CHOICETEL COMMUNICATIONS, INC.
800,000 UNITS(1)
CONSISTING OF 800,000 SHARES OF COMMON STOCK AND
800,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
UNDERWRITING AGREEMENT
, 1997
------------
Equity Securities Investments, Inc.
2820 IDS Center
00 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Ladies/Gentlemen:
ChoiceTel Communications, Inc., a Minnesota corporation (the
"Company"), hereby confirms its agreement to issue and sell to Equity
Securities Investments, Inc. (the "Underwriter") an aggregate of 800,000
units (the "Units"), each Unit consisting of one share of the Company's
common stock, $0.01 par value per share ("Common Stock"), and one
redeemable Common Stock purchase warrant of the Company (the "Redeemable
Warrants"). (Such 800,000 Units are collectively referred to in this
Agreement as the "Firm Units.") The Company also hereby confirms its
agreement to grant to the Underwriter an option to purchase up to 120,000
additional Units (the "Option Units") on the terms and for the purposes set
forth in Section 2(b) hereof. (As used in this Agreement, the term
"Units" shall consist of the Firm Units and the Option Units.) The Company
also hereby confirms its agreement to issue to the Underwriter warrants for
the purchase of a total of 80,000 Units as described in Section 6 hereof (the
"Underwriter's Warrants"), assuming purchase by the Underwriter of the Firm
Units. The Units issuable upon exercise of the Underwriter's Warrants are
referred to in this Agreement as the "Warrant Units."
1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY.
(a) The Company represents and warrants to and agrees with the
Underwriter as follows:
(i) A registration statement on Form SB-2 (File No.
333-29969) with respect to the Units, including a prospectus subject
to completion, has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "SEC")
thereunder and has been filed with the SEC under the Securities Act;
one or more amendments to such registration statement have also been
so prepared and have been, or will be, so filed. Copies of the
registration statement and amendments and each related preliminary
prospectus to date have been delivered by the Company to the
Underwriter, and, to the extent applicable, were identical to the
electronically transmitted copies thereof filed with the SEC pursuant
to the SEC's Electronic Data Gathering Analysis and Retrieval System
("XXXXX"), except to the extent permitted by Regulation S-T under the
Securities Act. If the Company has elected not to rely upon Rule 430A
of the Rules and Regulations, the Company has prepared and will
promptly file an amendment to the registration statement and an
amended prospectus. If the Company has elected to rely upon Rule 430A
of the Rules and Regulations, it will prepare and file a prospectus
pursuant to Rule 424(b) that discloses the information previously
omitted from the prospectus in reliance upon Rule
------------------------
(1) Plus an option to purchase up to 120,000 additional Units to cover
over-allotments.
430A. Such registration statement as amended at the time it is or was
declared effective by the SEC and, in the event of any amendment
thereto after the effective date and prior to the "First Closing Date"
(as hereinafter defined), such registration statement as so amended
(but only from and after the effectiveness of such amendment),
including the information deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430A(b), if
applicable, is hereinafter called the "Registration Statement." The
prospectus included in the Registration Statement at the time it is or
was declared effective by the SEC is hereinafter called the
"Prospectus," except that if any prospectus filed by the Company with
the SEC pursuant to Rule 424(b) of the Rules and Regulations or any
other prospectus provided to the Underwriter by the Company for use in
connection with the offering of the Units (whether or not required to
be filed by the Company with the SEC pursuant to Rule 424(b) of the
Rules and Regulations) differs from the prospectus on file at the time
the Registration Statement is or was declared effective by the SEC,
the term "Prospectus" shall refer to such differing prospectus from
and after the time such prospectus is filed with the SEC or
transmitted to the SEC for filing pursuant to such Rule 424(b) or from
and after the time it is first provided to the Underwriter by the
Company for such use. The term "Preliminary Prospectus" as used herein
means any preliminary prospectus included in the Registration
Statement prior to the time it becomes or became effective under the
Securities Act and any prospectus subject to completion as described
in Rule 430A of the Rules and Regulations. For purposes of this
Agreement, all references to the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement
to any of the foregoing shall be deemed to include the respective
copies thereof filed with the SEC pursuant to XXXXX.
(ii) At the time the Registration Statement is or was declared
effective by the SEC and at all times subsequent thereto up to the
"First Closing Date" and the "Second Closing Date" (as such terms are
hereinafter defined), the Registration Statement and Prospectus, and
all amendments thereof and supplements thereto, will comply or
complied with the provisions and requirements of the Securities Act
and the Rules and Regulations. Neither the SEC nor any state
securities authority has issued any order preventing or suspending the
use of any Preliminary Prospectus or requiring the recirculation of a
Preliminary Prospectus, or issued a stop order with respect to the
offering of the Units (if the Registration Statement has been declared
effective), or instituted or, to the Company's knowledge, threatened
the institution of, proceedings for any of such purposes. When the
Registration Statement shall become effective and when any
post-effective amendment thereto shall become effective, the
Registration Statement (as amended, if the Company shall have filed
with the SEC any post-effective amendments thereto) will not or did
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 in which they were
made, not misleading. When the Registration Statement is or was
declared effective by the SEC and at all times subsequent thereto up
to the First Closing Date and the Second Closing Date, the Prospectus
(as amended or supplemented, if the Company shall have filed with the
SEC any amendment thereof or supplement thereto) will not or did not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances in which
they were made, not misleading. When any Preliminary Prospectus was
first filed with the SEC and when any amendment thereof or supplement
thereto was first filed with the SEC, such Preliminary Prospectus and
any amendment thereof and supplement thereto complied in all material
respects with the applicable provisions of the Securities Act and the
Rules and Regulations and did not contain an untrue statement of a
material fact and did not omit to state any material fact required to
be stated therein or necessary in order to make the statements therein
not misleading. None of the representations and warranties in this
Subsection 1(a) shall apply to statements in, or omissions from, the
Registration Statement or the Prospectus, or any amendment thereof or
supplement thereto, which are based upon and conform to written
information relating to the Underwriter furnished to the Company by
the Underwriter specifically for use in the preparation of the
Registration Statement or the Prospectus, or any such amendment or
supplement.
-2-
(iii) The Company has no subsidiaries other than those
identified in Exhibit 21.1 to the Registration Statement (each one a
"Subsidiary" and collectively the "Subsidiaries") and is not
affiliated with any other company or business entity, except as
disclosed in the Prospectus. The Company and each Subsidiary has been
duly incorporated and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, with
full power and authority (corporate and other) to own, lease and
operate its properties and conduct its business as described in the
Registration Statement and Prospectus; the Company owns all of the
outstanding capital stock of each of the Subsidiaries free and clear
of any pledge, lien, security interest, encumbrance, claim or
equitable interest; the Company and each Subsidiary is duly qualified
to do business as a foreign corporation and is in good standing in
each jurisdiction in which the ownership or lease 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 the condition (financial or otherwise), earnings,
operations or business of the Company; and no proceeding has been
instituted in any such jurisdiction revoking, limiting or curtailing,
or seeking to revoke, limit or curtail, such power and authority or
qualification.
(iv) The Company and each Subsidiary has operated and is
operating in material compliance with all authorizations, licenses,
certificates, consents, permits, approvals and orders of and from all
state, federal and other governmental regulatory officials and bodies
necessary to own its properties and to conduct its business as
described in the Registration Statement and Prospectus, all of which
are, to the Company's knowledge, valid and in full force and effect;
the Company and each Subsidiary is conducting its business in
substantial compliance with all applicable laws, rules and regulations
of the jurisdictions in which it is conducting business; and neither
the Company nor any Subsidiary is in material violation of any
applicable law, order, rule, regulation, writ, injunction, judgment or
decree of any court, government or governmental agency or body,
domestic or foreign, having jurisdiction over the Company or any
Subsidiary or over their respective properties. Except as set forth in
the Registration Statement and Prospectus, (A) the Company is in
material compliance with all material rules, laws and regulations
relating to the use, treatment, storage and disposal of toxic
substances and protection of health or the environment (the
"Environmental Laws") which are applicable to its business, (B) the
Company has received no notice from any governmental authority or
third party of an asserted claim under Environmental Laws, which claim
is required to be disclosed in the Registration Statement and the
Prospectus, (C) the Company will not be required to make any future
material capital expenditures to comply with Environmental Laws, and
(D) no property which is owned, leased or occupied by the Company has
been designated as a Superfund site pursuant to the Comprehensive
Response, Compensation and Liability Act of 1980, as amended (42
U.S.C. Section 9601, ET SEQ.), or otherwise designated as a
contaminated site under applicable state or local law.
(v) Neither the Company nor any Subsidiary is in violation of
its respective articles of incorporation or bylaws or in default in
the performance or observance of any obligation, agreement, covenant
or condition contained in any bond, debenture, note or other evidence
of indebtedness or in any contract, lease, indenture, mortgage, loan
agreement, joint venture or other agreement or instrument to which it
is a party or by which it or its respective properties are bound,
which default is material to the business of the Company and its
Subsidiaries taken as a whole.
(vi) The Company has full requisite power and authority to
enter into this Agreement and perform the transactions contemplated
hereby. This Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement on the
part of the Company, enforceable against the Company in accordance
with its terms, except as enforceability may be limited by the
application of bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the rights of creditors generally and by
judicial limitations on the right of specific performance, and except
as the enforceability of the indemnification or contribution
provisions hereof may be affected by applicable law or the public
policies underlying such law. The performance of this Agreement and
the consummation of the
-3-
transactions herein contemplated will not result in a material breach
or violation of any of the terms and provisions of, or constitute a
material default under, (A) any indenture, mortgage, deed of trust,
loan agreement, bond, debenture, note, agreement or other evidence of
indebtedness, any lease, contract, joint venture or other agreement or
instrument to which the Company or any Subsidiary is a party or by
which the Company or any Subsidiary or their respective properties may
be bound, (B) the respective articles of incorporation or bylaws of
the Company or any Subsidiary, or (C) any material applicable law,
order, rule, regulation, writ, injunction, judgment or decree of any
court, government or governmental agency or body, domestic or foreign,
having jurisdiction over the Company or any Subsidiary or over their
respective properties. No consent, approval, authorization or order of
or qualification with any court, governmental agency or body, domestic
or foreign, having jurisdiction over the Company or any Subsidiary or
over their respective properties is required for the execution and
delivery of this Agreement and the consummation by the Company of the
transactions herein contemplated, except such as may be required under
the Securities Act, the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or under state or other securities or Blue Sky
laws, all of which requirements have been satisfied.
(vii) Except as is otherwise expressly described in the
Registration Statement or Prospectus, there is neither pending nor, to
the best of the Company's knowledge, threatened, any action, suit,
claim or proceeding against the Company, any Subsidiary, or any of
their respective officers or any of their respective properties,
assets or rights before any court, government or governmental agency
or body, domestic or foreign, having jurisdiction over the Company or
any Subsidiary or over their respective officers or properties or
otherwise which (i) might result in any material adverse change in the
condition (financial or otherwise), earnings, operations or business
of the Company and its Subsidiaries taken as a whole or might
materially and adversely affect their properties, assets or rights, or
(ii) might prevent consummation of the transactions contemplated
hereby.
(viii) The Company has, and at the First Closing Date and Second
Closing Date (collectively, the "Closing Dates") will have, the duly
authorized and outstanding capitalization set forth in the Prospectus.
All outstanding shares of capital stock of the Company are duly
authorized and validly issued, fully paid and non-assessable, have
been issued in compliance with all federal and state securities laws,
were not issued in violation of or subject to any preemptive rights or
other rights to subscribe for or purchase securities, and the
authorized and outstanding capital stock of the Company conforms in
all material respects with the statements relating thereto contained
in the Registration Statement and the Prospectus; the shares of Common
Stock included in the Units to be sold hereunder by the Company and
the shares of Common Stock issuable upon exercise of the Redeemable
Warrants have been duly authorized for issuance and sale to the
Underwriter pursuant to this Agreement and, when issued and delivered
by the Company against payment therefor in accordance with the terms
of this Agreement, will be duly and validly issued and fully paid and
non-assessable and will be sold free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest; and no
preemptive right, co-sale right, registration right, right of first
refusal or other similar right of shareholders exists with respect to
any of the shares of Common Stock included in the Units to be sold
hereunder by the Company or the shares of Common Stock issuable upon
exercise of the Redeemable Warrants or the issuance and sale thereof,
or the issuance and sale or exercise of the Redeemable Warrants, or
the issuance and sale or exercise of the Underwriter's Warrants and of
the Common Stock and Redeemable Warrants included in the Underwriter's
Warrants, or the issuance of the Common Stock issuable upon exercise
of the Redeemable Warrants included in the Underwriter's Warrants,
other than those that have been expressly waived prior to the date
hereof. Except as disclosed in the Prospectus, the Company has no
outstanding options to purchase, or any preemptive rights or other
rights to subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or sell,
shares of its capital stock or any such options, rights, convertible
securities or obligations. The certificates evidencing the shares of
Common Stock and the Redeemable Warrants comply as to form with all
applicable provisions of the laws of the State of Minnesota.
-4-
(ix) The Redeemable Warrants included in the Units to be sold
by the Company have been duly and validly authorized and, when
authenticated by Norwest Bank Minnesota, National Association (the
"Warrant Agent") and issued, delivered and sold in accordance with
this Agreement and the Warrant Agreement dated as of the date hereof,
between the Company and the Warrant Agent, will have been duly and
validly executed, authenticated, issued, and delivered and will
constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as
enforceability may be limited by the application of bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
the rights of creditors generally and by judicial limitations on the
right of specific performance. A sufficient number of shares of Common
Stock of the Company has been reserved for issuance by the Company
upon exercise of the Redeemable Warrants.
(x) The Underwriter's Warrants and the Common Stock and
Redeemable Warrants included in the Warrant Units have been duly
authorized. The Underwriter's Warrants, when issued and delivered to
the Underwriter, will constitute valid and binding obligations of the
Company in accordance with their terms, except as enforceability may
be limited by the application of bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the rights
of creditors generally and by judicial limitations on the right of
specific performance and except insofar as the indemnification
provisions thereof may be limited by applicable law and the policies
underlying such law. The Common Stock included in the Warrant Units,
when issued in accordance with the terms of this Agreement and
pursuant to the Underwriter's Warrants, will be fully paid and
non-assessable and subject to no preemptive rights or similar rights
on the part of any person or entity. The Redeemable Warrants included
in the Warrant Units, when authenticated by the Warrant Agent and
issued, delivered and sold in accordance with this Agreement, the
Warrant Agreement between the Company and the Warrant Agent, and the
Underwriter's Warrants, will have been duly and validly executed,
authenticated, issued and delivered and will constitute valid and
binding obligations of the Company, enforceable by the Company in
accordance with their terms, except as enforceability may be limited
by the application of bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the rights of creditors
generally and by judicial limitations on the right of specific
performance. The Common Stock issuable upon exercise of the Redeemable
Warrants included in the Warrant Units has been duly authorized and,
when issued and delivered upon such exercise, will be validly issued,
fully paid and non-assessable, and subject to no preemptive rights or
similar rights on the part of any person or entity. A sufficient
number of shares of Common Stock of the Company has been reserved for
issuance by the Company upon exercise of the Underwriter's Warrants.
(xi) Xxxxxxxxx Xxxxxx Xxxxxx Xxxxxxx & Xxxxxx, Ltd., which has
expressed its opinion with respect to the financial statements filed
as part of the Registration Statement and included in the Registration
Statement and Prospectus, are independent accountants within the
meaning of the Securities Act and the Rules and Regulations. The
financial statements of the Company set forth in the Registration
Statement and Prospectus comply in all material respects with the
requirements of the Securities Act and fairly present the financial
position and the results of operations of the Company and the
Subsidiaries at the respective dates and for the respective periods to
which they apply in accordance with generally accepted accounting
principles consistently applied throughout the periods involved
(subject, in the case of unaudited financial statements, to normal
year-end adjustments which in the opinion of management of the Company
are not material, and except as otherwise stated therein); and the
supporting schedules included in the Registration Statement present
fairly the information required to be stated therein. The selected and
summary financial and statistical data included in the Registration
Statement present fairly the information shown therein and have been
compiled on a basis consistent with the audited financial statements
presented therein. No other financial statements or schedules are
required by the Securities Act or the Rules and Regulations to be
included in the Registration Statement.
-5-
(xii) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, and
at each Closing Date, except as is otherwise disclosed in the
Registration Statement or Prospectus, there has not been: (A) any
change in the capital stock or long-term debt (including any
capitalized lease obligation) or material increase in the short-term
debt of the Company or any Subsidiary (other than issuances of Common
Stock upon the exercise of options outstanding as of the Effective
Date and options granted under the Company's 1997 Long-Term Incentive
and Stock Option Plan (the "Stock Plan")); (B) any issuance of
options, warrants, convertible securities or other rights to purchase
the capital stock of the Company (other than options granted under the
Stock Plan); (C) any material adverse change, or any development
involving a material adverse change, in or affecting the condition
(financial or otherwise), earnings, operations, business, or business
prospects, management, financial position, stockholders' equity,
results of operations or general condition of the Company; (D) any
transaction entered into by the Company or any Subsidiary that is
material to the Company; (E) any obligation, direct or contingent,
incurred by the Company or any Subsidiary, except obligations incurred
in the ordinary course of business that, in the aggregate, are not
material; (F) any dividend or distribution of any kind declared, paid
or made on the capital stock of the Company; or (G) any loss or damage
(whether or not insured) to the property of the Company or any
Subsidiary which has been sustained which has a material adverse
effect on the condition (financial or otherwise), earnings, operations
or business of the Company or a Subsidiary.
(xiii) Except as is otherwise expressly disclosed in the
Registration Statement or Prospectus, (A) the Company and each
Subsidiary has good and marketable title to all of the property, real
and personal, and assets described in the Registration Statement or
Prospectus as being owned by it, free and clear of any and all
pledges, liens, security interests, encumbrances, equities, charges or
claims, other than such as would not have a material adverse effect on
the condition (financial or otherwise), earnings, operations or
business of the Company, (B) the agreements to which the Company or
any Subsidiary is a party described in the Registration Statement and
Prospectus are valid agreements, enforceable by the Company or the
Subsidiary (as applicable), except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors'
rights generally or by judicial limitations on the right of specific
performance, and (C) each of the Company and the Subsidiaries has
valid and enforceable leases for all properties described in the
Registration Statement and Prospectus as leased by it, except as the
enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating
to or affecting creditors' rights generally or by judicial limitations
on the right of specific performance. Except as set forth in the
Registration Statement and Prospectus, the Company owns or leases all
such properties as are necessary to its operations as now conducted.
(xiv) The Company and each Subsidiary has timely filed (or has
timely requested an extension of time to file) all necessary federal
and state income and franchise tax returns and has paid all taxes
shown thereon as due; there is no tax deficiency that has been or, to
the best of the Company's knowledge, could be asserted against the
Company or any Subsidiary that might have a material adverse effect on
the condition (financial or otherwise), earnings, operations, business
or properties of the Company or a Subsidiary; and all tax liabilities
are adequately provided for in the books of the Company and each
Subsidiary.
(xv) No labor disturbance by the employees of the Company or
any Subsidiary exists or, to the best of the Company's knowledge, is
imminent. No collective bargaining agreement exists with any of the
employees of the Company or any Subsidiary and, to the best of the
Company's knowledge, no such agreement is imminent.
(xvi) The Company and each Subsidiary owns, or possesses
adequate rights to use, all patents, patent rights, inventions, trade
secrets, know-how, technology, service marks, trade names, copyrights,
trademarks and proprietary rights or information which are necessary
for the conduct of its present or intended business as described in
the Registration Statement or
-6-
Prospectus; the expiration of any patents, patent rights, trade
secrets, trademarks, service marks, trade names or copyrights would
not have a material adverse effect on the condition (financial or
otherwise), earnings, operations or business of the Company or any of
its Subsidiaries, taken as a whole; and the Company has not received
any notice of, and has no knowledge of, any infringement of or
conflict with the asserted rights of others with respect to any
patent, patent rights, inventions, trade secrets, know-how,
technology, trademarks, service marks, trade names or copyrights
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, might have a material adverse effect on
the condition (financial or otherwise), earnings, operations, business
or business prospects of the Company or any Subsidiary. Except as
disclosed in the Registration Statement or Prospectus, the Company is
not obligated or under any liability whatsoever to make any payments
by way of royalties, fees or otherwise to any owner of, licensor of,
or other claimant to, any patent, patent rights, inventions, trade
secrets, know-how, technology, service marks, trade names, trademark,
copyright or other intangible asset, with respect to the use thereof
or in connection with the conduct of its business or otherwise.
(xvii) The Common Stock and the Redeemable Warrants have been
approved for quotation on The Nasdaq SmallCap Market.
(xviii) The Company has no defined benefit pension plan or other
pension benefit plan which is intended to comply with the provisions
of the Employee Retirement Income Security Act of 1974 as amended from
time to time, except as disclosed in the Registration Statement.
(xix) The Company has not taken and will not take, directly or
indirectly, any action (and does not know of any action by its
directors, officers, shareholders or others) which has constituted or
is designed to, or which might reasonably be expected to, cause or
result in stabilization or manipulation, as defined in the Exchange
Act or otherwise, of the price of any security of the Company to
facilitate the sale or resale of the Units. The Company has not
distributed and will not distribute prior to the later of (A) the
First Closing Date or the Second Closing Date, as the case may be, and
(B) completion of the distribution of the Units, any offering material
in connection with the offering and sale of the Units other than any
Preliminary Prospectus, the Prospectus, the Registration Statement and
other materials, if any, permitted by the Securities Act. Except as is
otherwise disclosed in the Registration Statement or Prospectus, and
to the best of the Company's knowledge, no person is entitled,
directly or indirectly, to compensation from the Company or the
Underwriter for services as a "finder" or otherwise in connection with
the transactions contemplated by this Agreement.
(xx) The Company and each Subsidiary maintains insurance,
which is in full force and effect, with insurers of recognized
financial responsibility of the types and in the amounts generally
deemed adequate for their respective businesses; and neither the
Company nor any Subsidiary has any reason to believe that it will not
be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not
materially and adversely affect the condition (financial or
otherwise), earnings, operations, business or business prospects of
the Company.
(xxi) Each executive officer and director of the Company and
each beneficial owner of five percent (5%) or more of the Common Stock
to be outstanding after the sale of the Firm Units (calculated in
accordance with Rule 13d-3 under the Exchange Act) has agreed pursuant
to the form of Two-Year Lock-up Agreement attached hereto as
APPENDIX A-1 (the "Two-Year Lock-up Agreement") that such person will
not, for a period of two years from the date (the "Effective Date")
that the Registration Statement is declared effective by the SEC (the
"Two-Year Lock-up Period"), without the prior written consent of the
Underwriter, offer to sell, contract to sell, sell, pledge,
hypothecate, transfer or otherwise dispose of, or grant any rights
with respect to (collectively, a "Disposition"), any shares of Common
Stock and any options, warrants and other rights to purchase any
shares of Common Stock or any securities convertible into or
exchangeable or exercisable for shares of Common Stock now owned or
hereafter acquired by
-7-
such person (collectively, "Securities"), or with respect to which
such person has or hereafter acquires the power of Disposition, other
than as permitted by the Two-Year Lock-up Agreement. In addition, each
other beneficial owner of Common Stock of the Company has agreed
pursuant to the Lock-up Agreement attached hereto as APPENDIX A-2 (the
"Six-Month Lock-up Agreement") that such person shall not, for a
period of six (6) months from the Effective Date ("Six-Month Lock-up
Period"), Dispose of any Securities now owned or hereafter acquired by
such person or with respect to which such person has or hereafter
acquires the power of Disposition, other than as permitted by the
Six-Month Lock-up Agreement. (The Two-Year Lock-up Agreement and the
Six-Month Lock-up Agreement shall hereinafter be collectively referred
to as the "Lock-up Agreements.") The Company has provided to counsel
for the Underwriter ("Underwriter's Counsel") true, accurate and
complete copies of all of the Lock-up Agreements. The Company has
provided to Underwriter's Counsel a complete and accurate list of all
holders of Securities of the Company and the number and type of
Securities held by each holder of Securities.
(xxii) Neither the Company nor any Subsidiary has at any time
during the last five (5) years (or, if formed during the last five
years, since its inception) made any unlawful contribution to any
candidate for an office or failed to disclose fully any contribution
in violation of law, or made any payment to any federal or state
governmental officer or official, domestic or foreign, or other person
charged with similar public or quasi-public duties, other than
payments required or permitted by the laws of the United States or any
jurisdiction thereof. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurances that
transactions are executed in accordance with management's general or
specific authorizations, transactions are recorded as necessary to
permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain
accountability for assets, access to assets is permitted only in
accordance with management's general or specific authorization, and
the recorded accountability for assets is compared with existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(xxiii) Neither the Company nor any of its affiliates is
presently doing business with the government of Cuba or with any
person or affiliate located in Cuba.
(b) Any certificate signed by any officer of the Company and
delivered to you or to Underwriter's Counsel shall be deemed a
representation and warranty by the Company to the Underwriter as to the
matters covered thereby.
2. PURCHASE, SALE, DELIVERY AND PAYMENT.
(a) On the basis of the representations, warranties and agreements
herein contained, and subject to the terms and conditions herein set
forth, the Company agrees to sell to the Underwriter, and the Underwriter
agrees to purchase from the Company, the Firm Units at a purchase price of
$__________ per Unit. The Underwriter will purchase all of the Firm Units
if any are purchased.
The Firm Units will be delivered by the Company to the Underwriter for the
account of the Underwriter against payment of the purchase price therefor
by wire transfer or other same-day funds payable to the order of the
Company at the offices of Equity Securities Investments, Inc., 2820 IDS
Center, 00 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000 (or at such
other place as may be agreed upon by the Underwriter and the Company), at
9:00 a.m., Minneapolis, Minnesota time, on (i) the third (3rd) full
business day following the date hereof if the Registration Statement is
declared effective before 3:30 p.m., Minneapolis, Minnesota time on the
date hereof, (ii) the fourth (4th) full business day following the date
hereof if the Registration Statement is declared effective after 3:30
p.m., Minneapolis, Minnesota time on the date hereof, or (iii) such other
time and date as the Underwriter and the Company may determine, such time
and date of payment and delivery being herein called the "First Closing
Date." Delivery of the Firm Units will be made by credit to "full fast"
transfer to the account or accounts at The Depository Trust Company
designated by the Underwriter.
-8-
(b) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set
forth, the Company hereby grants an option to the Underwriter to purchase
an aggregate of up to 120,000 Option Units at the same purchase price as
the Firm Units, for use solely in covering any over-allotments made by the
Underwriter in the sale and distribution of the Firm Units. The option
granted hereunder may be exercised by the Underwriter at any time (but not
more than once), in whole or in part, during the period of forty-five (45)
days after the date of this Agreement by giving written notice to the
Company and the Company's counsel, which notice shall set forth the
aggregate number of Option Units as to which the Underwriter is exercising
the option, the names and denominations in which the Option Units are to
be registered, and the date and time, as determined by the Underwriter,
when the Option Units are to be delivered, such time and date being herein
referred to as the "Second Closing Date;" provided, however, that the
Second Closing Date shall not be earlier than the First Closing Date nor
earlier than the second business day after the date on which the option
shall have been exercised. No Option Units shall be sold and delivered
unless the Firm Units previously have been, or simultaneously are, sold
and delivered.
The Option Units will be delivered by the Company to the Underwriter for
the account of the Underwriter against payment of the purchase price
therefor by wire transfer or other same-day funds payable to the order of
the Company at the offices of Equity Securities Investments, Inc. 2820 IDS
Center, 00 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000 (or at such
other place as may be agreed upon by the Underwriter and the Company) at
9:00 a.m., Minneapolis, Minnesota time, on the Second Closing Date.
Delivery of the Option Units will be made by credit to "full fast"
transfer to the account or accounts at The Depository Trust Company
designated by the Underwriter.
3. COVENANTS OF THE COMPANY. The Company hereby covenants and agrees with the
Underwriter as follows:
(a) If the Registration Statement has not already been declared
effective by the SEC, the Company will use its best efforts to cause the
Registration Statement and any post-effective amendments thereto to become
effective as promptly as possible; the Company will notify the Underwriter
promptly of the time when the Registration Statement or any post-effective
amendment to the Registration Statement has become effective or any
supplement to the Prospectus has been filed and of any request by the SEC
for any amendment or supplement to the Registration Statement or
Prospectus or additional information; if the Company has elected to rely
on Rule 430A of the Rules and Regulations, the Company will file a
Prospectus containing the information omitted therefrom pursuant to such
Rule 430A with the SEC within the time period required by, and otherwise
in accordance with the provisions of, Rules 424(b) and 430A of the Rules
and Regulations; the Company will prepare and file with the SEC, promptly
upon your request, any amendments or supplements to the Registration
Statement or Prospectus that, in your opinion, may be necessary or
advisable in connection with the distribution of the Units by the
Underwriter; and the Company will not file any amendment or supplement to
the Registration Statement or Prospectus to which the Underwriter shall
reasonably object by notice to the Company after having been furnished a
copy a reasonable time prior to the filing.
(b) The Company will advise the Underwriter, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance by the SEC of
any stop order suspending the effectiveness of the Registration Statement,
of the suspension of the qualification of the Units for offering or sale
in any jurisdiction, or of the initiation or threatening of any proceeding
for any such purpose; and the Company will promptly use its best efforts
to prevent the issuance of any stop order or to obtain its withdrawal if
such a stop order should be issued.
(c) Within the time during which a prospectus relating to the Units
is required to be delivered under the Securities Act, the Company will
comply as far as it is able with all requirements imposed upon it by the
Securities Act, as now and hereafter amended, and by the Rules and
Regulations, as from time to time in force, so far as necessary to permit
the continuance of sales of or dealings in the Units as contemplated by
the provisions hereof and the Prospectus. If, during such period, any
event occurs as a result of which the Prospectus would include an untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances then
existing, not misleading, or if, during such period, it is necessary to
amend the Registration Statement or
-9-
supplement the Prospectus to comply with the Securities Act, the Company will
promptly notify the Underwriter and will amend the Registration Statement or
supplement the Prospectus (at the expense of the Company) so as to correct
such statement or omission or effect such compliance.
(d) The Company will use its best efforts to arrange for the
qualification of the Units for offering and sale under the securities laws of
such jurisdictions as the Underwriter may designate and to continue such
qualifications in effect for so long as may be required for purposes of the
distribution of the Units; provided, however, that in no event shall the
Company be obligated to qualify to do business in any jurisdiction where it
is not now so qualified or to take any action which would subject it to the
service of process in suits, other than those arising out of the offering or
sale of the Units, in any jurisdiction where it is not now so subject. In
each jurisdiction in which the Units shall have been qualified as herein
provided, the Company will make and file such statements and reports in each
year as are or may be reasonably required by the laws of such jurisdiction.
(e) The Company will furnish to the Underwriter copies of the
Registration Statement (two of which will be signed and will include all
exhibits), each Preliminary Prospectus, the Prospectus, and all amendments
and supplements to such documents, in each case as soon as available and in
such quantities as the Underwriter may from time to time reasonably request.
(f) For a period of five years from the Effective Date, the
Company will furnish directly to the Underwriter as soon as the same shall be
sent to its shareholders generally copies of all annual or interim
shareholder reports of the Company and will, for the same period, also
furnish the Underwriter with the following:
(i) One copy of any report, application or document (other
than exhibits, which, however, will be furnished on your request)
filed by the Company with the SEC, Nasdaq, the NASD or any securities
exchange;
(ii) As soon as the same shall be sent to shareholders
generally, copies of each communication sent to shareholders; and
(iii) From time to time, such other information concerning the
Company as the Underwriter may reasonably and specifically request,
provided that the Company shall not be required to furnish any
information pursuant hereto that is not furnished to its shareholders
or not otherwise made publicly available.
(g) The Company will, for a period of two (2) years from the
Effective Date, furnish directly to the Underwriter quarterly profit and loss
statements, reports of the Company's cash flow and statements of application
of the proceeds of the offering of the Units by the Company in such
reasonable detail as the Underwriter may request.
(h) The Company will make generally available to its security
holders as soon as practicable, but in any event not later than the fifteen
(15) months after the end of the Company's current fiscal quarter, an
earnings statement (which will be in reasonable detail but need not be
audited) complying with the provisions of Section 11(a) of the Securities Act
and Rule 158 of the Rules and Regulations and covering a twelve (12)-month
period beginning after the Effective Date of the Registration Statement.
(i) The Company will prepare and file with the SEC any required
reports on Form SR in accordance with the Securities Act and the Rules and
Regulations.
(j) After completion of the offering of the Units, the Company
will make all filings required to maintain the quotation of the Common Stock
and the Redeemable Warrants on The Nasdaq SmallCap Market, The Nasdaq
National Market, or any national stock exchange.
-10-
(k) The Company will apply the net proceeds from the sale of
the Units substantially in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(l) For a period of six months after the Second Closing Date,
the Company will not, without the prior written consent of the Underwriter,
directly or indirectly, effect the Disposition of any Securities including,
without limitation, any Securities that are convertible into or exchangeable
or exercisable for Common Stock, and shall not accelerate the exercisability
of any Securities that are convertible into or exchangeable or exercisable
for Common Stock, except for the sale of Units by the Company pursuant to
this Agreement, the exercise of options granted under the Company's Stock
Plan and other options outstanding on the date of this Agreement, and the
grant of options under the Plan in the ordinary course.
(m) For a period of six months from the Effective Date, the
Company will not, without the prior written consent of the Underwriter, file
a registration statement with the SEC or any state securities or "Blue Sky"
law authority relating to any of the Company's Securities, whether such
shares are to be offered and sold by the Company or by its shareholders,
except for a Registration Statement on Form S-8 (or any successor or
replacement form of registration statement) relating only to shares of Common
Stock subject to options granted under the Stock Plan.
(n) The Company will not take, and will use its best efforts
to cause each of its officers and directors not to take, directly or
indirectly, any action designed to or which might reasonably be expected to
cause or result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Units.
(o) The Company will inform the Florida Department of Banking
and Finance at any time prior to the consummation of the distribution of the
Units by the Underwriter if it commences engaging in business with the
government of Cuba or with any person or affiliate located in Cuba. Such
information shall be provided within ninety (90) days after the commencement
thereof or after a change occurs with respect to previously reported
information.
(p) For a period of three (3) years from the Effective
Date, the Underwriter shall have the right, but not the obligation, to act as
(i) managing underwriter or sole or lead selling agent in any public or
private offering of equity or debt securities by the Company, and (ii) the
Company's investment banker or financial advisor in connection with any
strategic partnership, sale of the Company or its assets, merger, acquisition
of stock or assets of another entity, or any similar transaction. If the
Company intends to consider or enter into any of the transactions described
in this Section 3(p), it will notify the Underwriter in writing, which
notification shall contain a description of such transaction in reasonable
detail.
(q) For a period of three years from the Effective Date, and
if the Underwriter so requests, the Company will use its best efforts to
secure the election to the Company's Board of Directors of a representative
selected by the Underwriter.
(r) The Company will cause the Common Stock, the Redeemable
Warrants and the Units to be registered under the Exchange Act, which
registrations shall be effective concurrently with the effectiveness of the
Registration Statement.
(s) Unless the Company's Common Stock and Redeemable Warrants
are listed on The Nasdaq National Market or other suitable secondary trading
exemptions are available, or if for any reason state Blue Sky or securities
laws do not apply to secondary trading of the Common Stock and Redeemable
Warrants, the Company will seek to become listed in Standard & Poors or
another recognized securities manual as soon as practicable after the
effective date of the Registration Statement and shall pay all filing fees in
connection therewith, for the purpose of facilitating secondary trading in
the Common Stock and Redeemable Warrants; and the Company shall also agree to
make appropriate filings to qualify the Common Stock and Redeemable Warrants
for secondary trading in states in which such filings are necessary to cause
the Common Stock and Redeemable Warrants to be qualified, provided that such
qualification may be obtained without causing the Company extraordinary cost
or hardship.
-11-
4. EXPENSES.
(a) The Company agrees with the Underwriter that:
(i) Whether or not this Agreement becomes effective or is
terminated or cancelled or the sale of the Units hereunder is
consummated, and regardless of the reason for or cause of any such
termination, cancellation, or failure to consummate, the Company
will pay or cause to be paid (A) all expenses (including any
transfer taxes) incurred in connection with the delivery to the
Underwriter of the Units, (B) all expenses and fees (including,
without limitation, fees and expenses of the Company's accountants
and of counsel to the Company, excluding, however, fees of
Underwriter's Counsel) in connection with the preparation, printing,
filing, delivery, and shipping of the Registration Statement
(including the financial statements therein and all amendments,
schedules, and exhibits thereto), each Preliminary Prospectus, the
Prospectus, and any amendment thereof or supplement thereto, (C) all
fees and reasonable expenses, including all reasonable counsel fees
of Underwriter's Counsel, incurred in connection with the
qualification of the Units for offering and sale by the Underwriter
or by dealers under the securities or Blue Sky laws of the states
and other jurisdictions which the Underwriter may designate in
accordance with Section 3(d) hereof, (D) all costs and expenses
incident to qualification with The Nasdaq SmallCap Market,
(E) postage and express charges and other expenses in connection with
delivery to the Underwriter of the Preliminary Prospectus and
Prospectus, and (F) all other costs and expenses incident to the
performance of the Company's obligations hereunder that are not
otherwise specifically described herein. In addition to and not
in lieu of the foregoing, the Company shall pay to the Underwriter
on each Closing Date for out-of-pocket expenses (including fees of
Underwriter's Counsel other than fees and expenses incurred in
connection with Blue Sky or state securities qualifications) a
nonaccountable expense allowance equal to two percent (2.0%) of the
aggregate Price to Public for all the Units sold to the Underwriter
on each Closing Date, including Units sold pursuant to orders
received through the Company. If the Underwriter withdraws from the
sale of the Units as herein proposed (A) for any reason within the
control of the Company such as, for example, the sale of the Units
as herein proposed is abandoned by the Company; (B) based upon the
fact that there has been a material adverse change in the financial
or other affairs of the Company since the date of the last financial
statements of the Company provided to the Underwriter; (C) because
any of the Company's representations or warranties in this Agreement
prove to be untrue; (D) because there shall have occurred any general
suspension of trading in securities on the New York Stock Exchange or
any limitation on prices for such trading or because any new
restrictions on the distribution of securities shall have been
established by the New York Stock Exchange or by the SEC or by any
federal or state agency, all to such a degree as, in the
Underwriter's judgment, would restrict materially a free market for
the Units, shares of Common Stock included in the Units, or the
Redeemable Warrants; (E) because there shall have occurred such a
materiel change in general economic, political or financial
conditions, or because the effect of international conditions on
the financial markets in the United States become such as, in the
Underwriter's judgment, makes it inadvisable to proceed with the sale
of the Units; (F) because the Company's financial condition or its
business prospects do not fulfill the Underwriter's expectations
based on representations made by the Company prior to March 3, 1997;
(G) because the offering of the Units lacks public interest prior to
the Effective Date; or (H) because adverse market or other conditions
make the offering of the Units not feasible in the Underwriter's
judgment, the Company will pay to the Underwriter the amount of all
actual accountable, out-of-pocket expenses (including fees and
disbursements of Underwriter's Counsel) incurred by the Underwriter
in connection with the contemplated purchase, offer and sale of the
Units, including, without limitation, expenses incurred in its
investigation, preparation to market, and marketing of the Units,
and in contemplation of performing and in performance of its
obligations hereunder, up to a maximum of $35,000.00. All
reimbursements pursuant to this Section 4(a)(i) shall occur within
ten (10) days after the Underwriter delivers to the Company a written
itemization of such expenses. The provisions of this Section 4(a)(i)
are intended to relieve the Underwriter from the
-12-
payment of the expenses and costs which the Company hereby agrees to
pay and shall not impair the obligations of the Company hereunder to
the Underwriter.
(ii) In addition to its other obligations under Sections 7(a)
and 8 hereof, the Company agrees that, as an interim measure during
the pendency of any claim, action, investigation, inquiry or other
proceeding described in Section 7(a), it will reimburse the
Underwriter on a monthly basis for all reasonable legal or other
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 Underwriter 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 so held to have been improper, the
Underwriter shall promptly return such payment to the Company
together with interest, compounded daily, determined on the basis of
the prime rate (or other commercial lending rate for borrowers of
the highest credit standing) listed from time to time in The Wall
Street Journal which represents the base rate on corporate loans
posted by a substantial majority of the nation's thirty (30) largest
banks (the "Prime Rate"). Any such interim reimbursement payments
which are not made to the Underwriter within thirty (30) days of a
request for reimbursement shall bear interest at the Prime Rate from
the date of such request.
(b) It is agreed that any controversy rising out of the operation
of the interim reimbursement arrangements set forth in Section 4(a)(ii)
hereof, including the amounts of any requested reimbursement payments and
the method of determining such amounts, shall be settled by arbitration
conducted pursuant to the Code of Arbitration Procedure of the National
Association of Securities Dealers, Inc. ("NASD"). Any such arbitration must
be commenced by service of a written demand for arbitration or a written
notice of intention to arbitrate, therein electing the arbitration tribunal.
If the party demanding arbitration does not make such designation of an
arbitration tribunal in such demand or notice, then the party responding to
said demand or notice is authorized to do so. Any such arbitration will be
limited to the operation of the interim reimbursement provisions contained
in Section 4(a)(ii) hereof and will not resolve the ultimate propriety or
enforceability of the obligation to indemnify for expenses which is created
by the provisions of Sections 7(a) and 7(b) hereof or the obligation to
contribute to expenses which is created by the provisions of Section 8(a)
hereof.
5. CONDITIONS OF THE UNDERWRITER'S OBLIGATIONS. The obligation of the
Underwriter to purchase and pay for the Units as provided herein shall be
subject to the accuracy of the representations and warranties of the Company,
in the case of the Firm Units, as of the date hereof and the First Closing
Date (as if made on and as of the First Closing Date), and in the case of the
Option Units, as of the date hereof and the Second Closing Date (as if made
on and as of the Second Closing Date); to the performance by the Company of
its obligations hereunder; and to the satisfaction of the following
additional conditions on or before the First Closing Date in the case of the
Firm Units and on or before the Second Closing Date in the case of the Option
Units:
(a) The Registration Statement shall have become effective not
later than 4:00 p.m. Minneapolis, Minnesota time on the date of this
Agreement, or such later date or time as shall be consented to in writing
by you (the "Effective Date"); and no stop order suspending the
effectiveness thereof shall have been issued and no proceedings for that
purpose shall have been initiated or, to the knowledge of the Company, or
the Underwriter, threatened by the SEC or any state securities commission
or similar regulatory body; and any request of the SEC for additional
information (to be included in the Registration Statement or the Prospectus
or otherwise) shall have been complied with to the satisfaction of the
Underwriter and Underwriter's Counsel.
(b) The Underwriter shall not have advised the Company that the
Registration Statement or Prospectus, or any amendment thereof or supplement
thereto, contains any untrue statement of a fact which is material or omits
to state a fact which is material and is required to be stated therein or is
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that this Section 5(b) shall not apply to statements in, or omissions from,
the Registration Statement or Prospectus, or any amendment thereof or
supplement
-13-
thereto, which are based upon and conform to written information furnished
to the Company by the Underwriter specifically for use in the preparation of
the Registration Statement or the Prospectus, or any such amendment or
supplement.
(c) Subsequent to the Effective Date and prior to each Closing
Date, there shall not have occurred any change, or any development involving
a prospective change, which materially and adversely affects the Company's
condition (financial or otherwise), earnings, operations, properties,
business or business prospects from that set forth in the Registration
Statement or Prospectus, and which, in the Underwriter's sole judgment, is
material and adverse and that makes it, in the Underwriter's sole judgment,
impracticable or inadvisable to proceed with the public offering of the
Units as contemplated by the Prospectus and this Agreement.
(d) All corporate proceedings and other legal matters in
connection with this Agreement, the form of Registration Statement and the
Prospectus, and the registration, authorization, issue, sale and delivery
of the Units shall have been reasonably satisfactory to Underwriter's
Counsel, and Underwriter's Counsel shall have been furnished with such
papers and information as it may reasonably have requested to enable it to
pass upon the matters referred to in this Section.
(e) On each Closing Date, the Underwriter shall have received the
opinion of Robins, Kaplan, Xxxxxx & Xxxxxx L.L.P., counsel for the Company,
dated as of such Closing Date, satisfactory in form and substance to the
Underwriter and Underwriter's Counsel, to the effect that:
(i) Each of the Company and the Subsidiaries has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation
and has the corporate power and authority to own, lease and operate
its properties and to conduct its business as currently being
carried on and as described in the Registration Statement and
Prospectus.
(ii) Each of the Company and the Subsidiaries is duly
qualified to do business as a foreign corporation and is in good
standing in each jurisdiction, if any, in which the ownership or
leasing of its properties or the conduct of its business requires
such qualification, except where the failure to be so qualified or
be in good standing would not have a material adverse effect on the
condition (financial or otherwise), earnings, operations or
business of the Company and the Subsidiaries considered as one
enterprise. To the best of such counsel's knowledge, the Company
does not own or control, directly or indirectly, any corporation,
association or other entity other than the Subsidiaries.
(iii) The capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus
under the caption "Description of Securities." The issued and
outstanding Units of the Company have been duly and validly issued
and are fully paid and non-assessable, and the holders thereof are
not subject to any personal liability solely by reason of being
such holders.
(iv) The Units to be issued by the Company pursuant to the
terms of this Agreement have been duly authorized and, upon
issuance and delivery against payment therefor in accordance with
the terms hereof, will be duly and validly issued and fully paid
and non-assessable, and the holders thereof will not be subject to
personal liability solely by reason of being such holders. The
shares of Common Stock issuable upon exercise of the Redeemable
Warrants included in the Units have been duly authorized and, when
issued and delivered upon such exercise, will be duly and validly
issued and fully paid and non-assessable, and the holders thereof
will not be subject to personal liability solely by reason of being
such holders. Except as otherwise stated in the Registration
Statement and Prospectus, there are no preemptive rights or other
rights to subscribe for or to purchase, or any restriction upon the
voting or transfer of, any shares of capital stock pursuant to the
Company's articles of incorporation, bylaws or any agreement or
other instrument known to such counsel to which the Company is a
party or by which the Company is bound. To the best of such
counsel's knowledge, except as set forth in the
-14-
Prospectus, neither the filing of the Registration Statement nor
the offering or sale of the Units as contemplated by this Agreement
gives rise to any rights for or relating to the registration of any
shares of capital stock or other securities of the Company and no
such rights exist, other than those rights described in Section
3(m) hereof. To the best of such counsel's knowledge, except as
described in the Registration Statement and Prospectus, there are
no options, warrants, agreements, contracts or rights in existence
to purchase or acquire from the Company any shares of capital stock
of the Company.
(v) The Redeemable Warrants included in the Units to be sold
by the Company have been duly and validly authorized and, when
authenticated by the Warrant Agent and issued, delivered and sold
in accordance with this Agreement and the Warrant Agreement dated
as of the date hereof between the Company and the Warrant Agent,
will have been duly and validly executed, authenticated, issued and
delivered and will constitute valid and binding obligations of the
Company, enforceable against the Company in accordance with their
terms, except as enforceability may be limited by the application
of bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the rights of creditors generally and by
judicial limitations on the right of specific performance. A
sufficient number of shares of Common Stock of the Company has been
reserved for issuance by the Company upon exercise of the
Redeemable Warrants.
(vi) The Underwriter's Warrants and the Common Stock and
Redeemable Warrants included in the Warrant Units have been duly
authorized. The Underwriter's Warrants, when issued and delivered
to the Underwriter, will constitute valid and binding obligations
of the Company in accordance with their terms, except as
enforceability may be limited by the application of bankruptcy,
insolvency, reorganization, moratorium, or other similar laws
affecting the rights of creditors generally and by judicial
limitations on the right of specific performance. The Common Stock
included in the Warrant Units, when issued in accordance with the
terms of this Agreement and pursuant to the Underwriter's Warrants,
will be fully paid and non-assessable and subject to no preemptive
rights or similar rights on the part of any person or entity. The
Redeemable Warrants included in the Warrant Units, when
authenticated by the Warrant Agent and issued, delivered and sold
in accordance with this Agreement, the Warrant Agreement between
the Company and the Warrant Agent, and the Underwriter's Warrants,
will have been duly and validly executed, authenticated, issued and
delivered and will constitute valid and binding obligations of the
Company, enforceable against the Company in accordance with their
terms, except as enforceability may be limited by the application
of bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the rights of creditors generally and by
judicial limitations on the right of specific performance. The
Common Stock issuable upon exercise of the Redeemable Warrants
included in the Warrant Units has been duly authorized and, when
issued and delivered upon such exercise, will be validly issued,
fully paid and non-assessable and, to such counsel's knowledge,
subject to no preemptive rights or similar rights on the part of
any person or entity. A sufficient number of shares of Common Stock
of the Company has been reserved for issuance by the Company upon
exercise of the Underwriter's Warrants and upon the exercise of the
Redeemable Warrants included in the Warrant Units.
(vii) The Company has the requisite corporate power and
authority to enter into this Agreement and to issue, sell and
deliver to the Underwriter the Units to be issued and sold by it
hereunder. This Agreement has been duly authorized by all necessary
corporate action on the part of the Company and has been duly
executed and delivered by the Company and, assuming due
authorization, execution and delivery by the Underwriter, is a
valid, legal and binding agreement of the Company, enforceable in
accordance with its terms, except insofar as indemnification and
contribution provisions may be limited by applicable law or the
public policies underlying such law and except as enforceability
may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar laws relating to or
affecting creditors' rights generally or by general equitable
principles.
-15-
(viii) The Registration Statement has become effective under
the Securities Act and, to the best of such counsel's knowledge, no
stop order suspending the effectiveness of the Registration
Statement has been issued and no proceeding for that purpose has
been instituted or is pending or threatened under the Securities
Act.
(ix) The Registration Statement and the Prospectus, and each
amendment thereof or supplement thereto (other than the financial
statements, including the notes thereto and the supporting
schedules, and other financial, numerical, statistical and
accounting data derived therefrom, as to which such counsel need
express no opinion), comply as to form in all material respects
with the requirements of the Securities Act and the Rules and
Regulations.
(x) The forms of certificates evidencing the Common Stock
and the Redeemable Warrants and filed as exhibits to the Registration
Statement comply with Minnesota law.
(xi) The description in the Registration Statement and the
Prospectus of the Company's articles of incorporation and bylaws
and of statutes, legal and governmental proceedings, contracts and
other documents are accurate in all material respects and fairly
present the information required to be presented by the Securities
Act and the applicable Rules and Regulations; and such counsel does
not know of any statutes or legal or governmental proceedings
required to be described in the Prospectus that are not described
as required, or of any agreements, contracts, leases or documents
of a character required to be described or referred to in the
Registration Statement or Prospectus or to be filed as an exhibit
to the Registration Statement which are not described or referred
to therein or filed as required.
(xii) The execution, delivery and performance of this
Agreement and the consummation of the transactions herein
contemplated (other than performance of the Company's
indemnification and contribution obligations hereunder, concerning
which no opinion need be expressed) do not result in any violation
of the Company's articles of incorporation or bylaws or result in a
breach or violation of any of the terms and provisions of, or
constitute a default under, any bond, debenture, note or other
evidence of indebtedness, or any material lease, contract,
indenture, mortgage, deed of trust, loan agreement, joint venture
or other material agreement or instrument known to such counsel to
which the Company is a party or by which its properties are bound,
or any applicable statute, rule or regulation known to such counsel
or, to the best of such counsel's knowledge, any order, writ or
decree of any court, government or governmental agency or body
having jurisdiction over the Company or the Subsidiaries or other
any of their material properties or operations.
(xiii) No consent, approval, authorization or order of, or
filing with, or qualification with, any court, government or
governmental agency or body is necessary in connection with the
execution, delivery and performance of this Agreement or for the
execution, delivery and performance of this Agreement or for the
consummation of the transactions herein contemplated, except such
as have been obtained under the Securities Act or such as may be
required under state or other securities or Blue Sky laws in
connection with the purchase and the distribution of the Units by
the Underwriter.
(xiv) To the best of such counsel's knowledge, there are no
legal or governmental proceedings pending or threatened against the
Company or any of the Subsidiaries of a character required to be
disclosed in the Registration Statement or the Prospectus by the
Securities Act or the Rules and Regulations, other than those
described therein.
(xv) To the best of such counsel's knowledge, neither the
Company nor any of the Subsidiaries is presently (A) in violation
of its respective articles of incorporation or bylaws, (B) in
material breach or violation of any applicable statute, rule or
regulation known to such counsel or any order, writ or decree of
any court or governmental agency or body, or (C) in breach of or
otherwise in default in the performance of any material obligation,
agreement or condition contained in any bond, debenture, note, loan
agreement or any other material contract,
-16-
lease or other instrument to which the Company is subject or by
which it may be bound, or to which any of the material assets or
property of the Company is subject.
(xvi) To the best of such counsel's knowledge, the Company
holds, and is operating in compliance in all material respects
with, all franchises, grants, authorizations, licenses, permits,
easements, consents, certificates and orders of any government or
self-regulatory body required for the conduct of its business, and
all such franchises, grants, authorizations, licenses, permits,
easements, consents, certifications and orders are valid and in
full force and effect.
(xvii) To the best of such counsel's knowledge, after due
inquiry, the Company has not received any notice of, and has no
knowledge of, any infringement of or conflict with the asserted
rights of others with respect to any patent, patent rights,
inventions, trade secrets, know-how, technology, trade marks,
service marks, trade names, or copyrights which, singularly or in
the aggregate, if the subject of an unfavorable decision, ruling or
finding, would have a material adverse effect on the condition
(financial or otherwise), earnings, operations, business or
business prospects of the Company.
(xviii) To the best of such counsel's knowledge, after due
inquiry, the Company owns, or possesses adequate rights to use, all
patents, patent rights, inventions, trade secrets, know-how,
technology, service marks, trade names, copyrights, trade marks and
proprietary rights or information which are necessary for the
conduct of its present or intended business as described in the
Registration Statement or Prospectus.
(xix) On the basis of information obtained as a result of
discussions and meetings with officers and other Underwriter of the
Company, discussions with Underwriter of the independent public
accountants for the Company in connection with the preparation of
the Registration Statement and the Prospectus, and the examination
of other information and documents requested by such counsel,
nothing has come to such counsel's attention that has caused them
to believe that the Registration Statement and any amendment
thereof, at the time it became effective and at all times
subsequent thereto up to and on that Closing Date, contained any
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make
the statements therein not misleading, or that the Prospectus, and
any amendment or supplement thereto, at the first date of its
issuance and up to and at all times subsequent thereto up to and on
that Closing Date, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading. Such counsel may further state that in making the
foregoing comments, such counsel does not intend them to include or
cover the financial statements and notes thereto and related
schedules and other financial, numerical, statistical and
accounting data contained or omitted from the Registration
Statement and any amendment or supplement thereto and the
Prospectus.
Counsel rendering the foregoing opinion may rely as to questions of
law not involving the laws of the United States or the State of
Minnesota upon opinions of local counsel, and, as to questions of fact,
upon representations or certificates of officers of the Company or its
Subsidiaries and of government officials, in which case their opinion is
to state the extent of such reliance. Copies of any opinion,
representation or certificate so relied upon shall be delivered to the
Underwriter and to Underwriter's Counsel.
(f) The Underwriter shall have received from Winthrop &
Weinstine, P.A., Underwriter's Counsel, such opinion or opinions as the
Underwriter may reasonably require, dated as of the First Closing Date and
the Second Closing Date, which are satisfactory in form and substance to
the Underwriter, with respect to the sufficiency of corporate proceedings
and other legal matters relating to this Agreement and the transactions
contemplated hereby, and the Company shall have furnished to
Underwriter's Counsel such documents as it may have requested for the
purpose of enabling it to pass upon such matters. In connection with
such opinion, as to matters of fact relevant to conclusions of law,
-17-
Underwriter's Counsel may rely, to the extent that it deems proper, upon
representations or certificates of public officials and of responsible
officers of the Company.
(g) At the time of execution of this Agreement, the Underwriter
shall have received from Xxxxxxxxx Dokken Kanter Xxxxxxx & Xxxxxx, Ltd.
a letter dated the date of such execution, in form and substance
satisfactory to the Underwriter, to the effect that they are independent
accountants with respect to the Company within the meaning of the
Securities Act and the applicable published instructions, and the Rules
and Regulations thereunder, and further stating in effect that:
(i) In their opinion, the audited financial statements
included in the Registration Statement and Prospectus covered by
their report included therein comply as to form in all material
respects with the applicable requirements of the Securities Act,
the published instructions and the Rule and Regulations.
(ii) On the basis of (A) a reading of the minutes of the
shareholders' and directors' meetings of the Company since January
1, 1994, (B) inquiries of certain officials of the Company
responsible for financial and accounting matters, (C) a reading of
the Company's monthly operating statements for the months beginning
on January 1, 1994, and (D) other specified procedures and
inquiries (but not an audit in accordance with generally accepted
accounting principles), nothing came to their attention causing
them to believe that:
(1) the unaudited consolidated financial statements of
the Company and its Subsidiaries contained in the Prospectus
and any amendment thereof or supplement thereto do not
comply as to form, in all material respects, with the
applicable accounting requirements of the Securities Act and
the published Rules and Regulations or were not prepared in
conformity with generally accepted accounting principles and
practices applied on a basis consistent in all material
respects with those followed in the preparation of the
audited consolidated financial statements of the Company and
its Subsidiaries included therein; or
(2) the unaudited consolidated amounts of revenues,
income before provision for income taxes, net income and
ratio of earnings to fixed charges of the Company and its
Subsidiaries, if any, contained in the Prospectus, or any
amendment thereof or supplement thereto, were not derived
from consolidated financial statements prepared in
conformity with generally accepted accounting principles and
practices applied on a basis consistent in all material
respects with those followed in the preparation of the
audited consolidated financial statements of the Company and
its Subsidiaries included therein; or
(3) the unaudited pro forma consolidated financial
statements of the Company and its Subsidiaries and
recently-acquired companies, if any, contained in the
Prospectus or any amendment thereof or supplement thereto,
were not properly compiled in accordance with generally
accepted accounting principles or did not provide for all
adjustments necessary for a fair presentation of the
information purported to be shown thereby; or
(4) with respect to the period subsequent to March 31,
1997, there were, at a specified date, not more than five
(5) business days prior to the date of the letter, any
changes or any material increases or decreases in capital
stock, long-term or short-term debt or shareholders' equity,
decreases in net assets, net current assets, or net worth or
any material decrease, as compared with the corresponding
period of the prior year, in revenues or net income of the
Company as compared with the amounts shown in the
consolidated balance sheet included in the Registration
Statement, except as disclosed or referred to in the
Prospectus and Registration Statement.
-18-
(iii) Certain information set forth on the cover of the Prospectus
and in the Prospectus under the headings "Prospectus Summary"
(including the subheading "Summary Combined Financial Data"), "Risk
Factors," "Use of Proceeds," "Dividend Policy," "Capitalization,"
"Dilution," "Selected Combined Financial Data," "Recent
Acquisitions," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business," "Management,"
"Certain Transactions," "Principal Shareholders," "Shares Eligible
for Future Sale," and "Description of Securities" and that are
expressed in dollars (or percentages derived from dollar amounts) or
numbers have been compared to accounting records of the Company which
were subject to the internal accounting controls of the Company and
are in agreement with such records or computations made therefrom,
excluding any questions of legal interpretation.
(h) The Underwriter shall have received from Xxxxxxxxx Dokken Kanter
Xxxxxxx & Xxxxxx, Ltd. a letter dated as of each Closing Date to the
effect that such accountants reaffirm, as of such Closing Date, and as
though made on such Closing Date, the statements made in the letter
furnished by such accountants pursuant to Section 5(g), except that the
specified date referred to in such letter will be a date not more than
five (5) business days prior to such Closing Date.
(i) The Underwriter shall have received from the Company a
certificate, dated as of the First Closing Date and the Second Closing
Date, of the principal executive officer and the principal financial or
accounting officer of the Company, to the effect that:
(i) The representations and warranties of the Company in this
Agreement are true and correct as if made on and as of such Closing
Date, and the Company has complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied
at, or prior to, such Closing Date;
(ii) No stop order or other order suspending the effectiveness of
the Registration Statement or any amendment thereof or the
qualification of the Units for offering or sale have been issued, and
no proceedings for that purpose have been instituted or, to the best
of their knowledge, are contemplated by the SEC or any state or
regulatory body; and
(iii) The signers of said certificate have carefully examined the
Registration Statement and the Prospectus and any amendments thereof
or supplements thereto, and (A) such documents contain all
statements and information required to be included therein; the
Registration Statement, or any amendment thereof, does not contain 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; and the Prospectus, as amended or
supplemented, does not include any untrue statement of material fact
or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; (B) since the Effective Date of the Registration
Statement, there has occurred no event required to be set forth in an
amended or supplemented Prospectus which has not been so set forth;
(C) subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, the Company
has not incurred any material liabilities or material obligations,
direct or contingent, or entered into any material transactions, not
in the ordinary course of business consistent with past practice, or
declared or paid any dividends or made any distribution of any kind
with respect to its capital stock, and except as disclosed in the
Prospectus, there has not been any change in the capital stock (other
than a change in the number of outstanding shares of Common Stock due
to the offering of the Units or the issuance of shares upon the
exercise of options outstanding as of the Effective Date or options
granted pursuant to the Stock Plan described to in the Registration
Statement), or any material increase in the short-term debt or
long-term debt, or in the issuance of options, warrants, convertible
securities or other rights to purchase the capital stock, of the
Company, or any material adverse change or any development involving a
prospective material adverse change (whether or not arising in the
ordinary course of business) in the general affairs, condition
(financial or otherwise), business, key personnel, property,
prospects, net worth or results of operations of the Company, and
(D)
-19-
except as stated in the Registration Statement and Prospectus,
there is not pending or, to their knowledge, threatened or
contemplated, any action, suit or proceeding to which the Company is a
party before or by any court or governmental agency, authority or
body, or any arbitrator, which might result in any material adverse
change of the condition, (financial or otherwise), business,
prospects, or results of operations of the Company.
(j) On each Closing Date, there shall have been furnished to you a
certificate of Secretary of the Company, dated as of such Closing Date,
with the documents listed herein attached, and to the effect and
certifying as follows:
(i) Attached thereto are true and correct copies of the articles
of incorporation of the Company, as amended to the date of the
certificate, and stating that there have been no changes or amendments
to the attached articles of incorporation of the Company, and no
resolutions have been adopted by the Board of Directors or
shareholders of the Company relating to (A) the amendment of said
articles of incorporation, (B) the merger, consolidation or
dissolution of the Company, or (C) the sale of all or substantially
all of the assets or business of the Company, and that the Company is
in good standing in the State of Minnesota and has paid all of its
corporate franchise taxes due as of the date of such certificate.
(ii) Attached thereto is a true and correct copy of the bylaws of
the Company as in effect as of the date of such certificate and no
resolutions have been adopted by the Board of Directors or
shareholders of the Company relating to changes or amendments to the
attached Bylaws.
(iii) Attached thereto are true and correct copies of the
resolutions of the Board of Directors of the Company relating to the
preparation and signing of the Registration Statement and this
Agreement, the issuance and sale of the Units and other related
matters, and such resolutions have not been amended, modified or
rescinded and are in full force and effect as of the date of such
certificate and are the only resolutions adopted by the Board of
Directors of the Company with respect to the offering contemplated by
the Registration Statement.
(iv) Attached thereto are true and correct copies of all material
correspondence with respect to the Registration Statement and
Prospectus and related matters between the Company, its counsel,
and/or Xxxxxxxxx Xxxxxx Xxxxxx Xxxxxxx & Xxxxxx, Ltd., on the one
hand, and the SEC, on the other.
(v) This Agreement, as executed and delivered by the Company, is
in the form presented to and approved by officers authorized to do so
by the Board of Directors of the Company.
(vi) Attached thereto are specimens of the certificates for the
Common Stock and the Redeemable Warrants in the forms authorized and
approved for use by the Board of Directors of the Company.
(vii) The persons who have signed the Registration Statement and
all amendments thereto were duly elected at the respective times of
such signing and duly acting as officers and directors of the Company
or as an attorney-in-fact therefor, as set forth in the Registration
Statement.
(k) The Underwriter shall have received from each of the executive
officers and directors of the Company and each beneficial owner of five
percent (5%) or more of the Common Stock to be outstanding after the sale
of the Firm Units (calculated in accordance with Rule 13d-3 under the
Exchange Act) the Two-Year Lock-up Agreement in the form of APPENDIX A-1
hereto whereby each such person agrees that during the Two-Year Lock-up
Period such person will not, without the Underwriter's prior written
consent, effect the Disposition of any Securities except as permitted by
the Two-Year Lock-up Agreement, and the Underwriter shall have received
from each other shareholder of the Company the Six-
-20-
Month Lock-up Agreement in the form of APPENDIX A-2 hereto whereby each
such person agrees that during the Six-Month Lock-up Period such person
will not, without the Underwriter's prior written consent, effect the
Disposition of any Securities other than as permitted by the Six-Month
Lock-up Agreement.
(l) The Common Stock of the Company shall be included and quoted on
The Nasdaq SmallCap Market.
(m) Winthrop & Weinstine, P.A. shall deliver to the Underwriter a
Blue Sky Memorandum reasonably satisfactory to the Underwriter confirming
that all requisite actions for the offer and sale of the Units in all
jurisdictions requested by the Underwriter have been taken.
(n) The Company shall have furnished to the Underwriter and to
Underwriter's Counsel such additional certificates, documents and
evidence as the Underwriter shall reasonably request.
All such opinions, certificates, letters and documents will be in compliance
with the provisions hereof only if they are reasonably satisfactory to the
Underwriter and Underwriter's Counsel. All statements contained in any
certificate, letter or other document delivered pursuant hereto by, or on
behalf of, the Company shall be deemed to constitute representations and
warranties of the Company.
The Underwriter may waive in writing the performance of any one or more of
the conditions specified in this Section 5 or extend the time for their
performance.
If any of the conditions specified in this Section 5 shall not have been
fulfilled when and as required by this Agreement to be fulfilled and if the
fulfillment of said condition has not been waived by the Underwriter, this
Agreement and all obligations of the Underwriter hereunder may be canceled
at, or at any time prior to, each Closing Date by the Underwriter. Any such
cancellation shall be without liability of the Underwriter to the Company and
shall not relieve the Company of its obligations under Section 4(a)
hereof. Notice of such cancellation shall be given to the Company at the
address specified in Section 12 hereof in writing, or by telegraph or
telephone confirmed in writing.
6. UNDERWRITER'S WARRANTS. In consideration of the agreement of the
Underwriter to act as Underwriter, and upon payment of a purchase price of
$100.00, on the First Closing Date the Company will issue and deliver to the
Underwriter, for its account, the Underwriter's Warrants to purchase the
Warrant Units in an amount equal to ten percent (10%) of the number of Firm
Units purchased by the Underwriter in the offering. The Underwriter's
Warrants shall be issued on the First Closing Date and shall be dated as of
the Effective Date. The Underwriter's Warrants shall be exercisable
commencing one year after the Effective Date and for a period ending five
years after the Effective Date at a price equal to 120% of the Per Unit Price
to Public set forth on the cover page of the Prospectus. As to other terms,
the Underwriter's Warrants shall be in form and substance substantially the
same as APPENDIX B hereto.
7. INDEMNIFICATION.
(a) The Company hereby agrees to indemnify and hold harmless the
Underwriter, and each person, if any, who controls the Underwriter within
the meaning of Section 15 of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which the
Underwriter or each such controlling person may become subject under the
Securities Act, the Exchange Act, the common law or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of, or are based upon, (i) any breach of any
representation, warranty, agreement or covenant of the Company contained
in this Agreement, (ii) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or
any amendment thereof or supplement thereto, or the omission or alleged
omission to state in the Registration Statement or any amendment thereof
or supplement thereto a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; (iii) any untrue statement or alleged untrue statement of
a material fact contained in any Preliminary Prospectus, if used prior to
the Effective Date of the Registration Statement, or in the Prospectus
(as amended or as supplemented, if the Company shall have filed with the
SEC any
-21-
amendment thereof or supplement thereto), or the omission or
alleged omission to state therein a material fact necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading; or (iv) any untrue statement or
alleged untrue statement of a material fact contained in any application
or other statement executed by the Company or based upon written
information furnished by the Company filed in any jurisdiction in order
to qualify the Units under, or exempt the Units or the sale thereof from
qualification under, the securities laws of such jurisdiction, or the
omission or alleged omission to state in such application or statement 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. The Company will reimburse each Underwriter and
each such controlling person for any legal or other expenses reasonably
incurred by such Underwriter or controlling person in connection with
investigating or defending against 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 any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance
upon and in conformity with written information relating to the
Underwriter furnished to the Company by the Underwriter specifically for
use in the preparation of the Registration Statement or any such
post-effective amendment thereof, any such Preliminary Prospectus, or the
Prospectus, or any such amendment thereof or supplement thereto, or in
any application or other statement executed by the Company or the
Underwriter filed in any jurisdiction in order to qualify the Units
under, or exempt the Units or the sale thereof from qualification under,
the securities laws of such jurisdiction; and provided further that the
foregoing indemnity agreement is subject to the condition that, insofar
as it relates to any untrue statement, alleged untrue statement, omission
or alleged omission made in any Preliminary Prospectus but eliminated or
remedied in the Prospectus, such indemnity agreement shall not inure to
the benefit of the Underwriter (or to the benefit of any person who
controls the Underwriter) if the person asserting any loss, claim, damage
or liability purchased the Units from the Underwriter if a copy of the
Prospectus was not sent or given to such person with, or prior to, the
written confirmation of the sale of such Units to such person. This
indemnity agreement is in addition to any liability which the Company may
otherwise have.
(b) The Underwriter agrees to indemnify and hold harmless the Company,
each of its directors, each of its officers who has signed the
Registration Statement, and each person who controls the Company within
the meaning of Section 15 of the Securities Act against any losses,
claims, damages or liabilities to which the Company or any such director,
officer or controlling person may become subject under the Securities
Act, the Exchange Act, the common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of, or are based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement or any amendment thereof or supplement thereto, or the omission
or alleged omission to state in the Registration Statement or any
amendment thereof or supplement thereto, a material fact required to be
stated therein or necessary to make the statements therein not
misleading; (ii) any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, if used prior to
the Effective Date of the Registration Statement, or in the Prospectus
(as amended or as supplemented, if the Company shall have filed with the
SEC any amendment thereof or supplement thereto), or the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading; or (iii)
any untrue statement or alleged untrue statement of a material fact
contained in any application or other statement executed by the Company
or by the Underwriter and filed in any jurisdiction in order to qualify
the Units under, or exempt the Units or the sale thereof from
qualification under, the securities laws of such jurisdiction, or the
omission or alleged omission to state in such application or statement 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; in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by, or on behalf of, the Underwriter
specifically for use in the preparation of the Registration Statement or
any such post-effective amendment thereof, any such Preliminary
Prospectus, or the Prospectus or any such amendment thereof or supplement
thereto, or in any application or other statement executed by the Company
or by the Underwriter and filed in any jurisdiction; and the Underwriter
will reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer, or controlling person in
connection with investigating or
-22-
defending against any such loss, claim, damage, liability or action. This
indemnity agreement is in addition to any liability which the
Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
7 of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against any
indemnifying party under this Section 7, notify in writing the
indemnifying party of the commencement thereof. The omission so to notify
the indemnifying party will relieve it from any liability under this
Section 7 as to the particular item for which indemnification is then
being sought, but not from any other liability which it may have to any
indemnified party. In case any such action is brought against any
indemnified party, and the indemnified party notifies an indemnifying
party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel who shall be reasonably satisfactory to
such indemnified party; and after notice from the indemnifying party to
such indemnified party of the indemnifying party's election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section 7 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation; provided,
however, that if the defendants in any such action include both the
indemnified party and the indemnifying party, and the indemnified party
shall have reasonably concluded 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 to assume such legal defenses and to otherwise participate in the
defense of such action on behalf of such indemnified party or parties, in
which event the fees and expenses of one such separate counsel shall be
borne by the indemnifying party. Any such indemnifying party shall not be
liable to any such indemnified party on account of any settlement of any
claim or action effected without the consent of such indemnifying party.
8. CONTRIBUTION.
(a) In order to provide for just and equitable contribution in any
action in which the Underwriter or the Company (or any person who
controls the Underwriter or the Company within the meaning of Section 15
of the Securities Act) makes claim for indemnification pursuant to
Section 7 hereof, but such indemnification is unavailable or insufficient
to hold harmless and indemnify a party under Section 7, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of the losses, claims, damages or
liabilities referred to in Section 7 above (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company
on the one hand and the Underwriter on the other from the offering of the
Units hereunder or (ii) if the allocation provided by the foregoing
clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in
such clause (i) but also the relative fault of the Company on the one
hand and the Underwriter on the other in connection with the statements
or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the
Underwriter on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering of the Units (before deducting
expenses) received by the Company bear to the total underwriting
discounts received by the Underwriter, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault 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 the Underwriter and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The Company and the Underwriter agree that it
would not be just and equitable if contributions pursuant to this Section
8 were to be determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable considerations
referred to in the first sentence of this Section 8. The amount paid by
an indemnified party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this Section 8 shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending against
any action or claim which is the subject of this Section 8.
Notwithstanding the provisions of this Section 8, the Underwriter shall
not be required to contribute any amount in excess of the amount by which
the total
-23-
price at which the Units underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages
that the Underwriter has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution
from any person who is not guilty of such fraudulent misrepresentation.
(b) Promptly after receipt by a party to this Agreement of notice of the
commencement of any action, suit or proceeding, such person will, if a claim for
contribution in respect thereof is to be made against another party (the
"Contributing Party"), notify the Contributing Party of the commencement
thereof; but the omission so to notify the Contributing Party will not relieve
the Contributing Party from any liability which it may have to any party other
than under this Section 8. Any notice given pursuant to Section 7 hereof shall
be deemed to be like notice hereunder. In case any such action, suit or
proceeding is brought against any party, and such person notifies a Contributing
Party of the commencement thereof, the Contributing Party will be entitled to
participate therein with the notifying party and any other Contributing Party
similarly notified.
9. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION.
(a) This Agreement shall become effective at immediately after the
time at which the Registration Statement shall become effective under the
Securities Act upon the Effective Date of the Registration Statement.
(b) Until the First Closing Date, this Agreement may be terminated by
the Underwriter, at its option, by giving notice to the Company, and the
option referred to in Section 2(b), if exercised, may be cancelled at any
time prior to the Second Closing Date, if (i) the Company shall have
failed, refused, or been unable, at or prior to such Closing Date, to
perform any agreement on its part to be performed hereunder, (ii) any
other condition of the Underwriter's obligations hereunder is not
fulfilled or waived by the Underwriter, (iii) trading in securities
generally on the New York Stock Exchange, the American Stock Exchange or
in the over-the-counter market shall have been suspended, (iv) minimum
or maximum prices for trading shall have been fixed, or maximum ranges
for prices for securities shall be required, on the New York Stock
Exchange, the American Stock Exchange, or in the over-the-counter market,
by such Exchange or by Nasdaq or by order of the SEC or any other
governmental authority having jurisdiction, (v) a banking moratorium
shall have been declared by federal, New York, or Minnesota authorities,
(vi) there shall have been such a serious, unusual and material change
in general economic, monetary, political or financial conditions, or the
effect of international conditions on the financial markets in the United
States shall be such as, in the judgment of the Underwriter, makes it
inadvisable to proceed with the delivery of the Units, (vii) the
enactment, publication, decree or other promulgation of any federal or
state statute, regulation, rule or order of any court or other
governmental authority which, in the judgment of the Underwriter,
materially and adversely affects or will materially and adversely affect
the business or operations of the Company, or (viii) there shall be a
material outbreak of hostilities or material escalation and deterioration
in the political and military situation between the United States and any
foreign power, or a formal declaration of war by the United States of
America shall have occurred. Any such termination shall be without
liability of any party to any other party, except as provided in Sections
7 and 8 hereof; provided, however, that the Company shall remain
obligated to pay costs and expenses to the extent provided in Section 4
hereof.
(c) If the Underwriter elects to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 9,
it shall notify the Company and the Company's counsel promptly by
telegram or telephone, confirmed by letter sent to the address specified
in Section 11 hereof. If the Company shall elect to prevent this
Agreement from becoming effective, it shall notify the Underwriter
promptly by telegram or telephone, confirmed by letter sent to the
addresses specified in Section 11 hereof.
10. SURVIVAL OF INDEMNITIES, CONTRIBUTION AGREEMENTS, WARRANTIES AND
REPRESENTATIONS. The respective indemnity and contribution agreements of the
Company and the Underwriter contained in Sections 7 and 8, the
representations and warranties of the Company set forth in Section 1 hereof,
and the covenants and agreements of
-24-
the Company set forth in Section 3 hereof, shall remain operative and in full
force and effect, regardless of any investigation made by, or on behalf of,
the Underwriter, the Company, any of its officers and directors, or any
controlling person referred to in Sections 7 and 8, and shall survive the
delivery of and payment for the Units. The aforesaid indemnity and
contribution agreements shall also survive any termination or cancellation of
this Agreement. Any successor of any party or of any such controlling person,
or any legal representative of such controlling person, as the case may be,
shall be entitled to the benefit of the respective indemnity and contribution
agreements.
11. NOTICES. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be mailed,
delivered or telegraphed, and confirmed, as follows:
If to the Underwriter, to: Equity Securities Investments, Inc.
2820 IDS Center
00 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Mr. Xxxxxx Xxxxxx
with a copy to: Winthrop & Weinstine, P.A.
0000 Xxxx Xxxxxxxx Xxxxx
00 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxxxxx, Esq.
If to the Company, to: ChoiceTel Communications, Inc.
0000 00xx Xxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attention: Xx. Xxxx X. Xxxxxx
with a copy to: Robins, Kaplan, Xxxxxx & Xxxxxx L.L.P.
0000 XxXxxxx Xxxxx
000 XxXxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
12. INFORMATION FURNISHED BY THE UNDERWRITER. The statements relating to the
stabilization activities of the Underwriter and the statements under the
caption "Underwriting" in any Preliminary Prospectus and in the Prospectus
constitute the written information furnished by, or on behalf of, the
Underwriter specifically for use with reference to the Underwriter referred
to in Section 1(a)(ii) and Sections 7(a) and 7(b) hereof.
13. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and
be binding upon the Underwriter and the Company and their respective
successors and assigns, and the officers, directors and controlling persons
referred to in Sections 7 and 8. Nothing expressed in this Agreement is
intended or shall be construed to give any person or corporation, other than
the parties hereto, their respective successors and assigns, and the
controlling persons, officers and directors referred to in Sections 7 and 8
any legal or equitable right, remedy or claim under, or in respect of, this
Agreement or any provision herein contained, this Agreement and all
conditions and provisions hereof being intended to be and being for the sole
and exclusive benefit of the parties hereto and their respective executors,
administrators, successors, assigns and such controlling persons, officers
and directors, and for the benefit of no other person or corporation. No
purchaser of any Units from the Underwriter shall be construed a successor or
assign merely by reason of such purchase.
-25-
14. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Minnesota.
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed counterpart of this Agreement,
whereupon it will become a binding agreement between the Company and the
Underwriter in accordance with its terms.
Very truly yours,
CHOICETEL COMMUNICATIONS, INC.
By
--------------------------------------
Signature
--------------------------------------
Name Typed or Printed
Its
-----------------------------------
Title Typed or Printed
ACCEPTANCE
The foregoing Underwriting Agreement is
hereby confirmed and accepted by us
as of the date first above written.
Equity Securities Investments, Inc.
By
-------------------------------------
Signature
-------------------------------------
Name Type or Printed
Its
----------------------------------
Title Typed or Printed
-00-
XXXXXXXX X-0
TWO-YEAR LOCK-UP AGREEMENT
Equity Securities Investments, Inc.
2800 IDS Center
00 Xxxxx 0xx Xxxxxx
Xxxxxxxxxxx, XX 00000
Re: ChoiceTel Communications, Inc.
Ladies and Gentlemen:
The undersigned, a beneficial owner of common stock, $.01 par value per share
(the "Common Stock"), of ChoiceTel Communications, Inc. (the
"Company"), understands and acknowledges that the Company is intending to
file or has filed with the Securities and Exchange Commission a Registration
Statement on Form SB-2 (the "Registration Statement") for the registration
of the offer and sale of units (the "Units"), each Unit consisting of one
share of Common Stock of the Company and a redeemable warrant to purchase one
share of Common Stock, including units subject to the over-allotment option
described in the Registration Statement (collectively, the "Units"). The
undersigned further understands that the Company, as issuer, and Equity
Securities Investments, Inc., as the underwriter (the "Underwriter") to be
named in that certain proposed underwriting agreement expected to be entered
into in connection with the public offering of the Units by the Underwriter
(the "Underwriting Agreement"), contemplate entering into such Underwriting
Agreement.
In order to induce the Underwriter to proceed with the public offering, the
undersigned agrees, for the benefit of the Company and the Underwriter, that
should such public offering be effectuated, the undersigned will not, without
the prior written consent of the Underwriter, during the two years commencing
on the effective date of the Registration Statement ("Effective Date"):
(i) offer to sell, contract to sell, pledge, hypothecate, transfer or
otherwise dispose of, grant any rights with respect to (collectively,
a "Disposition"), any shares of Common Stock of the Company, and
options, warrants or other rights to purchase any shares of Common
Stock or any securities convertible into or exchangeable or
exercisable for shares of Common Stock (collectively, "Securities")
now owned or hereafter acquired by the undersigned or with respect to
which the undersigned has or hereafter acquires the power of
Disposition; or
(ii) effect any Disposition of any Securities
other than by gifts to donees who agree in writing to be bound by the same
restrictions, or by will or the laws of descent and distribution; in which
case the Securities also will be subject to the same restriction.
Notwithstanding the foregoing, the Underwriter hereby agrees to release from
this Lock-up Agreement ten percent (10%) of the Securities beneficially owned
by the undersigned one (1) year following the Effective Date.
The undersigned hereby agrees to the entry of stop transfer instructions with
the Company's transfer agent against the transfer of the Securities except in
compliance with this Agreement.
The undersigned hereby further agrees that during the two years commencing on
the Effective Date, the undersigned will effect all sales of Securities only
through the Underwriter.
Dated: ________________, 1997 Very truly yours,
___________________________________
Signature
___________________________________
Name Typed or Printed
X-0
XXXXXXXX X-0
SIX-MONTH LOCK-UP AGREEMENT
Equity Securities Investments, Inc.
2800 IDS Center
00 Xxxxx 0xx Xxxxxx
Xxxxxxxxxxx, XX 00000
Re: ChoiceTel Communications, Inc.
Ladies and Gentlemen:
The undersigned, a beneficial owner of common stock, $.01 par value per share
(the "Common Stock"), of ChoiceTel Communications, Inc. (the
"Company"), understands and acknowledges that the Company is intending to
file or has filed with the Securities and Exchange Commission a Registration
Statement on Form SB-2 (the "Registration Statement") for the registration
of the offer and sale of units (the "Units"), each Unit consisting of one
share of Common Stock of the Company and a redeemable warrant to purchase one
share of Common Stock, including Units subject to the over-allotment option
described in the Registration Statement (collectively, the "Units"). The
undersigned further understands that the Company, as issuer, and Equity
Securities Investments, Inc., as the underwriter (the "Underwriter") to be
named in that certain proposed underwriting agreement expected to be entered
into in connection with the public offering of the Units by the Underwriter
(the "Underwriting Agreement"), contemplate entering into such Underwriting
Agreement.
In order to induce the Underwriter to proceed with the public offering, the
undersigned agrees, for the benefit of the Company and the Underwriter, that
should such public offering be effectuated, the undersigned will not, without
the prior written consent of the Underwriter, for six months commencing on
the effective date of the Registration Statement ("Effective Date"):
(i) offer to sell, contract to sell, pledge, hypothecate, transfer or
otherwise dispose of, grant any rights with respect to (collectively,
a "Disposition"), any shares of Common Stock of the Company, and
options, warrants or other rights to purchase any shares of Common
Stock or any securities convertible into or exchangeable or
exercisable for shares of Common Stock (collectively, "Securities")
now owned or hereafter acquired by the undersigned or with respect to
which the undersigned has or hereafter acquires the power of
Disposition; or
(ii) effect any Disposition of any Securities
other than by gifts to donees who agree in writing to be bound by the same
restrictions, or by will or the laws of descent and distribution; in which
case the Securities also will be subject to the same restriction.
The undersigned hereby agrees to the entry of stop transfer instructions with
the Company's transfer agent against the transfer of the Securities except in
compliance with this Agreement.
The undersigned hereby further agrees that during the two years commencing on
the Effective Date, the undersigned will effect all sales of Securities only
through the Underwriter.
Dated: ________________, 1997 Very truly yours,
_________________________________
Signature
_________________________________
Name Typed or Printed
X-0
XXXXXXXX X
FORM OF WARRANT
TO PURCHASE 80,000 UNITS
(EACH UNIT CONSISTING OF ONE SHARE OF COMMON STOCK
AND ONE REDEEMABLE COMMON STOCK PURCHASE WARRANT)
CHOICETEL COMMUNICATIONS, INC.
NO. ______ 80,000 UNITS
FOR GOOD AND VALUABLE CONSIDERATION, ChoiceTel Communications,
Inc., a Minnesota corporation (the "Company"), hereby certifies that Equity
Securities Investments, Inc., Minneapolis, Minnesota (the "Underwriter"),
or its registered assigns, is entitled to subscribe for and purchase from the
Company at any time or from time to time after ONE YEAR FROM EFFECTIVE
DATE, to and including [FIVE YEARS FROM EFFECTIVE DATE] Eighty Thousand
(80,000) Units (the "Units"), each Unit consisting of one share of the
Company's Common Stock and one redeemable Common Stock purchase warrant of
the Company. The per Unit exercise price of this Warrant is $___ (the
"Warrant Exercise Price"), subject to adjustment as provided herein.
This Warrant is one of the Underwriter's Warrants referred to in
the Underwriting Agreement dated_____________, 1997 by and between the
Company and the Underwriter (the "Offering") entered into in connection
with the offering by the Company of 800,000 Units (the "Units"), plus an
additional 120,000 Units solely to cover over-allotments.
As used herein, (i) this Warrant and all warrants hereafter
issued in exchange or substitution for this Warrant are referred to as the
"Warrants;" (ii) the Units which may be acquired upon exercise of the
Warrants are referred to herein as the "Warrant Units;" (iii) the term
"Holder" means the Underwriter, any party who acquires all or a part of
this Warrant as a registered transferee of the Underwriter, or any record
holder or holders of the Warrant Units issued upon exercise, whether in whole
or in part, of the Warrant; (iv) the term "Common Stock" means and
includes the Company's presently authorized common stock, par value $.01 per
share, together with any other equity securities which may be issued by the
Company with respect thereto or in substitution therefor; (v) the term
"Redeemable Warrants" means the redeemable common stock purchase warrants
subject to the Warrant Agreement dated __________, 1997 between the Company
and Norwest Bank Minnesota, National Association, as warrant agent (the
"Warrant Agent"), each Redeemable Warrant representing the right to
purchase at any time on or before _______, 2002 one share of Common Stock at
a price of $9.50 per share, subject to adjustment as provided in said Warrant
Agreement; and (vi) the term "Convertible Securities" means any stock or
other securities convertible into, or exchangeable for, Common Stock.
This Warrant is subject to the following provisions, terms and
conditions, to which each Holder hereof consents and agrees:
1. EXERCISE; TRANSFERABILITY.
(a) The rights represented by this Warrant may be exercised by
the Holder hereof, in whole or in part (but not as to a fractional Unit) by
written notice of exercise (in the form attached hereto) delivered to the
Company at the principal office of the Company prior to the expiration of
this Warrant and accompanied or preceded by the surrender of this Warrant
along with a check in payment of the Warrant Exercise Price for such Units.
B-1
(b) If the Company has redeemed the Redeemable Warrants prior to
the date upon which this Warrant first becomes exercisable, the Holder may,
for a period of thirty (30) days beginning on the date on which this Warrant
first becomes exercisable, exercise the Redeemable Warrants included in the
Warrant Units.
(c) This Warrant may not be sold, assigned, hypothecated, or
otherwise transferred for a period of one year from the effective date of the
Offering (other than by will, pursuant to the operation of law, or where
directed by a court of competent jurisdiction upon the dissolution or
liquidation of a corporate Holder hereof), except to (i) a person who is
both an officer and a shareholder of the Underwriter, (ii) a successor in
interest to the business of the Underwriter, (iii) a person who is an
officer and a shareholder of a successor, or (iv) a person who is an
employee of the Underwriter or a successor, but only if such employee is also
an officer of the Underwriter or successor; such transfer to be by
endorsement (by the Holder hereof executing the form of assignment attached
hereto) and delivery in the same manner as in the case of a negotiable
instrument transferable by endorsement and delivery. Further, this Warrant
may not be sold, transferred, assigned, hypothecated or divided into two or
more Warrants of smaller denominations, nor may any shares of Common Stock or
Redeemable Warrants issued pursuant to exercise of this Warrant or shares of
Common Stock issued pursuant to exercise of the Redeemable Warrants be
transferred, except as provided in Section 7 hereof.
2. EXCHANGE AND REPLACEMENT. Subject to Sections 1 and 7 hereof, this
Warrant is exchangeable upon the surrender hereof by the Holder to the
Company at its office for new Warrants of like tenor and date representing in
the aggregate the right to purchase the number of Warrant Units purchasable
hereunder, each of such new Warrants to represent the right to purchase such
number of Warrant Units (not to exceed the aggregate total number purchasable
hereunder) as shall be designated by the Holder at the time of such
surrender. Upon receipt by the Company of evidence reasonably satisfactory to
it of the loss, theft, destruction, or mutilation of this Warrant, and, in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and upon surrender and cancellation of this Warrant, if
mutilated, the Company will make and deliver a new Warrant of like tenor, in
lieu of this Warrant; provided, however, that if the Underwriter shall be
such Holder, an agreement of indemnity by such Holder shall be sufficient for
all purposes of this Section 2. This Warrant shall be promptly canceled by
the Company upon the surrender hereof in connection with any exchange or
replacement. The Company shall pay all expenses, taxes (other than stock
transfer taxes), and other charges payable in connection with the
preparation, execution, and delivery of Warrants pursuant to this Section 2.
3. ISSUANCE OF THE WARRANT UNITS.
(a) The Company agrees that the shares of Common Stock and the
Redeemable Warrants comprising the Warrant Units purchased upon exercise of
this Warrant shall be and are deemed to be issued to the Holder as of the
close of business on the date on which this Warrant shall have been
surrendered and the payment made for such Warrant Units as aforesaid. Subject
to the provisions of Section 3(b), certificates for the shares of Common
Stock and the Redeemable Warrants comprising the Warrant Units so purchased
shall be delivered to the Holder within a reasonable time, not exceeding
fifteen (15) days after the rights represented by this Warrant shall have
been so exercised, and, unless this Warrant has expired, a new Warrant
representing the right to purchase the number of Warrant Units, if any, with
respect to which this Warrant shall not then have been exercised shall also
be delivered to the Holder within such time.
(b) Notwithstanding the foregoing, the Company shall not be
required to deliver any shares of Common Stock or the Redeemable Warrants
comprising the Warrant Units upon exercise of this Warrant except in
accordance with exemptions from the applicable securities registration
requirements or registrations under applicable securities laws. Nothing
herein, however, shall obligate the Company to effect registrations under
federal or state securities laws, except as provided in Section 9. If
registrations are not in effect and if exemptions are not available when the
Holder seeks to exercise the Warrant, the Warrant exercise period will be
extended, if need be, to prevent the Warrant from expiring, until such time
as either registrations become effective or exemptions are available, and the
Warrant shall then remain exercisable for a period of at least thirty (30)
calendar days from the date the Company delivers to the Holder written notice
of the availability of such registrations or exemptions. The Holder agrees to
execute such documents and make such representations, warranties, and
agreements as may be reasonably required solely to comply with the exemptions
relied upon by the Company, or
B-2
the registrations made, for the issuance of the shares of Common Stock and
the Redeemable Warrants comprising the Warrant Units.
4. COVENANTS OF THE COMPANY. The Company covenants and agrees that (a)
all shares of Common Stock included in the Warrant Units will, upon issuance,
be duly authorized and issued, fully paid, non-assessable and free from all
taxes, liens and charges with respect to the issue thereof; (b) all
Redeemable Warrants included in the Warrant Units, when authenticated by the
Warrant Agent and issued, delivered and sold in accordance with this Warrant
and the Warrant Agreement between the Company and the Warrant Agent, will be
duly and validly executed, authenticated, issued and delivered and will
constitute valid and binding obligations of the Company, enforceable against
the Company in accordance with their terms, except as enforceability may be
limited by the application of bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the rights of creditors generally
and by judicial limitations on the right of specific performance; and (c) all
shares of Common Stock issuable upon exercise of the Redeemable Warrants
included in the Warrant Units will, upon issuance, be duly authorized and
issued, fully paid, non-assessable and free from all taxes, liens and charges
with respect to the issue thereof. 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 Common Stock and
Redeemable Warrants to provide for the exercise of the rights represented by
this Warrant.
5. ANTI-DILUTION ADJUSTMENTS. The provisions of this Warrant are
subject to adjustment as provided in this Section 5.
(a) The Warrant Exercise Price shall be adjusted from time to time
such that in case the Company shall hereafter:
(i) pay any dividends on any class of stock of the Company
payable in Common Stock or securities convertible into Common Stock;
(ii) subdivide its then outstanding shares of Common Stock into
a greater number of shares; or
(iii) combine outstanding shares of Common Stock, by
reclassification or otherwise;
then, in any such event, the Warrant Exercise Price in effect immediately
prior to such event shall (until adjusted again pursuant hereto) be adjusted
immediately after such event to a price (calculated to the nearest full cent)
determined by dividing (A) the number of shares of Common Stock outstanding
immediately prior to such event, multiplied by the then existing Warrant
Exercise Price, by (B) the total number of shares of Common Stock outstanding
immediately after such event (including in each case the maximum number of
shares of Common Stock issuable in respect of any securities convertible into
Common Stock), and the resulting quotient shall be the adjusted Warrant Exercise
Price per share. An adjustment made pursuant to this subsection shall become
effective immediately after the record date in the case of a dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination, reclassification or other event. If, as
a result of an adjustment made pursuant to this subsection, the Holder of any
Warrant thereafter surrendered for exercise shall become entitled to receive
shares of two or more classes of capital stock or shares of Common Stock and
other capital stock of the Company, the Board of Directors (whose determination
shall be conclusive) shall determine the allocation of the adjusted Warrant
Exercise Price between or among shares of such classes of capital stock or
shares of Common Stock and other capital stock. All calculations under this
subsection shall be made to the nearest cent or to the nearest 1/100 of a share,
as the case may be. In the event that at any time, as a result of an adjustment
made pursuant to this subsection, the holder of any Warrant thereafter
surrendered for exercise shall become entitled to receive any shares of the
Company other than shares of Common Stock, thereafter the Warrant Exercise Price
of such other shares so receivable upon exercise of any Warrant shall be subject
to adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to Common Stock contained in this
subsection.
B-3
(b) If the Company shall distribute to all holders of Common
Stock (including any such distribution made to the shareholders of the
Company in connection with a consolidation or merger in which the Company is
the continuing corporation) evidences of its indebtedness, cash (other than
any cash dividend which, together with any cash dividends paid within the 12
months prior to the record date for such distribution, does not exceed 5% of
the "Current Market Price" (as hereinafter defined) at the record date for
such distribution) or assets (other than dividends payable in shares of its
capital stock), or rights, options, or warrants to subscribe for or purchase
Common Stock or securities convertible into or exchangeable for shares of
Common Stock, then, in each such case, the Warrant Exercise Price shall be
adjusted by multiplying the Warrant Exercise Price in effect immediately
prior to the record date for the determination of shareholders entitled to
receive such distribution by a fraction, the numerator of which shall be the
Current Market Price per share of Common Stock on such record date, less the
fair market value (as determined in good faith by the Company's Board of
Directors, whose determination shall be conclusive, absent manifest error) of
the portion of the evidences of indebtedness or assets so to be distributed,
or of such rights, options, or warrants or convertible or exchangeable
securities, or the amount of such cash, applicable to one share, and the
denominator of which shall be such Current Market Price per share of Common
Stock. Such adjustment shall be made whenever any such distribution is made,
and shall become effective on the record date for the determination of
shareholders entitled to receive such distribution.
(c) For the purpose of any computation under this Warrant, the
"Current Market Price" per share of Common Stock on any date shall be the
average of the daily closing prices for the 30 consecutive trading days
immediately preceding the date in question. The closing price for each day
shall be the last reported sales price regular way or, in case no such
reported sale takes place on such day, the closing bid price regular way, in
either case on the principal national securities exchange (including, for
purposes hereof, The Nasdaq National Market and The Nasdaq SmallCap Market)
on which the Common Stock is listed or admitted to trading or, if the Common
Stock is not listed or admitted to trading on any national securities
exchange, the highest reported bid price for the Common Stock as furnished by
the National Association of Securities Dealers, Inc. through Nasdaq or a
similar organization if Nasdaq is no longer reporting such information. If,
on any such date, the Common Stock is not listed or admitted to trading on
any national securities exchange and is not quoted by Nasdaq or any similar
organization, the fair value of a share of Common Stock on such date, as
determined in good faith by the Company's Board of Directors, whose
determination shall be conclusive, absent manifest error, shall be used.
(d) No adjustment in the Warrant Exercise Price shall be required
if such adjustment is less than $.05; provided, however, that any adjustments
which by reason of this Section 5 are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 5 shall be made to the nearest cent or to the
nearest whole share, as the case may be.
(e) In any case in which this Section 5 shall require that an
adjustment in the Warrant Exercise Price may be made effective as of a record
date for a specified event, the Company may elect to defer, until the
occurrence of such event, issuing to the Holder, if the Holder exercised or
converted this Warrant after such record date, the shares of Common Stock, if
any, issuable upon such exercise or conversion over and above the shares of
Common Stock, if any, issuable upon such exercise or conversion on the basis
of the Warrant Exercise Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to the Holder a due xxxx or other
appropriate instrument evidencing the Holder's right to receive such
additional shares upon the occurrence of the event requiring such adjustment.
(f) Upon each adjustment of the Warrant Exercise Price pursuant to
Section 5(a) above, the Holder of each Warrant shall thereafter (until
another such adjustment) be entitled to purchase at the adjusted Warrant
Exercise Price the number of Warrant Units, calculated to the nearest full
Unit, obtained by multiplying the number of Units specified in such Warrant
(as adjusted as a result of all adjustments in the Warrant Exercise Price in
effect prior to such adjustment) by the Warrant Exercise Price in effect
prior to such adjustment and dividing the product so obtained by the adjusted
Warrant Exercise Price.
(g) In case of any consolidation or merger to which the Company is
a party other than a merger or consolidation in which the Company is the
continuing corporation, or in case of any sale or conveyance
B-4
to another corporation of the property of the Company as an entirety or
substantially as an entirety, or in the case of any statutory exchange of
securities with another corporation (including any exchange effected in
connection with a merger of a third corporation into the Company), there
shall be no adjustment under Subsection (a) of this Section above but the
Holder of each Warrant then outstanding shall have the right thereafter to
convert such Warrant into the kind and amount of shares of stock and other
securities and property which he would have owned or have been entitled to
receive immediately after such consolidation, merger, statutory exchange,
sale, or conveyance had such Warrant been converted immediately prior to the
effective date of such consolidation, merger, statutory exchange, sale, or
conveyance and in any such case, if necessary, appropriate adjustment shall
be made in the application of the provisions set forth in this subsection
with respect to the rights and interests thereafter of any Holders of the
Warrant, to the end that the provisions set forth in this subsection shall
thereafter correspondingly be made applicable, as nearly as may reasonably
be, in relation to any shares of stock and other securities and property
thereafter deliverable on the exercise of the Warrant. The provisions of this
subsection shall similarly apply to successive consolidations, mergers,
statutory exchanges, sales or conveyances.
(h) Upon any adjustment of the Warrant Exercise Price, then and in
each such case, the Company shall (i) give written notice thereof, by
first-class mail, postage prepaid, within ten (10) calendar days after the
date when the circumstances giving rise to the adjustment occurred, addressed
to the Holder as shown on the books of the Company, which notice shall state
the Warrant Exercise Price resulting from such adjustment and the increase or
decrease, if any, in the number of Units 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; and (ii)
prepare and retain on file a statement describing in reasonable detail the
method used in arriving at the new Warrant Exercise Price.
6. NO VOTING RIGHTS. This Warrant shall not entitle the Holder to any
voting rights or other rights as a shareholder of the Company.
7. NOTICE OF TRANSFER OF WARRANT OR RESALE OF THE SHARES OF COMMON
STOCK OR REDEEMABLE WARRANTS.
(a) Subject to the sale, assignment, hypothecation, or other
transfer restrictions set forth in Section 1 hereof, the Holder, by
acceptance hereof, agrees to give written notice to the Company before
transferring this Warrant, or any shares of Common Stock or Redeemable
Warrants comprising the Warrant Units, or any shares of Common Stock issuable
upon the exercise of the Redeemable Warrants included in the Warrant Units,
of such Holder's intention to do so, describing briefly the manner of any
proposed transfer. Promptly upon receiving such written notice, the Company
shall present copies thereof to the Company's counsel and to counsel to the
original purchaser of this Warrant. If, in the opinion of each such counsel,
the proposed transfer may be effected without registration or qualification
(under any federal or state securities laws), the Company, as promptly as
practicable, shall notify the Holder of such opinion, whereupon the Holder
shall be entitled to transfer this Warrant or to dispose of shares of Common
Stock and Redeemable Warrants comprising the Warrant Units received upon the
previous exercise of this Warrant or shares of Common Stock issuable upon
exercise of the Redeemable Warrants included in the Warrant Units, all in
accordance with the terms of the notice delivered by the Holder to the
Company; provided that an appropriate legend may be endorsed on this Warrant
or the certificates for such shares of Common Stock or Redeemable Warrants
comprising the Warrant Units or shares of Common Stock issuable upon exercise
of the Redeemable Warrants included in the Warrant Units, describing
restrictions upon transfer thereof necessary or advisable in the opinion of
counsel and satisfactory to the Company to prevent further transfers which
would be in violation of Section 5 of the Securities Act of 1933, as amended
(the "Securities Act"), and applicable state securities laws; and provided
further that the prospective transferee or purchaser shall execute such
documents and make such representations, warranties, and agreements as may be
required solely to comply with the exemptions relied upon by the Company for
the transfer or disposition of the Warrant or shares of Common Stock or
Redeemable Warrants comprising the Warrant Units or shares of Common Stock
issuable upon exercise of the Redeemable Warrants included in the Warrant
Units.
(b) If, in the opinion of either of the counsel referred to in
this Section 7, the proposed transfer or disposition of this Warrant or of
such shares of Common Stock or Redeemable Warrants comprising the
B-5
Warrant Units, or of shares of Common Stock issuable upon exercise of the
Redeemable Warrants included in the Warrant Units, described in the written
notice given pursuant to this Section 7 may not be effected without
registration or qualification of this Warrant, or such shares of Common Stock
or Redeemable Warrants comprising the Warrant Units or the shares of Common
Stock issuable upon exercise of the Redeemable Warrants included in the
Warrant Units, the Company shall promptly give written notice thereof to the
Holder, and the Holder will limit its activities in respect to such transfer
or disposition as, in the opinion of both such counsel, are permitted by law.
(c) Until this Warrant is duly transferred on the books of the
Company, the Company shall treat the registered Holder of this Warrant as
absolute owner hereof for all purposes without being affected by any notice
to the Company.
8. FRACTIONAL UNITS. Fractional Units shall not be issued upon the
exercise of this Warrant, but in any case where the holder would, except for
the provisions of this Section, be entitled under the terms hereof to receive
a fractional Unit, the Company shall, upon the exercise of this Warrant for
the largest number of whole Units then called for, pay a sum in cash equal to
the sum of (a) the excess, if any, of the "Fair Market Value" (as defined
in Section 10(d) hereof) of such fractional Unit over the proportional part
of the Warrant Exercise Price represented by such fractional Unit, plus (b)
the proportional part of the Warrant Exercise Price represented by such
fractional Unit.
9. REGISTRATION RIGHTS.
(a) The Company agrees that, if at any time (but on a one-time
basis only) during the period commencing [ONE YEAR FROM EFFECTIVE DATE] and
ending [FIVE YEARS FROM EFFECTIVE DATE], the Holder of this Warrant and/or
the Holders of any other Warrants and/or shares of Common Stock included in
the Warrant Units, Redeemable Warrants included in the Warrant Units, and
shares of Common Stock issuable upon exercise of the Redeemable Warrants
included in the Warrant Units (collectively ""Registrable Securities'') who
collectively shall hold not less than 50% of the Warrants and/or Registrable
Securities outstanding at such time and not previously sold pursuant to this
Section 9 shall request that the Company file a registration statement
covering all or any part of the Registrable Securities:
(i) the Company will promptly notify the Holder and all other
registered Holders, if any, of other Warrants and of Registrable
Securities that such registration statement will be filed and that
Registrable Securities which are then held and/or which may be acquired
upon the exercise of the Warrants by the Holder and such other Holders
will be included in such registration statement at the Holder's and
such Holders' request; and
(ii) the Company will cause such registration statement to
include all Registrable Securities which it has been so requested to
include, will take all necessary steps to register or qualify such
Registrable Securities under the Securities Act and the securities laws
of such states as the Holders may reasonably request, and will use its
best efforts to cause such registration statement and qualifications to
become effective as soon as practicable; provided, however, that the
Company shall not be required to register any Registrable Securities
that are eligible for resale under Rule 144(k) promulgated under the
Securities Act.
The Company shall keep effective and maintain any registration,
qualification, notification, or approval specified in this Section 9(a) for
such period as may be reasonably necessary for such Holder or Holders of such
Registrable Securities to dispose thereof and from time to time shall amend
or supplement the prospectus used in connection therewith to the extent
necessary in order to comply with applicable law; provided, however, that the
Company need not maintain the effectiveness of any such registration,
qualification, notification or approval, whether or not at the request of the
Holders, more than nine (9) months following the effective date thereof.
With regard to and notwithstanding this Section 9(a), the Company may delay
filing a registration statement for a reasonable period of time, and may
withhold efforts to cause the registration statement to become effective for
a reasonable period of time, if the Company determines in good faith that
such registration might interfere with or
B-6
affect the negotiation or completion of any transaction that is being
contemplated by the Company (whether or not a final decision has been made to
undertake such transaction) at the time the right to delay is exercised, or
involve initial or continuing disclosure obligations that might not be in the
best interest of the Company's shareholders.
(b) The Company agrees that, if at any time and from time to time
during the period commencing [ONE YEAR FROM EFFECTIVE DATE] and ending two
(2) years after complete exercise of this Warrant (but not later than [SEVEN
YEARS AFTER THE EFFECTIVE DATE]), the Company proposes to file a registration
statement under the Securities Act (other than a Form S-4 or Form S-8
Registration Statement or any successor or replacement forms thereto) with
respect to, or qualify for a public distribution under Section 3(b) of the
Securities Act, any of its securities in connection with the proposed offer
of such securities by the Company or any of its shareholders:
(i) the Company will promptly notify the Holder and all other
registered Holders, if any, of other Warrants, and of Registrable Securities,
at least thirty (30) days prior to each such filing, that it intends to file
such registration statement or effect such qualification, and that the
Registrable Securities which are then held and/or which may be acquired upon
the exercise of the Warrants by the Holder and such other Holders will be
included in such registration statement or qualification at the Holder's and
such Holders' request; and
(ii) the Company will use its best efforts to cause such
registration statement or qualification to include all Registrable Securities
which it has been so requested to include; provided, however, that if a
greater number of Registrable Securities is offered for participation in the
proposed offering than in the reasonable opinion of the managing underwriter
of the proposed offering can be accommodated without adversely affecting the
proposed offering, then the amount of Registrable Securities proposed to be
offered by such Holders for registration, as well as the number of securities
of any other selling shareholders participating in the registration (other
than selling shareholders participating in the registration as holders of
demand registration rights granted to them by the Company), shall be excluded
or proportionately reduced to a number deemed satisfactory by the managing
underwriter.
The Holder and such other Holders may request that their Registrable
Securities be included in such registration statement or qualification by making
written request to the Company specifying the number of shares of Common Stock
and/or Redeemable Warrants to be so included. Such request shall be made within
twenty (20) days after receipt from the Company of notice of such intended
registration or qualification.
(c) With respect to each inclusion of securities in a registration
or qualification pursuant to this Section 9, the Company shall bear all fees,
costs, and expenses thereof, including, without limitation, all filing fees,
fees imposed by the National Association of Securities Dealers, Inc.,
printing expenses, fees and disbursements of counsel and accountants for the
Company, fees and disbursements of counsel for the underwriter or Underwriter
of such securities (if the Company is required to bear such fees and
disbursements), all internal expenses, the premiums and other costs of
policies of insurance against liability arising out of the public offering,
and legal fees and disbursements and other expenses of complying with state
securities laws of any jurisdictions in which the securities to be offered
are to be registered or qualified. Fees and disbursements of special counsel
and accountants for the selling Holders, underwriting discounts and
commissions, and transfer taxes for selling Holders shall be borne by the
selling Holders.
(d) The Company will furnish the Holders whose Registrable
Securities are included in a registration or qualification pursuant to this
Section 9 with a reasonable number of copies of any prospectus and/or other
offering materials included in such filings and will amend or supplement the
same as required during the period of required use thereof. In connection
with any registration filed or qualification made pursuant to this Section 9
in which Registrable Securities are included, and to the extent permissible
under the Securities Act and controlling precedent thereunder, the Company
and each Holder whose Registrable Securities are so included in such
registration or qualification shall provide cross-indemnification agreements
to each other in customary scope covering the accuracy and completeness of
the information furnished by each in connection therewith.
B-7
(e) Each Holder of Registrable Securities included in a
registration or qualification pursuant to this Section 9 agrees to cooperate
with the Company in the preparation and filing of any such registration
statement or other offering materials and in the furnishing of information
concerning the Holder for inclusion therein, or in any efforts by the Company
to establish that the proposed sale is exempt under the Securities Act as to
any proposed distribution.
(f) If, after any registration statement filed as required under
either (a) or (b) of this Section 9 becomes effective, the Company advises
Holder that the Company considers it appropriate for the registration
statement to be amended, the Company shall use its commercially reasonable
efforts to amend such registration statement as soon as practicable and the
holders of such shares shall suspend any further sales of their registered
shares until the Company advises them that the registration statement has
been so amended.
10. RIGHT TO CONVERT.
(a) The Holder of this Warrant shall have the right (but not the
obligation) to require the Company to convert this Warrant (the "Conversion
Right"), at any time after one year from the date of this Warrant and prior
to its expiration, into Warrant Units as provided for in this Section 10.
Upon exercise of the Conversion Right by the Holder, the Company shall
deliver to the Holder (without payment by the Holder of any exercise price)
that number of Warrant Units equal to the quotient obtained by dividing (i)
the value of the Warrant at the time the Conversion Right is exercised
(determined by subtracting the aggregate Warrant Exercise Price for the
Warrant Units in effect immediately prior to the exercise of the Conversion
Right from the aggregate "Fair Market Value" (as determined below) for the
Warrant Units immediately prior to the exercise of the Conversion Right) by
(ii) the Fair Market Value of one Unit immediately prior to the exercise of
the Conversion Right.
(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 (the "Conversion Notice") to the Company at the
offices of the Company exercising the Conversion Right and specifying (i) the
total number of Units the Holder will purchase pursuant to such conversion,
and (ii) a place, and a date not less than five (5) nor more than twenty (20)
business days from the date of the Conversion Notice, for the closing of such
purchase.
(c) At any closing under Section 10(b) hereof, (i) the Holder will
surrender the Warrant, (ii) the Company will deliver or cause to be delivered
to the Holder a certificate or certificates for the number of shares of
Common Stock and Redeemable Warrants comprising the Warrant Units issuable
upon such conversion, together with cash, in lieu of any fraction of a Unit,
and (iii) the Company will deliver to the Holder a new Warrant representing
the number of Units, if any, with respect to which the Warrant shall not have
been converted.
(d) "Fair Market Value" of a Unit as of a particular date (the
"Determination Date") shall mean the aggregate Fair Market Value of the
share of Common Stock and the Redeemable Warrant comprising that Unit as of
the Determination Date. "Fair Market Value" of a share of Common Stock or
of the Redeemable Warrants as of the Determination Date shall mean:
(i) If the Company's Common Stock and Redeemable Warrants are
traded on an exchange or are quoted on The Nasdaq National Market or The
Nasdaq SmallCap Market, then the average closing or last sale prices,
respectively, reported for the ten (10) business days immediately preceding
the Determination Date.
(ii) If the Company's Common Stock and Redeemable Warrants are
not traded on an exchange or on The Nasdaq National Market or The Nasdaq
SmallCap Market but are traded in the over-the-counter market, then the
average of the closing bid and asked prices as reported by Metro Data
Company, Inc. (or a similar organization) from quotations by market makers in
such Common Stock or Redeemable Warrants on the Minneapolis-St. Xxxx local
over-the-counter market for the ten (10) business days immediately preceding
the Determination Date.
B-8
11. MISCELLANEOUS. The Company shall not, by amendment of its articles of
incorporation or through reorganization, consolidation, merger, dissolution or
sale of assets, or by any other voluntary act or deed, avoid or seek to avoid
the observance or performance of any of the covenants, stipulations or
conditions to be observed or performed hereunder by the Company, but will, at
all times in good faith, assist, insofar as it is able, in the carrying out of
all provisions hereof and in the taking of all other action which may be
necessary in order to protect the rights of Holders against dilution.
Upon written request of the Holder of this Warrant, the Company will
promptly provide such Holder with a then current written list of the names and
addresses of all Holders of warrants originally issued under the terms of, and
concurrent with, this Warrant.
The representations, warranties and agreements herein contained shall
survive the exercise of this Warrant. This Warrant shall be interpreted under
the laws of the State of Minnesota.
IN WITNESS WHEREOF, ChoiceTel Communications, Inc. has caused this
Warrant to be signed by its duly authorized officer and to be dated
______________, 1997.
CHOICETEL COMMUNICATIONS, INC.
By
-----------------------------
Signature
-----------------------------
Name Typed or Printed
Its
----------------------------
Title Typed or Printed
B-9
NOTICE OF EXERCISE OF WARRANT
(To be signed upon the exercise of the Warrant for cash or by check)
The undersigned hereby irrevocably elects to exercise the attached Warrant
and to purchase thereunder, for cash, ______________ of the Units of ChoiceTel
Communications, Inc. issuable upon the exercise of such Warrant, herewith
makes payment of $___________ therefor in cash or by check, and requests that
certificates for the shares of Common Stock and Redeemable Warrants comprising
such Units (together with a new Warrant to purchase the number of Units, if any,
with respect to which this Warrant is not exercised) be issued in the name set
forth below and be delivered to the address set forth below.
Dated:
-------------------------
------------------------------------------
(Signature)
------------------------------------------
(Name Typed or Printed)
------------------------------------------
(Address)
------------------------------------------
(Social Security or Tax Ident. No.)
* The signature on the Notice of Exercise of Warrant must exactly correspond
to the name as written upon the face of the Warrant in every particular
without alteration or any change whatsoever. When signing on behalf of a
corporation, partnership, trust or other entity, PLEASE indicate your
position(s) and title(s) with such entity.
NOTICE OF WARRANT CONVERSION
(To be signed only upon conversion of warrant)
The undersigned hereby irrevocably elects to exercise the conversion right
provided in Section 10 of the attached Warrant and to purchase thereunder
_______ Units of ChoiceTel Communications, Inc. to which such Warrant
relates and herewith tenders the Warrant in full payment of the shares and
requests that the certificates for the shares of Common Stock and Redeemable
Warrants comprising such Units be issued in the name of, and be delivered to
_______________________, whose address is set forth below the signature of
the undersigned.
Dated:
-------------------------
------------------------------------------
(Signature)
------------------------------------------
(Name Typed or Printed)
------------------------------------------
(Address)
* The signature on the Notice of Warrant Conversion must exactly correspond
to the name as written upon the face of the Warrant in every particular
without alteration or any change whatsoever. When signing on behalf of a
corporation, partnership, trust or other entity, PLEASE indicate your
position(s) and title(s) with such entity.
ASSIGNMENT OF WARRANT
(To be signed only upon authorized transfer of the Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
unto ____________________________ the right to purchase _______________ Units
of ChoiceTel Communications, Inc. to which the within Warrant relates and
appoints _________________________________, as attorney-in-fact, to transfer
said right on the books of ChoiceTel Communications, Inc. with full power
of substitution in the premises.
Dated:
-------------------------
------------------------------------------
(Signature)
------------------------------------------
(Name Typed or Printed)
------------------------------------------
(Address)
------------------------------------------
(Social Security or Tax Ident. No.)
* The signature on the Assignment of Warrant must exactly correspond to
the name as written upon the face of the Warrant in every particular
without alteration or any change whatsoever. When signing on behalf of a
corporation, partnership, trust or other entity, PLEASE indicate your
position(s) and title(s) with such entity.
RESTRICTION ON TRANSFER
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE DISTRIBUTED FOR VALUE
UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR LAWS
COVERING SUCH SECURITY OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE
COMPANY STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT, PLEDGE OR DISTRIBUTION
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE
SECURITIES ACT OF 1933 AND ALL APPLICABLE STATE SECURITIES LAWS.
