RSI SYSTEMS, INC.
SELLING AGENCY AGREEMENT
MAXIMUM OFFERING: 2,000,000 SHARES OF COMMON STOCK
MINIMUM OFFERING: 1,000,000 SHARES OF COMMON STOCK
Xxxxxx Xxxxxxx & Xxxxx Incorporated Minneapolis, Minnesota
5500 Wayzata Boulevard August 22, 0000
Xxxxx 000 - 0xx Xxxxx
Xxxxxxxxxxx, XX 00000
Gentlemen:
The undersigned, RSI Systems, Inc., (the "Company") hereby confirms
its agreement with you (the "Selling Agent") as follows:
1. DESCRIPTION OF OFFERING. The Company proposes to offer and sell
shares (the "Shares") of its common stock, $.01 par value per share (the "Common
Stock"), to private, accredited investors through you, as its exclusive agent
(the "Offering"), such Offering for a minimum of 1,000,000 shares (the "Minimum
Offering") and a maximum of 2,000,000 shares (the "Maximum Offering"). The
Shares will be sold at a per share price of $3.00. Purchases will be made
pursuant to a Subscription Agreement between the Company and each investor, the
form of which will be provided by the Company and acceptable to Selling Agent
(the "Subscription Agreement").
2. APPOINTMENT OF AGENT. On the basis of the warranties,
representations and agreements of the parties hereto, the Company hereby
appoints the Selling Agent, and the Selling Agent hereby accepts such
appointment, to act as the Company's exclusive agent in connection with the
offer and sale of the Shares to private investors, on a best efforts basis. The
Selling Agent will use its best efforts to sell the Shares, but there is no
commitment by the Selling Agent to purchase or sell all or any of the Shares.
The Selling Agent may utilize the services of sub-agents, but the use of
sub-agents shall not increase the compensation payable by the Company hereunder.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Selling Agent as follows:
(a) The Company will prepare a disclosure document or package
consisting of a description of the Offering, intended use of the
proceeds from the Offering, recent developments and risk factors
regarding the Company, and other information including the Company's
prospectus dated July 25, 1995, the Company's quarterly report on Form
10-QSB for each of the fiscal quarters ended after June 30, 1995, and
the Company's press releases released since January 1, 1996 (which,
together with any supplements or amendments thereto including any
documents incorporated by reference therein is herein defined as the
"Disclosure Package") with respect to the Shares which will (i) fairly
present all material information regarding the Company; and (ii) will
not include any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances
under which they were made. The Company will also prepare and file a
Form D, if applicable, with the Securities and Exchange Commission
(the "Commission"). The Disclosure Package and Form D will be subject
to your approval, which will not be unreasonably withheld. The Company
has not taken, or omitted to take, any action and will not take, or
omit to take, any action which would have the result of making the
exemptions from registration provided by Section 4(2) of the
Securities Act of 1933, as amended (the "Securities Act") or
Regulation D thereunder unavailable for the offer and sale of the
Shares. The Company and the Selling Agent shall mutually determine
whether to issue a press release under Rule 135 of the Securities Act
and the contents of such release.
(b) As of the commencement date of the Offering and until and
as of the date of any Closing (as hereinafter defined), the Disclosure
Package will (i) fairly present all material information regarding the
Company; and (ii) not include any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances under which they were made; provided, that the
representations and warranties in this paragraph shall not apply to
statements or omissions made in reliance upon written information
furnished to the Company by the Selling Agent expressly for use in
preparation of the Disclosure Package.
(c) The financial statements (including all related schedules
and notes) set forth in the Disclosure Package will fairly present the
financial condition and results of operations of the Company as of the
dates and for the periods indicated; such statements will have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods indicated; and, in the
event the Disclosure Package shall include a report of a public
accountant, such report shall be by an independent public accountant
within the meaning of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and the rules and regulations promulgated
thereunder.
(d) The Company is duly incorporated and validly existing as a
corporation in good standing under the laws of the State of Minnesota,
with power and authority to own its properties and conduct its business
as described in the Disclosure Package. The Company has one
wholly-owned subsidiary, RSI Systems Limited (the "Subsidiary") which
is duly organized and validly existing under the laws of the United
Kingdom. The Company is not otherwise affiliated with any other company
or business entity, except as explicitly stated in the Disclosure
Package.
(e) The Company is duly qualified to do business as a foreign
corporation and is in good standing in all states or jurisdictions in
which the ownership or leasing of its property or the conduct of its
business requires such qualification and the failure to be so qualified
would have a material, adverse effect on the Company's business.
(f) The Company has full legal power, right and authority to
enter into this Agreement and the Agent's Warrant (as defined herein).
This Agreement and such Agent's Warrant have been duly authorized, and
this Agreement has been and as of the date of Closing such Agent's
Warrant will be executed and delivered on behalf of the Company and
this Agreement is, and such Agent's Warrant when delivered will be, the
valid and binding obligation of the Company, subject, as to
enforcement, to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws affecting the rights of creditors generally,
to the exercise of judicial discretion as to the availability of
equitable remedies such as specific performance and injunction and
subject, as to enforcement of the indemnification provisions, to
limitations under applicable securities laws.
(g) Except as set forth in the Disclosure Package, the Company
and the Subsidiary have all licenses, certificates, permits and other
approvals from governmental and regulatory authorities necessary for
the conduct of its business as it is currently being carried on and as
will be described in the Disclosure Package, except those which would
not have a material adverse effect on the Company and the Subsidiary,
taken as a whole, if not obtained.
(h) Except as set forth in the Disclosure Package, the Company
owns or possesses all assets, patents, patent applications, trademarks,
service marks, trade names, trademark registrations, service xxxx
registrations, copyrights, licenses, inventions, trade secrets and
rights necessary for the conduct of its business as it is currently
being carried on and has not received any notice of conflict with the
asserted rights of others in respect thereof. To the Company's
knowledge, and except as will be set forth in the Disclosure Package or
except as will not have a material adverse effect on the Company, no
name which the Company uses and no other aspect of the business of the
Company involves or gives rise to any infringement of any patents,
patent applications, trademarks, service marks, trade names, trademark
registrations, service xxxx registrations, copyrights, licenses,
inventions, trade secrets or other similar rights of others.
(i) Since the date of the Disclosure Package and other than as
herein or therein contemplated (i) neither the Company nor the
Subsidiary has incurred any material liabilities or obligations,
contingent or otherwise, not in the ordinary course of business, (ii)
neither the Company nor the Subsidiary has paid or declared any
dividend or other distribution with respect to its outstanding capital
stock, (iii) there has not been any change in the capital stock or any
material increase in the long-term debt of the Company or the
Subsidiary, or any issuance of shares of capital stock of the Company
or the Subsidiary or of options, warrants, or rights to purchase
capital stock of the Company or the Subsidiary, except for issuances of
capital stock upon exercise of warrants, options or convertible
securities outstanding as of the date of the Disclosure Package and
grants of options pursuant to the Company's existing stock option plans
for which shares have been reserved for issuance, (iv) no material loss
or damage (whether or not insured) to the property of the Company or
the Subsidiary has been sustained, (v) no material legal or
governmental proceeding, domestic or foreign, affecting the Company,
the Subsidiary or the transactions contemplated by this Agreement has
been instituted or, to the best of the Company's knowledge, threatened,
and (vi) there has not been any material adverse change in the
business, condition (financial or otherwise) or properties of the
Company.
(j) Neither the Company nor the Subsidiary is in breach,
default or violation of, and the consummation of the transactions
herein contemplated will not result in any breach of any of the terms
or conditions of, or constitute a default or violation under, (i) its
Certificate of Incorporation, By-Laws or other governing document, (ii)
any material indenture, agreement or other instrument to which the
Company or the Subsidiary is now a party, or (iii) any law or any
order, rule or regulation applicable to the Company or the Subsidiary
of any court or of any federal or state regulatory body or
administrative agency having jurisdiction over the Company or the
Subsidiary or their property, except for such breaches, defaults or
violations which would not have a material adverse effect on the
Company and the Subsidiary, taken as a whole.
(k) No approval, authorization, consent or order of any
governmental or public board or body or self-regulatory organization,
other than in connection with or in compliance with the provisions of
the Securities Act, the Exchange Act and the securities laws of various
jurisdictions, is legally required for the sale of the Shares by the
Company.
(l) The Shares, when issued and delivered to the purchasers
against payment therefor in accordance with the Subscription Agreement,
will conform in all material respects to all statements made in
relation thereto contained in the Disclosure Package, and will be
validly issued, fully paid and non-assessable.
(m) Except as set forth in the Disclosure Package, there are
no pending, or to the Company's knowledge, threatened or contemplated
actions, suits or proceedings before or by any court or governmental
agency, authority or body, or any arbitrator, which are not ordinary,
routine and incidental to the business of the Company or which might
reasonably be expected to result in any material adverse change in the
business condition (financial or otherwise) or properties of the
Company.
(n) The Disclosure Package sets forth as of the date thereof
the authorized capital stock of the Company, the number of shares which
are issued and outstanding and the number of shares reserved for
issuance upon exercise of options, warrants, rights and convertible
instruments and there has been no material change in such amounts as of
the date hereof. All outstanding shares of capital stock have been duly
authorized, validly issued, are fully paid and nonassessable and have
been issued pursuant to valid registrations under, or valid exemptions
from, the registration requirements of, the Securities Act and
applicable state blue sky laws. The capital stock of the Company shall
conform in all material respects to the description thereof contained
in the Disclosure Package.
(o) The Company has good and marketable title, free and clear
of all liens, encumbrances and equities, and of all charges or claims,
to all of the real and personal property owned by it, except liens,
encumbrances and equities, and charges or claims, which are not
material and do not materially affect the value of such property or
interfere with the conduct of its business and has valid and binding
leases to all of the real and personal property described in the
Disclosure Package as under lease to it with such exceptions as do not
materially interfere with the conduct of its business.
(p) The Company has filed all federal, state and foreign
income and franchise tax returns due prior to the date hereof and the
date of the Closing and has paid all taxes, interest and penalties
shown as due thereon; and the Company has not received notice of any
material tax deficiency asserted against the Company.
(q) The Company has all requisite power and authority to
issue, sell and deliver the Shares in accordance with and upon the
terms set forth in this Agreement. The Company has duly taken all
required action for the due and proper authorization, issuance, sale
and delivery of the Shares. No preemptive rights of security holders of
the Company exist with respect to the issuance and sale of the Shares
by the Company. No security holder of the Company possesses any
registration rights except as disclosed in the Disclosure Package.
(r) In retaining and using the proceeds from the sale of the
Shares, the Company will not be required to register as an "Investment
Company" under the Investment Company Act of 1940, as amended.
(s) Neither the Company, nor to its knowledge, any of its
predecessors, any affiliated issuer nor any of the Company's directors,
officers, beneficial owners of 10% or more of any class of its equity
securities or other affiliates nor any promoter of the Company, is
subject to any of the disabilities enumerated in Exhibit E hereto and
the representations and warranties contained therein are true and
correct.
(t) Other than as contemplated by this Agreement, the Company
has not incurred any liability for any finder's or broker's fee or
agent's commission in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated
hereby.
(u) On or prior to the Closing (as hereinafter defined) the
Company will file a notice for the listing of the Shares offered hereby
on the Nasdaq SmallCap Market.
(v) The Company is subject to the reporting requirements of
the Securities Act and the Exchange Act and (i) has timely filed all
reports and statements required to be filed thereunder in the 12 month
period prior to the date hereof and (ii) each report and statement was
true and complete in all material respects as of their respective
dates.
4. FURTHER AGREEMENTS OF THE COMPANY. The Company covenants and agrees
as follows:
(a) The Company will promptly deliver to the Selling Agent and
its counsel a number of copies of the Disclosure Package and each
amendment or supplement thereto as may reasonably be requested by the
Selling Agent. The Selling Agent is authorized on behalf of the
Company to use and distribute copies of the Disclosure Package in
connection with the sale of the Shares as, and to the extent,
permitted by this Agreement and Federal and applicable state
securities laws.
(b) The Company will promptly notify the Selling Agent, by
telephone and in writing of (i) the issuance of any stop order
suspending the sale of securities of the Company, or of the
institution or notice of intended institution of any action or
proceeding for that purpose and (ii) any other communication directed
to and received by the Company by any public authority relating to the
possible suspension of the qualification of the offer and sale of the
securities of the Company in any state.
(c) Until the Closing (as hereinafter defined) of the Maximum
Offering or the earlier termination of this Agreement, if any event
relating to or affecting the Company, or of which the Company shall be
advised in writing by the Selling Agent, shall occur as a result of
which it is necessary, in the opinion of counsel for the Company or
the Selling Agent, to supplement or amend the Disclosure Package in
order to make the Disclosure Package not misleading in light of the
circumstances existing at the time it is delivered to a purchaser of
the Shares, the Company will forthwith prepare an amended or
supplemented Disclosure Package (in form satisfactory to counsel for
the Selling Agent) so that the amended or supplemented Disclosure
Package will not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances existing at the
time the Disclosure Package is delivered to such purchaser, not
misleading.
(d) The Company shall pay, or cause to be paid, all expenses
incident to the performance of its obligations under this Agreement,
including all expenses incident to the delivery of the Shares; the
fees and expenses of counsel and accountants for the Company; the cost
of filing the Form D and amendments thereto; and the cost of all blue
sky filings, including legal expenses related thereto. The payment of
all such fees and expenses shall not be conditioned upon the sale of
any Shares. The Company shall also pay to the Selling Agent a
nonaccountable expense allowance equal to 1% of the gross proceeds
from the sale of the Shares and the fees and expenses of counsel to
the Selling Agent.
(e) The Company will apply the net proceeds from the sale of
the Shares substantially in the manner set forth in the Disclosure
Package.
(f) For a period of three years from the date hereof, the
Company will furnish to the Selling Agent (i) within 100 days after the
end of each fiscal year, a copy of the Company's annual report on Form
10-KSB or Form 10-K, including audited financial statements, together
with a report thereon of its independent public accountants, and (ii)
within 55 days after the end of each of the first three quarters of
each fiscal year, the Company's quarterly report on Form 10-QSB or
Form 10-Q, including quarterly condensed financial statements of the
Company.
(g) During the three-year period following the final Closing
(as defined herein), if the Company intends to engage an underwriter,
selling agent or placement agent in connection with any financing, the
Company shall notify you in writing of such intention and the proposed
terms of sale and you shall have the right of first refusal to act in
that capacity in accordance with the following provisions. The Company
shall thereafter promptly furnish you with such information concerning
the business, condition and prospects of the Company as you may
reasonably request. If, within twenty (20) days of the receipt of such
notice of intention or a statement of terms, you do not accept in
writing such offer to act as underwriter, selling agent or placement
agent with respect to such financing upon the terms proposed, the
Company shall be free to negotiate with other underwriters, selling
agents or placement agents with respect to any such financing and to
effect the same on such proposed terms. Before the Company shall accept
any proposal on terms which are materially more adverse to the Company
or are materially more favorable to the underwriter, selling agent or
placement agent than such proposed terms, your preferential right shall
be reinstated and the same procedure with respect to such notified
proposal as provided above shall be adopted. The failure by you to
exercise this right of first refusal in any particular instance shall
not affect in any way such right with respect to any subsequent
financing undertaken by the Company during the three-year period.
Notwithstanding the foregoing, the provisions of this subsection shall
not apply if the Company engages an underwriter, selling agent or
placement agent to regional stature, such as Xxxxx Xxxxxxx or Xxxx
Xxxxxxxx, or of national stature, provided, however, that in such event
the Company will use reasonable, good-faith efforts to have the Selling
Agent included as a co-managing underwriter, selling agent or placement
agent.
(h) For a period of twelve months from the final Closing (as
defined herein), the Company shall not sell any securities, or rights
to purchase or acquire securities, except after consultation with the
Selling Agent or except that it may issue options to purchase shares of
its common stock pursuant to its existing stock option plans and shares
of its common stock issuable upon the exercise of options, warrants,
and convertible securities outstanding on the date hereof.
(i) The Company shall use its diligent, good faith efforts to
register the resale of the Shares in accordance with the provisions of
Exhibit A attached hereto.
5. OFFERING PERIOD. Subject to applicable law, the Selling Agent shall
commence the offer and sale of the Shares to investors on or as soon as is
reasonably practicable following the date hereof and, unless otherwise
terminated hereunder shall continue to offer and sell the Shares to investors
until the earlier of (i) the date on which all of the Shares are sold, (ii)
September 30, 1996 (unless extended up to 60 days by the Company and the Selling
Agent at their discretion and without notice to investors); (iii) such earlier
date as the Selling Agent and the Company mutually agree to terminate the
offering; or (iv) on such date as the Company or the Selling Agent terminates
its obligations under this Agreement as provided in Section 10 hereof.
"Termination Date," as used herein, shall refer to the date on which the
offering is terminated in accordance with the preceding sentence. In the event
of any such termination, the parties shall have no further obligations to each
other except (i) as set forth in Section 4(d) hereof and (ii) with respect to
provisions which survive termination of this Agreement.
6. DELIVERY: PAYMENT AND CLOSING.
(a) A closing of the sale of Shares shall be held as soon as
practicable after the Minimum Offering has been sold at a mutually
agreeable time at the offices of Xxxxxxx, Street and Deinard
Professional Association, Minneapolis. Minnesota, unless some other
time and place is mutually agreed upon by the Company and the Selling
Agent. Additional closings may be held from time to time until the
maximum number of Shares are sold (in any such case, a "Closing.")
(b) All checks and other funds received by the Selling Agent
in subscription for the Shares shall be held by Selling Agent in
accordance with Rule 15c2-4 under the Exchange Act until the Closing
of the sale of such Shares. If the Minimum Offering has not been
subscribed for on or before August 31, 1996 (unless extended up to 60
days by the Company and the Selling Agent), then all sums so held
shall be returned to the subscribers thereof, without interest or
deduction. All subscriptions are subject to the reasonable approval of
the Company.
7. CONDITIONS TO CLOSING. The obligation of the Selling Agent to close
the Offering shall be conditioned upon the satisfaction of the following at each
Closing:
(a) The receipt by the Selling Agent of an opinion of
counsel to the Company, substantially to the effect of Exhibit B
hereto.
(b) The receipt by the Selling Agent of a certificate of the
President and Chief Financial Officer of the Company, stating that the
representations and warranties contained in Section 3 hereof are true
and correct in all respects as of the date of the Closing, that the
Company has performed all of its agreements and obligations to be
performed under this Agreement and that the Disclosure Package, as of
the date of Closing, contains all material statements which are
required to be made therein, does not include any untrue statement of
a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made,
substantially in the form attached hereto as Exhibit C, and acceptable
to the Selling Agent.
(c) The receipt by the Selling Agent of a certificate of the
Secretary of the Company substantially in the form attached hereto as
Exhibit D; and acceptable to the Selling Agent.
(d) The receipt by the Selling Agent of a certificate of the
Company substantially in the form attached hereto as Exhibit E, and
acceptable to the Selling Agent.
(e) The receipt by Selling Agent of the commissions and
warrants referred to in Section 8 hereof.
(f) Such other documents, opinions and certificates as the
Selling Agent may reasonably request.
The obligation of the Company to close the Offering shall be
conditioned upon the satisfaction of the following at each closing:
(a) At each Closing, the receipt by the Company of payment
in full of the proceeds from the sale of the Shares.
(b) The receipt by the Company of executed copies of all
Subscription Agreements received by the Selling Agent from subscribers
acceptable to the Selling Agent (it being understood that the Selling
Agent and the Company have the right to reject any subscriptions in
whole or in part), for review and acceptance by the Company.
(c) The receipt by the Company of a certificate of the Selling
Agent substantially in the form attached hereto as Exhibit G, and
acceptable to the Company.
8. SALES COMMISSIONS.
(a) At each Closing, and conditioned thereon, the Selling
Agent shall receive from the Company as a commission 10% of the gross
proceeds received from the sale of the Shares at such Closing. The
commissions shall be payable to or upon the order of the Selling Agent
in immediately available Minneapolis funds and may, at the option of
the Selling Agent, be netted against the gross proceeds to be
delivered by the Selling Agent to the Company.
(b) If, during the period commencing on the Termination Date,
as defined herein, and ending on the first anniversary thereof, the
Company shall sell any securities (including, but not limited to,
shares of common stock, debentures or warrants) to any purchaser who
was contacted by the Selling Agent in connection with the offer and
sale of the Shares, the Selling Agent shall be entitled to receive upon
the sale of such securities a commission consisting of a cash amount
equal to 10% of the purchase price paid for such securities by such
purchaser. Upon any termination of this Agreement, the Selling Agent
will provide the Company with a list of persons and entities whom the
Selling Agent contacted.
(c) At each Closing, for the sum of $50.00 the Selling Agent
shall receive a warrant (the "Agent's Warrant") to purchase a number of
shares of the Company's common stock equal to 10% of the number of
Shares which have been sold at such Closing, in the form of Exhibit F
hereto with an exercise price per share equal to the per share price
paid by investors at such Closing. The Agent's Warrant shall be
exercisable for a period of ten years from the date of the Closing
subject to the exceptions contained therein.
9. INDEMNIFICATION.
(a) The Company shall indemnify and hold harmless the Selling
Agent, and each person who controls (as such term is defined by Rule
405 under the Securities Act) the Selling Agent within the meaning of
the Securities Act, against any losses, claims, damages or liabilities,
joint and several, to which the Selling Agent or such controlling
persons may become subject, under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
Disclosure Package, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Selling Agent and each such
controlling person for any legal or other expenses reasonably incurred
by such Selling Agent or such controlling person (including in
settlement of any litigation, if such settlement is effected with the
written consent of the Company) in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the Company will not be liable in any such case to the
extent that such loss, claim, damage or liability arises out of or is
based upon any untrue statement or alleged untrue statement or omission
or alleged omission made in reliance upon and in conformity with
written information furnished to the Company by or on behalf of the
Selling Agent specifically for use in the preparation of the Disclosure
Package or any additions or supplements thereto. This indemnity
agreement will be in addition to any liability which the Company may
otherwise have.
(b) The Selling Agent will indemnify and hold harmless the
Company, each person who controls (as such term is defined under Rule
405 under the Securities Act) the Company within the meaning of the
Securities Act, each of its directors, and each of its officers,
against any losses, claims, damages or liabilities, joint and several,
to which the Company, any such controlling person, director or officer
may become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Disclosure
Package, or any amendment or supplement thereto, or arise out of or are
based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement
or omission or alleged omission is made in the Disclosure Package or
any additions or supplements thereto, or such amendment or such
supplement, in reliance upon and in conformity with written information
furnished to the Company by the Selling Agent specifically for use in
the preparation thereof; and will reimburse the Company, any such
controlling person, director or officer for any legal or other expenses
reasonably incurred by them (including in settlement of any litigation,
if such settlement is effected with the written consent of the Selling
Agent) in connection with investigating or defending any such loss,
claim, damage, liability or action. This indemnity agreement will be in
addition to any liability which the Selling Agent may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action by a third party,
such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section, notify each
indemnifying party in writing of the commencement thereof. The
indemnification provided for in this Section 9 shall not be available
to any party who fails to so notify each indemnifying party to the
extent that the indemnifying party to whom notification was not given
was unaware of the action to which the notification would have related
and was prejudiced by the failure to notify; provided, however, that
the omission to so notify each indemnifying party will not relieve any
indemnifying party from any liability which it may have to any
indemnified party otherwise than under this section. In case any such
action is brought against any indemnified party, and it seeks or
intends to seek indemnity from an indemnifying party and notifies an
indemnifying party of the commencement thereof, the indemnifying party
will be entitled to participate in, and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel chosen by the indemnifying
party and reasonably satisfactory to the indemnified party; provided,
however, if the defendants in any such action (including any impleaded
parties) include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there
may be a conflict between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or
that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party or parties
shall have the right to select separate counsel (but the indemnifying
party shall not be liable for the expenses of more than one such
separate counsel), to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified
party or parties. Upon receipt of notice from the indemnifying party to
such indemnified party of its election so to assume the defense of such
action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under
this section for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof unless
(i) the indemnified party shall have employed separate counsel in
connection with the assumption of legal defenses in accordance with the
above proviso or (ii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after notice of
commencement of the action, in each of which cases the fees and
expenses of counsel shall be at the expense of the indemnifying party.
In no event shall any indemnifying party be liable in respect of any
amounts paid in settlement of any action unless the indemnifying party
shall have approved the terms of such settlement.
(d) As an interim measure during the pendency of any claim,
action, investigation, inquiry or other proceeding as to which
indemnification hereunder is sought, commencing on the one hundred
eightieth day after the service of a summons and complaint on an
indemnified party with respect to an action for which indemnification
is sought, the indemnifying party will reimburse the indemnified party
on a monthly basis for all reasonable legal fees or other reasonable
expenses incurred in connection with investigating or defending any
such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the
propriety and enforceability of the indemnifying party's obligation to
reimburse the indemnified party for such expenses and the possibility
that such payments might later be held to have been improper by a court
of competent jurisdiction. To the extent that any such interim
reimbursement payment is ultimately held to have been improper, the
indemnified party shall promptly return it to the party or parties that
made such payment, together with interest, determined on the basis of
the base rate (or other commercial lending rate for borrowers of the
highest credit standing) announced from time to time by Norwest Bank
Minnesota, N.A., ("Prime Rate"). Any such required interim
reimbursement payments which are not made to the indemnified party
within 30 days of a request for reimbursement shall bear interest at
the Prime Rate from the date of such request.
(e) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in Sections
9(a) or 9(b) is for any reason held, by a court of competent
jurisdiction, to be unenforceable as to any party entitled to
indemnity, the Company and the Selling Agent, or any controlling
person of the foregoing, shall contribute to the aggregate losses,
claims, damages and liabilities (including any investigation, legal
and other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted)
to which the Company and the Selling Agent, or any controlling person
of the foregoing, may be subject (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company,
on the one hand, and the Selling Agent on the other from the offering
contemplated hereby or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company, on the
one hand, and of the Selling Agent on the other in connection with the
statements or omissions which resulted in such loss, claim, damage,
liability or expense, as well as any other relevant equitable
considerations. The relative benefits received by the Company, on the
one hand, and the Selling Agent on the other shall be deemed to be in
the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Company bear to the total
sales commissions received by the Selling Agent. The relative fault of
the Company, on the one hand, and of the Selling Agent on the other
shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission
or alleged omission to state a material fact relates to information
supplied by the Company or by the Selling Agent and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. No person guilty of
fraudulent misrepresentation or guilty of misstating or
misrepresenting a material fact or failing to state a material fact
shall be entitled to contribution, as to any liability arising from
such fraudulent misrepresentation or omission, from any person who was
not guilty of such fraudulent or other misrepresentation or omission.
10. TERMINATION. Each party hereto shall have the right to terminate
its obligations under this Agreement by giving notice to the other party as
hereinafter specified at any time on or prior to the Closing if such other party
shall have failed, refused or been unable, at or prior to the Closing, to
perform any material agreement on its part to be performed; if there shall have
been a breach of any material warranty or representation of such other party
contained herein, or because any other material conditions of the terminating
party's obligations set forth herein are not fulfilled. Any such termination
shall be without liability of any party to any other party, except for the
Company's obligations to pay its expenses under Section 4(d) hereof.
11. REPRESENTATIONS AND AGREEMENTS TO SURVIVE. The respective
covenants, agreements, representations and warranties of the Company and the
Selling Agent hereunder, as set forth in, or made pursuant to this Agreement,
shall remain in full force and effect regardless of any investigation made by or
on behalf of any such party or any of its directors or officers or any
controlling person, and shall survive delivery of and payment for the Shares for
the statutory statute of limitations time period; and the indemnification
agreements contained in Section 9 shall also survive any termination of this
Agreement.
12. NOTICES. Except as otherwise expressly provided in this Agreement
or duly noticed hereunder, all notices and other communications hereunder shall
be in writing and, if given to the Selling Agent, shall be mailed, delivered or
telegraphed and confirmed to Xxxxxx Xxxxxxx & Xxxxx Incorporated, 0000 Xxxxxxx
Xxxxxxxxx, Xxxxx 000 - 8th Floor, Xxxxxxxxxxx, Xxxxxxxxx 00000, Attention: Xxxx
X. Xxxxx, with a copy to its counsel, Xxxxxxx, Street and Deinard, 000 Xxxxx
Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxxxx, Xxxxxxxxx 00000, Attention: Xxxx X. Xxxxx
or, if given to the Company, shall be mailed, delivered or telegraphed and
confirmed to RSI Systems, Inc., 0000 Xxxxx Xxxxxxxxx, Xxxxx 000, Xxxxx,
Xxxxxxxxx 00000, Attention: President with a copy to its counsel, Xxxx X.
Xxxxxxx, Xxxxxxxxxxx Xxxxx & Xxxxxxxx, Plaza VII, Suite 3400, 00 Xxxxx Xxxxxxx
Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000.
13. MISCELLANEOUS. This Agreement shall inure to the benefit of and be
binding upon the successors of the Selling Agent and of the Company. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any person or corporation, other than the parties hereto and their
successors, and the controlling persons and directors and officers referred to
in Section 9 hereof, any legal or equitable right, remedy or claim under or in
respect to this Agreement or any provision hereof. The term "successors" shall
not include any purchaser of the Shares merely by reason of such purchase. No
subrogee of a benefited party shall be entitled to any benefits hereunder.
If the foregoing expresses our agreement with you, kindly confirm by
signing the acceptance on the enclosed counterpart hereof and return the same to
us, whereupon this letter and your acceptance shall become and constitute a
binding agreement between the Company and the Selling Agent in accordance with
its terms.
Very truly yours,
RSI SYSTEMS, INC.
By /s/ Xxxxxx X. Lies
Its President
The terms set forth in the foregoing Selling Agency Agreement between
RSI Systems, Inc. and Xxxxxx Xxxxxxx & Xxxxx Incorporated are hereby accepted
and confirmed.
XXXXXX, XXXXXXX & XXXXX INCORPORATED
By /s/ Xxxx X. Xxxxx
its President
Exhibit A
REGISTRATION RIGHTS
1. Required Registration.
As soon as practicable but in no event later than the ninetieth day
after the final Closing, the Company shall file a Registration Statement under
the Securities Act covering the resale of the Shares purchased by purchasers of
Shares from the Company pursuant to that certain Selling Agency Agreement dated
August 22, 1996 between the Company and Xxxxxx, Xxxxxxx & Xxxxx (the
"Investors"), and will diligently proceed to use its diligent, good faith
efforts to have such Registration Statement become effective with the Securities
and Exchange Commission (the "Commission") as soon as possible thereafter.
2. Registration - General Provisions.
(a) Whenever the Company is required to effect the
registration of Shares under the Securities Act, the Company will:
(i) Prepare and file with the Commission a
registration statement with respect to such securities, and
use its diligent, good faith efforts to cause such
registration statement to become effective and remain
effective until the earlier of the date on which (i) all
Shares have been sold by the Investors or (ii) the Shares may
be sold by the Investors without restriction pursuant to Rule
144(k) under the Securities Act;
(ii) prepare and file with the Commission such
amendments to such registration statement and supplements to
the prospectus contained therein as may be necessary to keep
such registration statement effective for the period required
by Section 2(a)(i) above;
(iii) provide Investors counsel with reasonable
opportunities to review and comment on, and otherwise
participate in, the preparation of such registration
statement;
(iv) furnish to the Investors participating in such
registration and to the underwriters of the securities being
registered such reasonable number of copies of the
registration statement, preliminary prospectus, final
prospectus and such other documents as the Investors and
underwriters may reasonably request in order to facilitate the
public offering of such securities;
(v) use its diligent, good faith efforts to register
or qualify the securities covered by such registration
statement under such state securities or blue sky laws of such
jurisdictions as any such Investor may reasonably request,
except that the Company shall not for any purpose be required
to execute a general consent to service of process (which
shall not include a "Uniform Consent to Service of Process" or
other similar consent to service of process which relates only
to actions or proceedings arising out of or in connection with
the sale of securities, or out of a violation of the laws of
the jurisdiction requesting such consent) or to qualify to do
business as a foreign corporation in any jurisdiction wherein
it is not so qualified;
(vi) notify the Investors, promptly after it shall
receive notice thereof, of the time when such registration
statement has become effective or a supplement to any
prospectus forming a part of such registration statement has
been filed;
(vii) notify the Investors promptly of any request by
the Commission for the amending or supplementing of such
registration statement or prospectus or for additional
information;
(viii) prepare and file with the Commission, promptly
upon the request of any Investor, any amendments or
supplements to such registration statement or prospectus
which, in the opinion of counsel for such Investor (and
concurred in by counsel for the Company), is required under
the Securities Act or the rules and regulations thereunder in
connection with the distribution of the Shares by such
Investor;
(ix) prepare and promptly file with the Commission
and promptly notify the Investors of the filing of such
amendment or supplement to such registration statement or
prospectus as may be necessary to correct any statements or
omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Securities
Act, any event shall have occurred as the result of which
any such prospectus or any other prospectus as then in
effect would include an untrue statement of a material fact
or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in
which they were made, not misleading;
(x) advise the Investors, and the Investors' counsel,
if any, promptly after it shall receive notice or obtain
knowledge thereof, of the issuance of any stop order by the
Commission suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding
for that purpose and promptly use its best efforts to prevent
the issuance of any stop order or to obtain its withdrawal if
such stop order should be issued;
(xi) not file any amendment or supplement to such
registration statement or prospectus to which a majority in
interest of the Investors shall have reasonably objected on
the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the
Securities Act or the rules and regulations thereunder, after
having been furnished with a copy thereof at least five
business days prior to the filing thereof, unless in the
opinion of counsel for the Company the filing of such
amendment or supplement is reasonably necessary to protect the
Company from any liabilities under any applicable federal or
state law and such filing will not violate applicable law; and
(xii) at the request of any such Investor, furnish on
the effective date of the registration statement and, if such
registration includes an underwritten public offering, at the
closing provided for in the underwriting agreement: (i)
opinions, dated such respective dates, of the counsel
representing the Company for the purposes of such
registration, addressed to the underwriters, if any, and to
the Investor or Investors making such request, covering such
matters as such underwriters may reasonably request; and (ii)
letters, dated such respective dates, from the independent
certified public accountants of the Company, addressed to the
underwriters, if any, and to the Investor or Investors making
such request, covering such matters as such underwriters or
Investors making such request may reasonably request.
(b) The Company shall pay all Registration Expenses (as
defined below) in connection with the inclusion of Shares in any
Registration Statement, or application to register or qualify Shares
under state securities laws, filed by the Company hereunder, other than
as set forth herein. For purposes of this Agreement, the term
"Registration Expenses" means the filing fees payable to the
Commission, any state agency and the National Association of Securities
Dealers, Inc.; the fees and expenses of the Company's legal counsel and
independent certified public accountants in connection with the
preparation and filing of the Registration Statement (and all
amendments and supplements thereto) with the Commission; and all
expenses relating to the printing of the Registration Statement,
prospectuses and various agreements executed in connection with the
Registration Statement. Notwithstanding the foregoing, the Investors
will pay the fees and expenses of any legal counsel the Investors may
engage, as well as the Investors' proportionate share of any custodian
fees or commission or discounts which may be payable to any
underwriter.
(c) The Investors acknowledge that there may occasionally be
times when the Company must suspend the use of the prospectus forming a
part of the Registration Statement, when there exists material
non-public information relating to the Company (including, but not
limited to, an acquisition, merger, recapitalization, consolidation,
reorganization or similar transaction (or negotiations with respect
thereto)) which in the reasonable opinion of the Company's Board of
Directors should not be disclosed. Accordingly, the Company may suspend
resales pursuant to such Registration Statement for a period not to
exceed ninety (90) days in any twelve (12) month period if the Company
has been advised by counsel and the Board of Directors reasonably
concurs that the information the Board reasonably believes should not
be disclosed is material and therefore the prospectus forming a part of
the Registration Statement is not current. Each Investor agrees that it
shall not sell any Shares pursuant to said prospectus during the period
commencing at the time at which the Company gives the Investor notice
of the suspension of the use of such prospectus and ending at the time
the Company gives the Investor notice that the Investor may thereafter
effect sales pursuant to such prospectus. The Investors shall comply
with the applicable provisions of the Securities Act and of such other
securities or blue sky laws as may be applicable in connection with the
use of such prospectus forming a part of the Registration Statement.
(d) The Company hereby indemnifies the holder of the Shares,
its officers and directors, and any person who controls such holder
within the meaning of Section 15 of the Securities Act of 1933, against
all losses, claims, damages and liabilities caused by any untrue
statement of a material fact contained in any registration statement,
prospectus, notification or offering circular (and as amended or
supplemented if the Company shall have furnished any amendments or
supplements thereto) or any preliminary prospectus or caused by any
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of
the circumstances under which they were made except insofar as such
losses, claims, damages or liabilities are caused by any untrue
statement or omission contained in information furnished in writing to
the Company by such holder expressly for use therein, and each such
holder severally agrees that it will indemnify and hold harmless the
Company and each of its officers who signs such registration statement
and each of its directors and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act of 1933
with respect to losses, claims, damages or liabilities which are caused
by any material untrue statement or omission contained in information
furnished in writing to the Company by such holder expressly for use
therein.
Exhibit F
FORM OF COMMON STOCK WARRANT
To Purchase __________
Shares of Common Stock of
RSI Systems, Inc.
______________ 1996
THE SECURITIES EVIDENCED BY THIS CERTIFICATE WERE ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL (WHICH SHALL BE
IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY) THAT SUCH REGISTRATION IS NOT
REQUIRED.
THIS CERTIFIES THAT, in consideration for $50.00 and other valuable
consideration, Xxxxxx, Xxxxxxx & Xxxxx, Incorporated ("MJK") or its registered
assigns is entitled to subscribe for and purchase from RSI Systems, Inc. (the
"Company"), a Minnesota corporation, at any time after the date hereof to and
including the Expiration Date (as defined in Section 1 hereof),
_____________ (___________) fully paid and nonassessable shares of the Company's
Common Stock, $.01 par value, at a price of $_______ per share:
This Warrant is subject to the following provisions, terms and
conditions:
1. Expiration: Exercise: Transferability.
(a) This Warrant may be exercised in whole or in part, at any
time after the date hereof to and including the Expiration Date. As used herein
"Expiration Date" shall mean _______, 2006.
(b) The rights represented by this Warrant may be exercised by
the holder hereof, in whole or in part (but not as to a fractional share of
stock), by written notice of exercise in the form appended hereto delivered to
the Company on or prior to the Expiration Date, ten (10) days prior to the
intended date of exercise and by the surrender of this Warrant (properly
endorsed if required) at the principal office of the Company and upon payment to
it in full by certified or bank check or wire transfer of the purchase price for
such shares.
(c) This Warrant may be transferred subject to the following
conditions: (i) during the first year after the date of this Warrant, it may not
be sold, transferred, assigned or hypothecated except to persons who are (x)
both officers and shareholders of MJK, or (y) both officers and employees of
MJK, and (ii) after such period, the Warrant shall be transferable without
restriction, but subject to the opinion of counsel as provided by paragraph 7
herein that such transfer is not in violation of federal or state securities
laws.
2. Issuance of Shares. The Company agrees that the shares purchased
hereby shall be and are deemed to be issued to the record holder hereof as of
the close of business on the date on which this Warrant shall have been
exercised by surrender of the Warrant and payment for the shares. Subject to the
provisions of the next succeeding paragraph, certificates for the shares of
stock so purchased shall be delivered to the holder hereof within a reasonable
time, not exceeding ten (10) days after the rights represented by this Warrant
shall have been so exercised, and, unless this Warrant has expired a new Warrant
representing the number of shares, if any, with respect to which this Warrant
shall not then have been exercised shall also be delivered to the holder hereof
within such time.
Notwithstanding the foregoing, however, the Company shall not
be required to deliver any certificate for shares of stock upon exercise of this
Warrant, except in accordance with the provisions, and subject to the
limitations, of paragraph 7 hereof.
3. Covenants of Company. The Company covenants and agrees that all
shares which may be issued upon the exercise of the rights represented by this
Warrant will upon receipt of payment therefor upon issuance, be duly authorized
and issued, fully paid, nonassessable and free from all taxes, liens and charges
with respect to the issue thereof, and, without limiting the generality of the
foregoing, the Company covenants and agrees that it will from time to time take
all such action as may be required to assure that the par value per share of the
common stock is at all times equal to or less than the then effective purchase
price per share of the common stock issuable pursuant to this Warrant. The
Company further covenants and agrees that, during the period within which the
rights represented by this Warrant may be exercised, the Company will at all
times have authorized, and reserved for the purpose of issue or transfer upon
exercise of the subscription rights evidenced by this Warrant, a sufficient
number of shares of its common stock to provide for the exercise of the rights
represented by this Warrant.
4. Anti-Dilution Adjustments. The above provisions are, however,
subject to the following:
(a) In case the Company shall at any time hereafter subdivide
or combine the outstanding shares of common stock or declare a dividend payable
in common stock, the exercise price of this Warrant in effect immediately prior
to the subdivision, combination or record date for such dividend payable in
common stock shall forthwith be proportionately increased, in the case of
combination, or decreased, in the case of subdivision or dividend payable in
common stock. Upon each adjustment of the exercise price, the holder of this
Warrant shall thereafter be entitled to purchase, at the exercise price
resulting from such adjustment, the number of shares obtained by multiplying the
exercise price immediately prior to such adjustment by the number of shares
purchasable pursuant hereto immediately prior to such adjustment and dividing
the product thereof by the exercise price resulting from such adjustment.
(b) No fractional shares of common stock are to be issued upon
the exercise of this Warrant, but the Company shall pay a cash adjustment in
respect of any fraction of a share which would otherwise be issuable in an
amount equal to the same fraction of the market price per share of common stock
on the day of exercise as determined in good faith by the Company.
(c) If any capital reorganization or reclassification of the
capital stock of the Company, or consolidation or merger of the Company with
another corporation, or the sale of all or substantially all of its assets to
another corporation shall be effected in such a way that holders of common stock
shall be entitled to receive stock, securities or assets with respect to or in
exchange for common stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby the holder hereof shall thereafter have the right to
purchase and receive, upon the basis and upon the terms and conditions specified
in this Warrant and in lieu of the shares of common stock of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby, such stock, securities or assets as may be issued or
payable with respect to or in exchange for a number of outstanding shares of
such common stock equal to the number of shares of such stock immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby had such reorganization, reclassification, consolidation,
merger or sale not taken place, and in any such case appropriate provisions
shall be made with respect to the rights and interests of the holder of this
Warrant to the end that the provisions hereof (including without limitation
provisions for adjustments of the Warrant purchase price and of the number of
shares purchasable upon the exercise of this Warrant) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise hereof. The Company shall not
effect any such consolidation, merger or sale unless prior to the consummation
thereof the successor corporation (if other than the Company) resulting from
such consolidation or merger, or the corporation purchasing such assets, shall
assume by written instrument executed and mailed to the registered holder hereof
at the last address of such holder appearing on the books of the Company, the
obligation to deliver to such holder such shares of stock, securities or assets
as, in accordance with the foregoing provisions, such holder may be entitled to
purchase.
Notwithstanding any language to the contrary set forth in this
paragraph 4 (c), if an occurrence or event described herein shall take place in
which the shareholders of the Company receive cash for their shares of common
stock of the Company and a successor corporation or corporation purchasing
assets shall survive the transaction then, at the election of the record holder
hereof, such corporation shall be obligated to purchase this Warrant (or the
unexercised part hereof) from the record holder without requiring the holder to
exercise all or part of the Warrant. If such corporation refuses to so purchase
this Warrant then the Company shall purchase the Warrant for cash. In either
case the purchase price shall be the amount per share that shareholders of the
outstanding common stock of the Company shall receive as a result of the
transaction multiplied by the number of shares covered by the Warrant, minus the
aggregate exercise price of the Warrant. Such purchase shall be closed within 60
days following the election of the holder to sell this Warrant.
(d) Upon any adjustment of the Warrant purchase price, then,
and in each such case, the Company shall give written notice thereof, by first
class mail, postage prepaid, addressed to the registered holder of this Warrant
at the address of such holder as shown on the books of the Company, which notice
shall state the Warrant purchase price resulting from such adjustment and the
increase or decrease, if any, in the number of shares purchasable at such price
upon the exercise of this Warrant, setting forth in reasonable detail the method
of calculation and the facts upon which such calculation is based.
(e) If any event occurs as to which in the good faith
determination of the Board of Directors of the Company the other provisions of
this paragraph 4 are not strictly applicable or if strictly applicable would not
fairly protect the purchase rights of the holder of this Warrant or of common
stock in accordance with the essential intent and principles of such provisions,
then the Board of Directors shall make an adjustment in the application of such
provisions, in accordance with such essential intent and principles, so as to
protect such purchase rights as aforesaid.
5. Common Stock. As used herein, the term "common stock" shall mean
and include the Company's presently authorized shares of common stock and shall
also include any capital stock of any class of the Company hereafter authorized
which shall not be limited to a fixed sum or percentage in respect of the rights
of the holders thereof to participate in dividends or in the distribution,
dissolution or winding up of the Company; provided that the shares purchasable
pursuant to this Warrant shall include shares designated as common stock of the
Company on the date of original issue of this Warrant or, in the case of any
reclassification of the outstanding shares thereof, the stock, securities or
assets provided for in Section 4 above.
6. No Voting Rights. This Warrant shall not entitle the holder hereof
to any voting rights or other rights as a stockholder of the Company.
7. Transfer of Warrant or Resale of Shares. In the event the holder of
this Warrant desires to transfer this Warrant, or any common stock issued upon
the exercise hereof, the holder shall provide the Company with a written notice
describing the manner of such transfer in the form appended hereto and an
opinion of counsel (reasonably acceptable to the Company) that the proposed
transfer may be effected without registration or qualification (under any
Federal or State law), whereupon such holder shall be entitled to transfer this
Warrant or to dispose of shares of common stock received upon the previous
exercise hereof in accordance with the notice delivered by such holder to the
Company; provided, that an appropriate legend may be endorsed on this Warrant or
the certificates for such shares respecting restrictions upon transfer thereof
necessary or advisable in the opinion of counsel satisfactory to the Company to
prevent further transfers which would be in violation of Section 5 of the
Securities Act, as amended (the "Securities Act").
If, in the opinion of counsel referred to in this paragraph 7,
the proposed transfer or disposition described in the written notice given
pursuant to this paragraph 7 may not be effected without registration or
qualification of this Warrant or the shares of common stock issued upon the
exercise hereof, the Company shall promptly give written notice thereof to the
holder hereof, and such holder will limit its activities in respect to such
proposed transfer or disposition as, in the opinion of such counsel, are
permitted by law.
8. Registration Rights.
(a) If the Company proposes to claim an exemption under
Section 3(b) for a public offering of any of its securities or to register under
the Securities Act (except by a claim of exemption or registration statement on
Form S-8 or Form S-4 or any form that does not permit the inclusion of shares by
its security holders) any of its securities, it will give written notice to all
registered holders of Warrants, and all registered holders of shares of common
stock acquired upon the exercise of Warrants (the "Common Shares") of its
intention to do so and, on the written request of any such registered holders
given within twenty (20) days after receipt of any such notice, the Company will
use its best efforts to cause all Common Shares which such holders shall have
requested the registration or qualification thereof, to be included in such
notification or registration statement proposed to be filed by the Company;
provided, however, that nothing herein shall prevent the Company from, at any
time, abandoning or delaying any such registration initiated by it. If any such
registration shall be underwritten in whole or in part, the Company may require
that the shares requested for inclusion pursuant to this section be included in
the underwriting on the same terms and conditions as the securities otherwise
being sold through the underwriters. In the event that, in the good faith
judgment of the managing underwriter of such public offering, the inclusion of
all of the shares originally covered by a request for registration would reduce
the number of shares to be offered by the Company or interfere with the
successful marketing of the shares of stock offered by the Company, the number
of shares otherwise to be included pursuant to this Section in the underwritten
public offering may be proportionately reduced to a number deemed satisfactory
by the managing underwriter. Those shares which are thus excluded from the
underwritten public offering shall be withheld from the market for a period, not
to exceed 90 days from the effective date of the registration statement, which
the managing underwriter reasonably determines is necessary in order to effect
the underwritten public offering. All expenses of such offering, except the fees
of special counsel to such holders and brokers' commissions or underwriting
discounts payable by such holders, shall be borne by the Company.
(b) Further, on one occasion only upon request by the holders
of Warrants and/or the holders of shares issued upon the exercise of the
Warrants who collectively (i) have the right to purchase at least 50% of the
shares subject to the Warrants, (ii) hold directly at least 50% of the shares
purchased under the Warrants, or (iii) have the right to purchase or hold
directly an aggregate of at least 50% of the shares purchasable or purchased
under the Warrants, the Company will promptly take all necessary steps, at the
option of such holders, to register or qualify the sale of the Warrants or such
shares by the holders thereof, under the Securities Act (and, upon the request
of such holders, under Rule 415 thereunder) and such state laws as such holders
may reasonably request; provided that (i) such request must be made by the
Expiration Date; (ii) such request may not be made until at least one (1) year
after the date of this Warrant; and (iii) the Company may delay the filing of
any registration statement requested pursuant to this section to a date not more
than ninety (90) days following the date of such request if in the opinion of
the Company's principal investment banker at the time of such request such a
delay is necessary in order not to adversely affect financing efforts then
underway at the Company or if in the opinion of the Company such a delay is
necessary or advisable to avoid disclosure of material nonpublic information.
The costs and expenses directly related to any registration requested pursuant
to this section, including but not limited to legal fees of the Company's
counsel, audit fees, printing expense, filing fees and fees and expenses
relating to qualifications under state securities or blue sky laws incurred by
the Company shall be borne entirely by the Company; provided, however, that the
persons for whose account the securities covered by such registration are sold
shall bear the expenses of underwriting commissions applicable to their shares
and fees of their legal counsel. If the holders of Warrants and the holders of
shares of common stock underlying the Warrants are the only persons whose shares
are included in the registration pursuant to this section, such holders shall
bear the expense of inclusion of audited financial statements in the
registration statement which are not dated as of the Company's normal fiscal
year or are not otherwise prepared by the Company for its own business purposes.
The Company shall keep effective and maintain any registration, qualification,
notification or approval specified in this paragraph for the period specified in
paragraph (c)(i) below, and from time to time shall amend or supplement, at the
holder's expense, the prospectus or offering circular used in connection
therewith to the extent necessary in order to comply with applicable law.
If, at the time any written request for registration
is received by the Company pursuant to this Section 8(b), the Company has
determined to proceed with the actual preparation and filing of a registration
statement under the Securities Act in connection with the proposed offer and
sale for cash of any of its securities by it or any of its security holders,
such written request shall be deemed to have been given pursuant to Section 8(a)
hereof rather than this Section 8(b), and the rights of the holders of Warrants
and or shares issued upon the exercise of the Warrants covered by such written
request shall be governed by Section 8(a) hereof.
The managing underwriter of an offering registered
pursuant to this Section 8(b), if any, shall be selected by the holders of a
majority of the Warrants and/or shares issued upon the exercise of the Warrants
for which registration has been requested and shall be reasonably acceptable to
the Company. Without the written consent of the holders of a majority of the
Warrants and/or shares issued upon the exercise of the Warrants for which
registration has been requested pursuant to this Section 8(b), neither the
Company nor any other holder of securities of the Company may include securities
in such registration if in the good faith judgment of the managing underwriter
of such public offering the inclusion of such securities would interfere with
the successful marketing of the Warrants and/or shares issued upon the exercise
of the Warrants or require the exclusion of any portion of the Warrants and/or
shares issued upon the exercise of the Warrants to be registered. Subject to the
preceding sentence, shares to be excluded from an underwritten public offering
shall be selected in the manner provided in Section 8(a) hereof.
(c) If and whenever the Company is required by the provisions
of Sections 8(a) or 8(b) hereof to effect the registration of Warrants and/or
shares issued upon the exercise of the Warrants under the Securities Act, the
Company will:
(i) Prepare and file with the Securities and Exchange Commission (the
"Commission") a registration statement with respect to such securities, and use
its diligent, good faith efforts to cause such registration statement to become
and remain effective until the earlier of the date on which all the securities
have been sold or the date the securities may be sold without restriction
pursuant to Rule 144(k) under the Securities Act;
(ii) prepare and file with the Commission such amendments to such
registration statement and supplements to the prospectus contained therein as
may be necessary to keep such registration statement effective for the period
required by Section 8(c)(i) above;
(iii) provide security holders' counsel with reasonable opportunities
to review and comment on, and otherwise participate in, the preparation of such
registration statement;
(iv) furnish to the security holders participating in such
registration and to the underwriters of the securities being registered such
reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as such security holders
and underwriters may reasonably request in order to facilitate the public
offering of such securities;
(v) use its diligent, good faith efforts to register or qualify the
securities covered by such registration statement under such state securities or
blue sky laws of such jurisdictions as such participating holders may reasonably
request in writing within 30 days following the original filing of such
registration statement, except that the Company shall not for any purpose be
required to execute a general consent to service of process or to qualify to do
business as a foreign corporation in any jurisdiction wherein it is not so
qualified;
(vi) notify the security holders participating in such registration,
promptly after it shall receive notice thereof, of the time when such
registration statement has become effective or a supplement to any prospectus
forming a part of such registration statement has been filed;
(vii) notify such holders promptly of any request by the Commission
for the amending or supplementing of such registration statement or prospectus
or for additional information;
(viii) prepare and file with the Commission, promptly upon the request
of any such holders, any amendments or supplements to such registration
statement or prospectus which, in the opinion of counsel for such holders (and
concurred in by counsel for the Company), is required under the Securities Act
or the rules and regulations thereunder in connection with the distribution of
the Warrants or shares by such holder;
(ix) prepare and promptly file with the Commission and promptly notify
such holders of the filing of such amendment or supplement to such registration
statement or prospectus as may be necessary to correct any statements or
omissions if, at the time when a prospectus relating to such securities is
required to be delivered under the Securities Act, any event shall have occurred
as the result of which any such prospectus or any other prospectus as then in
effect would include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading;
(x) advise such holders, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the Commission
suspending the effectiveness of such registration statement or the initiation or
threatening of any proceeding for that purpose and promptly use its best efforts
to prevent the issuance of any stop order or to obtain its withdrawal if such
stop order should be issued;
(xi) not file any amendment or supplement to such registration
statement or prospectus to which a majority in interest of such holders shall
have reasonably objected on the grounds that such amendment or supplement does
not comply in all material respects with the requirements of the Securities Act
or the rules and regulations thereunder, after having been furnished with a copy
thereof at least five business days prior to the filing thereof, unless in the
opinion of counsel for the Company the filing of such amendment or supplement is
reasonably necessary to protect the Company from any liabilities under any
applicable federal or state law and such filing will not violate applicable law;
and
(xii) at the request of any such holder, furnish on the effective date
of the registration statement and, if such registration includes an underwritten
public offering, at the closing provided for in the underwriting agreement: (i)
opinions, dated such respective dates, of the counsel representing the Company
for the purposes of such registration, addressed to the underwriters, if any,
and to the holder or holders making such request, covering such matters as such
underwriters and holder or holders may reasonably request; and (ii) letters,
dated such respective dates, from the independent certified public accountants
of the Company, addressed to the underwriters, if any, and to the holder or
holders making such request, covering such matters as such underwriters and
holder or holders may reasonably request.
(d) The Company shall pay all Registration Expenses (as
defined below) in connection with the inclusion of Shares in any Registration
Statement, or application to register or qualify Shares under state securities
laws, filed by the Company hereunder, other than as set forth herein. For
purposes of this Agreement, the term "Registration Expenses" means the filing
fees payable to the Commission, any state agency and the National Association of
Securities Dealers, Inc.; the fees and expenses of the Company's legal counsel
and independent certified public accountants in connection with the preparation
and filing of the Registration Statement (and all amendments and supplements
thereto) with the Commission; and all expenses relating to the printing of the
Registration Statement, prospectuses and various agreements executed in
connection with the Registration Statement. Notwithstanding the foregoing, the
security holders will pay the fees and expenses of any legal counsel such
holders may engage, as well as the holders' proportionate share of any custodian
fees or commission or discounts which may be payable to any underwriter.
(e) The holders of Warrants and/or the holders of shares
issued upon the exercise of the Warrants acknowledge that there may occasionally
be times when the Company must suspend the use of the prospectus forming a part
of the Registration Statement, when there exists material non-public information
relating to the Company (including, but not limited to, an acquisition, merger,
recapitalization, consolidation, reorganization or similar transaction (or
negotiations with respect thereto)) which in the reasonable opinion of the
Company's Board of Directors should not be disclosed. Accordingly, the Company
may suspend resales pursuant to such Registration Statement for a period not to
exceed ninety (90) days in any twelve (12) month period if the Company has been
advised by counsel and the Board of Directors reasonably concurs that the
information the Board reasonably believes should not be disclosed is material
and therefore the prospectus forming a part of the Registration Statement is not
current. Each such holder agrees that it shall not sell any Shares pursuant to
said prospectus during the period commencing at the time at which the Company
gives the holder notice of the suspension of such prospectus and ending at the
time the Company gives the holder notice that the holder may thereafter effect
sales pursuant to such prospectus. Each such holder shall comply with the
applicable provisions of the Securities Act and of such other securities or blue
sky laws as may be applicable in connection with the use of such prospectus
forming a part of the Registration Statement.
(f) The Company hereby indemnifies the holder of this Warrant
and of any common stock issued or issuable hereunder, its officers and
directors, and any person who controls such Warrant holder or such holder of
common stock within the meaning of Section 15 of the Securities Act, against all
losses, claims, damages and liabilities caused by any untrue statement of a
material fact contained in any registration statement, prospectus, notification
or offering circular (and as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) or any preliminary prospectus
or caused by any omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading except
insofar as such losses, claims, damages or liabilities are caused by any untrue
statement or omission contained in information furnished in writing to the
Company by such Warrant holder or such holder of common stock expressly for use
therein, and each such holder by its acceptance hereof severally agrees that it
will indemnify and hold harmless the Company and each of its officers who signs
such registration statement and each of its directors and each person, if any,
who controls the Company within the meaning of Section 15 of the Securities Act
with respect to losses, claims, damages or liabilities which are caused by any
untrue statement or omission contained in information furnished in writing to
the Company by such holder expressly for use therein.
9. Additional Right to Convert Warrant.
(a) If at any time the shares to be issued upon exercise of
this Warrant cannot be immediately sold pursuant to an effective registration
under the Securities Act, the holder of this Warrant shall have the right to
require the Company to convert this Warrant (the "Conversion Right") at any time
prior to its expiration into shares of Common Stock as provided for in this
Section 9. Upon exercise of the Conversion Right, the Company shall deliver to
the holder (without payment by the holder of any Exercise Price) that number of
shares of Common Stock equal to the quotient obtained by dividing (x) the value
of the Warrant at the time the Conversion Right is exercised (determined by
subtracting the aggregate Exercise Price for the Warrant Shares in effect
immediately prior to the exercise of the Conversion Right from the aggregate
Fair Market Value for the Warrant Shares immediately prior to the exercise of
the Conversion Right) by (y) the Fair Market Value of one share of Common Stock
immediately prior to the exercise of the Conversion Right.
(b) The Conversion Right may be exercised by the holder, at
any time or from time to time, prior to its expiration, on any business day by
delivering a written notice in the form attached hereto (the "Conversion
Notice") to the Company at the offices of the Company exercising the Conversion
Right and specifying (i) the total number of shares of Common Stock the
Warrantholder will purchase pursuant to such conversion and (ii) a place and
date not less than one nor more than 20 business days from the date of the
Conversion Notice for the closing of such purchase.
(c) At any closing under Section 9(b) hereof, (i) the holder
will surrender the Warrant and (ii) the Company will deliver to the holder a
certificate or certificates for the number of shares of Common Stock issuable
upon such conversion, together with cash, in lieu of any fraction of a share,
and (iii) the Company will deliver to the holder a new warrant representing the
number of shares, if any, with respect to which the warrant shall not have been
exercised.
(d) "Fair Market Value" means, with respect to the Company's
Common Stock, as of any date:
(i) if the Common Stock is listed or admitted to
unlisted trading privileges on any national securities exchange or is not so
listed or admitted but transactions in the Common Stock are reported on the
NASDAQ National Market System, the reported closing price of the Common Stock on
such exchange or by the NASDAQ National Market System as of such date (or, if no
shares were traded on such day, as of the next preceding day on which there was
such a trade); or
(ii) if the Common Stock is not so listed or admitted
to unlisted trading privileges or reported on the NASDAQ National Market System,
and bid and asked prices therefor in the over-the-counter market are reported by
the NASDAQ system or National Quotation Bureau, Inc. (or any comparable
reporting service), the mean of the closing bid and asked prices as of such
date, as so reported by the NASDAQ System, or, if not so reported thereon, as
reported by National Quotation Bureau, Inc. (or such comparable reporting
service); or
(iii) if the Common Stock is not so listed or
admitted to unlisted trading privileges, or reported on the NASDAQ National
Market System, and such bid and asked prices are not so reported by the NASDAQ
system or National Quotation Bureau, Inc. (or any comparable reporting service),
such price as the Company's Board of Directors determines in good faith in the
exercise of its reasonable discretion.
IN WITNESS WHEREOF, RSI Systems, Inc. has caused this Warrant to be
executed by its duly authorized officers and this Warrant to be dated as
of__________________, 1996.
RSI SYSTEMS, INC.
By ________________________________
EXERCISE FORM
(TO BE SIGNED ONLY UPON EXERCISE OF WARRANT)
RSI SYSTEMS, INC.
The undersigned, the holder of the within warrant, hereby irrevocably
elects to exercise the purchase right represented by such warrant for, and to
purchase thereunder ________________ shares of the Common Stock, $.01 par
value, of RSI Systems, Inc. and herewith makes payment of $___________________
therefor, and requests that the certificates for such shares be issued in the
name of _______________________________________ and be delivered to
________________________________________________________________________
whose address is _________________________________________________________.
Dated: _________________ ___________________________________________________
(Signature must conform in all respects to the name
of holder as specified on the face of the warrant)
(Address)
(City - State - Zip)
ASSIGNMENT FORM
(TO BE SIGNED ONLY UPON TRANSFER OF THE WARRANT)
For value received, the undersigned hereby sells, assigns and
transfers unto those individuals listed on Exhibit A, attached hereto, the right
represented by the within warrant to purchase the number of shares opposite
their names on the attached Exhibit A of Common Stock, $.01 par value, of RSI
Systems, Inc. to which the within warrant relates, and appoints
______________________ attorney to transfer said right on the books of RSI
Systems, Inc., with full power of substitution in the premises.
Dated: ____________ XXXXXX, XXXXXXX & XXXXX,
INCORPORATED
0000 Xxxxxxx Xxxx.
Xxxxx 000 - 0xx Xxxxx
Xxxxxxxxxxx, XX 00000
By________________________________
In the presence of:
____________________________
____________________________
CONVERSION NOTICE
(TO BE SIGNED ONLY UPON EXERCISE OF CONVERSION RIGHT
SET FORTH IN SECTION 9 OF THE WARRANT)
TO RSI SYSTEMS, INC.:
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the Conversion Right set forth in Section 9 of such Warrant
and to purchase ________________ shares of the Common Stock, of RSI Systems,
Inc. The closing of this conversion shall take place at the offices of the
undersigned on _______________________. Certificates for the shares to be
delivered at the closing shall be issued in the name of __________________ whose
address is ____________________________________________________.
Dated: _________________ _________________________________________
(Signature must conform in all respects to the
name of holder as specified on the face of the Warrant)
(Address)
