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EXHIBIT 4.3
DRAFT DATED 1/19/97
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES
ACT"), AND THEREFORE MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS (1) A REGISTRATION STATEMENT REGISTERING THIS WARRANT, AND THE
SECURITIES ISSUABLE UPON ITS EXERCISE, HAS BEEN FILED AND DECLARED EFFECTIVE
UNDER THE SECURITIES ACT OR (2) THE COMPANY IS SATISFIED THAT NO SUCH
REGISTRATION STATEMENT IS THEN REQUIRED AND THAT, THIS WARRANT AND THE
UNDERLYING SECURITIES MAY BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE
MANNER CONTEMPLATED WITHOUT REGISTRATION UNDER THE SECURITIES ACT.
USTEL, INC.
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REPRESENTATIVE'S WARRANT
WARRANT NO. FIELD(CERT. NO.)
Date of Issuance: As of , 1997 Right to Purchase FIELD(Units) Units
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FOR VALUE RECEIVED, UStel, Inc., a Minnesota corporation (the
"Company"), promises to issue in the name of, and sell and deliver to,
FIELD(Holder) (the "Holder") a certificate or certificates for an aggregate of
FIELD(Units) units (the "Units"), each Unit consisting of two shares (the "Unit
Shares") of the Company's common stock, $.01 par value per share (the "Common
Stock"), and one common stock purchase warrant (the "Underlying Warrants") to
purchase one share of Common Stock (the "Warrant Shares"), which number of Unit
Shares and Warrant Shares is subject to adjustment from time to time, as
described below, upon payment therefor of the exercise price of $7.20 per Unit
in lawful funds of the United States of America, such amounts (the "Basic
Exercise Price") being subject to adjustment in the circumstances set forth
hereinbelow. This applicable Basic Exercise Price, until such adjustment is
made and thereafter as adjusted from time to time, is called the "Exercise
Price." This Warrant expires in its entirety at 5:00 p.m. Eastern Time on
____________________, 2002 (the "Expiration Date"). This Warrant is one of a
series of Representative's Warrants dated ____________________, 1997. The terms
and conditions of the Representative's Warrants shall be identical in all
material respects except that the number of Units to which the Holder is
entitled to purchase may differ.
SECTION 1.
CERTAIN DEFINITIONS
As used in this Warrant, the following terms have the meanings set
forth below:
"COMMON STOCK DEEMED OUTSTANDING" means, at any given time, the number
of shares of Common Stock actually outstanding at such time, plus the number of
shares of Common Stock deemed to be outstanding pursuant to Section 4 of this
Warrant.
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"DATE OF ISSUANCE" is the date set forth on the front page of this
Warrant, and the terms "date hereof," "date of this Warrant," and similar
expressions shall be deemed to refer to the Date of Issuance, as specified in
Section 11 of this Warrant.
"EXERCISE PERIOD" means the period of time commencing at 12:01 A.M.,
Eastern Time, on the first anniversary of the Effective Date and ending at
12:00 Midnight, Eastern Time, on the fifth anniversary of the Effective Date.
"MARKET PRICE" means as to any security the average of the closing
prices of such security's sales on the principal domestic securities exchange
on which such security may at the time be listed, or, if there have been no
sales on any such exchange on any day, the average of the highest bid and
lowest asked prices on all such exchanges at the end of such day, or, if on any
day such security is not so listed, the average of the representative bid and
asked prices quoted in the Nasdaq SmallCap as of the close of trading in New
York City on such day, or, if on any day such security is not quoted in the
Nasdaq SmallCap, the average of the high and low bid and asked prices on such
day in the domestic over- the-counter market as reported by the National
Quotation Bureau, Incorporated, or any similar successor organization, in each
such case averaged over a period of 20 consecutive business days consisting of
the business day immediately preceding the day as of which "Market Price" is
being determined and the 19 consecutive business days prior to such day;
provided that if such security is listed on any domestic securities exchange or
quoted in the Nasdaq SmallCap, the term "business day" or "business days" as
used in this sentence means a day or days, as applicable, on which such
exchange or the Nasdaq SmallCap is open for trading or quotation, as the case
may be. If at any time such security is not listed on any domestic securities
exchange or quoted in the Nasdaq SmallCap or the domestic over-the-counter
market, the "Market Price" will be the fair value thereof determined jointly by
the Company and the Holders of Warrants representing at least 50% of the Common
Stock purchasable upon the exercise of all the Warrants then outstanding;
provided that if such parties are unable to reach agreement, such fair value
will be determined by an appraiser jointly selected by the Company and the
Holders of Warrants representing at least 25% of the Common Stock purchasable
upon the exercise of all the Warrants then outstanding.
"NASDAQ SMALLCAP" means the Nasdaq SmallCap Market or such other
similar quotation system as may in the future be used generally by members of
the National Association of Securities Dealers, Inc. for transactions in
securities.
"PERSON" means an individual, a partnership, a corporation, a trust, a
joint venture, an unincorporated organization, and a government or any
department or agency thereof.
"UNDERLYING SECURITIES" means the Unit Shares, Underlying Warrants and
shares of Common Stock issuable upon exercise of the Underlying Warrant,
collectively.
"WARRANTS" mean this Warrant and all other Warrants issued in exchange
or substitution for this Warrant or any such other options issued pursuant to
the terms hereof or thereof, as the case may be.
SECTION 2.
EXERCISE OF WARRANT
2.1 EXERCISE PERIOD. The Holder may exercise this Warrant, in
whole or in part (but not as to a fractional Share), at any time and from time
to time, during the Exercise Period.
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2.2 EXERCISE PROCEDURE.
(a) This Warrant will be deemed to have been exercised at
such time as the Company has received all of the following items (the "Exercise
Date"):
(i) a completed Exercise Agreement, in the form
set forth as Exhibit II hereto, executed by the Person exercising all or part
of the purchase rights represented by this Warrant (the "Purchaser");
(ii) this Warrant (subject to delivery by the
Company of a new Warrant with respect to any unexercised portion, as provided
in Subsection 2.2(b));
(iii) if this Warrant is not registered in the name
of the Purchaser, an Assignment or Assignments in the form set forth as Exhibit
II hereto, evidencing the assignment of this Warrant to the Person; and
(iv) a certified check or other certified funds
payable to the Company in an amount equal to the product of the Exercise Price
multiplied by the number of Units being purchased upon such exercise.
Notwithstanding anything contained herein to the contrary, the Exercise Price
for the Warrant may be satisfied by the delivery of an unexercised portion of
this Warrant to the Company or the Transfer Agent for cancellation having a
market value, as determined by the spread as of the date of surrender equal to
the difference between the then Exercise Price and the market price of the
shares of Common Stock and Warrants underlying this Warrant, equal to the
aggregate Exercise Price of the portion of this Warrant desired to be then
exercised.
(b) Certificates for Unit Shares and Underlying Warrants
purchased upon exercise of this Warrant will be delivered by the Company to the
Purchaser within five calendar days after the Exercise Date. Unless this
Warrant has expired or all of the purchase rights represented hereby have been
exercised, the Company will prepare a new Warrant representing the rights
formerly represented by this Warrant that have not expired or been exercised.
The Company will, within such five day period, deliver such new Warrant to the
Person designated for delivery in the Exercise Agreement.
(c) The Unit Shares and Underlying Warrants issuable upon
the exercise of this Warrant will be deemed to have been transferred to the
Purchaser on the Exercise Date, and the Purchaser will be deemed for all
purposes to have become the record holder of such Common Stock on the Exercise
Date.
(d) The issuance of certificates for Unit Shares and
Underlying Warrants upon exercise of this Warrant and the issuance of
certificates for shares of Common Stock upon exercise of the Underlying Warrant
will be made without charge to the Holder or the Purchaser for any issuance tax
in respect thereof or any other cost incurred by the Company in connection with
such exercise and the related transfer of the Underlying Securities; provided,
however, that the Company shall not be required to pay any tax that may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate or instrument in a name other than that of the Holder of this
Warrant, and the Company shall not be required to issue or deliver any such
certificate or instrument unless and until the Person or Persons requesting the
issue thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been
paid.
(e) The Company will not close its books for the transfer
of this Warrant or of any of the Underlying Securities in any manner that
interferes with the timely exercise of this Warrant. The
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Company will from time to time take all such action as may be necessary to
assure that the par value per share of the unissued Common Stock acquirable
upon exercise of this Warrant and the Underlying Warrants is at all times equal
to or less than the Exercise Price (divided by such number of shares) then in
effect.
2.3 EXERCISE AGREEMENT. The Exercise Agreement will be
substantially in the form set forth as Exhibit I hereto, except that if the
Unit Shares and Underlying Warrants are not to be issued in the name of the
Holder of this Warrant, the Exercise Agreement will also state the name of the
Person to whom the certificates or instrument for the Unit Shares and
Underlying Warrants are to be issued, and if the number of Unit Shares
purchasable does not include all of such securities purchasable hereunder, it
will also state the name of the Person to whom a new Warrant for the
unexercised portion of the rights hereunder is to be delivered.
2.4 FRACTIONAL SHARES OR WARRANTS. If a fractional share of
Common Stock or fractional Underlying Warrant would, but for the provisions of
Subsection 2.1, be issuable upon exercise of the rights represented by this
Warrant, the Company will, within twenty days after the Exercise Date, deliver
to the Purchaser a check payable to the Purchaser, in lieu of such fractional
share or fractional Underlying Warrant, in an amount equal to the Market Price
of such fractional share or fractional Underlying Warrant as of the close of
business on the Exercise Date.
SECTION 3.
EXERCISE PRICE
3.1 GENERAL.
(a) The Holder of this Warrant shall be entitled to
purchase such numbers of Units at an Exercise Price of $7.20 per Unit which,
for purposes of this Warrant, shall be allocated between the Unit Shares and
the Underlying Warrant at $___________ per share and $______ per warrant.
(b) If and whenever the Company issues or sells, or in
accordance with Subsection 3.2 is deemed to have issued or sold, any shares of
its Common Stock for a consideration per share less than the Exercise Price in
effect immediately prior to the time of such issuance or sale (except for the
issuance or deemed issuance of securities in a transaction described in
paragraph (c) of this Subsection 3.1), then immediately upon such issuance or
sale the Exercise Price will be reduced to a price determined by multiplying
the Exercise Price in effect immediately prior to the issuance or sale by a
fraction, the numerator of which shall be the sum of (i) the number of shares
of Common Stock outstanding prior to the issuance or sale plus (ii) the number
of shares of Common Stock (in terms of Common Stock issuable upon an exercise
of this Warrant) that the maximum aggregate amount receivable by the Company
upon such issuance or sale would purchase at the Exercise Price in effect
immediately prior to the issuance or sale, and the denominator of which shall
be the number of shares of Common Stock Deemed Outstanding immediately after
such issuance or sale.
(c) The following securities or transactions shall be
excluded from the operation of paragraph (b) of this Subsection 3.1 and
Subsection 3.2:
(i) The existence and any exercise of the
Warrants;
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(ii) The existence and any exercise of any option,
warrant, or other right to purchase Common Stock, that is outstanding on the
date of this Warrant; and
(iii) Any grant or exercise of options for Common
Stock granted under the Company's stock option plans with an exercise price (as
possibly adjusted) of at least the last reported sale price on date of grant.
3.2 EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes of
determining the adjusted Exercise Price under Subsection 3.1 above, the
following provisions will be applicable:
(a) If the Company in any manner grants any rights or
options to subscribe for or to purchase Common Stock or any stock or other
securities convertible into or exchangeable for Common Stock (such rights or
options being herein called "Rights" and such convertible or exchangeable stock
or securities being herein called "Convertible Securities") and the price per
share for which Common Stock is issuable upon the exercise of such Rights or
upon conversion or exchange of such Convertible Securities is less than the
Exercise Price in effect immediately prior to the time of the granting of such
Rights, then the total maximum number of shares of Common Stock issuable upon
the exercise of such Rights or upon conversion or exchange of the total maximum
amount of such Convertible Securities issuable upon the exercise of such Rights
will be deemed to be outstanding and to have been issued and sold by the
Company for such price per share. For purposes of this paragraph, the "price
per share for which Common Stock is issuable upon exercise of such Rights or
upon conversion or exchange of such Convertible Securities" will be determined
by dividing (i) the total amount, if any, received or receivable by the Company
as consideration for the granting of such Rights, plus the minimum aggregate
amount of additional consideration payable to the Company upon exercise of all
such Rights, plus, in the case of Rights that relate to Convertible Securities,
the minimum aggregate amount of additional consideration, if any, payable to
the Company upon the issuance or sale of such Convertible Securities and the
conversion or exchange thereof, by (ii) the total maximum number of shares of
Common Stock then issuable upon the exercise of such Rights or upon the
conversion or exchange of all Convertible Securities issuable upon the exercise
of such Rights. Except as otherwise provided in paragraphs (c) and (d) below,
no adjustment of the Exercise Price will be made when Convertible Securities
are actually issued upon the exercise of such Rights or when Common Stock is
actually issued upon the exercise of such Rights or the conversion or exchange
of such Convertible Securities.
(b) The following adjustments apply to the Exercise Price
of the Warrants with respect to the Unit Shares and the number of Unit Shares
purchasable upon exercise of the Warrants. In the event such Exercise Price
and number of Unit Shares is adjusted, then the Exercise Price of the
Underlying Warrants and the number of Warrant Shares purchasable upon exercise
of the Underlying Warrants shall be adjusted accordingly.
(c) If the Company in any manner issues or sells any
Convertible Securities, and the price per share for which Common Stock is
issuable upon such conversion or exchange is less than the Exercise Price in
effect immediately prior to the time of such issuance or sale, then the maximum
number of shares of Common Stock then issuable upon conversion or exchange of
all such Convertible Securities will be deemed to be outstanding and to have
been issued and sold by the Company for such price per share. For purposes of
this paragraph, the "price per share for which Common Stock is issuable upon
such conversion or exchange" will be determined by dividing (i) the total
amount received or receivable by the Company as consideration for the issuance
or sale of such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common Stock
then issuable upon the conversion or exchange of all such Convertible
Securities. Except as otherwise provided in paragraphs
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(c) and (d) below, no adjustment of the Exercise Price will be made when Common
Stock is actually issued upon the conversion or exchange of such Convertible
Securities, and if any such issuance or sale of such Convertible Securities is
made upon exercise of any options for which adjustments of the Exercise Price
had been or are to be made pursuant to other provisions of this Section 3, no
further adjustment of the Exercise Price will be made by reason of such
issuance or sale.
(d) If the purchase price provided for in any Rights, the
additional consideration, if any, payable upon the conversion or exchange of
any Convertible Securities, or the rate at which any Convertible Securities are
convertible into or exchangeable for Common Stock changes at any time (other
than under or by reason of provisions that are designed to protect against
dilution of the type set forth in this Section 3 and are no more favorable on
the holders of such Rights or Convertible Securities than this Section 3 would
have if this Section 3 were included in such Rights or Convertible Securities),
then the Exercise Price in effect at the time of such change will be readjusted
to the Exercise Price that would have been in effect at such time had such
Rights or Convertible Securities still outstanding provided for such changed
purchase price, additional consideration, or changed conversion rate, as the
case may be, at the time initially granted, issued, or sold; such adjustment of
the Exercise Price will be made whether the result thereof is to increase or
reduce the Exercise Price then in effect under this Warrant, provided that no
such adjustment shall increase the Exercise Price above the initial Exercise
Price hereof; such adjustments shall be made by the Board of Directors of the
Company who shall promptly provide notice of the new Exercise Price to each
Holder.
(e) Upon the expiration of any Right, or the termination
of any right to convert or exchange any Convertible Security, without the
exercise of such Right, the Exercise Price then in effect hereunder will be
adjusted to the Exercise Price that would have been in effect at the time of
such expiration or termination had such Right or Convertible Security never
been issued, but such subsequent adjustment shall not affect the number of
shares of Common Stock issued upon any exercise of this Warrant prior to the
date such adjustment is made.
(f) If any Common Stock, Rights, or Convertible
Securities are issued or sold or deemed to have been issued or sold for
consideration that includes cash, then the amount of cash consideration
actually received by the Company will be deemed to be the cash portion thereof.
If any Common Stock, Rights, or Convertible Securities are issued or sold or
deemed to have been issued or sold for a consideration part or all of which is
other than cash, then the amount of the consideration other than cash received
by the Company will be the fair value of such consideration as determined by
the Board of Directors of the Company, except where such consideration consists
of securities, in which case the amount of consideration received by the
Company will be the Market Price thereof as of the date of receipt. If any
Common Stock, Rights, or Convertible Securities are issued in connection with
any merger or consolidation in which the Company is the surviving corporation,
then the amount of consideration therefor will be deemed to be the fair value
of such portion of the net assets and business of the non- surviving
corporation as is attributable to such Common Stock, Rights, or Convertible
Securities, as the case may be.
(g) If any Right is issued in connection with the
issuance or sale of other securities of the Company, together comprising one
integrated transaction in which no specific consideration is allocated to such
Right by the parties thereto, the Right will be deemed to have been issued
without consideration.
(h) The number of shares of Common Stock Deemed
Outstanding at any given time does not include shares owned or held by or for
the account of the Company, and the disposition of any shares so owned or held
will be considered an issuance or sale of Common Stock.
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3.3 SUBDIVISION OR COMBINATION OF COMMON STOCK AND STOCK
DIVIDENDS. If the Company shall at any time after the date hereof (a) issue any
shares of Common Stock or Convertible Securities, or any rights to purchase
Common Stock or Convertible Securities, as a dividend upon Common Stock, (b)
issue any shares of Common Stock, in subdivision of outstanding shares of
Common Stock by reclassification or otherwise, or (c) combine outstanding
shares of Common Stock, by reclassification or otherwise, then the Exercise
Price that would apply if purchase rights hereunder were being exercised
immediately prior to such action by the Company shall be adjusted by
multiplying it by a fraction, the numerator of which shall be the number of
shares of Common Stock Deemed Outstanding immediately prior to such dividend,
subdivision, or combination and the denominator of which shall be the number of
shares of Common Stock Deemed Outstanding immediately after such dividend,
subdivision, or combination.
3.4 CERTAIN DIVIDENDS OF DISTRIBUTIONS. If the Company shall
declare a dividend or distribution upon the Common Stock payable otherwise than
out of earnings or earned surplus and otherwise than in Common Stock, Rights or
Convertible Securities, the Exercise Price that would apply if purchase rights
hereunder were being exercised immediately prior to the declaration of such
dividend or distribution shall be reduced by an amount equal, in the case of a
dividend or distribution in cash, to the amount thereof payable per share of
the Common Stock or, in the case of any other dividend or distribution, to the
fair value of such dividend or distribution per share of the Common Stock as
determined in good faith by the Board of Directors of the Company. For
purposes of the foregoing, a dividend or distribution other than in cash shall
be considered payable out of earnings or earned surplus only to the extent that
such earnings or earned surplus are charged an amount equal to the fair value
of such dividend or distribution as determined in good faith by the Board of
Directors of the Company. Such reductions shall take effect as of the date on
which a record is taken for the purpose of such dividend or distribution or, if
a record is not taken, the date as of which the holders of Common Stock of
record entitled to such dividend or distribution are to be determined.
3.5 NO DE MINIMIS ADJUSTMENTS. No adjustment of the Exercise
Price shall be made if the amount of such adjustment would be less than one
cent per share, but in such case any adjustment that otherwise would be
required to be made shall be carried forward and shall be made at the time and
together with the next subsequent adjustment that, together with any adjustment
or adjustments so carried forward, shall amount to not less than one cent per
share.
SECTION 4.
ADJUSTMENT OF NUMBER OF
SHARES ISSUABLE UPON EXERCISE
Upon each adjustment of the Exercise Price pursuant to Section 3
hereof, the Holder of this Warrant shall thereafter (until another such
adjustment) be entitled to purchase, at the adjusted Exercise Price in effect
on the date purchase rights under this Warrant are exercised, the number of
Units, calculated to the nearest number of Units, determined by (a) multiplying
the number of Units purchasable hereunder immediately prior to the adjustment
of the Exercise Price by the Exercise Price in effect immediately prior to such
adjustment, and (b) dividing the product so obtained by the adjusted Exercise
Price in effect on the date of such exercise. The provisions of Subsection 2.4
shall apply, however, so that no fractional Unit Share or fractional Underlying
Warrant shall be issued upon exercise of this Warrant.
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SECTION 5.
EFFECT OF REORGANIZATION,
RECLASSIFICATION, CONSOLIDATION, MERGER, OR SALE
If at any time while this Warrant is outstanding there shall be any
reorganization or reclassification of the capital stock of the Company (other
than a subdivision or combination of shares provided for in Subsection 3.3
hereof), any consolidation or merger of the Company with another corporation
(other than a consolidation or merger in which the Company is the surviving
entity and which does not result in any change in the Common Stock), or any
sale or other disposition by the Company of all or substantially all of its
assets to any other corporation, then the Holder of this Warrant shall
thereafter upon exercise of this Warrant be entitled to receive the number of
Unit Shares, Underlying Warrants or other securities or property of the
Company, or of the successor corporation resulting from such consolidation or
merger, as the case may be, to which the Units (and any other securities and
property) of the Company, deliverable upon the exercise of this Warrant, would
have been entitled upon such reorganization, reclassification of capital stock,
consolidation, merger, sale, or other disposition if this Warrant had been
exercised immediately prior to such reorganization, reclassification of capital
stock, consolidation, merger, sale, or other disposition. In any such case,
appropriate adjustment (as determined in good faith by the Board of Directors
of the Company) shall be made in the application of the provisions set forth in
this Warrant with respect to the rights and interests thereafter of the Holder
of this Warrant to the end that the provisions set forth in this Warrant
(including those relating to adjustments of the Exercise Price and the number
of shares issuable upon the exercise of this Warrant) shall thereafter be
applicable, as near as reasonably may be, in relation to any shares or other
property thereafter deliverable upon the exercise hereof as if this Warrant had
been exercised immediately prior to such reorganization, reclassification of
capital stock, consolidation, merger, sale, or other disposition and the Holder
hereof had carried out the terms of the exchange as provided for by such
reorganization, reclassification of capital stock, consolidation, or merger.
If in any such reorganization, reclassification, consolidation, or merger,
additional Unit Shares or Common Stock shall be issued in exchange, conversion,
substitution, or payment, in whole or in part, for or of a security of the
Company other than Common Stock deliverable from exercise of this Warrant, any
such issue shall be treated as an issue of Common Stock covered by the
provisions of Section 3, with the amount of the consideration received upon the
issue thereof being determined in good faith by the Board of Directors of the
Company. The Company shall not effect any such reorganization, consolidation,
or merger unless, upon or prior to the consummation thereof, the successor
corporation shall assume by written instrument the obligation to deliver to the
Holder hereof such shares of stock or other securities, cash, or property as
such Holder shall be entitled to purchase in accordance with the foregoing
provisions. Notwithstanding any other provisions of this Warrant, in the event
of sale or other disposition of all or substantially all of the assets of the
Company as a part of a plan for liquidation of the Company, all rights to
exercise the Warrant shall terminate upon the earlier of the expiration of the
Exercise Period and 60 days after the Company gives written notice to the
Holder of this Warrant that such sale or other disposition has been
consummated.
SECTION 6.
NOTICE OF ADJUSTMENT
Immediately upon any adjustment of the Exercise Price, or increase or
decrease in the number of Unit Shares and Underlying Warrants purchasable upon
exercise of this Warrant, the Company will send written notice thereof to all
Holders, stating the adjusted Exercise Price and the increased or decreased
number of Unit Shares and Underlying Warrants purchasable upon exercise of this
Warrant and setting forth in reasonable detail the method of calculation for
such adjustment and increase or decrease. When
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appropriate, such notice may be given in advance and included as part of any
notice required to be given pursuant to Section 7 below.
SECTION 7.
PRIOR NOTICE OF CERTAIN EVENTS
If at any time:
(a) the Company shall pay any dividend payable in stock
upon its Common Stock or make any distribution (other than cash dividends) to
the holders of its Common Stock;
(b) the Company shall offer for subscription pro rata to
the holders of its Common Stock any additional shares of stock of any class or
any other rights;
(c) there shall be any reorganization or reclassification
of the capital stock of the Company, any consolidation or merger of the Company
with another corporation, or a sale or disposition of all or substantially all
its assets; or
(d) there shall be a voluntary or involuntary
dissolution, liquidation, or winding up of the Company,
then, in each such case, the Company shall give prior written notice, by hand
delivery or by certified mail, postage prepaid, addressed to the Holder of this
Warrant at the address of such holder as shown on the books of the Company, of
the date on which (i) the books of the Company shall close or a record shall be
taken for such stock dividend, distribution, or subscription rights or (ii)
such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation, or winding up shall take place, as the case may be.
A copy of each such notice shall be sent simultaneously to each transfer agent
of the Company's Common Stock. Such notice shall also specify the date as of
which the holders of Common Stock of record shall participate in said dividend,
distribution, or subscription rights or shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding up, as the case may be. Such written notice shall be
given at least 30 days prior to the record date or the effective date,
whichever is earlier, of the subject action or other event.
If any other event (not listed above) would require adjustment to the
Exercise Price, then the Company shall give prior written notice thereof (in
substance as set forth above) to the Holders, at their addresses and in the
manner provided in Subsection 15.3. Notwithstanding the foregoing, the Company
shall not be required to give prior written notice where it is not reasonably
possible.
SECTION 8.
NEW PRO RATA PURCHASE RIGHTS
If at any time the Company grants, issues, or sells any warrants,
Convertible Securities, or rights to purchase stock, warrants, securities, or
other property pro rata to the record holders of Common Stock (the "Purchase
Rights"), then the Holder of this Warrant will be entitled to acquire, upon the
terms applicable to such Purchase Rights, the aggregate Purchase Rights that
such Holder could have acquired
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if such Holder had held the number of shares of Common Stock acquirable upon
exercise of this Warrant had this Warrant been fully exercised immediately
prior to the date on which a record was taken for the grant, issuance, or sale
of such Purchase Rights, or, if no such record was taken, the date as or which
the record holders of Common Stock were determined for the grant, issuance, or
sale of such Purchase Rights.
SECTION 9.
RESERVATION OF COMMON STOCK
The Company will at all times reserve and keep available such number
of shares of Common Stock as will be sufficient to permit the exercise in full
of all outstanding Warrants and the Underlying Warrants. Upon exercise of this
Warrant and the Underlying Warrants, the Holder will acquire fully paid and
non-assessable ownership rights of the Common Stock, free and clear of any
liens, claims or encumbrances.
SECTION 10.
NO SHAREHOLDER RIGHTS OR OBLIGATION
This Warrant will not entitle the holder hereof to any voting rights
or other rights as a shareholder of the Company. Until the shares of Common
Stock issuable upon exercise of this Warrant and the Underlying Warrants are
recorded as issued on the books and records of the Company's transfer agent,
the Holder shall not be entitled to any voting rights or other rights as a
shareholder; provided, however, the Company uses its best efforts to ensure
that, upon receipt of an Exercise Agreement, the appropriate documentation
necessary to effectuate the exercise of the Warrant and issuance of the Common
Stock is accomplished as expeditiously as possible. No provision of this
Warrant, in the absence of affirmative action by the Holder to purchase Shares,
and no enumeration in this Warrant of the rights or privileges of the Holder,
will give rise to any obligation of such Holder for the Exercise Price of the
Unit Shares and the Underlying Warrants acquirable by exercise hereof or as a
shareholder of the Company.
SECTION 11.
EXCHANGEABLE FOR DIFFERENT DENOMINATIONS
This Warrant is exchangeable, upon the surrender hereof by the Holder
at the principal office of the Company, for new Warrants of like tenor
representing in the aggregate the purchase rights hereunder, and each of such
new Warrants, as set forth on the front page hereof, will represent such
portion of such rights as is designated by the Holder at the time of such
surrender. The date the Company initially issued this Warrant, which is set
forth on the front page hereof, will be deemed to be the "Date of Issuance" of
this Warrant and any option purchase warrant exchanged or substituted herefor,
regardless of the number of times (and dates on which) new certificates
representing the unexpired and unexercised rights formerly represented by this
Warrant are issued.
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SECTION 12.
TRANSFERABILITY
Subject to the transfer conditions referred to in Section 2 or in the
remaining provisions or this Section 12, this Warrant and all rights hereunder
are transferable, in whole or in part, without charge to the Holder, upon
surrender of this Warrant with a properly executed Assignment (in the form of
Exhibit Il hereto) at the principal office of the Company. This Warrant and
the Unit Shares and the Underlying Warrants issued upon exercise hereof may not
be offered, sold, or transferred except in compliance with the Securities Act
of 1933, as amended (the "Act"), and any applicable state securities laws; and
then only against receipt of an agreement of the Person to whom such offer or
sale is made to comply with the provisions of this Section 13 with respect to
any resale or other disposition of such securities; provided that no such
agreement shall be required from any Person purchasing this Warrant or any
underlying security pursuant to a registration statement effective under the
Act. The Holder of this Warrant agrees that, prior to the disposition of any
security purchased on the exercise hereof under circumstances that might
require registration of such security under the Act, or any similar statute
then in effect, the Holder shall give written notice to the Company, expressing
his intention as to such disposition. Promptly upon receiving such notice, the
Company shall present a copy thereof to its securities counsel. If, in the
opinion of such counsel, the proposed disposition does not require registration
of such security under the Act, or any similar statute then in effect, the
Company shall, as promptly as practicable, notify the Holder of such opinion,
whereupon the Holder shall be entitled to dispose of such security in
accordance with the terms of the notice delivered by the Holder to the Company.
The above agreement by the Holder of this Warrant shall not be deemed to limit
or restrict in any respect the exercise of rights set forth in Section 13
hereof.
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SECTION 13.
REGISTRATION RIGHTS
13.1 DEMAND REGISTRATION RIGHTS. At any time during the Exercise
Period, the Holders of Warrants whose holdings thereof comprise a majority of
the Units purchasable upon the exercise of outstanding Warrants and outstanding
shares of Common Stock not previously sold pursuant to a registration statement
as contemplated by this Section 13 (collectively, the "Warrant Securities")
shall have the right to require the Company (a) to prepare and file with the
Commission up to two new registration statements under the Act (or, in lieu of
either, a post-effective amendment or amendments to the Registration
Statement, if then permitted under the Act), covering all or any portion of the
Warrant Securities and to use its best efforts to obtain promptly and maintain
the effectiveness thereof for at least 180 days and (b) to register or qualify
the subject Warrant Securities for sale in up to ten states identified by such
holders. The Company shall bear all expenses incurred in the preparation and
filing of such registration statements or post-effective amendments (and
related state registrations, to the extent permitted by applicable law) and the
furnishing of copies of the preliminary and final prospectus thereof to such
Holders of Warrant Securities.
13.2 PIGGY BACK REGISTRATION RIGHTS. In addition, if at any time
during the Exercise Period, the Company shall prepare and file one or more
registration statements under the Act, with respect to a public offering of
equity or debt securities of the Company, or of any such securities of the
Company held by its security holders, the Company will include in any such
registration statement such information as is required, and such number of
Shares held by the Holders thereof or their respective designees or transferees
as may be requested by them, to permit a public offering of the Shares so
requested; provided, however, that if, in the written opinion of the Company's
managing underwriter, if any, for such offering, the inclusion of the Shares
requested to be registered, when added to the securities being registered by
the Company or the selling security holder(s), would exceed the maximum amount
of the Company's securities that can be marketed without otherwise materially
and adversely affecting the entire offering, then the Company may exclude from
such offering that portion of the Shares requested to be so registered, so that
the total number of securities to be registered is within the maximum number of
shares that, in the opinion of the managing underwriter, may be marketed
without otherwise materially and adversely affecting the entire offering,
provided that the Company shall be required to include in the offering and in
the following order: first, the pro rata number of securities requested by the
Holder along with all other holders of securities requesting registration
pursuant to registration rights which were granted on or prior to the date
hereof and are described in the Company's Registration Statement; and, second,
the pro rata number of securities requested by all other holders of securities
requesting registration pursuant to other registration rights. The Company
shall bear all fees and expenses incurred by it in connection with the
preparation and filing of such registration statement. In the event of such a
proposed registration, the Company shall furnish the then Holders with not less
than thirty (30) days' written notice prior to the proposed date of filing of
such registration statement. The Company shall use its best efforts to ensure
that such registration statement is declared effective and remains effective
until such time as all of the Shares have been registered or may be sold
without registration under the Act or applicable state securities laws and
regulations, and without limitation as to volume, pursuant to Rule 144 of the
Act. The holders of Shares shall exercise the rights provided for in this
Subsection 13.2 by giving written notice to the Company, within twenty (20)
days of receipt of the Company's notice of its intention to file a registration
statement.
13.3 SURVIVAL. The rights and obligations set forth in this
Section 13 shall survive the exercise and surrender of this Warrant.
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SECTION 14.
REGISTRATION UNDER THE SECURITIES ACT
This Warrant and the Unit Shares and Underlying Warrants issuable upon
exercise of this Warrant have not been registered under the Act. Unless and
until so registered, this Warrant and all replacement Warrants shall bear the
following legend:
THIS WARRANT, AND THE SECURITIES ISSUABLE UPON THE EXERCISE OF
THIS WARRANT, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED ("SECURITIES ACT"), AND THEREFORE MAY
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS (i) A
REGISTRATION STATEMENT REGISTERING THIS WARRANT, AND THE
SECURITIES ISSUABLE UPON ITS EXERCISE, HAS BEEN FILED AND
DECLARED EFFECTIVE UNDER THE SECURITIES ACT OR (ii) THE
COMPANY IS SATISFIED THAT NO SUCH POST-EFFECTIVE AMENDMENT OR
OTHER REGISTRATION STATEMENT IS THEN REQUIRED AND THAT THIS
WARRANT AND THE UNDERLYING SECURITIES MAY BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF IN THE MANNER CONTEMPLATED WITHOUT
REGISTRATION UNDER THE SECURITIES ACT.
SECTION 15.
MISCELLANEOUS
15.1 ORIGINAL ISSUE TAXES. The Company will pay all United States,
state and local (but not foreign) original issue taxes, if any, upon the
issuance of this Warrant, the Unit Shares and the Underlying Warrants
deliverable upon exercise hereof.
15.2 AMENDMENT AND WAIVER. Except as otherwise provided herein,
the provisions of this Warrant may be amended, and the Company may take any
action herein prohibited or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
Holders of Warrants representing at least 50% of the shares of Common Stock
obtainable upon the exercise of the Warrants outstanding at the time of such
consent.
15.3 NOTICES. Any notices required to be sent to a Holder of this
Warrant or of any Warrant Securities purchased upon the exercise hereof will be
delivered to the address of such Holder shown on the books of the Company. All
notices referred to herein will be delivered in person or sent by registered or
certified mail, postage prepaid, and will be deemed to have been given when so
delivered in person or on the third business day following the date so sent by
mail.
If to the Holder: ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ Incorporated
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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With a copy to: Broad and ▇▇▇▇▇▇
Miami Center
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, P.A.
If to the Company: UStel, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇
With a copy to: Freshman, Marantz, Orlanski, ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇, Esquire
15.4 DESCRIPTIVE HEADINGS. The descriptive headings of the
sections and paragraphs of this Warrant are inserted for convenience only and
do not constitute a part of this Warrant.
15.5 GOVERNING LAW; ARBITRATION. This Warrant is governed by,
interpreted under and construed in all respects in accordance with the
substantive laws of the State of Florida, without regard to the conflicts of
law provisions thereof, and irrespective of the place of domicile or residence
of the party. In the event of a controversy arising out of the interpretation,
construction, performance or breach of this Warrant, the parties hereby agree
and consent to the jurisdiction and venue of the Courts of the State of
Florida, or the United States District Court for the Southern District of
Florida; and further agree and consent that personal service of process in any
such action or proceeding outside the State of Florida shall be tantamount to
service in person in Florida.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
and attested by its duly authorized officers under its corporate seal.
USTEL, INC., a Minnesota corporation
By:
-------------------------------------------
▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇, Chief Executive Officer
[Corporate Seal]
Attest:
-------------------------------------------
Warter van Biene, Secretary
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EXHIBIT I
EXERCISE AGREEMENT
To: Dated:
The undersigned Record Holder, pursuant to the provisions set forth in
the within Warrant, hereby subscribes for and purchases _____ Units covered by
such Warrant and herewith makes full cash payment of $__________________ for
such Units at the Exercise Price provided by such Warrant.
----------------------------------
(Signature)
----------------------------------
(Print or type name)
----------------------------------
(Address)
----------------------------------
----------------------------------
NOTICE: The signature on this Exercise Agreement must correspond with
the name as written upon the face of the within Warrant, or upon the Assignment
thereof if applicable, in every particular, without alteration, enlargement, or
any change whatsoever, and must be guaranteed by a bank, other than a saving
bank, having an office or correspondent in New York, New York, or Fort
Lauderdale or Miami, Florida, or by a firm having membership on a registered
national securities exchange and an office in New York, New York, or Fort
Lauderdale or Miami, Florida.
SIGNATURE GUARANTEE
Authorized Signature:
--------------------------------------------------------
Name of Bank or Firm:
--------------------------------------------------------
Dated:
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EXHIBIT II
ASSIGNMENT
FOR VALUE RECEIVED, __________________________________________, the
undersigned Holder hereby sells, assigns, and transfers all of the rights of
the undersigned under the within Warrant with respect to the number of Units
covered thereby set forth below, unto the Assignee identified below, and does
hereby irrevocably constitute and appoint____________________________________
to effect such transfer of rights on the books of the Company, with full power
of substitution:
Name of Assignee Address of Assignee No. of Units
---------------- ------------------- ------------
Dated:
-------------------------------- ------------------------------------
(Signature of Holder)
------------------------------------
(Print or type name)
NOTICE: The signature on this Assignment must correspond with the name
as written upon the face of the within Warrant, in every particular, without
alteration, enlargement, or any change whatsoever, and must be guaranteed by a
bank, other than a savings bank, having an office or correspondent in New York,
or New York, Fort Lauderdale or Miami, Florida, or by a firm having membership
on a registered national securities exchange and an office in New York, New
York, or Fort Lauderdale or Miami, Florida.
SIGNATURE GUARANTEE
Authorized Signature:
--------------------------------------------------------
Name of Bank or Firm:
--------------------------------------------------------
Dated:
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