole or in part (but not as to a fractional share of
stock), by written notice of exercise in the form appended hereto delivered to
the Company on or prior to the Expiration Date, ten (10) days prior to the
intended date of exercise and by the surrender of this Warrant (properly
endorsed if required) at the principal office of the Company and upon payment to
it in full by certified or bank check or wire transfer of the purchase price for
such shares.
(c) This Warrant may be transferred subject to the following
conditions: (i) during the first year after the date of this Warrant, it may not
be sold, transferred, assigned or hypothecated except to persons who are (x)
both officers and shareholders of MJK, or (y) both
1
officers and employees of MJK, and (ii) after such period, the Warrant shall be
transferable without restriction, but subject to the opinion of counsel as
provided by paragraph 7 herein that such transfer is not in violation of federal
or state securities laws.
2. Issuance of Shares. The Company agrees that the shares purchased
hereby shall be and are deemed to be issued to the record holder hereof as of
the close of business on the date on which this Warrant shall have been
exercised by surrender of the Warrant and payment for the shares. Subject to the
provisions of the next succeeding paragraph, certificates for the shares of
stock so purchased shall be delivered to the holder hereof within a reasonable
time, not exceeding ten (10) days after the rights represented by this Warrant
shall have been so exercised, and, unless this Warrant has expired, a new
Warrant representing the number of shares, if any, with respect to which this
Warrant shall not then have been exercised shall also be delivered to the holder
hereof within such time.
Notwithstanding the foregoing, however, the Company shall not
be required to deliver any certificate for shares of stock upon exercise of this
Warrant, except in accordance with the provisions, and subject to the
limitations, of paragraph 7 hereof.
3. Covenants of Company. The Company covenants and agrees that all
shares which may be issued upon the exercise of the rights represented by this
Warrant will upon receipt of payment therefor upon issuance, be duly authorized
and issued, fully paid, nonassessable and free from all taxes, liens and charges
with respect to the issue thereof, and, without limiting the generality of the
foregoing, the Company covenants and agrees that it will from time to time take
all such action as may be required to assure that the par value per share of the
common stock is at all times equal to or less than the then effective purchase
price per share of the common stock issuable pursuant to this Warrant. The
Company further covenants and agrees that, during the period within which the
rights represented by this Warrant may be exercised, the Company will at all
times have authorized, and reserved for the purpose of issue or transfer upon
exercise of the subscription rights evidenced by this Warrant, a sufficient
number of shares of its common stock to provide for the exercise of the rights
represented by this Warrant.
4. Anti-Dilution Adjustments. The above provisions are, however,
subject to the following:
(a) In case the Company shall at any time hereafter subdivide
or combine the outstanding shares of common stock or declare a dividend payable
in common stock, the exercise price of this Warrant in effect immediately prior
to the subdivision, combination or record date for such dividend payable in
common stock shall forthwith be proportionately increased, in the case of
combination, or decreased, in the case of subdivision or dividend payable in
common stock. Upon each adjustment of the exercise price, the holder of this
Warrant shall thereafter be entitled to purchase, at the exercise price
resulting from such adjustment, the number of shares obtained by multiplying the
exercise price immediately prior to such adjustment by the number of shares
purchasable pursuant hereto immediately prior to such adjustment and dividing
the product thereof by the exercise price resulting from such adjustment.
2
(b) No fractional shares of common stock are to be issued upon
the exercise of this Warrant, but the Company shall pay a cash adjustment in
respect of any fraction of a share which would otherwise be issuable in an
amount equal to the same fraction of the market price per share of common stock
on the day of exercise as determined in good faith by the Company.
(c) If any capital reorganization or reclassification of the
capital stock of the Company, or consolidation or merger of the Company with
another corporation, or the sale of all or substantially all of its assets to
another corporation shall be effected in such a way that holders of common stock
shall be entitled to receive stock, securities or assets with respect to or in
exchange for common stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby the holder hereof shall thereafter have the right to
purchase and receive, upon the basis and upon the terms and conditions specified
in this Warrant and in lieu of the shares of common stock of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby, such stock, securities or assets as may be issued or
payable with respect to or in exchange for a number of outstanding shares of
such common stock equal to the number of shares of such stock immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby had such reorganization, reclassification, consolidation,
merger or sale not taken place, and in any such case appropriate provisions
shall be made with respect to the rights and interests of the holder of this
Warrant to the end that the provisions hereof (including without limitation
provisions for adjustments of the Warrant purchase price and of the number of
shares purchasable upon the exercise of this Warrant) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise hereof. The Company shall not
effect any such consolidation, merger or sale unless prior to the consummation
thereof the successor corporation (if other than the Company) resulting from
such consolidation or merger, or the corporation purchasing such assets, shall
assume by written instrument executed and mailed to the registered holder hereof
at the last address of such holder appearing on the books of the Company, the
obligation to deliver to such holder such shares of stock, securities or assets
as, in accordance with the foregoing provisions, such holder may be entitled to
purchase.
Notwithstanding any language to the contrary set forth in this
paragraph 4 (c), if an occurrence or event described herein shall take place in
which the shareholders of the Company receive cash for their shares of common
stock of the Company and a successor corporation or corporation purchasing
assets shall survive the transaction then, at the election of the record holder
hereof, such corporation shall be obligated to purchase this Warrant (or the
unexercised part hereof) from the record holder without requiring the holder to
exercise all or part of the Warrant. If such corporation refuses to so purchase
this Warrant then the Company shall purchase the Warrant for cash. In either
case the purchase price shall be the amount per share that shareholders of the
outstanding common stock of the Company shall receive as a result of the
transaction multiplied by the number of shares covered by the Warrant, minus the
aggregate exercise price of the Warrant. Such purchase shall be closed within 60
days following the election of the holder to sell this Warrant.
(d) Upon any adjustment of the Warrant purchase price, then,
and in each such case, the Company shall give written notice thereof, by first
class mail, postage prepaid, addressed to the registered holder of this Warrant
at the address of such holder as shown on the books of the
3
Company, which notice shall state the Warrant purchase price resulting from such
adjustment and the increase or decrease, if any, in the number of shares
purchasable at such price upon the exercise of this Warrant, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
(e) If any event occurs as to which in the good faith
determination of the Board of Directors of the Company the other provisions of
this paragraph 4 are not strictly applicable or if strictly applicable would not
fairly protect the purchase rights of the holder of this Warrant or of common
stock in accordance with the essential intent and principles of such provisions,
then the Board of Directors shall make an adjustment in the application of such
provisions, in accordance with such essential intent and principles, so as to
protect such purchase rights as aforesaid.
5. Common Stock. As used herein, the term "common stock" shall mean and
include the Company's presently authorized shares of common stock and shall also
include any capital stock of any class of the Company hereafter authorized which
shall not be limited to fixed sum or percentage in respect of the rights of the
holders thereof to participate in dividends or in the distribution, dissolution
or winding up of the Company; provided that the share purchasable pursuant to
this Warrant shall include shares designated as common stock of the Company on
the date of original issue of this Warrant or, in the case of any
reclassification of the outstanding shares thereof, the stock, securities or
assets provided for in Section 4 above.
6. No Voting Rights. This Warrant shall not entitle the holder hereof
to any voting rights or other rights as a stockholder of the Company.
7. Transfer of Warrant or Resale of Shares. In the event the holder of
this Warrant desires to transfer this Warrant, or any common stock issued upon
the exercise hereof, the holder shall provide the Company with a written notice
describing the manner of such transfer in the form appended hereto and an
opinion of counsel (reasonably acceptable to the Company) that the proposed
transfer may be effected without registration or qualification (under any
Federal or State law), whereupon such holder shall be entitled to transfer this
Warrant or to dispose of shares of common stock received upon the previous
exercise hereof in accordance with the notice delivered by such holder to the
Company; provided, that an appropriate legend may be endorsed on this Warrant or
the certificates for such shares respecting restrictions upon transfer thereof
necessary or advisable in the opinion of counsel satisfactory to the Company to
prevent further transfers which would be in violation of Section 5 of the
Securities Act, as amended (the "Securities Act").
If, in the opinion of either of the counsel referred to in
this paragraph 7, the proposed transfer or disposition described in the written
notice given pursuant to this paragraph 7 may not be effected without
registration or qualification of this Warrant or the shares of common stock
issued upon the exercise hereof, the Company shall promptly give written notice
thereof to the holder hereof, and such holder will limit its activities in
respect to such proposed transfer or disposition as, in the opinion of both such
counsel, are permitted by law.
4
8. Registration Rights.
(a) If the Company proposes to claim an exemption under
Section 3(b) for a public offering of any of its securities or to register under
the Securities Act (except by a claim of exemption or registration statement on
Form S-8 or Form S-4 or any form that does not permit the inclusion of shares by
its security holders) any of its securities, it will give written notice to all
registered holders of Warrants, and all registered holders of shares of common
stock acquired upon the exercise of Warrants (the "Common Shares") of its
intention to do so and, on the written request of any such registered holders
given within twenty (20) days after receipt of any such notice, the Company will
use its best efforts to cause all Common Shares which such holders shall have
requested the registration or qualification thereof, to be included in such
notification or registration statement proposed to be filed by the Company;
provided, however, that nothing herein shall prevent the Company from, at any
time, abandoning or delaying any such registration initiated by it. If any such
registration shall be underwritten in whole or in part, the Company may require
that the shares requested for inclusion pursuant to this section be included in
the underwriting on the same terms and conditions as the securities otherwise
being sold through the underwriters. In the event that, in the good faith
judgment of the managing underwriter of such public offering, the inclusion of
all of the shares originally covered by a request for registration would reduce
the number of shares to be offered by the Company or interfere with the
successful marketing of the shares of stock offered by the Company, the number
of shares otherwise to be included pursuant to this Section in the underwritten
public offering may be proportionately reduced to a number deemed satisfactory
by the managing underwriter. Those shares which are thus excluded from the
underwritten public offering shall be withheld from the market for a period, not
to exceed 90 days from the effective date of the registration statement, which
the managing underwriter reasonably determines is necessary in order to effect
the underwritten public offering. All expenses of such offering, except the fees
of special counsel to such holders and brokers' commissions or underwriting
discounts payable by such holders, shall be borne by the Company.
(b) Further, on one occasion only upon request by the holders
of Warrants and/or the holders of shares issued upon the exercise of the
Warrants who collectively (i) have the right to purchase at least 50% of the
shares subject to the Warrants, (ii) hold directly at least 50% of the shares
purchased under the Warrants, or (iii) have the right to purchase or hold
directly an aggregate of at least 50% of the shares purchasable or purchased
under the Warrants, the Company will promptly take all necessary steps, at the
option of such holders, to register or qualify the sale of the Warrants or such
shares by the holders thereof, under the Securities Act (and, upon the request
of such holders, under Rule 415 thereunder) and such state laws as such holders
may reasonably request; provided that (i) such request must be made by the
Expiration Date; and (ii) the Company may delay the filing of any registration
statement requested pursuant to this section to a date not more than ninety (90)
days following the date of such request if in the opinion of the Company's
principal investment banker at the time of such request such a delay is
necessary in order not to adversely affect financing efforts then underway at
the Company or if in the opinion of the Company such a delay is necessary or
advisable to avoid disclosure of material nonpublic information. The costs and
expenses directly related to any registration requested pursuant to this
section, including but not limited to legal fees of the Company's counsel, audit
fees, printing expense, filing fees and fees and expenses relating to
qualifications under state securities or blue sky laws incurred by the Company
shall be borne entirely by the Company; provided, however, that the
5
persons for whose account the securities covered by such registration are sold
shall bear the expenses of underwriting commissions applicable to their shares
and fees of their legal counsel. If the holders of Warrants and the holders of
shares of common stock underlying the Warrants are the only persons whose shares
are included in the registration pursuant to this section, such holders shall
bear the expense of inclusion of audited financial statements in the
registration statement which are not dated as of the Company's normal fiscal
year or are not otherwise prepared by the Company for its own business purposes.
The Company shall keep effective and maintain any registration, qualification,
notification or approval specified in this paragraph for such period as may be
necessary for the holders of the Warrants and such common stock to dispose
thereof, and from time to time shall amend or supplement, at the holder's
expense, the prospectus or offering circular used in connection therewith to the
extent necessary in order to comply with applicable law.
If, at the time any written request for registration is
received by the Company pursuant to this Section 8(b), the Company has
determined to proceed with the actual preparation and filing of a registration
statement under the Securities Act in connection with the proposed offer and
sale for cash of any of its securities by it or any of its security holders,
such written request shall be deemed to have been given pursuant to Section 8(a)
hereof rather than this Section 8(b), and the rights of the holders of Warrants
and or shares issued upon the exercise of the Warrants covered by such written
request shall be governed by Section 8(a) hereof.
The managing underwriter of an offering registered pursuant to
this Section 8(b), if any, shall be selected by the holders of a majority of the
Warrants and/or shares issued upon the exercise of the Warrants for which
registration has been requested and shall be reasonably acceptable to the
Company. Without the written consent of the holders of a majority of the
Warrants and/or shares issued upon the exercise of the Warrants for which
registration has been requested pursuant to this Section 8(b), neither the
Company nor any other holder of securities of the Company may include securities
in such registration if in the good faith judgment of the managing underwriter
of such public offering the inclusion of such securities would interfere with
the successful marketing of the Warrants and/or shares issued upon the exercise
of the Warrants or require the exclusion of any portion of the Warrants and/or
shares issued upon the exercise of the Warrants to be registered. Subject to the
preceding sentence, shares to be excluded from an underwritten public offering
shall be selected in the manner provided in Section 8(a) hereof.
(c) If and whenever the Company is required by the provisions
of Sections 8(a) or 8(b) hereof to effect the registration of Warrants and/or
shares issued upon the exercise of the Warrants under the Securities Act, the
Company will:
(i) Prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement with
respect to such securities, and use its diligent, good faith
efforts to cause such registration statement to become and
remain effective until the earlier of the date on which all
the securities have been sold or the date the securities may
be sold without restriction pursuant to Rule 144(k) under the
Securities Act;
(ii) prepare and file with the Commission such
amendments to such registration statement and supplements to
the prospectus contained therein as may be
6
necessary to keep such registration statement effective for
the period required by Section 8(c)(i) above;
(iii) provide security holders' counsel with
reasonable opportunities to review and comment on, and
otherwise participate in, the preparation of such registration
statement;
(iv) furnish to the security holders participating in
such registration and to the underwriters of the securities
being registered such reasonable number of copies of the
registration statement, preliminary prospectus, final
prospectus and such other documents as such security holders
and underwriters may reasonably request in order to facilitate
the public offering of such securities;
(v) use its diligent, good faith efforts to register
or qualify the securities covered by such registration
statement under such state securities or blue sky laws of such
jurisdictions as such participating holders may reasonably
request in writing within 30 days following the original
filing of such registration statement, except that the Company
shall not for any purpose be required to execute a general
consent to service of process or to qualify to do business as
a foreign corporation in any jurisdiction wherein it is not so
qualified;
(vi) notify the security holders participating in
such registration, promptly after it shall receive notice
thereof, of the time when such registration statement has
become effective or a supplement to any prospectus forming a
part of such registration statement has been filed;
(vii) notify such holders promptly of any request by
the Commission for the amending or supplementing of such
registration statement or prospectus or for additional
information;
(viii) prepare and file with the Commission, promptly
upon the request of any such holders, any amendments or
supplements to such registration statement or prospectus
which, in the opinion of counsel for such holders (and
concurred in by counsel for the Company), is required under
the Securities Act or the rules and regulations thereunder in
connection with the distribution of the Warrants or shares by
such holder;
(ix) prepare and promptly file with the Commission
and promptly notify such holders of the filing of such
amendment or supplement to such registration statement or
prospectus as may be necessary to correct any statements or
omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Securities
Act, any event shall have occurred as the result of which any
such prospectus or any other prospectus as then in effect
would include an untrue statement of a material fact or omit
to state any material fact necessary to make the statements
therein, in the light of the circumstances in which they were
made, not misleading;
7
(x) advise such holders, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance of
any stop order by the Commission suspending the effectiveness
of such registration statement or the initiation or
threatening of any proceeding for that purpose and promptly
use its best efforts to prevent the issuance of any stop order
or to obtain its withdrawal if such stop order should be
issued;
(xi) not file any amendment or supplement to such
registration statement or prospectus to which a majority in
interest of such holders shall have reasonably objected on the
grounds that such amendment or supplement does not comply in
all material respects with the requirements of the Securities
Act or the rules and regulations thereunder, after having been
furnished with a copy thereof at least five business days
prior to the filing thereof, unless in the opinion of counsel
for the Company the filing of such amendment or supplement is
reasonably necessary to protect the Company from any
liabilities under any applicable federal or state law and such
filing will not violate applicable law; and
(xii) at the request of any such holder, furnish on
the effective date of the registration statement and, if such
registration includes an underwritten public offering, at the
closing provided for in the underwriting agreement: (i)
opinions, dated such respective dates, of the counsel
representing the Company for the purposes of such
registration, addressed to the underwriters, if any, and to
the holder or holders making such request, covering such
matters as such underwriters and holder or holders may
reasonably request; and (ii) letters, dated such respective
dates, from the independent certified public accountants of
the Company, addressed to the underwriters, if any, and to the
holder or holders making such request, covering such matters
as such underwriters and holder or holders may reasonably
request.
(d) The Company shall pay all Registration Expenses (as
defined below) in connection with the inclusion of Shares in any Registration
Statement, or application to register or qualify Shares under state securities
laws, filed by the Company hereunder, other than as set forth herein. For
purposes of this Agreement, the term "Registration Expenses" means the filing
fees payable to the Commission, any state agency and the National Association of
Securities Dealers, Inc.; the fees and expenses of the Company's legal counsel
and independent certified public accountants in connection with the preparation
and filing of the Registration Statement (and all amendments and supplements
thereto) with the Commission; and all expenses relating to the printing of the
Registration Statement, prospectuses and various agreements executed in
connection with the Registration Statement. Notwithstanding the foregoing, the
security holder will pay the fees and expenses of any legal counsel such holders
may engage, as well as the holder's proportionate share of any custodian fees or
commission or discounts which may be payable to any underwriter.
(e) The holders of Warrants and/or the holders of shares
issued upon the exercise of the Warrants acknowledge that there may occasionally
be times when the Company must suspend the use of the prospectus forming a part
of the Registration Statement, when there exists
8
material non-public information relating to the Company (including, but not
limited to, an acquisition, merger, recapitalization, consolidation,
reorganization or similar transaction (or negotiations with respect thereto))
which in the reasonable opinion of the Company's Board of Directors should not
be disclosed. Accordingly, the Company may suspend resales pursuant to such
Registration Statement for a period not to exceed ninety (90) days in any
twenty-four (24) month period if the Company has been advised by counsel and the
Board of Directors reasonably concurs that the information the Board reasonably
believes should not be disclosed is material and therefore the prospectus
forming a part of the Registration Statement is not current. Each such holder
agrees that it shall not sell any Shares pursuant to said prospectus during the
period commencing at the time at which the Company gives the holder notice of
the suspension of such prospectus and ending at the time the Company gives the
holder notice that the holder may thereafter effect sales pursuant to such
prospectus.
(f) The Company hereby indemnifies the holder of this Warrant
and of any common stock issued or issuable hereunder, its officers and
directors, and any person who controls such Warrant holder or such holder of
common stock within the meaning of Section 15 of the Securities Act, against all
losses, claims, damages and liabilities caused by any untrue statement of a
material fact contained in any registration statement, prospectus, notification
or offering circular (and as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) or any preliminary prospectus
or caused by any omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading except
insofar as such losses, claims, damages or liabilities are caused by any untrue
statement or omission contained in information furnished in writing to the
Company by such Warrant holder or such holder of common stock expressly for use
therein, and each such holder by its acceptance hereof severally agrees that it
will indemnify and hold harmless the Company and each of its officers who signs
such registration statement and each of its directors and each person, if any,
who controls the Company within the meaning of Section 15 of the Securities Act
with respect to losses, claims, damages or liabilities which are caused by any
untrue statement or omission contained in information furnished in writing to
the Company by such holder expressly for use therein.
9. Additional Right to Convert Warrant.
(a) If at any time the shares to be issued upon exercise of
this Warrant cannot be immediately sold pursuant to an effective registration
under the Securities Act, the holder of this Warrant shall have the right to
require the Company to convert this Warrant (the "Conversion Right") at any time
prior to its expiration into shares of Common Stock as provided for in this
Section 9. Upon exercise of the Conversion Right, the Company shall deliver to
the holder (without payment by the holder of any Exercise Price) that number of
shares of Common Stock equal to the quotient obtained by dividing (x) the value
of the Warrant at the time the Conversion Right is exercised (determined by
subtracting the aggregate Exercise Price for the Warrant Shares in effect
immediately prior to the exercise of the Conversion Right from the aggregate
Fair Market Value for the Warrant Shares immediately prior to the exercise of
the Conversion Right) by (y) the Fair Market Value of one share of Common Stock
immediately prior to the exercise of the Conversion Right.
9
(b) The Conversion Right may be exercised by the holder, at
any time or from time to time, prior to its expiration, on any business day by
delivering a written notice in the form attached hereto (the "Conversion
Notice") to the Company at the offices of the Company exercising the Conversion
Right and specifying (i) the total number of shares of Common Stock the
Warrantholder will purchase pursuant to such conversion and (ii) a place and
date not less than one nor more than 20 business days from the date of the
Conversion Notice for the closing of such purchase.
(c) At any closing under Section 9(b) hereof, (i) the holder
will surrender the Warrant and (ii) the Company will deliver to the holder a
certificate or certificates for the number of shares of Common Stock issuable
upon such conversion, together with cash, in lieu of any fraction of a share,
and (iii) the Company will deliver to the holder a new warrant representing the
number of shares, if any, with respect to which the warrant shall not have been
exercised.
(d) "Fair Market Value" means, with respect to the Company's
Common Stock, as of any date:
(i) if the Common Stock is listed or admitted to
unlisted trading privileges on any national securities exchange or is not so
listed or admitted but transactions in the Common Stock are reported on the
NASDAQ National Market System, the reported closing price of the Common Stock on
such exchange or by the NASDAQ National Market System as of such date (or, if no
shares were traded on such day, as of the next preceding day on which there was
such a trade); or
(ii) if the Common Stock is not so listed or admitted
to unlisted trading privileges or reported on the NASDAQ National Market System,
and bid and asked prices therefor in the over-the-counter market are reported by
the NASDAQ system or National Quotation Bureau, Inc. (or any comparable
reporting service), the mean of the closing bid and asked prices as of such
date, as so reported by the NASDAQ System, or, if not so reported thereon, as
reported by National Quotation Bureau, Inc. (or such comparable reporting
service); or
(iii) if the Common Stock is not so listed or
admitted to unlisted trading privileges, or reported on the NASDAQ National
Market System, and such bid and asked prices are not so reported by the NASDAQ
system or National Quotation Bureau, Inc. (or any comparable reporting service),
such price as the Company's Board of Directors determines in good faith in the
exercise of its reasonable discretion.
IN WITNESS WHEREOF, RSI Systems, Inc. has caused this Warrant to be
executed by its duly authorized officers and this Warrant to be dated as of
1998.
RSI SYSTEMS, INC.
By
-------------------------------------
10
EXERCISE FORM
(TO BE SIGNED ONLY UPON EXERCISE OF WARRANT)
RSI SYSTEMS, INC.
The undersigned, the holder of the within warrant, hereby irrevocably
elects to exercise the purchase right represented by such warrant for, and to
purchase thereunder ______________ shares of the Common Stock, $.01 par value,
of RSI Systems, Inc. and herewith makes payment of $________________ therefor,
and requests that the certificates for such shares be issued in the name of
_____________________________________ and be delivered to ______________________
whose address is ___________________________.
Dated: ________________ ____________________________________________
(Signature must conform in all respects to
the name of holder as specified on the face
of the warrant)
(Address)
(City - State - Zip)
11
ASSIGNMENT FORM
(TO BE SIGNED ONLY UPON TRANSFER OF THE WARRANT)
For value received, the undersigned hereby sells, assigns and transfers
unto those individuals listed on Exhibit A, attached hereto, the right
represented by the within warrant to purchase the number of shares opposite
their names on the attached Exhibit A of Common Stock, $.01 par value, of RSI
Systems, Inc. to which the within warrant relates, and appoints
______________________ attorney to transfer said right on the books of RSI
Systems, Inc., with full power of substitution in the premises.
Dated: ________________ XXXXXX, XXXXXXX & XXXXX,
INCORPORATED
0000 Xxxxxxx Xxxx.
Xxxxx 000 - 0xx Xxxxx
Xxxxxxxxxxx, XX 00000
By _____________________________________
In the presence of:
_____________________________________
_____________________________________
12
CONVERSION NOTICE
(TO BE SIGNED ONLY UPON EXERCISE OF CONVERSION RIGHT
SET FORTH IN SECTION 9 OF THE WARRANT)
TO RSI SYSTEMS, INC.:
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the Conversion Right set forth in Section 9 of such Warrant
and to purchase _______________ shares of the Common Stock, of RSI Systems, Inc.
The closing of this conversion shall take place at the offices of the
undersigned on ____________________. Certificates for the shares to be delivered
at the closing shall be issued in the name of ________________ whose address is
___________________________________________.
Dated: ________________ ____________________________________________
(Signature must conform in all respects to
the name of holder as specified on the face
of the Warrant)
(Address)
(City - State - Zip)
