AMENDED AND RESTATED WARRANT
(▇▇▇▇▇▇▇ ▇▇▇▇▇)
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
THERE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
UNLESS THERE IS (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED,
(iii) RECEIPT OF A NO-ACTION LETTER(S) FROM THE APPROPRIATE
GOVERNMENTAL AUTHORITY(IES), OR (iv) OTHERWISE COMPLYING WITH THE
PROVISIONS OF SECTION 7 OF THE WARRANT UNDER WHICH THESE SECURITIES
WERE ISSUED DIRECTLY OR INDIRECTLY.
USTEL, INC.
WARRANT TO PURCHASE 9,565,953 SHARES
OF COMMON STOCK (this "WARRANT")
UStel, Inc., a Minnesota corporation (the "COMPANY"), hereby certifies
that, for value received, ▇▇▇▇▇▇▇, Sachs & Co., a New York limited partnership
("HOLDER"), or its registered assigns, is the registered holder of warrants (the
"WARRANTS") to subscribe for and purchase an aggregate of Nine Million Five
Hundred Sixty-Five Thousand Nine Hundred Fifty-Three (9,565,953) shares of the
fully paid and nonassessable Common Stock (as adjusted pursuant to SECTION 4
hereof, the "WARRANT SHARES") of the Company, at a purchase price per share as
follows: (a) Seven Million Eight Hundred Ninety-One Thousand One Hundred Six
(7,891,106) shares at a per share purchase price equal to Twenty-One Cents
($.21) and (b) One Million Six Hundred Seventy-Four Thousand Eight Hundred
Forty-Seven (1,674,847) shares at a per share purchase price equal to One Cent
($.01) (both of such prices, as adjusted pursuant to SECTION 4 hereof, the
"WARRANT PRICE"), subject to the provisions and upon the terms and conditions
hereinafter set forth. As used herein, (a) the term "COMMON STOCK" shall mean
the Company's presently authorized Common Stock, par value $.001 per share, and
any stock into or for which such Common Stock may hereafter be converted or
exchanged, (b) the term "DATE OF GRANT" shall mean November 25, 1998, and
(c) the term "OTHER WARRANTS" shall mean any warrant issued upon transfer or
partial exercise of this Warrant. The term "WARRANT" as used herein shall be
deemed to include Other Warrants unless the context hereof or thereof clearly
requires otherwise.
These Warrants are amended and restated from, and are being issued in
exchange for, those certain Warrants of the Company originally issued to Holder
on June 25, 1998 (the "OLD WARRANTS"). The Old Warrants were originally issued
pursuant to that certain Loan and Security Agreement dated as of June 25, 1998
(the "LOAN AGREEMENT"), by and among the Company,
Arcada Communications, Inc., a Washington corporation ("ARCADA"), Coast Business
Credit, a Division of Southern Pacific Bank and ▇▇▇▇▇▇▇ ▇▇▇▇▇ Credit Partners,
L.P., a Bermuda limited partnership.
1. TERM. The purchase right represented by this Warrant is
exercisable, in whole or in part, at any time and from time to time from the
Date of Grant through and including the close of business (i.e., 5:00 p.m. New
York time) on November 25, 2003 (the "EXPIRATION DATE"); PROVIDED, HOWEVER, that
in the event that any portion of this Warrant is unexercised as of the
Expiration Date, the terms of SECTION 2(b), below, shall apply.
2. EXERCISE.
a. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT.
Subject to SECTION 1 hereof, the purchase right represented by this Warrant may
be exercised by the holder hereof, in whole or in part and from time to time, by
the surrender of this Warrant (with the notice of exercise form attached hereto
as EXHIBIT A duly executed) at the principal office of the Company and by the
payment to the Company of an amount equal to the lowest then applicable Warrant
Prices multiplied by the number of Warrant Shares then being purchased. The
person or persons in whose name(s) any certificate(s) representing shares of
Common Stock shall be issuable upon exercise of this Warrant shall be deemed to
have become the holder(s) of record of, and shall be treated for all purposes as
the record holder(s) of, the shares represented thereby (and such shares shall
be deemed to have been issued) immediately prior to 5:00 p.m. (New York time) on
the date or dates upon which this Warrant is exercised. In the event of any
exercise of the rights represented by this Warrant, certificates for the shares
of Common Stock so purchased shall be delivered to the holder hereof as soon as
possible and in any event within thirty (30) days after such exercise and,
unless this Warrant has been fully exercised (including without limitation,
exercise pursuant to SECTION 2(b) below), a new Warrant representing the portion
of the Warrant Shares, if any, with respect to which this Warrant shall not then
have been exercised shall also be issued to the holder hereof as soon as
possible and in any event within such thirty (30)-day period.
b. AUTOMATIC EXERCISE. In the event that any portion of this
Warrant is unexercised as of the Expiration Date, such portion of this Warrant
shall be deemed to have been exercised automatically immediately prior to 5:00
p.m. (New York time) on the Expiration Date (or, in the event that the
Expiration Date is not a business day, the immediately preceding business day),
or, if the Expiration Date is due to a Sale, immediately prior to the
consummation of such Sale (the "AUTOMATIC EXERCISE DATE") and the person
entitled to receive the shares of Common Stock issuable upon such exercise shall
be treated for all purposes as the holder of record of such Warrant Shares as of
5:00 p.m. (New York time), or, in the event of a Sale, as of immediately prior
to the consummation of the Sale, on such Automatic Exercise Date. This Warrant
shall be deemed to be surrendered to the Company on the Automatic Exercise Date,
by virtue of this SECTION 2(b) and without any action by the holder of this
Warrant or any other person, and payment to the Company of the then applicable
Warrant Prices multiplied by the number of Warrant Shares then being purchased
shall be deemed to be made pursuant to the terms of SECTION 10.2 below (without
payment by the holder of any exercise price or any cash or other consideration).
As promptly as practicable on or after the Automatic Exercise Date and in any
event within thirty (30) days thereafter, the Company at its expense shall issue
and deliver to the person or persons entitled to
2.
receive the same a certificate or certificates for the number of Warrant Shares
issuable upon such exercise.
3. STOCK FULLY PAID; RESERVATION OF SHARES. All Warrant Shares that
may be issued upon the exercise of the rights represented by this Warrant will,
upon issuance pursuant to the terms and conditions herein, be fully paid and
nonassessable, and free from all taxes, liens, charges, and pre-emptive rights
with respect to the issue thereof. The Company shall pay all transfer taxes, if
any, attributable to the issuance of the Warrant Shares upon the exercise of
this Warrant. During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized and
reserved for the purpose of the issue upon exercise of the purchase rights
evidenced by this Warrant, a sufficient number of shares of its Common Stock to
provide for the exercise of the rights represented by this Warrant.
4. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number and
kind of securities purchasable upon the exercise of this Warrant and the Warrant
Price(s) shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
a. ADJUSTMENT FOR INITIAL ERRORS. The Company hereby
acknowledges that the Nine Million Five Hundred Sixty-Five Thousand Nine Hundred
Fifty-Three (9,565,953) Warrant Shares constituting the initial number of
securities purchasable upon the exercise of the Warrants was based upon the
Company's representations as to the amount of outstanding Common Stock (on a
fully diluted basis) on the Date of Grant, as set forth on Schedule 5.8 to the
Loan Agreement ("SCHEDULE 5.8"). If for any reason it shall hereafter be
determined by the holder of any outstanding Warrant that the actual amount of
Common Stock outstanding as of the Date of Grant (on a fully diluted basis)
differs from that set forth on Schedule 5.8, then the holder may notify the
Company of such determination and the Company shall forthwith reissue all of the
Warrants with an appropriate proportional adjustment in said number to be
effective from the Date of Grant, PROVIDED that such adjustment shall be made
only if it results in an increase to the number of Warrant Shares hereunder.
b. RECLASSIFICATION. In case of any reclassification, change
or conversion of securities of the class issuable upon exercise of this Warrant
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination), the
Company shall duly execute and deliver to the holder of this Warrant a new
Warrant (in form and substance satisfactory to the holder of this Warrant), so
that the holder of this Warrant shall have the right to receive, at a total
purchase price not to exceed that payable upon the exercise of the unexercised
portion of this Warrant, and in lieu of the shares of Common Stock theretofore
issuable upon exercise of this Warrant, the kind and amount of shares of stock,
other securities, money and property receivable upon such reclassification,
change or conversion by a holder of the number of shares of Common Stock then
purchasable under this Warrant. Such new Warrant shall provide for adjustments
that shall be as nearly equivalent as may be practicable to the adjustments
provided for in this SECTION 4. The provisions of this SECTION 4(b) shall
similarly apply to successive reclassification, changes and conversions.
c. SUBDIVISION OR COMBINATION OF SHARES. If the Company at any
time while this Warrant remains outstanding and unexpired shall subdivide or
combine its outstanding shares of Common Stock, the Warrant Price shall be
proportionately decreased in the case of a
3.
subdivision or increased in the case of a combination, effective as of 5:00 p.m.
(New York time) on the date the subdivision or combination becomes effective.
d. STOCK DIVIDENDS AND OTHER DISTRIBUTIONS. If the Company at
any time while this Warrant is outstanding and unexpired shall (i) pay a
dividend with respect to Common Stock payable in Common Stock, or (ii) make any
other distribution with respect to Common Stock (except any distribution
specifically provided for in the foregoing SECTION 4(b) and SECTION 4(c)) of
Common Stock, then the Warrant Price(s) shall be adjusted, from and after the
date of determination of stockholders entitled to receive such dividend or
distribution, to that price determined by multiplying the then applicable
Warrant Price(s) in effect immediately prior to such date of determination by a
fraction (i) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such dividend or distribution, and
(ii) the denominator of which shall be the total number of shares of Common
Stock outstanding immediately after such dividend or distribution.
e. RIGHTS OFFERINGS. In case the Company shall, at any time
after the Date of Grant, issue rights, options or warrants to any person or
persons who are at the time of such issuance the holders of equity securities of
the Company, entitling them to subscribe for or purchase shares of Common Stock
(or securities convertible or exchangeable into Common Stock) at a price per
share of Common Stock as determined in accordance with SECTION 4(i) below (or
having a conversion or exchange price per share of Common Stock if a security
convertible or exchangeable into Common Stock) less than the fair market value
per share of Common Stock on the record date for such issuance (or the date of
issuance, if there is no record date), the Warrant Price(s) to be in effect on
and after such record date (or issuance date, as the case may be) shall be
determined by multiplying the then applicable Warrant Price(s) in effect
immediately prior to such record date (or issuance date, as the case may be) by
a fraction (i) the numerator of which shall be the number of shares of Common
Stock outstanding on such record date (or issuance date, as the case may be)
plus the number of shares of Common Stock which the aggregate offering price of
the total number of shares of such Common Stock so to be offered (or the
aggregate initial exchange or conversion price of the exchangeable or
convertible securities so to be offered) would purchase at such fair market
value on such record date (or issuance date, as the case may be) and (ii) the
denominator of which shall be the number of shares of Common Stock outstanding
on such record date (or issuance date, as the case may be) plus the number of
additional shares of Common Stock to be offered for subscription or purchase (or
into which the convertible securities to be offered are initially exchangeable
or convertible). In case such subscription price may be paid in part or in
whole in a form other than cash, the fair market value of such consideration
shall be determined by the Board of Directors of the Company in good faith as
set forth in a duly adopted board resolution certified by the Company's
Secretary or Assistant Secretary, PROVIDED, that in the event the Board of
Directors is unable to make such a determination or holders of at least
fifty-one percent (51%) of the Warrant Shares issuable under this Warrant
disagree in writing with such determination, then the fair market value of such
consideration shall be determined in the same manner as a Valuation under
SECTION 4(i) below. Such adjustment shall be made successively whenever such an
issuance occurs; and in the event that such rights, options, warrants, or
convertible or exchangeable securities are not so issued or expire or cease to
be convertible or exchangeable before they are exercised, converted, or
exchanged (as the case may be), then the Warrant Price(s) shall again be
adjusted to be the Warrant Price(s) that would then be in effect if such
issuance had not occurred, but such
4.
subsequent adjustment shall not affect the number of Warrant Shares issued upon
any exercise of this Warrant prior to the date such subsequent adjustment is
made.
f. SPECIAL DISTRIBUTIONS. In case the Company shall fix a
record date for the making of a distribution to all holders of shares of Common
Stock (including any such distribution made in connection with a consolidation
or merger in which the Company is the surviving corporation) or evidences of
indebtedness or assets (other than dividends and distributions referred to in
SECTION 4(c) and SECTION 4(d) above and other than cash dividends) or of
subscription rights, options, warrants, or exchangeable or convertible
securities containing the right to subscribe for or purchase shares of any class
of equity securities of the Company (excluding those referred to in SECTION 4(e)
above), the Warrant Price(s) to be in effect on and after such record date shall
be adjusted by multiplying the then applicable Warrant Price(s) in effect
immediately prior to such record date by a fraction (i) the numerator of which
shall be the fair market value per share of Common Stock on such record date,
less the fair value (as determined by the Board of Directors of the Company in
good faith as set forth in a duly adopted board resolution certified by the
Company's Secretary or Assistant Secretary) of the portion of the assets or
evidences of indebtedness so to be distributed or of such subscription rights,
options, warrants, or exchangeable or convertible securities applicable to one
(1) share of the Common Stock outstanding as of such record date, PROVIDED, that
in the event the Board of Directors is unable to make such a determination or
holders of at least fifty-one percent (51%) of the Warrant Shares issuable under
this Warrant disagree in writing with such determination, then the fair value of
such consideration shall be determined in the same manner as a Valuation under
SECTION 4(i) below, and (ii) the denominator of which shall be such fair market
value per share of Common Stock. Such adjustment shall be made successively
whenever such a record date is fixed; and in the event that such distribution is
not so made, the Warrant Price(s) shall again be adjusted to be the Warrant
Price(s) which would then be in effect if such record date had not been fixed,
but such subsequent adjustment shall not affect the number of Warrant Shares
issued upon any exercise of this Warrant prior to the date such subsequent
adjustment was made.
g. OTHER ISSUANCES OF SECURITIES. In case the Company or any
subsidiary shall, at any time after the Date of Grant, issue shares of Common
Stock, or rights, options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase shares of Common Stock
(excluding (i) shares, rights, options, warrants, or convertible or exchangeable
securities described in SECTION 11(f) or SECTION 11(g) hereof outstanding on the
Date of Grant, or issued in any of the transactions described in SECTION 4(c),
4(d), 4(e) or 4(f) above, (ii) shares issued upon the exercise of such rights,
options or warrants or upon conversion or exchange of such convertible or
exchangeable securities, (iii) the Warrants and any shares issued upon exercise
thereof, (iv) up to Eight Hundred Fifty Thousand (850,000) shares of Common
Stock issued or issuable to directors, officers, employees or consultants of the
Company or any subsidiary in connection with their service as directors,
officers, employees or consultants pursuant to any stock grant, stock option,
warrant or other right (the "EMPLOYEE SHARES")), at a price per share of Common
Stock (determined in the case of such rights, options, warrants, or convertible
or exchangeable securities by dividing (x) the total amount receivable by the
Company in consideration of the sale and issuance of such rights, options,
warrants, or convertible or exchangeable securities, plus the total minimum
consideration payable to the Company upon exercise, conversion, or exchange
thereof by (y) the total maximum number of shares of Common Stock covered by
such rights, options, warrants, or convertible or exchangeable securities) lower
5.
than the fair market value per share of Common Stock (determined in accordance
with SECTION 4(i) below) on the date the Company fixes the offering price of
such shares, rights, options, warrants, or convertible or exchangeable
securities, then the then applicable Warrant Price(s) shall be adjusted so as to
equal the price(s) determined by multiplying the Warrant Price(s) in effect
immediately prior thereto by a fraction (i) the numerator of which shall be the
sum of (A) the number of shares of Common Stock outstanding immediately prior to
such sale and issuance plus (B) the number of shares of Common Stock which the
aggregate consideration received (determined as provided below) for such sale or
issuance would purchase at such fair market value per share, and (ii) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such sale and issuance. Such adjustment shall be
made successively whenever such an issuance is made. For the purposes of such
adjustment, the maximum number of shares of Common Stock which the holder of any
such rights, options, warrants or convertible or exchangeable securities shall
be entitled to subscribe for or purchase shall be deemed to be issued and
outstanding as of the date of such sale and issuance and the consideration
received by the Company therefor shall be deemed to be the consideration
received by the Company for such rights, options, warrants, or convertible or
exchangeable securities, plus the minimum consideration or premium stated in
such rights, options, warrants, or convertible or exchangeable securities to be
paid for the shares of Common Stock covered thereby. In case the Company shall
sell and issue shares of Common Stock, or rights, options, warrants, or
convertible or exchangeable securities containing the right to subscribe for or
purchase shares of Common Stock for a consideration consisting, in whole or in
part, of property other than cash or its equivalent, then in determining the
price per share of Common Stock and the consideration received by the Company
for purposes of the first sentence of this SECTION 4(g), the Board of Directors
of the Company shall determine, in good faith, the fair value of said property,
and such determination shall be described in a duly adopted board resolution
certified by the Company's Secretary or Assistant Secretary, PROVIDED, that in
the event the Board of Directors is unable to make such a determination or
holders of at least fifty-one percent (51%) of the Warrant Shares issuable under
this Warrant disagree in writing with such determination, then the fair value of
such consideration shall be determined in the same manner as a Valuation under
SECTION 4(i) below. In case the Company shall sell and issue rights, options,
warrants, or convertible or exchangeable securities containing the right to
subscribe for or purchase shares of Common Stock together with one (1) or more
other securities as a part of a unit at a price per unit, then in determining
the price per share of Common Stock and the consideration received by the
Company for purposes of the first sentence of this SECTION 4(g), the Board of
Directors of the Company shall determine, in good faith, which determination
shall be described in a duly adopted board resolution certified by the Company's
Secretary or Assistant Secretary, the fair value of the rights, options,
warrants, or convertible or exchangeable securities then being sold as part of
such unit, PROVIDED, that in the event the Board of Directors is unable to make
such a determination or holders of at least fifty-one percent (51%) of the
Warrant Shares issuable under this Warrant disagree in writing with such
determination, then the fair value of such consideration shall be determined in
the same manner as a Valuation under SECTION 4(i) below. Such adjustment shall
be made successively whenever such an issuance occurs, and in the event that
such rights, options, warrants, or convertible or exchangeable securities expire
or cease to be convertible or exchangeable before they are exercised, converted,
or exchanged (as the case may be), then the Warrant Price(s) shall again be
adjusted to the Warrant Price(s) that would then be in effect if such sale and
issuance had not occurred, but such subsequent adjustment shall not affect the
number of
6.
Warrant Shares issued upon any exercise of the Warrant prior to the date such
subsequent adjustment is made.
h. ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment in the
Warrant Price(s), the number of Warrant Shares purchasable hereunder shall be
adjusted, to the nearest whole share, to the product obtained by multiplying the
number of Warrant Shares purchasable immediately prior to such adjustment in the
Warrant Price(s) by a fraction, the numerator of which shall be the then
applicable Warrant Price(s) in effect immediately prior to such adjustment and
the denominator of which shall be the Warrant Price(s) in effect immediately
thereafter.
i. DETERMINATION OF FAIR MARKET VALUE. For purposes of those
provisions of this Warrant requiring a determination in accordance with this
SECTION 4(i), "FAIR MARKET VALUE" of a share of Common Stock as of a particular
date (the "DETERMINATION DATE") shall mean (i) if shares of Common Stock are
traded on a national securities exchange (an "EXCHANGE"), the weighted average
of the closing prices of a share of the Common Stock of the Company on the last
five (5) trading days prior to the Determination Date reported on such Exchange
as reported in THE WALL STREET JOURNAL, (ii) if shares of Common Stock are not
traded on an Exchange but trade in the over-the-counter market and such shares
are quoted on the National Association of Securities Dealers Automated
Quotations System ("NASDAQ"), (A) the average of the last sale prices reported
on NASDAQ or (B) if such shares are an issue for which last sale prices are not
reported on NASDAQ, the average of the closing bid and ask prices, in each case
on the last five (5) trading days (or if the relevant price or quotation did not
exist on any of such days, the relevant price or quotation on the next preceding
business day on which there was such a price or quotation) prior to the
Determination Date as reported in THE WALL STREET JOURNAL, or (iii) if no price
can be determined on the basis of the above methods of valuation, then the
judgment of valuation shall be determined in good faith by the Board of
Directors of the Company, which determination shall be described in a duly
adopted board resolution certified by the Company's Secretary or Assistant
Secretary. If the Board of Directors of the Company is unable to determine any
Valuation (as defined below), or if the holders of at least fifty-one percent
(51%) of the Warrant Shares issuable under this Warrant (the "REQUESTING
HOLDERS") disagree with the Board's determination of any Valuation by written
notice delivered to the Company within five (5) business days after the
determination thereof by the Board of Directors of the Company is communicated
to holders of the Warrants affected thereby, which notice specifies a
majority-in-interest of the Requesting Holders' determination of such Valuation,
then the Company and a majority-in-interest of the Requesting Holders shall
select a mutually acceptable investment banking firm of national reputation
which has not had a material relationship with the Company or any officer of the
Company within the preceding two (2) years, which shall determine such
Valuation. Such investment banking firm's determination of such Valuation shall
be final, binding and conclusive on the Company and the holders of all of the
Warrants issued hereunder and then outstanding. If the Board of Directors of
the Company was unable to determine such Valuation, all costs and fees of such
investment banking firm shall be borne by the Company. If the Requesting
Holders disagreed with the Board's determination of such Valuation, the party
whose determination of such Valuation differed from the Valuation determined by
such investment banking firm by the greatest amount shall bear all costs and
fees of such investment banking firm. For purposes of this SECTION 4(i), the
term "VALUATION" shall mean the determination, to be made initially by the Board
of Directors of the Company, of the fair market value per share of Common Stock
pursuant to clause (iii) above.
7.
5. NOTICE OF ADJUSTMENTS. Whenever the Warrant Price(s) or the
number of Warrant Shares purchasable hereunder shall be adjusted pursuant to
SECTION 4 hereof, the Company shall make a certificate signed by its chief
financial officer 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 Warrant Price(s) and the number of Warrant Shares
purchasable hereunder after giving effect to such adjustment, which shall be
mailed (without regard to SECTION 14 hereof, by first class mail, postage
prepaid) to the holder of this Warrant.
6. FRACTIONAL SHARES. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor based on the fair market
value (as determined in accordance with SECTION 4(i) above) of a share of Common
Stock on the date of exercise.
7. COMPLIANCE WITH SECURITIES ACT; DISPOSITION OF WARRANT OR WARRANT
SHARES.
a. COMPLIANCE WITH SECURITIES ACT. The holder of this Warrant,
by acceptance hereof, agrees that this Warrant and the shares of Common Stock to
be issued upon exercise hereof are being acquired for investment and that such
holder will not offer, sell or otherwise dispose of this Warrant, or any shares
of Common Stock to be issued upon exercise hereof except under circumstances
which will not result in a violation of the Securities Act of 1933, as amended
(the "ACT"). Upon exercise of this Warrant, the holder hereof shall confirm in
writing, by executing the form attached as Schedule 1 to EXHIBIT A hereto, that
the shares of Common Stock so purchased are being acquired for investment and
not with a view toward distribution or resale. This Warrant and all shares of
Common Stock issued upon exercise of this Warrant (unless registered under the
Act) shall be stamped or imprinted with a legend in substantially the following
form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE
OR DISPOSITION MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER,
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED, (iii) RECEIPT OF A NO-ACTION LETTER(S) FROM THE APPROPRIATE
GOVERNMENTAL AUTHORITY(IES), OR (iv) OTHERWISE COMPLYING WITH THE
PROVISIONS OF SECTION 7 OF THE WARRANT UNDER WHICH THESE SECURITIES WERE
ISSUED DIRECTLY OR INDIRECTLY."
In addition, in connection with the issuance of this Warrant, the
holder specifically represents to the Company by acceptance of this Warrant as
follows:
(1) The holder is aware of the Company's business affairs
and financial condition, and has acquired information about the Company
sufficient to reach an informed and knowledgeable decision to acquire this
Warrant. The holder is acquiring this Warrant for its own account for
investment purposes only and not with a view to, or for the resale in connection
with, any "distribution" thereof for purposes of the Act.
8.
(2) The holder understands that this Warrant and the
Warrant Shares have not been registered under the Act in reliance upon a
specific exemption therefrom, which exemption depends upon, among other things,
the bona fide nature of the holder's investment intent as expressed herein. In
this connection, the holder understands that, in the view of the Securities and
Exchange Commission (the "SEC"), the statutory basis for such exemption may be
unavailable if the holder's representation was predicated solely upon a present
intention to hold the Warrant and the Warrant Shares for the minimum capital
gains period specified under applicable tax laws, for a deferred sale, for or
until an increase or decrease in the market price of the Warrant and the Warrant
Shares, or for a period of one (1) year or any other fixed period in the future.
(3) The holder further understands that this Warrant and
the Warrant Shares must be held indefinitely unless subsequently registered
under the Act and any applicable state securities laws, or unless exemptions
from registration are otherwise available.
(4) The holder is aware of the provisions of Rule 144 and
144A, promulgated under the Act, which, in substance, permit limited public
resale of "restricted securities" acquired, directly or indirectly, from the
issuer thereof (or from an affiliate of such issuer), in a non-public offering
subject to the satisfaction of certain conditions, if applicable, including,
among other things: the availability of certain public information about the
Company, the resale occurring not less than one (1) year after the party has
purchased and paid for the securities to be sold; the sale being made through a
broker in an unsolicited "broker's transaction" or in transactions directly with
a market maker (as said term is defined under the Securities Exchange Act of
1934, as amended) and the amount of securities being sold during any three-month
period not exceeding the specified limitations stated therein.
(5) The holder further understands that at the time it
wishes to sell this Warrant and the Warrant Shares there may be no public market
upon which to make such a sale, and that, even if such a public market then
exists, the Company may not be satisfying the current public information
requirements of Rule 144 and 144A, and that, in such event, the holder may be
precluded from selling this Warrant and the Warrant Shares under Rule 144 and
144A even if the one (1)-year minimum holding period had been satisfied.
(6) The holder further understands that in the event all of
the requirements of Rule 144 and 144A are not satisfied, registration under the
Act, compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 and 144A is not
exclusive, the Staff of the SEC has expressed its opinion that persons proposing
to sell private placement securities other than in a registered offering and
otherwise than pursuant to Rule 144 and 144A will have a substantial burden of
proof in establishing that an exemption from registration is available for such
offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk.
b. DISPOSITION OF WARRANT OR WARRANT SHARES. With respect to
any offer, sale or other disposition of this Warrant, or any Warrant Shares
acquired pursuant to the exercise of this Warrant prior to registration of such
Warrant or Warrant Shares, the holder hereof and each subsequent holder of this
Warrant agrees to give written notice to the Company prior thereto, describing
briefly the manner thereof, together with a written opinion of such holder's
counsel, if reasonably requested by the Company, to the effect that such offer,
sale or other disposition may be
9.
effected without registration or qualification (under the Act as then in effect
or any federal or state law then in effect) of this Warrant or such Warrant
Shares and indicating whether or not under the Act certificates for this Warrant
or such Warrant Shares to be sold or otherwise disposed of require any
restrictive legend as to applicable restrictions on transferability in order to
ensure compliance with applicable law. Promptly upon receiving such written
notice and reasonably satisfactory opinion, if so requested, the Company, as
promptly as practicable, shall notify such holder that such holder may sell or
otherwise dispose of this Warrant or such Warrant Shares, all in accordance with
the terms of the notice delivered to the Company. If a determination has been
made pursuant to this SECTION 7(b) that the opinion of counsel for the holder is
not reasonably satisfactory to the Company, the Company shall so notify the
holder promptly after such determination has been made. The foregoing
notwithstanding, this Warrant or such Warrant Shares may, as to such federal
laws, be offered, sold or otherwise disposed of in accordance with Rule 144 and
144A under the Act, provided that the Company shall have been furnished with
such information as the Company may reasonably request to provide a reasonable
assurance that the provisions of Rule 144 and 144A have been satisfied. Each
certificate representing this Warrant or the Warrant Shares thus transferred
(except a transfer pursuant to Rule 144) shall bear a legend as to the
applicable restrictions on transferability in order to ensure compliance with
such laws, unless in the aforesaid opinion of counsel for the holder, such
legend is not required in order to ensure compliance with such laws. The
Company may issue stop transfer instructions to its transfer agent or, if acting
as its own transfer agent, the Company may stop transfer on its corporate books,
in connection with such restrictions.
8. RIGHTS AS STOCKHOLDERS; INFORMATION. No holder of this Warrant,
as such, shall be entitled to vote or receive dividends or be deemed the holder
of Common Stock or any other securities of the Company which may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained
herein be construed to confer upon the holder of this Warrant, as such, any of
the rights of a stockholder of the Company or any right to vote for the election
of the directors or upon any matter submitted to stockholders at any meeting
thereof, or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until this Warrant shall have been exercised
and the Warrant Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein. The foregoing notwithstanding, the Company
will transmit to the holder of this Warrant such information, documents and
reports as are generally distributed to the holders of any class or series of
the securities of the Company concurrently with the distribution thereof to the
stockholders.
9. REGISTRATION RIGHTS.
9.1 DEMAND REGISTRATION RIGHTS.
a. SHELF REGISTRATION. The Company covenants and agrees that
at any time after receipt of a written request (a "SHELF REGISTRATION REQUEST")
from the holder(s) of Warrant Shares and/or this Warrant (collectively, the
"SECURITYHOLDERS") constituting at least twenty-five percent (25%) of the
Warrant Shares (determined on an as-exercised basis) to have the Company
register the Warrant Shares for sale on a continuous basis pursuant to Rule 415
under the Act, then the Company shall: (i) promptly deliver written notice (the
"SHELF REGISTRATION NOTICE") to all other Securityholders of the Company's
receipt of the Shelf Registration Request; (ii) file with the SEC a registration
statement on Form S-3 or any successor form or registration to such form, or,
10.
if the Company is ineligible for Form ▇-▇, ▇▇▇▇ ▇-▇ or any successor form of
registration to such form, for an offering to be made on a continuous basis
pursuant to Rule 415 (the "SHELF REGISTRATION STATEMENT") covering all of the
outstanding Warrant Shares (determined on an as-exercised basis) (the
"REGISTRABLE SECURITIES"), within forty-five (45) days of delivery of the Shelf
Registration Request, (iii) shall use its best efforts to cause such
registration statement to be declared effective within ninety (90) days of
delivery of the Shelf Registration Notice and (iv) shall use its best efforts,
including but not limited to the filing of any and all supplements and
amendments to the Shelf Registration Statement required under applicable rules,
regulations or instructions or reasonably requested by the holders of a majority
of the shares then registered under the Shelf Registration Statement, to keep
the Shelf Registration Statement effective under the Act until all of the
Warrant Shares so registered have been sold, subject to SECTION 9.3(b) below and
applicable law.
B. OTHER DEMAND REGISTRATIONS. The Company covenants and
agrees that in the event that it fails to file and cause to become effective a
Shelf Registration Statement covering all of the Registrable Securities within
one hundred eighty (180) days after delivery of a Shelf Registration Request, or
if it fails to keep such Shelf Registration Statement continuously effective
until all of the Registrable Securities are sold (subject to SECTION 9.3(b)
hereof), then at any time after receipt of a written request (a "DEMAND
REGISTRATION REQUEST") from Securityholders holding at least twenty-five percent
(25%) of the Registrable Securities stating that such Securityholders desire and
intend to have the Company register all or a portion of the Registrable
Securities held by them on Form S-3, or any successor form of registration to
such form, or, if the Company is ineligible therefore, Form S-1, or any
successor form of registration to such form, the Company shall give notice (the
"REGISTRATION NOTICE") to all of the Securityholders within thirty (30) days of
the Company's receipt of such registration request, the Company shall cause to
be included in such registration all Registrable Securities requested to be
included therein by any such Securityholder within fifteen (15) days after such
Registration Notice is effective (subject to the provisions of the final
sentence of this SECTION 9.1(a)). After such fifteen (15)-day period, the
Company shall file as promptly as practicable a registration statement and use
its reasonable best efforts to cause such registration statement to become
effective under the Act and remain effective for six (6) months or such shorter
period as may be required if all such Registrable Securities covered by such
registration statement are sold prior to the expiration of such six (6)-month
period; PROVIDED, HOWEVER, that the Company shall not be obligated to effect any
such registration pursuant to this SECTION 9.1(b) after the Company has effected
two (2) such registrations pursuant to this SECTION 9.1. For purposes of this
SECTION 9, a registration shall not be deemed to have been effected unless a
registration statement including at least fifty percent (50%) of the Registrable
Shares requested to be included therein has been declared effective and, subject
to SECTION 9.3(b) hereof, remained effective for a period of six (6) months (or
such shorter period as is permitted in the second sentence of this
SECTION 9.1(b)). The foregoing notwithstanding, in the event of an underwritten
offering pursuant to this SECTION 9.1(b), if the managing underwriter of such
offering shall advise the Securityholders in writing that, in its opinion, the
distribution of a specified portion of the securities requested to be included
in the registration would materially adversely affect the distribution of such
securities by increasing the aggregate amount of the offering in excess of the
maximum amount of securities which such managing underwriter believes can
reasonably be sold in the contemplated distribution, then the securities to be
included in the registration shall be included in the following order:
(i) first, pro rata among all of the Registrable Securities requested to be
included therein by the Securityholders according to the number of Registrable
Securities requested
11.
to be included by each such Securityholder requesting inclusion therein, and
(ii) second, such other securities requested to be included therein by the
Company and the holders of such other securities, pro rata among the Company and
the holders of such other securities according to the number of securities
requested to be included by the Company and each such holder requesting
inclusion therein. For purposes of this SECTION 9.1(b), the Securityholders who
have requested registration of Common Stock to be acquired upon the exercise of
Warrants not theretofore exercised shall furnish the Company with an undertaking
that they or the underwriters or other persons to whom such Warrants will be
transferred have undertaken to exercise such Warrants and to sell, transfer or
otherwise dispose of the Shares received upon exercise of such Warrants in such
registration.
9.2 INCIDENTAL REGISTRATION.
a. The Company covenants and agrees with the Securityholders
that in the event that the Company proposes after the Date of Grant to file a
registration statement under the Act with respect to any of its equity
securities (other than pursuant to registration statements on Form S-4 or Form
S-8 or any successor or similar forms), whether or not for its own account, then
the Company shall give written notice of such proposed filing to all
Securityholders promptly (and in any event at least twenty (20) days before the
anticipated filing date). Such notice shall offer to such Securityholders,
together with others who have similar rights, the opportunity to include in such
registration statement such number of Registrable Securities as they may request
(other than Registrable Securities already registered pursuant to a Shelf
Registration Statement). The Company shall direct and use its reasonable best
efforts to cause the managing underwriter of a proposed underwritten offering
(unless the offering is an underwritten offering of a class of the Company's
equity securities other than Common Stock and the managing underwriter has
advised the Company in writing that, in its opinion, the inclusion in such
offering of Common Stock would materially adversely affect the distribution of
such offering) to permit the holders of Registrable Securities requested to be
included in the registration to include such Registrable Securities in the
proposed offering and the Company shall use its reasonable best efforts to
include such Registrable Securities in such proposed offering on the same terms
and conditions as any similar securities of the Company included therein. If
the offering of which the Company gives notice is a public offering involving an
underwriter, the right of a Securityholder to registration pursuant to this
SECTION 9.2 shall be conditioned upon such Securityholder's participation in
such underwriting and the inclusion of the Registrable Securities to be sold by
such Securityholder in the underwriting. All Securityholders proposing to
distribute Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the representative of the
underwriter or underwriters. The foregoing notwithstanding, in the case of a
firm commitment offering on underwriting terms appropriate for such a
transaction, other than a registration requested by Securityholders pursuant to
SECTION 9.1, if any such managing underwriter of recognized standing shall
advise the Company and the Securityholders in writing that, in its opinion, the
distribution of all or a specified portion of the Registrable Securities
requested to be included in the registration concurrently with the securities
being registered by the Company would materially adversely affect the
distribution of such securities by increasing the aggregate amount of the
offering in excess of the maximum amount of securities which such managing
underwriter believes can reasonably be sold in the contemplated distribution,
then the securities to be included in a registration which is a primary
underwritten offering on behalf of the Company shall be included in the
following order: (i) first, the securities the Company proposes to include
therein, (ii) second, pro rata among all of the Registrable Securities requested
to be included therein by the Securityholders according to the
12.
number of Registrable Securities requested to be included by each such
Securityholder requesting inclusion therein, and (iii) third, such other
securities requested to be included, pro rata among the holders of such other
securities according to the number of securities requested to be included by
each such holder requesting inclusion therein.
b. In the event that a holder or holders of the Company's
securities (other than a Securityholder or Securityholders) requests, pursuant
to rights granted to such holder or holders, that the Company file a
registration statement for the public offering of securities and the Company and
the other holders of the Company's securities (including the Securityholders)
who have rights to be included in such registration, request to be included in
such registration and the managing underwriter of such offering shall advise the
Company and the holders requesting inclusion in the offering that, in its
opinion, the distribution of a specified portion of the securities requested to
be included in the registration would materially adversely affect the
distribution of such securities by increasing the aggregate amount of the
offering in excess of the maximum amount of securities which such managing
underwriter believes can reasonably be sold in the contemplated distribution
then, the securities to be included in the registration shall be included in the
following order: (i) first, all of the securities requested to be included
therein by the holder or holders making the initial request for the
registration, (ii) second, all of the Registrable Securities requested to be
included therein by the Securityholders according to the number of Registrable
Securities requested to be included by each such Securityholder requesting
inclusion therein, and (iii) third, such other securities requested to be
included therein by the Company and the holders of such other securities, pro
rata among the Company and the holders of such other securities according to the
number of securities requested to be included by the Company and each such
holder requesting inclusion therein. For purposes of this SECTION 9.2(b), the
Company agrees to request for inclusion in the registration only that number of
securities that the Company intends, in good faith, to sell, if all such
securities so requested by the Company were permitted to be included by the
managing underwriter in such registration and sold pursuant thereto.
9.3 COMPANY'S OBLIGATIONS.
a. In connection with the registration of Registrable
Securities on behalf of the holders thereof (such Securityholders being referred
to herein as "SELLERS") in accordance with SECTION 9.1 or SECTION 9.2 above, and
in addition to its other obligations under this SECTION 9, the Company agrees
to:
(i) with respect to any registration pursuant to
SECTION 9.1(a) or 9.1(b), prepare and file with the Commission a registration
statement on the form specified in such section, with respect to the Registrable
Securities to be registered pursuant to such section, and to use its best
efforts to cause such registration statement to become and remain effective as
provided in such section;
(ii) enter into a cross-indemnity agreement, in customary
form, with each underwriter, if any, and each Seller;
(iii) subject to the provisions of SECTION 9.1 and
SECTION 9.2 regarding reductions in Registrable Securities to be included in a
registration, include in the registration statement filed with the SEC, the
Registrable Securities for which requests for
13.
registration have been made (or, in the case of a registration under
SECTION 9.1(a), all such Registrable Securities); and promptly after filing of
such a registration statement or prospectus or any amendments or supplements
thereto, the Company shall furnish to each Seller copies of all such documents
filed including, if requested, documents incorporated by reference in the
registration statement; and notify each Seller of any stop order issued or
threatened by the SEC and use its best efforts to prevent the entry of such stop
order or to remove it if entered;
(iv) prepare and file with the SEC such amendments of and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective
(A) with respect to a registration statement under SECTION 9.1(b) or
SECTION 9.2, for a period of six (6) months or such shorter period as may be
required if all such Registrable Securities covered by such registration
statement are sold prior to the expiration of such period or (B) with respect to
a Shelf Registration Statement, until all the Registrable Securities covered by
such registration statement are sold, and to otherwise comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement during such period in accordance with the
intended methods of disposition by the Sellers set forth in such registration
statement;
(v) furnish to each Seller and each underwriter, if any,
without charge, such number of copies of the registration statement, each
amendment and supplement thereto (in each case including all exhibits thereto),
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such Seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
proposed to be sold by such Seller;
(vi) use its reasonable best efforts to register or
qualify such Registrable Securities under such other securities or Blue Sky laws
of such jurisdictions as any Seller or any such underwriter reasonably requests
in writing and keep such registrations or qualifications in effect for so long
as such registration statement remains in effect and do any and all acts and
things which may be reasonably necessary or advisable to enable such Seller to
consummate the disposition in such jurisdictions of the Registrable Securities
owned by such Seller; PROVIDED, HOWEVER, that the Company shall not be required
to (A) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this SUBSECTION 9.3(a)(vi), or
(B) consent to general service of process in any such jurisdiction;
(vii) notify each Seller, at any time when a prospectus
relating to such Seller's Registrable Securities is required to be delivered
under the Act, of the occurrence of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits to state any material fact necessary to make the
statements therein not misleading, and as soon as practicable prepare a
supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading;
(viii) cause all such Registrable Securities to be listed
on any Exchange or NASDAQ on which similar securities issued by the Company are
then listed;
14.
(ix) provide a transfer agent, registrar and CUSIP number
for all such Registrable Securities not later than the effective date of such
registration statement;
(x) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other actions that
the Sellers or the underwriters, if any, reasonably request in order to expedite
or facilitate the disposition of such Registrable Securities;
(xi) make available for inspection by the Sellers and
their counsel, any underwriter participating in any disposition pursuant to such
registration statement, and any counsel retained by any such underwriter, all
pertinent financial and other information and corporate documents of the
Company, and cause the Company's officers, directors and employees to supply all
information reasonably requested by any such Seller, underwriter or counsel in
connection with such registration statement;
(xii) with respect to any underwritten offering, use its
reasonable best efforts to obtain a "cold comfort" letter from the Company's
independent public accountants in customary form and covering such matters of
the type customarily covered by "cold comfort" letters as the Sellers or any
underwriter may reasonably request;
(xiii) with respect to an underwritten offering, obtain an
opinion of counsel to the Company, addressed to the Sellers and any underwriter,
in customary form and including such matters as are customarily covered by such
opinions in underwritten registered offerings of equity securities as the
Sellers or any underwriter may reasonably request, such opinion to be reasonably
satisfactory in form and substance to each Seller; and
(xiv) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
securityholders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months subsequent to the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Act and Rule 158 thereunder.
b. Any other provisions of this SECTION 9 notwithstanding, upon
receipt by the Securityholders of a written notice signed by the chief executive
officer or chief financial officer of the Company to the effect set forth below,
the Company shall not be obligated during a reasonable period of time (not to
exceed ninety (90) days) thereafter (i) to effect any registrations pursuant to
this SECTION 9 or (ii) with respect to an effective Shelf Registration
Statement, may suspend the effectiveness of such registration statement, at any
time at which, in the Company's reasonable judgment, (i) there is a development
involving the Company or any of its affiliates which is material but which has
not yet been publicly disclosed or (ii) sales pursuant to the registration
statement would materially and adversely affect an underwritten public offering
for the account of the Company or any other material financing project or a
proposed or pending material merger or other material acquisition or material
business combination or material disposition of the Company's assets, to which
the Company or any of its affiliates is, or is expected to be, a party. In the
event a registration is postponed in accordance with this SECTION 9.3(b),
(x) the Company must (unless otherwise instructed by those holders who requested
such registration) file the requested registration within nine (9) months from
the date the Company first received the request of the
15.
holders, (y) the Company may not defer the filing of a requested registration or
suspend the effectiveness of a Shelf Registration Statement pursuant to this
SECTION 9.3(b) more than once in any eighteen (18)-month period, and (z) there
shall be added to any period during which the Company is obligated to keep a
registration effective the number of days for which the registration was
postponed pursuant to this SECTION 9.3(b).
c. The Company may require that each Seller, as a condition to
registering his, her or its Registrable Securities pursuant hereto, furnish the
Company with such information regarding the distribution of the Registrable
Securities proposed to be sold by such Seller as the Company may from time to
time reasonably request in writing.
d. Each Seller agrees that, upon receipt of any notice from the
Company of the occurrence of any event of the kind described in
SECTION 9.3(a)(vii) above, such Seller shall forthwith discontinue disposition
of Registrable Securities pursuant to the registration statement covering such
Registrable Securities until such Seller's receipt of copies of the supplemented
or amended prospectus contemplated by SECTION 9.3(a)(vii) above and, if so
directed by the Company, such Seller will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies in such Seller's
possession, of the prospectus covering such Registrable Securities current at
the time of receipt of such notice. In the event the Company shall give any
such notice, the period mentioned in SECTION 9.3(a)(iv) above shall be extended
by the number of days during the period from and including the date of giving of
such notice to and including the date when each Seller shall have received the
copies of the supplemented or amended prospectus contemplated by
SECTION 9.3(a)(vii) above.
e. The Company shall not file or permit the filing of any
registration or comparable statement which refers to any Seller by name or
otherwise as the Seller of any securities of the Company unless such reference
to such Seller is specifically required by the Act or any similar federal
statute then in force.
9.4 All expenses incident to the Company's performance of or
compliance with this Warrant, including without limitation all registration and
filing fees, fees and expenses relating to filings with any Exchange, fees and
expenses of compliance with securities or Blue Sky laws in jurisdictions
reasonably requested by any Seller or underwriter pursuant to SECTION 9.3(a)(vi)
(including reasonable fees and disbursements of counsel in connection with Blue
Sky qualifications of the Registrable Securities), all word processing,
duplicating and printing expenses, messenger and delivery expenses, fees and
disbursements of counsel for the Company and one (1) counsel for the Sellers,
independent public accountants (including the expenses of any special audit or
"cold comfort" letters required by or incident to such performance) and
underwriters (excluding discounts, commissions or fees of underwriters, selling
brokers, dealer managers or similar securities industry professionals
attributable to the securities being registered, which discounts, commissions or
fees with respect to any Seller's respective shares shall be paid by such
Seller, and legal expenses of any person other than the Company and the Sellers,
but including liability insurance if the Company so desires), all the Company's
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the expense
of any annual audit, the expense of any liability insurance (if the Company
determines to obtain such insurance) and the fees and expenses incurred in
connection with the listing of the securities to be registered on any Exchange
and/or NASDAQ on which such
16.
securities issued by the Company are then listed, the reasonable fees and
expenses of any special experts (including attorneys) retained by the Company
(if it so desires) in connection with such registration and fees and expenses of
other persons retained by the Company (all such expenses being herein called
"REGISTRATION EXPENSES"), shall be borne by the Company.
9.5 In connection with the preparation and filing of each
registration statement under the Act pursuant to this SECTION 9, the Company
shall give the Sellers under such registration statement, their underwriters, if
any, and their respective counsel and accountants, the opportunity to
participate in the preparation of such registration statement, each prospectus
included therein or filed with the SEC, and each amendment thereof or supplement
thereto, and will give each of them such access to its books and records and
such opportunities to discuss the business of the Company with its officers and
the independent public accountants who have certified its financial statements
as shall be necessary, in the opinion of such Sellers' and such underwriters'
respective counsel, to conduct a reasonable investigation within the meaning of
the Act.
9.6 INDEMNIFICATION.
a. In the event of any registration of any securities of the
Company under the Act, the Company shall, and hereby does, indemnify and hold
harmless in the case of any registration statement filed pursuant to SECTION 9.1
or SECTION 9.2, the Seller of any Registrable Securities covered by such
registration statement, its directors, officers, employees and agents, each
other person who participates as an underwriter in the offering or sale of such
Registrable Securities and each other person, if any, who controls such Seller
or any such underwriter within the meaning of the Act against any losses,
claims, damages, or liabilities (or actions or proceedings whether commenced or
threatened in respect thereof), joint or several, to which such Seller or any
such director or officer or employee or agent or underwriter or controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages, or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such Registrable Securities were registered
under the Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Company shall reimburse such Seller and each such director, officer,
employee, agent, underwriter and controlling person for any legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action, or proceeding; PROVIDED,
HOWEVER, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability (or action or proceeding, whether
commenced or threatened in respect thereof), or expense arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment, or supplement in
reliance upon and in conformity with written information furnished to the
Company by such Seller for the express purpose of use in the preparation thereof
and, provided, further, that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability (or action or
proceeding, whether commenced or threatened, in respect thereof), or expense
arises out of such person's failure to send or give a copy of the final
prospectus, as the same may be then supplemented or amended, within the time
required by the Act to the person asserting an untrue statement or alleged
untrue statement
17.
or omission or alleged omission if such statement or omission was corrected in
such final prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Seller or any such
director, officer, employee, agent, underwriter or controlling person and shall
survive the transfer of such Registrable Securities by such Seller.
b. In the event that the Company includes any Registrable
Securities of a prospective Seller in any registration statement filed pursuant
to SECTION 9.3, such prospective Seller shall, and hereby does, indemnify and
hold harmless the Company, its directors, officers, employees and agents, each
other person who participates as an underwriter in the offering or sale of such
Registrable Securities and each other person, if any, who controls the Company
or any such underwriter within the meaning of the Act against any losses,
claims, damages, or liabilities (or actions or proceedings whether commenced or
threatened in respect thereof), joint or several, to which the Company or any
such director or officer or employee or underwriter or controlling person may
become subject under the Act or otherwise, insofar as such losses, claims,
damages, or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such Registrable Securities were registered
under the Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
such prospective Seller shall reimburse the Company and any such director,
officer, employee, agent, underwriter or controlling person for any legal or any
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action, or proceeding if, and only
if, such statement or alleged statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by such Seller specifically stating
that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment, or
supplement. In no event shall the liability of any Seller hereunder be greater
in amount than the dollar amount of the proceeds received by such Seller upon
the sale of the Registrable Securities giving rise to such indemnification
obligation. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Company or any such director,
officer, employee, agent, underwriter or controlling person and shall survive
the transfer of such Registrable Securities by such Seller.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers, and similar securities industry
professionals participating in the distribution to the same extent as provided
above with respect to information so furnished in writing by such persons
specifically for inclusion in any prospectus or registration statement.
d. Promptly after receipt by an indemnified party of notice of
the commencement of any action or proceeding involving a claim referred to in
this SECTION 9.6, such indemnified party shall, if a claim in respect thereof is
to be made against an indemnifying party, give written notice to the latter of
the commencement of such action; PROVIDED, HOWEVER, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of this
SECTION 9.6, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action
18.
is brought against an indemnified party, unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the indemnifying
party shall be entitled to participate in and to assume the defense thereof,
jointly with any other indemnifying party similarly notified, to the extent
that the indemnifying party may wish, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any
legal or other expenses subsequently incurred by the latter in connection
with the defense thereof other than reasonable costs of investigation. If,
in the indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist in respect of such claim,
the indemnified party may assume the defense of such claim, jointly with any
other indemnified party that reasonably determines such conflict of interest
to exist, and the indemnifying party shall be liable to such indemnified
parties for the reasonable legal fees and expenses of one counsel for all
such indemnified parties and for other expenses reasonably incurred in
connection with the defense thereof incurred by the indemnified party. No
indemnifying party shall, without the consent of the indemnified party,
consent to entry of any judgment or enter into any settlement of any such
action which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability, or a covenant not to ▇▇▇, in respect of such claim or litigation.
No indemnified party shall consent to entry of any judgment or enter into any
settlement of any such action the defense of which has been assumed by an
indemnifying party without the consent of such indemnifying party.
e. Indemnification and contribution similar to that specified
in this SECTION 9.6 (with appropriate modifications) shall be given by the
Company and each Seller with respect to any required registration or other
qualification of Registrable Securities under any Federal or state law or
regulation of any governmental authority, other than the Act.
f. The indemnification required by this SECTION 9.6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred.
g. If the indemnification provided for in this SECTION 9.6 from
the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities, or expenses referred to
herein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of losses, claims, damages, liabilities, or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified party in connection with the actions which resulted in
such losses, claims, damages, liabilities, or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying
party and indemnified party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact, has been made by, or relates to information supplied by, such indemnifying
party or indemnified party, and the parties' relative intent, knowledge, access
to information, and opportunity to correct or prevent such action. The amount
paid or payable by a party as a result of the losses, claims, damages,
liabilities, and expenses referred to above shall be deemed to include any legal
or other fees or expenses reasonably incurred by such party in connection with
any investigation or proceeding. In no event shall the liability of any Seller
19.
hereunder be greater in amount than the dollar amount of the proceeds received
by such Seller upon the sale of the Registrable Securities giving rise to such
contribution obligation. The parties hereto agree that it would not be just and
equitable if contribution pursuant to this SECTION 9.6(g) were determined by pro
rata allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in this SECTION 9.6(g). No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person or
entity who was not guilty of such fraudulent misrepresentation.
9.7 MARKET STAND-OFF AGREEMENT. If requested by the managing
underwriter of an offering for which securities of such Securityholder have been
registered, a Securityholder shall not sell or otherwise transfer or dispose of
any Registrable Securities held by such Securityholder (other than those
included in the registration) during such period following the effective date of
such registration as is usual and customary at such time in similar public
offerings of similar securities, so long as the officers, directors and all
holders of two percent (2%) or more of the Common Stock of the Company are also
required to so withhold their shares for such period. The obligations described
in this SECTION 9.7 shall not apply to offerings pursuant to a registration
statement on Form S-4 or Form S-8 or any successor or similar form.
9.8 ASSIGNMENT OF RIGHTS; TERMINATION. The rights granted under
this SECTION 9 may be assigned to the transferee of any of the Registrable
Securities and will terminate on the five (5) year anniversary of the Expiration
Date.
10. ADDITIONAL RIGHTS.
10.1 NOTICE OF SALE. In the event that the Company undertakes to
effect a Sale, the Company will use its best efforts to provide to the holder at
least thirty (30) days notice of the terms and conditions of the proposed
transaction. The Company will cooperate with the holder in consummating the
sale of this Warrant in connection with any such transaction.
10.2 RIGHT TO CONVERT WARRANT INTO COMMON STOCK; NET ISSUANCE.
a. RIGHT TO CONVERT. In addition to and without limiting the
rights of the holder under the terms of this Warrant, the holder shall have the
right to convert this Warrant or any portion thereof (the "CONVERSION RIGHT")
into shares of Common Stock as provided in this SECTION 10.2 at any time or from
time to time during the term of this Warrant. Upon exercise of the Conversion
Right with respect to all or a specified portion of shares subject to this
Warrant (the "CONVERTED WARRANT SHARES"), the Company shall deliver to the
holder (without payment by the holder of any exercise price or any cash or other
consideration) that number of shares of fully paid and nonassessable Common
Stock equal to the quotient obtained by dividing (i) the value of this Warrant
(or the specified portion hereof) on the Conversion Date (as defined in
SECTION 10.2(b) hereof), which value shall be equal to (A) the aggregate fair
market value of the Converted Warrant Shares issuable upon exercise of this
Warrant (or the specified portion hereof) on the Conversion Date less (B) the
aggregate of the lowest Warrant Price(s) applicable to the Converted Warrant
Shares immediately prior to the exercise of the Conversion Right by (ii) the
fair market value of one (1) share of Common Stock on the Conversion Date.
Expressed as a formula, such conversion shall be computed as follows:
20.
X= A - B
-----
Y
Where: X= the number of shares of Common Stock
that may be issued to holder
Y= the fair market value (FMV) of one
(1) share of Common Stock
A= the aggregate FMV (I.E., FMV x
Converted Warrant Shares)
B= the aggregate Warrant Price (I.E.,
Converted Warrant Shares x Warrant
Price)
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date. For purposes of SECTION 9 of this
Warrant, shares issued pursuant to the Conversion Right shall be treated as if
they were issued upon the exercise of this Warrant.
b. METHOD OF EXERCISE. The Conversion Right may be exercised
by the holder by the surrender of this Warrant at the principal office of the
Company together with a written statement specifying that the holder thereby
intends to exercise the Conversion Right and indicating the number of shares
subject to this Warrant which are being surrendered (referred to in
SECTION 10.2(a) hereof as the Converted Warrant Shares), and the Warrant
Price(s) applicable thereto, in exercise of the Conversion Right. Such
conversion shall be effective upon receipt by the Company of this Warrant
together with the aforesaid written statement, or on such later date as is
specified therein (the "CONVERSION DATE"). Certificates for the shares issuable
upon exercise of the Conversion Right and, if applicable, a new warrant
evidencing the balance of the shares remaining subject to this Warrant, shall be
issued as of the Conversion Date and shall be delivered to the holder within
thirty (30) days following the Conversion Date.
c. DETERMINATION OF FAIR MARKET VALUE. For purposes of this
SECTION 10.2, "fair market value" of a share of Common Stock shall have the
meaning set forth in SECTION 4(i) above.
11. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the holder of this Warrant as follows:
a. This Warrant has been duly authorized and executed by the
Company and is a valid and binding obligation of the Company enforceable in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and the rules of law or
principles at equity governing specific performance, injunctive relief and other
equitable remedies;
21.
b. The Warrant Shares have been duly authorized and reserved
for issuance by the Company and, when issued in accordance with the terms
hereof, will be validly issued, fully paid and nonassessable;
c. The rights, preferences, privileges and restrictions granted
to or imposed upon the Common Stock and Preferred Stock of the Company and the
holders thereof are as set forth in the certificate of incorporation of the
Company, as amended to and as of the Date of Grant (as so amended, the
"CHARTER"), a true and complete copy of which has been delivered to the original
holder of this Warrant;
d. The execution and delivery of this Warrant are not, and the
issuance of the Warrant Shares upon exercise of this Warrant in accordance with
the terms hereof and the authorization and issuance of shares of Series B
Preferred Stock of the Company in accordance with the terms of the Agreement for
Merger, dated September 25, 1997, by and among the Company, Arcada Acquisition
Corp., and Arcada, as amended to and as of the Date of the Grant will not be,
inconsistent with the Charter or by-laws of the Company, do not and will not
contravene, in any material respect, any governmental rule or regulation,
judgment or order applicable to the Company, and do not and will not conflict
with or contravene any provision of, or constitute a default under, any
indenture, mortgage, contract or other instrument of which the Company is a
party or by which it is bound or require the consent or approval of, the giving
of notice to, the registration or filing with or the taking of any action in
respect of or by, any Federal, state or local government authority or agency or
other person, except for the filing of notices pursuant to federal and state
securities laws, which filings will be effected by the time required thereby;
e. There are no actions, suits, audits, investigations or
proceedings pending or, to the knowledge of the Company, threatened against the
Company in any court or before any governmental commission, board or authority
which, if adversely determined, will have a material adverse effect on the
ability of the Company to perform its obligations under this Warrant;
f. The authorized capital stock of the Company and the capital
stock issued and outstanding, or reserved for issuance, are as set forth on
Schedule 5.8. All of the outstanding shares have been validly issued and are
fully paid, nonassessable shares free of preemptive rights;
g. Except as set forth on Schedule 5.8, there are no
subscriptions, rights, options, warrants, or calls relating to any shares of the
Company's capital stock, including any right of conversion or exchange under any
outstanding security or other instrument; and
h. The Company is not subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of its
capital stock or any security convertible into or exchangeable for any of its
capital stock.
12. MODIFICATION AND WAIVER. This Warrant and any provision hereof
may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
22.
13. NOTICES. Unless otherwise specifically provided herein, all
communications under this Warrant shall be in writing and shall be deemed to
have been duly given (i) on the date of service if served personally on the
party to whom notice is to be given, (ii) on the day of transmission if sent by
facsimile transmission to the number given below, and telephonic confirmation of
receipt is obtained promptly after completion of transmission, (iii) on the day
after delivery to Federal Express or similar overnight courier, or (iv) on the
fifth day after mailing, if mailed to the party to whom notice is to be given,
by first class mail, registered or certified, postage prepaid, and properly
addressed, return receipt requested, to each such holder at its address as shown
on the books of the Company or to the Company at the address indicated therefor
on the signature page of this Warrant. Any party hereto may change its address
for purposes of this SECTION 13 by giving the other party written notice of the
new address in the manner set forth herein.
14. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company's assets, and all of the obligations
of the Company relating to the Common Stock issuable upon the exercise or
conversion of this Warrant shall survive the exercise, conversion and
termination of this Warrant and all of the covenants and agreements of the
Company shall inure to the benefit of the successors and assigns of the holder
hereof. The Company will, at the time of the exercise or conversion of this
Warrant, in whole or in part, upon request of the holder hereof but at the
Company's expense, acknowledge in writing its continuing obligation to the
holder hereof in respect of any rights to which the holder hereof shall continue
to be entitled after such exercise or conversion in accordance with this
Warrant; PROVIDED, that the failure of the holder hereof to make any such
request shall not affect the continuing obligation of the Company to the holder
hereof in respect of such rights.
15. LOST WARRANTS OR STOCK CERTIFICATES. The Company covenants to
the holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any loss, theft or destruction, upon
receipt of an executed lost securities bond or indemnity reasonably satisfactory
to the Company, or in the case of any such mutilation upon surrender and
cancellation of such Warrant or stock certificate, the Company will make and
deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost,
stolen, destroyed or mutilated Warrant or stock certificate.
16. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
17. GOVERNING LAW. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of New York.
18. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder, and in addition, the Registration Rights contained in SECTION 9 above
shall survive the exercise of this Warrant. All agreements of the Company and
the holder hereof contained herein shall survive indefinitely until, by their
respective terms, they are no longer operative.
23.
19. REMEDIES. In case any one (1) or more of the covenants and
agreements contained in this Warrant shall have been breached, the holders
hereof (in the case of a breach by the Company), or the Company (in the case of
a breach by a holder), may proceed to protect and enforce their or its rights
either by suit in equity and/or by action at law, including, but not limited to,
an action for damages as a result of any such breach and/or an action for
specific performance of any such covenant or agreement contained in this
Warrant.
20. ACCEPTANCE. Receipt of this Warrant by the holder hereof shall
constitute acceptance of and agreement to the foregoing terms and conditions.
21. NO IMPAIRMENT OF RIGHTS. The Company will not, by amendment of
its Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
holder of this Warrant against material impairment. Specifically, from the Date
of Grant until the date upon which all Indebtedness (as defined in the Loan
Agreement) shall have been repaid in full and all obligations of the Borrower
(as defined in the Loan Agreement) under the Loan Agreement shall have been
satisfied in full, the Company will not amend its Charter to create any new
class or series of shares having rights or preferences prior and superior or in
parity with the Warrant Shares or increase the rights and preferences or the
number of authorized shares of a class or series having rights and preferences
prior or superior to the Warrant Shares without the prior written consent of the
holders of at least fifty-one percent (51%) of the Warrant Shares issuable
under this Warrant.
[Signature page follows.]
24.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
on its behalf by one of its officers thereunto duly authorized.
USTEL, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇
---------------
Title: General Counsel and Secretary
------------------------------
Address: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dated: as of November 25, 1998
25.
EXHIBIT A
NOTICE OF EXERCISE
To: UStel, Inc.
1. The undersigned hereby elects to purchase ______ shares of Common
Stock of UStel, Inc. pursuant to the terms of the attached Warrant, and tenders
herewith payment of the purchase price of such shares in full.
2. Please issue a certificate or certificates representing said
shares in the name of the undersigned or in such other name or names as are
specified below:
--------------------------------------
(Name)
--------------------------------------
--------------------------------------
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
In support thereof, the undesigned has executed an Investment Representation
Statement attached hereto as Schedule 1.
--------------------------------------
(Signature)
------------------
(Date)
SCHEDULE 1
INVESTMENT REPRESENTATION STATEMENT
Purchaser:
Company UStel, Inc..
Security Common Stock
Amount:
Date:
In connection with the purchase of the above-listed securities (the
"REGISTRABLE SECURITIES"), the undersigned (the "PURCHASER") represents to the
Company as follows:
(a) The Purchaser is aware of the Company's business affairs and
financial condition, and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the Registrable
Securities. The Purchaser is purchasing the Registrable Securities for its own
account for investment purposes only and not with a view to, or for the resale
in connection with, any "distribution" thereof for purposes of the Registrable
Securities Act of 1933, as amended (the "ACT").
(b) The Purchaser understands that the Registrable Securities have
not been registered under the Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of the Purchaser's investment intent as expressed herein. In this
connection, the Purchaser understands that, in the view of the Registrable
Securities and Exchange Commission ("SEC"), the statutory basis for such
exemption may be unavailable if the Purchaser's representation was predicated
solely upon a present intention to hold these Registrable Securities for the
minimum capital gains period specified under applicable tax laws, for a deferred
sale, for or until an increase or decrease in the market price of the
Registrable Securities, or for a period of one year or any other fixed period in
the future.
(c) The Purchaser further understands that the Registrable Securities
must be held indefinitely unless subsequently registered under the Act or unless
an exemption from registration is otherwise available. In addition, the
Purchaser understands that the certificate evidencing the Registrable Securities
will be imprinted with the legend referred to in the Warrant under which the
Registrable Securities are being purchased.
(d) The Purchaser is aware of the provisions of Rule 144 and 144A,
promulgated under the Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, if applicable, including, among other
things: The availability of certain public information about the Company, the
resale occurring not less than one (1) year after the party has purchased and
paid for the securities to be sold; the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Registrable Securities Exchange Act of
1934, as
amended) and the amount of securities being sold during any three-month period
not exceeding the specified limitations stated therein.
(e) The Purchaser further understands that at the time it wishes to
sell the Registrable Securities there may be no public market upon which to make
such a sale, and that, even if such a public market then exists, the Company may
not be satisfying the current public information requirements of Rule 144 and
144A, and that, in such event, the Purchaser may be precluded from selling the
Registrable Securities under Rule 144 and 144A even if the one-year minimum
holding period had been satisfied.
(f) The Purchaser further understands that in the event all of the
requirements of Rule 144 and 144A are not satisfied, registration under the Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
Staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden or proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
Purchaser:
-----------------------------------
Date:
------------------------------