THE OFFER AND SALE OF THE SECURITIES REFERRED TO IN THIS AGREEMENT (THE
"OFFERING") HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS AND SUCH SHARES
ARE BEING OFFERED AND SOLD IN RELIANCE ON THE EXEMPTION FROM THE SECURITIES
REGISTRATION AND QUALIFICATION REQUIREMENTS OF THE ACT AND SUCH LAWS OFFERED
BY SECTION 4(2) OF THE ACT. ACCORDINGLY, THE SECURITIES MAY NOT BE
TRANSFERRED OR RESOLD WITHOUT REGISTRATION AND QUALIFICATION UNDER THE ACT
AND APPLICABLE STATE SECURITIES LAWS, UNLESS AN EXEMPTION FROM SUCH
REGISTRATION AND QUALIFICATION UNDER THE ACT AND SUCH LAWS IS THEN AVAILABLE.
THE OFFER AND SALE OF THE SECURITIES EFFECTED HEREBY HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE
SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE
FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THE OFFERING.
SUBSCRIPTION AGREEMENT
MICROTEL INTERNATIONAL, INC.
CONVERTIBLE PREFERRED STOCK - SERIES A
_______________________________________________________________________________
THIS SUBSCRIPTION AGREEMENT (hereinafter the "Agreement") has been executed
by the undersigned (collectively the "Buyer") in connection with the sale of
certain Securities designated as Series A Convertible Preferred Stock
(hereinafter the "Preferred Shares"), which are convertible into shares of
common stock (hereinafter the "Conversion Shares") of MicroTel International,
Inc. (the "Company").
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE
1.1 Each Buyer hereby subscribes for the number of Preferred Shares set
forth below on the signature page of this Agreement which Preferred Shares
shall be convertible into Conversion Shares of the Company in accordance with
the terms set forth in the Certificate of Designations, Rights and
Preferences of Preferred Stock attached as Exhibit A to this Agreement (the
"Conversion Shares"), at a purchase price of $10,000 per Preferred Share
payable in United States Dollars.
1.2 Buyer shall pay the purchase price by delivering same day funds in
United States Dollars to the Company upon delivery of the Preferred Shares by
the Company to Buyer.
2. REPRESENTATIONS AND WARRANTIES.
2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants that as of the date of this Agreement:
(a) EXISTENCE. The Company is a corporation duly organized and in
good standing under the laws of the State of Delaware and is duly qualified
to do business and is in good standing in all states where such
qualification is necessary, except for those jurisdictions in which the
failure to qualify would not, in the aggregate, have a material adverse
effect on the Company's financial condition, results of operations or
business.
(b) AUTHORITY. The execution and delivery by the Company of this
Agreement and the Preferred Stock (i) are within the Company's corporate
powers; (ii) are duly authorized by the Company's board of directors; (iii)
are not in contravention of the terms of the Company's certificate of
incorporation or bylaws; (iv) are not in contravention of any law or laws;
(v) except for the filing of a Form D Notice with the Securities and
Exchange Commission and any exemption filing related thereto which may be
required pursuant to applicable state securities or "blue sky" laws, do not
require any governmental consent, registration or approval; (vi) do not
contravene any contractual or governmental restriction binding upon the
Company; and (vii) will not result in the imposition of any lien, charge,
security interest or encumbrance upon any property of the Company under any
existing indenture, mortgage, deed of trust, loan or credit agreement or
other material agreement or instrument to which the Company is a party or
by which the Company or any of the Company's property may be bound or
affected.
(c) BINDING EFFECT. This Agreement has been duly authorized,
executed and delivered by the Company and constitutes the valid and legally
binding obligation of the Company, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to
general equity principles.
(d) CAPITALIZATION. The authorized capital stock of the Company
consists of 25,000,000 shares of Common Stock, par value $.0033 per share,
11,927,793 shares of which are issued and outstanding and 10,000,000 shares
of Preferred Stock, par value $.01 per share, of which none are
outstanding. The shares of common stock issuable upon conversion of the
Preferred Stock (the "Conversion Shares") have been duly and validly
authorized and reserved for issuance and, when issued and delivered in
accordance with the terms of this Agreement, will be duly and validly
issued, fully paid and non-assessable.
(e) SEC DOCUMENTS. The Company has furnished each Buyer with a true
and complete copy of the Company's Report on Form 10-K for the fiscal year
ended December 31, 1997 and Form 10-Q for the quarter ended March 31, 1998
(the "Disclosure Documents"). Except as disclosed in the Disclosure
Documents, since December 31, 1997 the Company has not incurred any
material liability except in the
2
ordinary course of its business consistent with past practice and there
has not been any change in the business, financial condition or results of
operations of the Company which has had a material adverse effect on the
Company. Since January 1, 1997, the Company has filed with the Securities
and Exchange Commission (the "SEC") all documents required to be filed
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated thereunder. As of their
respective dates, the Disclosure Documents complied in all material
respects with the requirements of the Exchange Act, and the rules and
regulations of the SEC thereunder applicable to such Disclosure Documents,
and the Disclosure Documents did not contain any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the Disclosure Documents (the
"Financial Statements") comply as to form in all material respects with
applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto. The Financial Statements
are accurate, complete and have been prepared in accordance with the
books and records of the Company and in accordance with generally accepted
accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto and fairly
present (subject, in the case of the unaudited statements, to normal,
recurring audit adjustments that are not material) the consolidated
financial position of the Company as at the dates thereof and the
consolidated results of its operations and cash flows for the periods
then ended.
(f) For a period of ninety (90) days commencing with the Effective
Date of the Registration Statement, the Company covenants that it shall not
issue any issued additional common stock or securities convertible into
common stock or preferred stock unless such securities are issued at the
then current Market Price. If the Company desires to issue securities
during such ninety (90) day period at less than current Market Price, then:
(a) the Buyer's conversion discount will be adjusted to equal
the conversion discount given to the Buyer of such additional
securities; and
(b) the restrictions contained in Section 2.2(c) hereof shall be
lifted upon the issuance of such additional securities.
For purposes of this Section(e), the Market Price means the average
closing sale price for the ten trading days immediately preceding the date of
issuance.
Notwithstanding the above, the Company shall not be precluded from
issuing (i) Common Stock issued pursuant to Rule 144, provided the holder
thereof holds such Common Stock for at least one year from the date of issuance;
or (ii) the issuance of securities (other than for cash) in connection with a
merger, consolidation, sale of assets, disposition or the exchange of the
capital stock for assets, stock or other joint venture interests; provided, such
securities would not be included in the Registration Statement relating to the
Shares and a registration
3
statement in respect of such stock shall not be filed prior to sixty (60)
days after the Effective Date of the Registration Statement.
(g) LITIGATION. Except as set forth in the Disclosure Documents,
there is neither pending nor, to the Company's knowledge and belief,
threatened any action, suit, proceeding or claim, or any basis therefor, to
which the Company is or may be named as a party or its property is or may
be subject or which calls into question any of the transactions
contemplated by this Agreement.
(h) SECURITIES MATTERS. Subject to the accuracy of the
representations of the Buyers set forth in Section 2.2 hereof, the offer,
sale and issuance of the Preferred Stock and the Conversion Shares as
contemplated by this Agreement are exempt from the registration
requirements of the Securities Act of 1933 as amended (the "Securities
Act"). The Company has complied and will comply with all applicable state
"blue sky" or securities laws in connection with the offer, sale and
issuance of the Preferred Stock and the Conversion Shares as contemplated
by this Agreement.
(i) CERTIFICATES. The Company will issue one or more Certificates
representing the Preferred Shares in the name of Buyer with the following
restrictive legend set forth below (the "Restrictive Legend") in such
denominations to be specified by the Buyer:
"The Securities represented by this Certificate have not
been registered under the United States Securities Act of
1933 (the "Act") and may not be sold, transferred, pledged
or otherwise hypothecated unless (a) they are covered by a
registration statement or a post-effective amendment thereto
under the Act, or (b) in the opinion of counsel for Buyer,
which opinion shall be reasonably acceptable to the Company,
such sale, transfer, pledge or hypothecation is otherwise
exempt from the provisions of Section 5 of the Act."
(j) CONVERSION. Within two full business days of receipt by the
Company of a properly executed request for conversion in the form annexed
as Exhibit B hereto accompanied by the Preferred Shares to be converted,
the Company will deliver to its transfer agent its directive and
authorization to execute the conversion and to issue to Buyer the common
stock shares so authorized.
The Company acknowledges that a delay in issuance of its authorization
and directive for the conversion could result in economic loss to the
Buyer. Therefore, as compensation to the Buyer for such loss, in the event
that the Company fails to deliver said authorization and directive within
two full business days, the Company agrees to pay liquidated damages to the
Buyer for late issuance of said authorization and directive in the amount
of $500 per day for each day of delay after three days. Nothing herein
shall create a liability to the Company for actions or delays of the
transfer agent once the authorization and directive have been delivered to
it by the Company. Any liquidated
4
damages due Buyer will be paid within five (5) days of demand therefore.
(k) ISSUANCE OF SHARES. Upon conversion of the Preferred Shares, the
Company will issue one or more certificates representing the Conversion
Shares in the name of the Buyer without restrictive legend, except as may
otherwise be required by applicable law, rule or regulation, and in DTC
eligible form, in such denominations to be specified by the Buyer prior to
conversion provided Buyer represents to the Company that resale of the
Conversion Shares will be made only in compliance with applicable
securities laws. Company further warrants that no instructions other than
these instructions, and instructions for a "stop transfer" for any sale of
Conversion Shares in excess of those permitted to be sold under Section
2.2(c), have been given to the transfer agent and also warrants that the
Conversion Shares shall otherwise be freely transferable on the books and
records of the Company subject to compliance with Federal and State
securities laws.
(l) The Company may be limited in the number of shares of Common
Stock it may issue by NASDAQ Rule 4310(c)(25)(H)(i)(a)(2) (the "Cap
Regulations"). The Company agrees that (i) the Company will take all steps
reasonably necessary to be in a position to issue shares of Common Stock on
conversion of the Preferred Stock and/or exercise of the Warrants without
violating the Cap Regulations and (ii) if, despite taking such steps, the
Company still cannot issue such shares of Common Stock without violating
the Cap Regulations, the Buyer, to the extent it holds Preferred Stock and
Warrants which cannot be converted as a result of the Cap Regulations (each
such share, an "Unconverted Preferred Stock") shall have the option,
exercisable in Buyer's sole and absolute discretion, to elect either of the
following remedies:
(x) require the Company to issue shares of Common Stock in
accordance with Buyer's notice of conversion at a conversion purchase
price equal to the average of the closing bid price per share of
Common Stock for the five (5) consecutive trading days (subject to
certain equitable adjustments for certain events occurring during such
period) preceding the date of notice of conversion; or
(y) require the Company to redeem each Unconverted Preferred
Stock for an amount in cash (the "Redemption Amount") equal to:
V x M
C
"V" means the stated value of the Unconverted Preferred Stock
plus any accrued but unpaid interest thereof;
"C" means the conversion price in effect on the date of
redemption (the "Redemption Date") specified in the notice from the
Buyer; and
5
"M" means the highest closing bid price per share of the Common
Stock during the period beginning on the Redemption Date and ending on
the date of payment of the Redemption Amount.
2.2 REPRESENTATIONS AND WARRANTIES OF THE BUYER. Each Buyer
represents and warrants that as of the date of the execution of this
Agreement:
(a) AUTHORIZATION. This Agreement constitutes a valid and legally
binding obligation of such Buyer.
(b) INVESTMENT REPRESENTATIONS. Except as provided in the
registration provisions hereof:
(i) The Buyer has received and reviewed the Company's
Disclosure Documents and the Buyer or the Buyer's designated
representatives have concluded a satisfactory due diligence
investigation of the Company and have had an opportunity to have all
their questions regarding the Company satisfactorily answered.
(ii) The Buyer acknowledges that the Preferred Stock and the
Conversion Shares are speculative and involve a high degree of risk
and the Buyer represents that it is able to sustain the loss of the
entire amount of its investment.
(iii) The Buyer (or its members and/or officers) has
previously invested in unregistered securities and has sufficient
financial and investing expertise to evaluate and understand the risks
of the Preferred Stock and the Conversion Shares.
(iv) The Buyer has received from the Company, and is relying
on, no representations (except as set forth in this Agreement) or
projections with respect to the Company's business and prospects.
(v) The Buyer is an "accredited investor" within the
meaning of Regulation D under the Securities Act.
(vi) The Buyer is acquiring the Preferred Stock and the
Conversion Shares for investment purposes only without intent to
distribute the same, and acknowledges that the Preferred Stock and the
Conversion Shares have not been registered under the Securities Act
and applicable state securities laws, and accordingly, constitute
"restricted securities" for purposes of the Securities Act and such
state securities laws.
6
(vii) The Buyer acknowledges that it will not be able to
transfer the Preferred Stock and the Conversion Shares except upon
compliance with the registration requirements of the Securities Act
and applicable state securities laws or exemptions therefrom.
(viii) The certificates and/or instruments evidencing the
Preferred Stock and the Conversion Shares will contain a legend to the
foregoing effect.
(c) LOCK-UP. The Buyer will not transfer any Preferred Shares or
Conversion Shares until the earlier of (i) ninety (90) days after the date
of the Closing or (ii) the Effective Date of the Registration Statement to
be filed pursuant to Section 4 hereof (the earlier of (i) or (ii), the
"Conversion Start Date"). No more than 20% of the aggregate number of
Series A Preferred Shares originally purchased and owned by the Buyer may
be converted in any thirty (30) day period, on a cumulative basis, after
the Conversion Start Date. Further, the Buyer will not, after conversion,
sell more than 20% of the Conversion Shares owned by it in any thirty day
period, on a cumulative basis, commencing with the Conversion Start Date.
3. CLOSING
3.1 The Buyer understands that the Company's obligation to sell the
Preferred Shares is conditioned upon delivery by the Buyer to the Company of
the purchase price set forth in Section 1 herein.
3.2 The Company understands that Buyer's obligation to purchase the
Preferred Shares is conditioned upon delivery of certificate(s) representing
the Preferred Shares as described herein, and provision of an opinion of
counsel as provided in Subsection D (ii) herein below.
3.3 For this transaction to close, the Buyer must:
(i) Wire funds to the Pacific Continental Securities
Corporation, as Escrow Agent (the "Escrow Agent"), in the amount of
One Million U.S. dollars ($1,000,000) (the "Purchase Price") no later
than 72 hours after receipt by the Company of the Subscription
Agreement executed by the Buyer and the Company. Wire transfer
instructions for the Escrow Agent are annexed as Exhibit C hereto.
(ii) Deliver a signed Subscription Agreement.
3.4 For this transaction to close, the Company must:
(i) Deliver to the Buyer Certificate(s) for the Preferred
Shares.
(ii) Deliver to the Buyer the Company's Certificate of
Designation set
7
forth in Exhibit A hereto.
(iii) Deliver to the Buyer an opinion letter from the
Company's counsel in substantially the form annexed as Exhibit
3.4(iii) hereto; and
(iv) Deliver to the Buyer a signed Subscription Agreement
which shall be signed after execution of such Subscription Agreement
by Buyer; and
(v) Deliver to the Buyer executed warrants to purchase
common stock of the Company in the form attached hereto as Exhibit D
(the "Warrants").
3.5 Upon confirmation by Buyer that it has received each of the items
set forth in 3.4(i)-(v), and by the Company that it has received a signed
Subscription Agreement, Escrow Agent shall, after deducting any amounts due
to it from the Company, release the balance of the purchase price to the
Company or as directed by the Company.
E. Pacific Continental Securities Corporation shall serve as agent (the
"Agent") in the transaction contemplated by this Agreement. Agent's fee is
solely the responsibility of the Company and Company expressly agrees to
pay Agent said fee as such is agreed upon between the Company and the
Agent. Neither the Company nor the Agent has any recourse of any kind
whatsoever against the Buyer for any monies owed the Agent by the Company
or for any monies paid by the Company to the Agent. Company expressly
indemnifies Buyer against any monies owed the Agent.
4. REGISTRATION OF CONVERSION SHARES
4.1 The Company shall prepare and file with the SEC a registration
statement as soon as practical, which registration statement shall include
the Conversion Shares and shares of Common Stock issuable pursuant to the
Warrants ("Warrant Shares") and shall thereafter use its best efforts to have
such registration statement declared effective the earlier of (i) five (5)
days after the SEC indicates the Registration Statement may be declared
effective or (ii) ninety (90) days after the Closing Date (the "Target Date")
and remain effective until the earlier of the date on which all the
Conversion Shares are sold or two years after the Closing Date (the
"Effective Period"). The Company shall prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective throughout the Effective Period and to comply with the
provisions of the Securities Act with respect to the sale or other
disposition of the Conversion Shares or Warrant Shares covered by such
registration statement whenever the Buyer shall desire to sell or otherwise
dispose of the same.
4.2 If a registration statement covering all Shares is not effective by
the Target Date, the Company shall pay to the Buyers as liquidated damages an
aggregate amount equal to one percent (1%) of the total purchase price of the
Preferred Stock for each thirty (30) day period following the Target Date
until such time as the registration statement is declared effective. The
payment set forth above shall be pro-rated daily as to any period of less
than thirty (30) days. Such payment shall be made to each Buyer by cashier's
check or wire transfer in immediately
8
available funds to such account as shall be designated in writing by the
Buyer and shall be paid irrespective of the amount of Preferred Stock,
Conversion Shares and Warrant Shares held by Buyer on the Target Date and
thereafter. After the expiration of the first thirty (30) day period, the
Company shall pay to the Buyer as liquidated damages 2% of the total purchase
price of the Preferred Stock for each additional thirty (30) day period until
such time as the Registration Statement is declared effective, which shall be
pro-rated daily for any period of less than thirty (30) days.
4.3 Any amount payable pursuant to the foregoing provisions shall be
delivered on or before the fifth (5th) day following the end of the calendar
month in which such payment or delivery obligation arose.
4.4 The Company shall file a request for acceleration of effectiveness
of the registration statement within five days after it has received a no
review/no further comment determination from the SEC.
4.5 The Registration Statement shall include only the common stock to
be issued to the Buyer and other purchasers of the Preferred Shares (except
such Registration Statement may include additional shares of common stock not
to exceed 100,000 in the aggregate).
4.6 It shall be a condition precedent to the obligation of the Company
to register any Conversion Shares and Warrant Shares pursuant to this Section
4 that Buyer shall furnish to the Company such information regarding the
Conversion Shares and Warrant Shares held and the intended method of
disposition thereof and other information concerning the Buyer as the Company
shall reasonably request and as shall be required in connection with the
registration statement to be filed by the Company. If after a registration
statement becomes effective the Company advises the Buyer that the Company
considers it appropriate to amend or supplement the applicable registration
statement, the Buyer shall suspend further sales of the Conversion Shares and
Warrant Shares until the Company advises the Buyer that such registration
statement has been amended or supplemented.
4.7 Whenever the Company is required by the provisions of this Section
4 to effect the registration of the Conversion Shares and Warrant Shares
under the Securities Act, the Company shall:
(i) Prepare and file with the SEC a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective;
(ii) Prepare and file with the SEC such amendments to such
registration statement and supplements to the prospectus contained
therein as may be necessary to keep such registration statement
effective;
(iii) Furnish to the Buyer and to the underwriters (if any)
of the securities being registered such reasonable number of copies of
the registration
9
statement, preliminary prospectus, final prospectus and such other
documents as the Buyer may reasonably request in order to facilitate
the public offering of such securities;
(iv) Use its best efforts to register or qualify the
securities covered by such registration statement under such state
securities or Blue Sky Laws of such jurisdictions as the Buyer may
reasonably request within twenty (20) 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;
(v) Notify the Buyer, 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;
(vi) Notify the Buyer promptly of any request by the SEC for
the amending or supplementing of such registration statement or
prospectus or for additional information; and
(vii) Prepare and promptly file with the SEC and promptly
notify the Buyer 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 light of the
circumstances in which they were made, not misleading.
4.8 With respect to the inclusion of the Conversion Shares and Warrant
Shares in a registration statement pursuant to this Section 4, all
registration expenses, fees, costs and expenses of and incidental to such
registration, inclusion and public offering in connection therewith shall be
borne by the Company; provided, however, that the Buyer shall bear its own
professional fees and pro rata share of the underwriting discount and
commissions, if any. The fees, costs and expenses of registration to be
borne by the Company shall include, without limitation, all registration,
filing, printing expenses, fees and disbursements of counsel and accountants
for the Company, fees and disbursements of counsel for the underwriter or
underwriters of such securities (if any and if the Company and/or selling
security holders are required to bear such fees and disbursements), and all
legal fees and disbursements and other expenses of complying with state
securities or Blue Sky Laws of any jurisdiction in which the securities to be
offered are to be registered or qualified.
4.9 Subject to the conditions set forth below, in connection with any
registration of the Shares pursuant to this Section 4, the Company agrees to
indemnify and hold harmless the Buyer, any underwriter for the Company or
acting on behalf of the Buyer and each person, if any,
10
who controls the Buyer, within the meaning of Section 15 of the Securities
Act, as follows:
11
(i) Against any and all loss, claim, damage and expense
whatsoever arising out of or based upon (including, but not limited
to, any and all expense whatsoever reasonably incurred in
investigating, preparing or defending any litigation, commenced or
threatened, or any claim whatsoever based upon) any untrue or alleged
untrue statement of a material fact contained in any preliminary
prospectus (if used prior to the effective date of the registration
statement), the registration statement or the prospectus (as from time
to time amended and supplemented), or in any application or other
document executed by the Company or based upon written information
furnished by the Company filed in any jurisdiction in order to qualify
the Company's securities under the securities laws thereof, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading, or any other violation of applicable federal or state
statutory or regulatory requirements or limitations relating to action
or inaction by the Company in the course of preparing, filing, or
implementing such registered offering; provided, however, that the
indemnity agreement contained in this section shall not apply to any
loss, claim, damage, liability or action arising out of or based upon
any untrue or alleged untrue statement or omission made in reliance
upon and in conformity with any information furnished in writing to
the Company by or on behalf of the Buyer expressly for use in
connection therewith or arising out of any action or inaction of the
Buyer;
(ii) Subject to the proviso contained in Subsection (i)
above, against any and all loss, liability, claim, damage and expense
whatsoever to the extent of the aggregate amount paid in settlement of
any litigation, commenced or threatened, or of any claim whatsoever
based upon any untrue statement or omission (including, but not
limited to, any and all expense whatsoever reasonably incurred in
investigating, preparing or defending against any such litigation or
claim) if such settlement is effected with the written consent of the
Company; and
(iii) In no case shall the Company be liable under this
indemnity agreement with respect to any claim made against such
Company, underwriter or any such controlling person unless the Company
shall be notified, by letter or by facsimile confirmed by letter, of
any action commenced against such persons, promptly after such person
shall have been served with the summons or other legal process giving
information as to the nature and basis of the claim. The failure to
so notify the Company, if prejudicial in any material respect to the
Company's ability to defend such claim, shall relieve the Company from
its liability to the indemnified person under this Section 4, but only
to the extent that the Company was prejudiced. The failure to so
notify the Company shall not relieve the Company from any liability
which it may have otherwise than on account of this indemnity
agreement. The Company shall be entitled to participate at its own
expense in the defense of any suit brought to enforce any such claim,
but if the Company elects to assume the defense, such defense shall be
12
conducted by counsel chosen by it, provided such counsel is reasonably
satisfactory to the Company or controlling persons, defendants in any
suit so brought. In the event the Company elects to assume the
defense of any such suit and retain such counsel, the Company,
underwriter or controlling persons, defendants in the suit, shall,
after the date they are notified of such election, bear the fees and
expenses of any counsel thereafter retained by them, as well as any
other expenses thereafter incurred by them in connection with the
defense thereof; provided, however, that if the Company, underwriter
or controlling persons reasonably believe that there may be available
to them any defense or counterclaim different than those available to
the Company or that representation of such Company, underwriters or
controlling persons by counsel for the Company presents a conflict of
interest for such counsel, then such Company, underwriter and
controlling person shall be entitled to defend such suit with counsel
of their own choosing and the Company shall bear the fees, expenses
and other costs of such separate counsel.
4.10 Each Buyer agrees to indemnify and hold harmless the Company, each
underwriter for the offering, (if any), and each of their officers and
directors and agents and each other person, if any, who controls the Company
and underwriter within the meaning of Section 15 of the Securities Act
against any and all such losses, liabilities, claims, damages and expenses as
are indemnified against by the Company under Section 4.6 above; provided,
however, that such indemnification by Buyer hereunder shall be limited to any
losses, liabilities, claims, damages, or expenses to the extent caused by any
untrue statement of a material fact or omission of a material fact (required
to be stated therein or necessary to make statements therein not misleading),
if any made (or in settlement of any litigation effected with the written
consent of such Company, alleged to have been made) in any preliminary
prospectus, the registration statement or prospectus or any amendment or
supplement thereof or in any application or other document in reliance upon,
and in conformity with, written information furnished in respect of such
Company by or on behalf of such Company expressly for use in any preliminary
prospectus, the registration statement or prospectus or any amendment or
supplement thereof or in any such application or other document or arising
out of any action or inaction of such Company in implementing such registered
offering. Notwithstanding the foregoing, the indemnification obligation of
each Buyer shall not exceed the purchase price of the Notes paid by such
Buyer. In case any action shall be brought against the Company, or any other
person so indemnified, in respect of which indemnity may be sought against
any Company, such Company shall have the rights and duties given to the
Company, and each other person so indemnified shall have the rights and
duties given to the Buyer, by the provisions of Section 4.6. The person
indemnified agrees to notify the Company promptly after the assertion of any
claim against the person indemnified in connection with the sale of
securities.
4.11 If the indemnification provided for in Sections 4.8 and 4.9 above
are unavailable or insufficient to hold harmless an indemnified party in
respect of any losses, claims, damages or liabilities (or actions in respect
thereof) referred to therein, then each indemnifying party shall contribute
to the amount paid or payable by such indemnified party as a result of such
losses,
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claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative fault of the indemnified
party, on one hand, and such indemnifying party, on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages, or liabilities (or actions in respect thereof). The
relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the indemnified party, on one hand, or such indemnifying party,
on the other hand, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
No person who has committed fraudulent misrepresentation (within the meaning
of the Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof referred to above in this Section
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim.
5. CLOSING DATE
The Preferred Share certificate shall be delivered to Buyer and the
funds therefore shall be delivered to Company on or before June 12, 1998 (the
"Closing Date") or at such other time mutually agreed to by the parties.
6. GOVERNING LAW; INTERPRETATION
This Agreement shall be governed by and interpreted in accordance with
the laws of the State of Delaware. The Company and the Buyer hereby
irrevocably consent to the exclusive jurisdiction and venue of the state and
federal courts of the State of Delaware and agree that any action or
proceeding arising out of or relating to this Agreement shall be brought in
the state or federal courts located in Delaware. The Company and the Buyer
waive any defense of forum nonconveniens and any other objections or defenses
which the Buyer or Company may have to venue in connection with any such
action or proceeding. The Company and the Buyer hereby waive any right to
trial by jury in such proceeding.
7. ENTIRE AGREEMENT; AMENDMENT
This Agreement and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof, and no party shall be
liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth herein or
therein. Except as expressly provided herein, neither this Agreement nor any
term hereof may be amended, waived, discharged or terminated other than by a
written instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought.
8. NOTICES; ETC.
Any notice, demand or request required or permitted to be given by
either the Company
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or the Buyer pursuant to the terms of this Agreement shall be in writing and
shall be deemed given when delivered personally or by facsimile, with a hard
copy to follow by two day courier addressed to the parties at the addresses
of the parties set forth at the end of this Agreement or such other address
as a party may request by notifying the other in writing.
9. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
10. SEVERABILITY
In the event that any provision of this Agreement becomes or is declared
by a court of competent jurisdiction to be illegal, enforceable or void, this
Agreement shall continue in full force and effect without said provision,
provided that no such severability shall be effective if it materially
changes the economic benefit of this Agreement to any party.
11. TITLES AND SUBTITLES
The titles and subtitles used in this Agreement are used for convenience
only and are not to be considered in construing or interpreting this
Agreement.
IN WITNESS WHEREOF, this Agreement was duly executed on the date first
written above, as confirmed by signatory below. Facsimile signatures of this
agreement shall be binding on all parties hereto.
Official Signatory of Company:
MICROTEL INTERNATIONAL, INC.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
By:
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President and Chief Executive Officer
RESONACE LTD.
By:
-----------------------------------
Number of Shares of
Series A Preferred: 100
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