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EXHIBIT 4.3
USTEL, INC.
COMMON STOCK WARRANT
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS THERE IS
AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH SALE OR TRANSFER IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
This certifies that, for good and valuable consideration,
receipt of which is hereby acknowledged, Cruttenden ▇▇▇▇ Incorporated ("Holder")
is entitled to purchase, subject to the terms and conditions of this Warrant,
from UStel, Inc., a Minnesota corporation (the "Company"), up to 160,000 fully
paid and nonassessable shares of the Common Stock, par value $.01 per share
("Common Stock"), of the Company, in accordance with Section 2 below during the
period commencing one year after the date hereof and ending at 5:00 p.m.
California time, , 2001 (the "Expiration Date"), at which time this Warrant will
expire and become void unless earlier terminated as provided herein. The shares
of Common Stock of the Company for which this Warrant is exercisable as adjusted
from time to time pursuant to the terms hereof, are hereinafter referred to as
the "Shares."
1. Exercise Price. The initial purchase price for the Shares
shall be $_______________ per share. Such price shall be subject to adjustment
pursuant to the terms hereof (such price, as adjusted from time to time, is
hereinafter referred to as the "Exercise Price").
2. Exercise and Payment.
(a) Cash Exercise. At any time after , 1997, this
Warrant may be exercised, in whole or in part, from time to time by the Holder,
during the term hereof, by surrender of this Warrant and the Notice of Exercise
annexed hereto duly completed and executed by the Holder to the Company at the
principal executive offices of the Company, together with payment in the amount
obtained by multiplying the Exercise Price then in effect by the number of
Shares thereby purchased, as designated in the Notice of Exercise. Payment may
be in cash or by check payable to the order of the Company.
(b) Net Issuance. In lieu of payment of the Exercise
Price described in Section 2(a), the Holder may elect to receive, without the
payment by the Holder of any additional consideration, shares equal to the value
of this Warrant or any portion hereof by the surrender of this Warrant or such
portion to the Company, with the net issue election
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notice annexed hereto duly executed, at the office of the Company. Thereupon,
the Company shall issue to the Holder such number of fully paid and
nonassessable shares of Common Stock as is computed using the following formula:
where: X = Y (A-B)
------
A
X = the number of shares to be issued to the Holder pursuant
to this Section 2.
Y = the number of shares covered by this Warrant in respect of
which the net issuance election is made pursuant to this
Section 2.
A = the fair market value of one share of Common Stock, as
determined in accordance with the provisions of this Section
2.
B = the Exercise Price in effect under this Warrant at the time
the net issuance election is made pursuant to this Section 2.
For purposes of this Section 2, the "fair market value" per share of the
Company's Common Stock shall mean:
i. If the Common Stock is traded on a national
securities exchange or admitted to unlisted trading privileges on such
an exchange, or is listed on the Nasdaq SmallCap Market or the Nasdaq
National Market of the Nasdaq Stock Market (the "Nasdaq Market") or
other over-the-counter quotation system, the fair market value shall be
the last reported sale price of the Common Stock on such exchange or on
the Nasdaq Market on the last business day before the effective date of
exercise of the net issuance election or if no such sale is made on
such day, the mean of the closing bid and asked prices such day on such
exchange, the Nasdaq Market or over-the-counter quotation system; and
ii. If the Common Stock is not so listed or admitted
to unlisted trading privileges and bid and ask prices are not reported,
the fair market value shall be the price per share which the Company
could obtain from a willing buyer for shares sold by the Company from
authorized but unissued shares, as such price shall be determined by
mutual agreement of the Company and the Holder of this Warrant.
In the event that immediately prior to the Expiration Date the
Holder hereof has not exercised any portion of this Warrant and the fair market
value of the Company's Common Stock at such time exceeds the Exercise Price then
in effect, such remaining portion of this Warrant shall be automatically
exercised and the Exercise Price shall be paid to the Company pursuant to the
provisions of this Section 2(b).
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3. Delivery of Stock Certificates. Within a reasonable time
after exercise, in whole or in part, of this Warrant, the Company shall issue in
the name of and deliver to the Holder, a certificate or certificates for the
number of fully paid and nonassessable shares of Common Stock which the Holder
shall have requested in the Notice of Exercise. If this Warrant is exercised in
part, the Company shall deliver to the Holder a new Warrant for the unexercised
portion of this Warrant at the time of delivery of such stock certificate or
certificates.
4. No Fractional Shares. No fractional shares or scrip
representing fractional shares will be issued upon exercise of this Warrant. If
upon any exercise of this Warrant a fraction of a share results, the Company
will pay the Holder the difference between the cash value of the fractional
share and the portion of the Exercise Price allocable to the fractional share.
5. Charges, Taxes and Expenses. The Holder shall pay all
transfer taxes or other incidental charges, if any, in connection with the
transfer of the Shares purchased pursuant to the exercise hereof from the
Company to the Holder.
6. Loss, Theft, Destruction or Mutilation of Warrant. 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 the Company,
and upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will make and deliver a new Warrant of like tenor and dated as of such
cancellation, in lieu of this Warrant. The Company agrees that the agreement of
the Holder to so indemnify the Company shall be satisfactory to the Company and
no further security shall be required.
7. Saturdays, Sundays, Holidays, Etc. If the last or appointed
day for the taking of any action or the expiration of any right required or
granted herein shall be a Saturday or a Sunday or shall be a legal holiday, then
such action may be taken or such right may be exercised on the next succeeding
weekday which is not a legal holiday.
8. Adjustment of Exercise Price and Number of Shares. The
number of and kind of securities purchasable upon exercise of this Warrant and
the Exercise Price shall be subject to adjustment from time to time as follows:
(a) Subdivisions, Combinations and Other Issuances.
If the Company shall at any time after the date hereof but prior to the
expiration of this Warrant subdivide its outstanding securities as to which
purchase rights under this Warrant exist, by split-up or otherwise, or combine
its outstanding securities as to which purchase rights under this Warrant exist,
the number of Shares as to which this Warrant is exercisable as of the date of
such subdivision, split-up or combination shall forthwith be proportionately
increased
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in the case of a subdivision, or proportionately decreased in the case of a
combination. Appropriate adjustments shall also be made to the purchase price
payable per share, but the aggregate purchase price payable for the total number
of Shares purchasable under this Warrant as of such date shall remain the same.
(b) Stock Dividend. If at any time after the date
hereof the Company declares a dividend or other distribution on Common Stock
payable in Common Stock or other securities or rights convertible into Common
Stock ("Common Stock Equivalents") without payment of any consideration by such
holder for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon exercise or
conversion thereof), then the number of shares of Common Stock for which this
Warrant may be exercised shall be increased as of the record date (or the date
of such dividend distribution if no record date is set) for determining which
holders of Common Stock shall be entitled to receive such dividend, in
proportion to the increase in the number of outstanding shares (and shares of
Common Stock issuable upon conversion of all such securities convertible into
Common Stock) of Common Stock as a result of such dividend, and the Exercise
Price shall be adjusted so that the aggregate amount payable for the purchase of
all the Shares issuable hereunder immediately after the record date (or on the
date of such distribution, if applicable), for such dividend shall equal the
aggregate amount so payable immediately before such record date (or on the date
of such distribution, if applicable).
(c) Other Distributions. If at any time after the
date hereof the Company distributes to holders of its Common Stock, other than
as part of its dissolution or liquidation or the winding up of its affairs, any
shares of its capital stock, any rights to purchase shares of its capital stock,
any evidence of indebtedness or any of its assets (other than cash, Common Stock
or securities convertible into Common Stock), then the Company may, at its
option, either (i) decrease the per share Exercise Price of this Warrant by an
appropriate amount based upon the value distributed on each share of Common
Stock as determined in good faith by the Company's Board of Directors or (ii)
provide by resolution of the Company's Board of Directors that on exercise of
this Warrant, the Holder hereof shall thereafter be entitled to receive, in
addition to the shares of Common Stock otherwise receivable on exercise hereof,
the number of shares or other securities or property which would have been
received had this Warrant at the time been exercised.
(d) Merger. If at any time after the date hereof
there shall be a merger or consolidation of the Company with or into another
corporation when the Company is not the surviving corporation then the Holder
shall thereafter be entitled to receive upon exercise of this Warrant, during
the period specified herein and upon payment of the aggregate Exercise Price
then in effect, the number of shares or other securities or property of the
successor corporation resulting from such merger or consolidation, which would
have been received by Holder for the shares of stock subject to this Warrant had
this Warrant at such time been exercised.
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(e) Reclassification, Etc. If at any time after the
date hereof there shall be a change or reclassification of the securities as to
which purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, then the Holder shall
thereafter be entitled to receive upon exercise of this Warrant, during the
period specified herein and upon payment of the Exercise Price then in effect,
the number of shares or other securities or property resulting from such change
or reclassification, which would have been received by Holder for the shares of
stock subject to this Warrant had this Warrant at such time been exercised.
9. Notice of Adjustments; Notices. Whenever the Exercise Price
or number of Shares purchasable hereunder shall be adjusted pursuant to Section
8 hereof, the Company shall execute and deliver to the Holder a certificate
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated and
the Exercise Price and number of shares purchasable hereunder after giving
effect to such adjustment, and shall cause a copy of such certificate to be
mailed (by first class mail, postage prepaid) to the Holder.
10. Rights As Shareholder. Prior to exercise of this Warrant,
the Holder shall not be entitled to any rights as a shareholder of the Company
with respect to the Shares, including (without limitation) the right to vote
such Shares, receive dividends or other distributions thereon, or be notified of
shareholder meetings, and the Holder shall not be entitled to any notice or
other communication concerning the business or affairs of the Company. However,
in the event of any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend (other than a cash dividend) or other
distribution, any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to receive
any other right, the Company shall mail to each Holder of this Warrant, at least
10 days prior to the date specified therein, a notice specifying the date on
which any such record is to be taken for the purpose of such dividend,
distribution or right, and the amount and character of such dividend,
distribution or right.
11. Restricted Securities. The Holder understands that this
Warrant and the Shares purchasable hereunder constitute "restricted securities"
under the federal securities laws inasmuch as they are, or will be, acquired
from the Company in transactions not involving a public offering and accordingly
may not, under such laws and applicable regulations, be resold or transferred
without registration under the Securities Act of 1933, as amended (the "1933
Act"), or an applicable exemption from such registration. In this connection,
the Holder acknowledges that Rule 144 of the Commission is not now, and may not
in the future be, available for resales of the Warrant and the Shares
purchasable hereunder. Unless the Shares are subsequently registered pursuant to
Section 14, the Holder further acknowledges that the securities legend on
Exhibit A to the Notice of Exercise attached hereto shall be placed on any
Shares issued to the Holder upon exercise of this Warrant.
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12. Certification of Investment Purpose. Unless a current
registration statement under the 1933 Act shall be in effect with respect to the
securities to be issued upon exercise of this Warrant, the Holder covenants and
agrees that, at the time of exercise hereof, it will deliver to the Company a
written certification executed by the Holder that the securities acquired by him
upon exercise hereof are for the account of such Holder and acquired for
investment purposes only and that such securities are not acquired with a view
to, or for sale in connection with, any distribution thereof in violation of
applicable securities law.
13. Disposition of Shares. ▇▇▇▇▇▇ hereby agrees not to make
any disposition of any ▇▇▇▇▇▇ purchased hereunder unless and until:
(a) Holder shall have notified the Company of the
proposed disposition and provided a written summary of the terms and conditions
of the proposed disposition;
(b) Holder shall have complied with all requirements
of this Warrant applicable to the disposition of the Shares; and
(c) Holder shall have provided the Company with
written assurances, in form and substance satisfactory to legal counsel of the
Company, that (i) the proposed disposition does not require registration of the
Shares under the 1933 Act or (ii) all appropriate action necessary for
compliance with the registration requirements of the 1933 Act or of any
exemption from registration available under the 1933 Act has been taken.
The Company shall not be required (i) to transfer on its books
any Shares which have been sold or transferred in violation of the provisions of
this Section 13 or (ii) to treat as the owner of the Shares, or otherwise to
accord voting or dividend rights to, any transferee to whom the Shares have been
transferred in contravention of the terms of this Warrant.
14. Registration Rights.
(a) Piggyback Registration. If at any time within
five (5) years after the effective date of the Company's Registration Statement
on Form SB-2 (File No. 333-8061), the Company shall determine to register for
its own account or the account of others under the 1933 Act any of its equity
securities, other than on Form S-4 or Form S-8 or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business, or equity securities issuable in
connection with stock option or other employee benefit plans, the Company shall
send to each Holder of Warrants or Shares, who is entitled to registration
rights under this Section 14(a) written notice of such determination and, if
within twenty (20) days after receipt of such notice, such Holder shall so
request in writing (hereafter a "Selling Holder"), the Company shall include in
such registration statement all or any part of the Shares issuable upon exercise
of the Warrants
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(the "Registrable Securities") such Selling Holder requests to be registered.
The obligations of the Company under this Section 14(a) may be waived by Holders
holding a majority in interest of the Registrable Securities. In the event that
the managing underwriter for said offering advises the Company in writing that
the inclusion of such securities in the offering would be materially detrimental
to the offering, such securities shall nevertheless be included in the
registration statement, provided that the Holder and each holder of Shares
desiring to have their Shares included in the registration statement agree in
writing, for a period of 90 days following such offering, not to sell or
otherwise dispose of such Shares pursuant to such registration statement, which
registration statement the Company shall keep effective for a period of at least
nine months following the expiration of such 90-day period.
(b) Demand Registration. In addition to any
registration statement pursuant to subparagraph (a) above, during the four-year
period beginning on , 1997 and ending on , 2001, the Company will, as promptly
as practicable (but in any event within 60 days), after written request (the
"Request") by the Holder, or by a person or persons holding (or having the right
to acquire by virtue of holding the Warrants) at least 50% of the shares of
Common Stock which have been (or may be) issued upon exercise of the Warrants
(such Holder or Holders to be included in the definition of "Selling Holder" for
the purposes of Section 14(c) hereof), prepare and file at its own expense a
registration statement with the Commission and appropriate "blue sky"
authorities sufficient to permit the public offering of the Registrable
Securities and will use its best efforts at its own expense through its
officers, directors, auditors and counsel, in all matters necessary or
advisable, to cause such registration statement to become effective as promptly
as practicable and to maintain such effectiveness so as to permit resale of the
Shares covered by the Request until the earlier of the time that all such Shares
have been sold or the expiration of 90 days from the effective date of the
registration statement, provided, however, that the Company shall only be
obligated to file one such registration statement under this Section 14(b).
(c) Obligations of the Holders. In connection with
the registration of the Registrable Securities pursuant to either Sections 14(a)
or (b), the Selling Holders shall have the following obligations:
i. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement with
respect to each Selling Holder that such Selling Holder shall furnish to the
Company such information regarding itself, the Registrable Securities held by it
and the intended method of disposition of the Registrable Securities held by it
as shall be reasonably required to effect the registration of the Registrable
Securities and shall execute such documents in connection with such registration
as the Company may reasonably request. At least fifteen (15) days prior to the
first anticipated filing date of the registration statement, the Company shall
notify each Selling Holder of the information the Company requires from each
such Selling Holder (the "Requested Information") in the case of a registration
statement being prepared pursuant to Section 14(b) or if such Selling Holder
elects to have any of such Selling Holder's
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Registrable Securities included in the registration statement in the case of a
registration statement being prepared pursuant to Section 14(a).
ii. Each Selling Holder by such ▇▇▇▇▇▇▇
▇▇▇▇▇▇'s acceptance of the Registrable Securities agrees to cooperate with the
Company as reasonably requested by the Company in connection with the
preparation and filing of the registration statement hereunder, unless such
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ has notified the Company in writing of such Selling Holder's
election to exclude all of such Selling Holder's Registrable Securities from the
registration statement; and
iii. No Selling Holder may participate in
any underwritten registration hereunder unless such ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (i) agrees to
sell such Selling ▇▇▇▇▇▇'s Registrable Securities on the basis provided in any
underwriting arrangements approved by the Selling Holders entitled hereunder to
approve such arrangements, (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements, and (iii)
agrees to pay its pro rata share of all underwriting discounts and commissions
and other fees and expenses of investment bankers and any manager or managers of
such underwriting, except as provided in Section 14(d) below.
(d) Expenses of Registration. All expenses, other
than underwriting discounts and commissions and other fees and expenses of
investment bankers and other than brokerage commissions, incurred in connection
with registrations, filings or qualifications pursuant to Section 14(a) or
14(b), including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees and the fees and disbursements
of counsel for the Company and the Selling Holders, shall be borne by the
Company; provided, however, that the Company shall only be required to bear the
fees and out-of-pocket expenses of one law firm selected by the Selling Holders
in connection with such registration.
(e) Indemnification. In the event any Registrable
Securities are included in a registration statement under this Agreement:
i. To the extent permitted by law, the
Company will indemnify and hold harmless each Selling Holder who holds such
Registrable Securities, the directors, if any, of such Selling Holder, the
officers, if any, of such Selling Holder, each person, if any, who controls any
Selling Holder within the meaning of the 1933 Act, any underwriter (as defined
in the 1933 Act) for the Selling Holders, the directors, if any, of such
underwriter and the officers, if any, of such underwriter, and each person, if
any, who controls any such underwriter within the meaning of the 1933 Act (each,
an "Indemnified Person"), against any losses, claims, damages, expenses or
liabilities (joint or several) (collectively, "Claims") to which any of them may
become subject under the 1933 Act or otherwise, insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue statement or
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alleged untrue statement of a material fact contained in the registration
statement when it first became effective, or any related final prospectus,
amendment or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which the statements
therein were made, not misleading (a "Violation"). The Company shall reimburse
the Selling Holders and each such underwriter or controlling person, promptly as
such expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 14(e)(i) shall
not apply in such case to the extent any such Claim arising out of or based upon
a Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by any Indemnified Person or underwriter for
such Indemnified Person expressly for use in connection with the preparation of
the registration statement or any such amendment thereof or supplement thereto,
and shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld.
ii. In connection with any registration
statement in which a Selling Holder is participating, each such Selling Holder
agrees to indemnify and hold harmless, to the same extent and in the same manner
set forth in Section 14(e)(i), the Company, each of its directors, each of its
officers who signs the registration statement, each person, if any, who controls
the Company within the meaning of the 1933 Act, any underwriter and any other
shareholder selling securities pursuant to the registration statement or any of
its directors or officers or any person who controls such shareholder or
underwriter within the meaning of the 1933 Act (collectively and together with
an Indemnified Person, an "Indemnified Party"), against any Claim to which any
of them may become subject, under the 1933 Act or otherwise, insofar as such
Claim arises out of or is based upon any Violation, in each case to the extent
(and only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished to the Company by such Selling
Holder expressly for use in connection with such registration statement, and
such Selling Holder will reimburse any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section
14(e)(ii) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such Selling Holder,
which consent shall not be unreasonably withheld. The indemnification by each
Selling Holder shall be limited in amount to the net amount of proceeds received
by such Selling Holder from the sale of Registrable Securities.
iii. The Company shall be entitled to
receive indemnities from underwriters, selling brokers, dealer, managers and
similar securities industry professionals participating in any distribution, to
the same extent as provided above, with respect to information furnished in
writing by such persons expressly for inclusion in the registration statement.
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iv. Promptly after receipt by an Indemnified
Person or Indemnified Party under this Section 14(e) of notice of the
commencement of any action (including any governmental action), such Indemnified
Person or Indemnified Party shall, if a Claim in respect thereof is made against
any indemnifying party under this Section 14(e), deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed,
to assume control of the defense thereof with counsel mutually satisfactory to
the indemnifying parties; provided, however, that an Indemnified Person or
Indemnified Party shall have the right to retain its own counsel, with the fees
and expenses to be paid by the indemnifying party, if, in the reasonable opinion
of counsel retained by the indemnifying party, the representation by such
counsel of the Indemnified Person or Indemnified Party and the indemnifying
party would be inappropriate due to actual or potential differing interests
between such Indemnified Person or Indemnified Party and any other party
represented by such counsel in such proceeding. The Indemnifying Party shall pay
for only one separate law firm for the Indemnified Parties; such law firm shall
be selected by the Indemnified Parties holding a majority in interest of the
Registrable Securities. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 14(e), except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action. The indemnification required by this Section 14(e) shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as such expense, loss, damage or liability is incurred and is due
and payable.
v. Notwithstanding any of the foregoing, if,
in connection with an underwritten public offering of Registrable Securities,
the Company, the Selling Holders and the underwriter(s) enter into an
underwriting or purchase agreement relating to such offering which contains
provisions covering indemnification and contribution among the parties, the
indemnification and contribution provisions of this Section 14(e) shall be
deemed inoperative for purposes of such offering.
(f) Contribution. To the extent any indemnification
by an indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 14(e) to the fullest extent permitted by
law; provided, however, that (i) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 14(e), (ii) no seller of
Registrable Securities guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from
any seller of Registrable Securities who was not guilty of such fraudulent
misrepresentation, and (iii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities.
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(g) Reports Under Exchange Act. With a view to making
available to the Holders the benefits of Rule 144 promulgated under the 1933 Act
or any other similar rule or regulation of the SEC that may at any time permit
the Holders to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to:
i. make and keep public information
available, as those terms are understood and defined in Rule 144; and
ii. file with the SEC in a timely manner all
reports and other documents required of the Company under the 1933 Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"); and
iii. furnish to each Holder so long as such
Holder owns Registrable Securities, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting requirements of
Rule 144, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested to permit the Holders to
sell such securities without registration pursuant to Rule 144.
(h) Assignment of the Registration Rights. The rights
to have the Company register Registrable Securities pursuant to this Agreement
shall be automatically assigned by the Holders to transferees or assignees of
all or any portion of such securities only if: (i) the Holder agrees in writing
with the transferee or assignee to assign such rights, (ii) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of the name and address of such transferee or assignee (iii) such
assignment is in accordance with and permitted by law and all other agreements
between the transferor or assignor and the Company, including without
limitation, shareholder's agreements, warrants and subscription agreements, and
the transferor or assignor otherwise is not in material default of any
obligation to the Company under any such other agreement, and (iv) at or before
the time the Company received the written notice contemplated by clause (ii) of
this sentence the transferee or assignee agrees in writing with the Company to
be bound by all of the provisions contained herein.
(i) Termination of Registration Rights. No Holder of
Warrants or Shares shall be entitled to exercise any right provided for in this
Section 14 at such time as such Holder would be able to dispose of all of its
Registrable Securities in any three (3) month period under SEC Rule 144.
15. Transferability.
(a) General. This Warrant shall be transferable only
on the books of the Company maintained at its principal office in Irvine,
California or wherever its principal office may then be located, upon delivery
thereof duly endorsed by the Holder or by its duly authorized attorney or
representative, accompanied by proper evidence of
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succession, assignment or authority to transfer. Upon any registration of
transfer, the Company shall execute and deliver new Warrants to the person
entitled thereto.
(b) Limitations on Transfer. This Warrant shall not
be sold, transferred, assigned or hypothecated by the Holder except to (i) one
or more persons, each of whom on the date of transfer is an officer or employee
of the Holder; (ii) a general partnership or general partnerships, the general
partners of which are the Holder and one or more persons, each of whom on the
date of transfer is an officer or employee of the Holder; (iii) a successor to
the Holder in any merger or consolidation; (iv) a purchaser of all or
substantially all of the Holder's assets; or (v) any person receiving this
Warrant from one or more of the persons listed in this Section 15(b) at such
person's or persons' death pursuant to will, trust or the laws of intestate
succession. This Warrant may be divided or combined, upon request to the Company
by the Holder, into a certificate or certificates representing the right to
purchase the same aggregate number of Shares.
16. Miscellaneous.
(a) Construction. Unless the context indicates
otherwise, the term "Holder" shall include any transferee or transferees of this
Warrant pursuant to Section 15(b), and the term "Warrant" shall include any and
all warrants outstanding pursuant to this Agreement, including those evidenced
by a certificate or certificates issued upon division, exchange, substitution or
transfer pursuant to Section 15(b).
(b) Restrictions. By receipt of this Warrant, the
Holder makes the same representations with respect to the acquisition of this
Warrant as the Holder is required to make upon the exercise of this Warrant and
acquisition of the Shares purchasable hereunder as set forth in the Form of
Investment Letter attached as Exhibit A to the Notice of Exercise attached
hereto.
(c) Notices. Unless otherwise provided, any notice
required or permitted under this Warrant shall be given in writing and shall be
deemed effectively given upon personal delivery to the party to be notified or
three (3) days following deposit with the United States Post Office, by
registered or certified mail, postage prepaid and addressed to the party to be
notified (or one (1) day following timely deposit with a reputable overnight
courier with next day delivery instructions), or upon confirmation of receipt by
the sender of any notice by facsimile transmission, at the address indicated
below or at such other address as such party may designate by ten (10) days'
advance written notice to the other parties.
To Holder: Cruttenden ▇▇▇▇ Incorporated
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
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To the Company: UStel, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, #▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President and Chief
Executive Officer
(d) Governing Law. This Warrant shall be governed by
and construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
(e) Entire Agreement. This Warrant, the exhibits and
schedules hereto, and the documents referred to herein, constitute the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof, and supersede all prior and contemporaneous agreements and
understandings, whether oral or written, between the parties hereto with respect
to the subject matter hereof.
(f) Binding Effect. This Warrant and the various
rights and obligations arising hereunder shall inure to the benefit of and be
binding upon the Company and its successors and assigns, and ▇▇▇▇▇▇ and its
successors and assigns.
(g) Waiver; Consent. This Warrant may not be changed,
amended, terminated, augmented, rescinded or discharged (other than by
performance), in whole or in part, except by a writing executed by the parties
hereto, and no waiver of any of the provisions or conditions of this Warrant or
any of the rights of a party hereto shall be effective or binding unless such
waiver shall be in writing and signed by the party claimed to have given or
consented thereto.
(h) Severability. If one or more provisions of this
Warrant are held to be unenforceable under applicable law, such provision shall
be excluded from this Warrant and the balance of the Warrant shall be
interpreted as if such provision were so excluded and the balance shall be
enforceable in accordance with its terms.
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IN WITNESS WHEREOF, the parties hereto have executed this
Common Stock Warrant effective as of the date hereof.
DATED: , 1996 THE COMPANY:
UStel, Inc.
By:_____________________________________
Its:____________________________________
HOLDER:
Cruttenden ▇▇▇▇ Incorporated
By:_____________________________________
Its:____________________________________
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NOTICE OF EXERCISE
To: USTEL, INC.
1. The undersigned hereby elects to purchase _____________
shares of Common Stock ("Stock") of UStel, Inc., a Minnesota corporation (the
"Company") pursuant to the terms of the attached Warrant, and tenders herewith
payment of the purchase price pursuant to the terms of the Warrant.
2. Attached as Exhibit A is an investment representation
letter addressed to the Company and executed by the undersigned as required by
Section 12 of the Warrant.
3. Please issue certificates representing the shares of Stock
purchased hereunder in the names and in the denominations indicated on Exhibit A
attached hereto.
4. Please issue a new Warrant for the unexercised portion of
the attached Warrant, if any, in the name of the undersigned.
Dated: _______________ ________________________________________
16
NET ISSUANCE ELECTION NOTICE
To: USTEL, INC. Date:___________________
The undersigned hereby elects under Section 2 of the attached Warrant
to surrender the right to purchase ___________ shares of Common Stock pursuant
to the attached Warrant. The Certificate(s) for the shares issuable upon such
net issuance election shall be issued in the name of the undersigned or as
otherwise indicated below.
---------------------------
Signature
---------------------------
Name for Registration
---------------------------
Mailing Address
17
EXHIBIT A
To: USTEL, INC.
In connection with the purchase by the undersigned of
___________ shares of the Common Stock (the "Stock") of UStel, Inc., a Minnesota
corporation (the "Company"), upon exercise of that certain Common Stock Warrant
dated as of , 1996, the undersigned hereby represents and warrants as follows:
1. The shares of Stock to be received by the undersigned upon
exercise of the Warrant are being acquired for its own account, not as a nominee
or agent, and not with a view to resale or distribution of any part thereof, and
the undersigned has no present intention of selling, granting any participation
in, or otherwise distributing the same in violation of applicable securities
laws. The undersigned further represents that it does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participation to such person or to any third person, with respect to the Stock.
The undersigned believes it has received all the information it considers
necessary or appropriate for deciding whether to purchase the Stock.
2. The undersigned understands that the shares of Stock are
characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in transactions not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act of
1933, as amended (the "Act"), only in certain limited circumstances. In this
connection, the undersigned represents that it is familiar with SEC Rule 144, as
presently in effect, and understands the resale limitations imposed thereby and
by the Act.
3. Without in any way limiting the representations set forth
above, the undersigned agrees not to make any disposition of all or any portion
of the Stock unless and until:
(a) There is then in effect a registration statement
under the Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) (i) The undersigned shall have notified the
Company of the proposed disposition and shall have furnished the Company with a
statement of the circumstances surrounding the proposed disposition, and (ii) if
requested, the undersigned shall have furnished the Company with an opinion of
counsel, reasonably satisfactory to the Company that such disposition will not
require registration of such shares under the Act. The Company will not require
an opinion of counsel for sales made pursuant to Rule 144.
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4. The undersigned understands the instruments evidencing the
Stock may bear the following legend:
THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS
THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR THE COMPANY
RECEIVES AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH SALE OR
TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
SUCH ACT.
Dated: _______________ ________________________________________
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