Exhibit 10.38
MANAGEMENT AND CONSULTING AGREEMENT
THIS MANAGEMENT AND CONSULTING AGREEMENT (the "Agreement") is entered
into effective as of the 1st day of February 2001, by and between ACTIVE
MANAGEMENT, L.L.C., a 1imited 1iability company, duly organized and existing
pursuant to the laws of the State of Nevada (hereinafter called "AM"), and RSI
SYSTEMS, INC., a corporation duly organized and existing pursuant to the laws of
the State of Minnesota (hereinafter called "RSIS" or the "Corporation).
W I T N E S S E T H:
WHEREAS, RSIS is a manufacturer and distributor of video conferencing
equipment; and
WHEREAS, RSIS needs a qualified management team to adequately operate
the business of RSIS; and
WHEREAS, RSIS needs capital infusions and financing to further its
business and carry out its business plan; and
WHEREAS, RSIS desires to retain Active Management, L.L.C. as its
exclusive agent to consult with and seek out potential investors and to recruit
and hire senior personnel to operate the business of RSIS under the terms and
conditions set forth herein.
WHEREAS, the Board of Directors believe it to be in the best interest
of all shareholders of the Corporation for the Corporation to enter into this
Agreement; and
NOW THEREFORE, for and in consideration of the mutual understandings,
covenants, promises and representations herein contained, and for other good and
valuable consideration the receipt and sufficiency of which is acknowledged and
stipulated by each party hereto, the parties hereto agree as follows:
DEFINITIONS
CHANGE IN CONTROL. As used herein, the term "Change in Control" shall
mean a change in control of the nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended, ("Exchange Act"); provided that,
without limitation, such a change of control also shall be deemed to have
occurred:
a. If any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) is or becomes the beneficial owner,
directly or indirectly by the acquisition, or otherwise, of securities
of RSIS representing fifty (50%) percent or more of the combined voting
power of RSIS's then outstanding securities; or
b. A sale of all or substantially all of the assets of RSIS,
other than to a subsidiary of RSIS; or
c. A merger or consolidation of RSIS, (other than (1) a
consolidation or merger effected to change the state of incorporation
of RSIS or (2) a consolidation or merger where either (i) the
Corporation or any of its subsidiaries is the surviving entity or (ii)
the shareholders of the RSIS prior to such consolidation or merger
continue to own at least a majority in total of the voting securities
of the surviving entity immediately following such consolidation or
merger);
EBITDA. EBITDA shall mean, for any period, without duplication and
determined on a consolidated basis and in accordance with GAAP; the sum of (A)
Net Income (Loss), (B) interest expense (net of interest income) deducted in
determining Net Income (Loss) (including, without limitation, cash interest,
payment-in-kind interest and amortization of original issue discount), (C) the
amount of Taxes deducted in determining Net Income (Loss), (D) the amount of
depreciation and amortization expense deducted in determining Net Income (Loss),
and (E) any extraordinary or unusual non-cash losses. However EBITDA shall not
include any amounts paid to or received by RSIS with respect to its Intellectual
Property Rights.
INTELLECTUAL PROPERTY RIGHTS. As used herein the term "Intellectual
Property Rights" means, collectively, all of the following worldwide intangible
legal rights pertaining directly and primarily to the business of RSIS or any of
its Products, including those existing or acquired by ownership, license or
other legal operation, whether or not filed, perfected, registered or recorded,
existing as of the date hereof in or to: (i) all patents, patent applications,
patent disclosures and related patent rights, including any and all
continuations, divisions, reissues, reexaminations, or extensions thereof which
have been filed, issued or acquired by RSIS as of the date hereof, and all
inventions conceived of or reduced to practice as of the date hereof (the
"Patent Rights"); (ii) all copyrights, whether or not registered, owned by RSIS
as of the date hereof, including all registrations and applications therefor and
all moral rights relating thereto (the "Copyright Rights"); (iii) all
trademarks, trade dress, trade names, logos, domain names, and service marks,
together with all translations, adaptations, derivations, and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations, reservations, and renewals in connection therewith; whether or
not registered (the "Trademark Rights"); (iv) all trade secrets and know-how;
(v) all technology and other intellectual and proprietary rights; (vi) all
rights relating to the protection of the foregoing; and (vii) all rights to ▇▇▇
or make any claims for any past, present or future infringement,
misappropriation or unauthorized use of the any of the foregoing rights and the
right to all income, royalties, damages and other payments that are now or may
hereafter become due or payable with respect to any of the foregoing rights,
including damages for past, present or future infringement, misappropriate or
unauthorized use thereof.
GAAP. As used herein, the term "GAAP" shall mean generally accepted
accounting principles, as in effect from time to time in the United States,
consistently applied.
WARRANTS. As used herein, the term "Warrants" shall mean each
individual warrant granted by RSIS to AM hereunder in accordance with paragraph
4.2 A.
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SECTION I
RETENTION OF AGENT
1.1 APPOINTMENT. Subject to the terms, conditions, exclusions and
limitations set forth herein, RSIS hereby appoints AM as its exclusive agent to
recruit and hire senior personnel including, without limitation a chief
financial officer, chief operating officer as well as qualified members to serve
on the Board of Directors of the Corporation.
1.2 CONSIDERATION. The Corporation specifically acknowledges the
benefits of and consideration passing to it for and in consideration of this
Agreement and that such consideration is actual and not a mere recital.
1.3 STATUS. AM is and shall remain an independent contractor in its
performance of this Agreement. Neither AM nor anyone directly or indirectly
engaged or employed by AM shall thereby become the agent, representative,
employee or servant of RSIS in the performance of the services hereunder, and
neither RSIS, AM, nor their employees shall make any representations to the
contrary.
SECTION II
DUTIES OF AM
2.1 PERSONNEL. AM shall develop and carryout a recruiting campaign as
it deems necessary or advisable in its sole discretion. In this regard, AM shall
be solely responsible to search for and interview all potential senior
management personnel as needed by RSIS for the effective operation of its
business through all available channels. AM shall bear all costs of the
operation of its business, including without limitation all office overhead,
salaries, travel, entertainment and employee benefits.
2.2 CONSULTING. AM hereby agrees to render, such consultation services
to the Corporation, its officers, directors, managers, employees and such other
persons and entities as the Corporation may deem necessary or desirable with
regard to the Corporation's business, the development of long-term goals and
strategic planning for raising necessary capital for implementing the business
plan of the Corporation.
SECTION III
TERM OF AGREEMENT
3.1 TERM. The Term of this Agreement shall commence on the effective
date hereof and shall continue, unless otherwise terminated pursuant hereto, or
extended by mutual agreement of the Parties, until February 1, 2004 (the
"Termination Date"); provided however, notwithstanding any other provision of
this Agreement, this Agreement shall not be terminated as to RSIS's obligations
under Section IV of this Agreement.
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SECTION IV
COMPENSATION
4.1 CONSULTING FEES. Throughout the term of this Agreement RSIS will
pay to AM, without deduction for any taxes or similar assessment, a consulting
fee of Five Hundred Dollars ($500) per month on the 1st day of each month, in
advance.
4.2 EQUITY COMPENSATION. In recognition of the peculiar skills to be
contributed by AM to RSIS, and in addition to all consulting fees or other
compensation payable hereunder, AM shall be entitled to receive Equity
Compensation in such amounts and at such times as follows:
A. INITIAL WARRANT GRANT. By the execution hereof, RSIS
irrevocably grants, sells, assigns, and conveys unto AM, a warrant to
purchase 50,000 shares of its common stock, $0.01 par value per share,
at the exercise price of $0.45 per share. The Warrant granted hereby
shall vest upon execution hereof and shall be evidenced by that certain
Warrant executed by RSIS in favor of AM of even date herewith, a true
and correct copy of which is attached hereto as Exhibit "A."
B. PERFORMANCE WARRANT GRANTS. By the execution hereof, RSIS
irrevocably grants, sells, assigns, and conveys unto AM warrants to
purchase an additional 450,000 shares of RSIS's common stock, $0.01 par
value per share at the exercise price of $0.45 per share (Performance
Warrants), which shall vest for 37,500 shares quarterly beginning on
the effective date hereof throughout the term of this Agreement. All
Performance Warrants shall be issued in a separate Warrant within ten
(10) days of the end of each quarter. Once any such Warrant is issued,
it shall not be subject to cancellation for any reason whatsoever. All
Performance Warrants shall be identical in form and substance to the
Warrant, attached hereto as Exhibit "A," with the exception of the
number of shares and the expiration date.
(1) EARLY ISSUANCE FOR ATTAINING CERTAIN FINANCIAL
GOALS. All Performance Warrants shall be issued immediately
upon the Corporation achieving EBITDA in the amounts set forth
in the chart contained in the paragraph following immediately
hereinbelow exercisable upon the achievement of the EBITDA
Targets set forth in said chart.
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A B C
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EBITDA Target Dates Number of Shares
---------------------------------------------------------------------------------
$ 1,000,000 for the 12 month period ending 12/31/01 225,000
---------------------------------------------------------------------------------
$ 2,000,000 for the 12 month period ending 12/31/02 225,000
---------------------------------------------------------------------------------
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(2) IMMEDIATE VESTING. All warrants shall
automatically be issued in their entirety not subject to
cancellation upon (i) any sale, license, or other disposition
of all or substantially all of the assets (including
intellectual property) of the RSIS, or any reorganization,
consolidation, or merger of the RSIS where the holders of the
RSIS's voting securities before the transaction beneficially
own less than 50% of the outstanding voting securities of the
surviving entity after the transaction or (ii) any of the
events constituting a Change in Control of RSIS shall occur.
The foregoing warrants (Performance Warrants) are independent
of and in addition to each other grant contained herein. The total
number of shares for which warrants shall be issued pursuant to this
paragraph 4.2(B) will be 450,000 shares in addition to the 50,000
shares issued pursuant to paragraph 4.2A.
All Performance Warrants are irrevocably granted by the
execution of this Agreement and no further action is necessary by RSIS
in order for said warrants to be issued. The obligation of RSIS to
deliver the warrants is unconditional and absolute upon the execution
hereof. The sole future event to occur prior to the delivery of each
Warrant to AM is the determination of the date of delivery of such
warrant to AM, and the number of shares for which such Warrant shall be
issued. All Performance Warrants shall be issued in a separate Warrant
within ten (10) days of the end of each quarter unless immediately
issued and delivered upon attainment of an EBITDA Target. The Target
Date is a guideline by which performance may be measured, however, such
dates are not maximum time constraints before when any warrant shall be
issued. In this regard, if one or more of the EBITDA Targets are
attained, all warrants to be issued therefor will immediately be issued
and delivered irrespective of the passage of time or date.
SECTION V
REPORTING REQUIREMENTS AND
RIGHT TO AUDIT
5.1 RSIS shall keep complete and accurate records and books of accounts
containing all information required for the computation and verification of the
amounts of Warrants to be issued hereunder. RSIS further agrees, upon the
request of AM, and on reasonable notice to permit AM or any firm of independent
accountants mutually agreed to by RSIS and AM, to have access during ordinary
working hours to such records as may be necessary to audit with respect to any
payment or report period ending prior to such request, the correctness of any
report or payment made under this Agreement, or to obtain information as to the
Warrants to be issued for any such period in the case of failure to report or
issue Warrants pursuant to the terms of this Agreement.
5.2 RSIS further agrees to cooperate with any such accountant and to
provide all information reasonably requested by such accountant. AM shall
deliver a true, correct, and complete copy of the accountant's written report to
RSIS within ten (10) business days of the receipt thereof. If the accountant
determines that AM would be entitled to any additional Warrants as a result of
such audit, RSIS shall immediately issue and deliver to AM Warrants for such
additional shares within said five (5) day period, and RSIS shall be responsible
for the fees of the accountant; otherwise such fees shall be paid by AM.
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SECTION VI
REPRESENTATIONS AND WARRANTIES
6.1 RSIS represents and warrants to AM, its subsidiaries and its
members as follows:
a. DUE INCORPORATION AND QUALIFICATION. RSIS is a corporation
duly organized, validly existing and in good standing under the laws of
its jurisdiction of incorporation and has the corporate power and
authority to own, lease and operate its assets, properties and business
and to carry on its business as now being and as heretofore conducted.
RSIS is duly qualified as a foreign corporation to transact business
and is in good standing in each jurisdiction in which such
qualification or authorization is required by law and in which the
failure so to qualify or be authorized could have a material adverse
effect on the business, assets, operations or condition (financial or
otherwise) of RSIS taken as a whole.
b. AUTHORITY TO EXECUTE AND PERFORM AGREEMENTS. RSIS has the
full legal right and power and capacity required to enter into, execute
and deliver this Agreement and the other agreements, instruments and
documents contemplated hereby and to perform fully its obligations
hereunder. The Board of Directors of RSIS has duly and validly approved
the execution, delivery, and performance of this Agreement by RSIS. No
vote of the holders of the capital stock of RSIS is required for RSIS
to enter into and perform its obligations under this Agreement and any
other agreements contemplated hereby. This Agreement has been duly
executed, delivered by, and is the valid and binding obligation of
RSIS, enforceable in accordance with its terms, subject to the
qualifications that enforcement of the rights and remedies created
hereby is subject to bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting the rights and remedies
of creditors. The execution and delivery of this Agreement by RSIS, the
consummation of the transactions contemplated hereby by RSIS and the
performance by RSIS of this Agreement in accordance with its terms and
conditions will not, (i) violate any provision of the corporate
charter, by-laws or other corporate documents of RSIS as currently in
effect; (ii) require the approval or consent of any governmental or
regulatory body or any other person; or (iii) conflict with or result
in any breach or violation of any of the terms and conditions of, or
constitute (or with notice or lapse of time or both constitute) a
default under any federal, state, local or foreign statute, regulation,
order, judgment, writ, rule, regulation or decree applicable to RSIS or
by which RSIS's assets may be bound or affected, or any instrument,
option, lien, right, security interest, contract or other agreement to
which RSIS is a party or by which any property of RSIS may be bound or
subject.
c. OUTSTANDING CAPITAL STOCK OPTIONS OR OTHER RIGHTS. The
Capital Stock of RSIS consists of 15,000,000 shares of Common Stock,
.01 par value per share, of which 8,799,883 shares are currently issued
and outstanding. All of the aforesaid issued and outstanding shares are
duly authorized, validly issued, fully paid, and nonassessable Except
as disclosed in Schedule 6.1(c), there is no outstanding right,
subscription, warrant, call, preemptive right, option or other
agreement of any kind to purchase or otherwise to receive from RSIS any
shares of the capital stock or any other
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security of, or other proprietary interest in RSIS. Except as disclosed
in Schedule 6.1c, there is no outstanding security of any kind
convertible into such capital stock, security, or proprietary interest
and there is no agreement or understanding with respect to the voting
of the capital stock of RSIS.
d. ABILITY TO CONDUCT BUSINESS. RSIS owns all of the assets,
intellectual property and proprietary rights necessary to conduct its
current business and to continue to develop, market, distribute, use,
license and sell its Products and to otherwise conduct its business in
the manner in which the business is conducted by RSIS as of this date
and as it is presently proposed to be conducted by RSIS in the
foreseeable future.
e. INTEGRITY OF INTELLECTUAL PROPERTY. None of the
Intellectual Property Rights is registered in the name of anyone other
than RSIS and no one other than RSIS has any interest therein or right
thereto, including the right to royalty or other payments except ▇▇▇▇▇
Fargo Business Credit, N.A. and ▇▇▇▇▇ Fargo Bank MN, N.A. and rights
claimed by Lucent Technologies to G.728 Algoritham.
SECTION VII
TERMINATION OF AGREEMENT
7.1 TERMINATION BY RSIS. This Agreement may be terminated by RSIS at
any time, upon notice to AM for "Cause." For this purpose, "Cause" is defined as
a material violation by AM of its duties which are not remedied in a reasonable
period of time (not to exceed sixty (60) days) after receipt of written notice
from RSIS.
7.3 NOTICE OF TERMINATION. Any termination by RSIS shall be
communicated by written Notice of Termination to AM. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision(s) in the Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the services of AM under the provision(s) so indicated.
7.4 DATE OF TERMINATION. For purposes of this Agreement, "Date of
Termination" shall mean:
Sixty (60) days following receipt by AM of the written Notice
of Termination provided that if within thirty (30) days after any
written Notice of Termination is given, AM notifies RSIS that a dispute
exists concerning the termination. The Date of Termination shall be the
date on which the dispute is finally determined by a binding and final
arbitration award or by a final judgment, order or decree of a court of
competent jurisdiction (the time for appeal therefrom having expired
and no appeal having been perfected); provided, however, that AM's
action is finally adjudicated or arbitrated in favor of AM and against
RSIS or AM's action is settled by written agreement of the parties.
7.5 TERMINATION BY RSIS FOR CAUSE, RESIGNATION OR BY MUTUAL AGREEMENT.
If AM and RSIS mutually agree to the termination of this Agreement, if AM
voluntarily resigns, or AM is terminated by RSIS for Cause, then AM shall be
entitled to all compensation earned
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through the date of such resignation or termination plus all Warrants earned
pursuant to Section 4.2 of this Agreement, if any, all applicable Commissions
and expense reimbursements, if any, from RSIS due under Section IV hereof.
7.6 TERMINATION FOR REASONS OTHER THAN TERMINATION BY RSIS FOR CAUSE,
RESIGNATION, OR MUTUAL AGREEMENT. If RSIS shall terminate AM's services without
Cause, then RSIS shall pay AM the following amounts and issue the following
Warrants:
a. A lump sum payment equal to the total consulting fees due
for the number of years, or portions thereof, remaining under this
Agreement, including all extensions;
b. All warrants issuable pursuant to every provision of this
agreement notwithstanding the date of such termination or the
achievement of any EBITDA amount or the close of any period specified
by any Target Date including all options that have not vested as of the
date of termination;
c. RSIS shall also pay all indemnity payments and all legal
fees and expenses incurred by AM as a result of such termination
(including all such fees and expenses, if any, incurred in contesting
or disputing any such termination or in seeking to obtain or enforce
any right or benefit provided by this Agreement); and
d. AM shall not be required to mitigate the amount of any
payment provided for in this section by seeking other employment or
otherwise.
7.7 TERMINATION. Notwithstanding the provisions of paragraph 7.5
hereinabove, either party shall have the right to terminate this Agreement with
immediate effect if the other party shall default in the performance of any of
its obligations hereunder and such default shall continue for a period of sixty
(60) days after receipt by the defaulting party of written notice of such
default. Additionally, if either party shall make a general assignment for the
benefit of creditors or shall become or be adjudicated a bankrupt, or shall
voluntarily file a petition in bankruptcy, or file an answer admitting the
material allegations of a petition filed against it for an adjudication in
bankruptcy, or shall, by reason of its insolvency, apply for or suffer the
appointment of a receiver of its property and assets and such receiver so
appointed shall not be discharged within one hundred twenty (120) days after his
appointment then in any such event the other party shall have the right
immediately to terminate this Agreement by written notice to such party
7.8 FORCE MAJEURE. Neither Party shall be deemed in default of its
obligations hereunder for failure to perform due to reasons of Force Majeure,
including, but not limited to acts of God, acts of public enemy, acts of the
government of any country or state or political subdivision or any department or
regulatory agency thereof or entity created thereby, quotas, embargoes, acts of
any person engaged in subversive activity or sabotage, fires, floods, explosions
or other catastrophes, epidemics, or quarantine restrictions, strikes or other
labor stoppages, slow downs or disputes, unavailability of equipment or
materials or any other cause beyond the control of such Party. The Party failing
to perform shall provide the other Party with prompt notices to the possibility
of such a cause of delay and shall use due diligence and all reasonable efforts
to avoid and cure any such cause preventing performance so as to resume
performance hereunder as soon as reasonably possible. Any suspension of
performance by reason of this paragraph 7.8 shall be limited to the calendar
quarter during which such cause exists.
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VIII
RIGHTS OF RSIS
8.1 AM shall not have the authority to hire any employee of the
Corporation or set or otherwise agree to any compensation package for any such
employee. AM shall make recommendations to the Board who shall have the sole
authority to appoint any officer or hire any employee on terms and conditions
acceptable to the Board by majority consent.
SECTION IX
REPORTING OBLIGATION
9.1 AM and RSIS hereby agree that AM shall only be responsible to, and
shall be required to report only to the Board of Directors of RSIS, excluding
directors who are appointed or elected as representatives of AM, Digital
Investors, Inc., or any "affiliate" or "associate" of either of AM or Digital
Investors, Inc.
SECTION X
MISCELLANEOUS
10.1 NOTICES. Any notice or other communication required or permitted
hereunder shall be deemed given if in writing and delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally or sent by overnight air courier or facsimile
transmission or, if mailed, two days after the date of deposit in the United
States mails, as follows:
IF TO AM:
Active Management, L.L.C.:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, #▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
WITH COPY TO:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, #▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
IF TO THE CORPORATION:
RSI Systems, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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WITH A COPY TO:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may be given notice in accordance with this Section by any other party
at another address or person for receipt of notices, if such party so designates
such other person or address in writing in accordance with this Section 10,
paragraph 10.1.
10.2 PARTIAL INVALIDITY. Each part of this Agreement is intended to be
separate. If any term, covenant, condition or provision hereof is illegal or
invalid or unenforceable for any reason whatsoever, such illegality, invalidity
or unenforceability shall not affect the legality, validity or enforceability of
the remaining parts of this Agreement and all such remaining parts hereto shall
not be impaired or invalidated in any way, but shall be legal, valid and
enforceable and have full force and effect as if the illegal, invalid,
unenforceable part has not been included.
10.3 LAW GOVERNING AGREEMENT. This Agreement is made and entered into
and is to be at least partially performed in Dallas County, Texas. It shall be
interpreted, construed and enforced and its construction and performance shall
be governed by the laws of the State of Texas applicable to Agreements made and
to be performed entirely within such State without regard to principles of
conflicts of laws, except to the extent that Federal law may apply.
10.4 ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding and Agreement of the parties hereto, and supersedes any and all
prior understandings or other Agreements, either oral or in writing, if any,
among such parties with respect to the subject matter hereof and contains all of
the covenants and Agreements between the parties with respect thereto. Each
party to this Agreement acknowledges that no representations, inducements, or
Agreements, oral or otherwise, have been made by such party, or anyone acting on
behalf of such party, which are not embodied herein, and no other Agreement,
statement or promise not contained in this Agreement shall be valid or binding.
The parties hereto have had an opportunity to consult with their respective
attorneys concerning the meaning and the import of this Agreement and each has
read this Agreement, as signified by their signatures below, and is executing
the same for the purposes and consideration herein expressed.
10.5 WAIVERS. No delay on the part of any party in exercising any
right, power, or privilege hereunder shall operate as a waiver thereof. Nor
shall any waiver on the part of any party of any such right, power or privilege,
nor any single or partial exercise of any such right, power or privilege,
preclude any further exercise thereof or the exercise of any other such right,
power or privilege. The rights and remedies of any party based upon, arising out
of or otherwise in respect of any inaccuracy in or breach by any other party of
any representation, warranty, covenant or Agreement contained in this Agreement
shall in no way be limited by the fact that the act, omission, occurrence or
other state of facts upon which any claim of any such inaccuracy or breach is
based may also be the subject matter of any other representation, warranty,
covenant or Agreement contained in this Agreement (or in any other Agreement
between the parties) as to which there is no inaccuracy or breach.
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10.6 TAX CONSULTATION. Each Party acknowledges that it has had the
opportunity to and has consulted with their own separate independent accounting
and tax advisors in connection with the accounting and tax treatment for the
transactions contemplated hereby and the tax ramifications thereof. Each Party
shall bear all risk in connection with the accounting and tax treatment of the
transactions contemplated by this Agreement and no Party is relying on the other
Party in connection with the same.
10.7 VARIATIONS IN PRONOUNS. Wherever the context shall so require, all
words herein in the male gender shall be deemed to include the female or neuter
gender and vice versa, all singular words shall include the plural, and all
plural words shall include the singular. All pronouns and any variations thereof
refer to the masculine, feminine or neuter, singular or plural, as the context
may require.
10.8 HEADINGS. The headings used in this Agreement are for
administrative purposes only and do not constitute substantive matter to be
considered in construing the terms and shall not affect the interpretation of
this Agreement. All references herein to Sections, subsections, and clauses,
shall be deemed references to such parts of this Agreement, unless the context
shall otherwise require. A reference to an article or section will mean an
article or section in this Agreement, unless otherwise explicitly set forth. The
titles and headings in this Agreement are for reference purposes only and will
not in any manner limit the construction of this Agreement. For the purposes of
such construction, this Agreement will be considered as a whole. The terms
"including" and "include" as used in this Agreement will be deemed to include
the phrase "without limitation."
10.9 ATTORNEY'S FEES AND COSTS. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs, and necessary
disbursements, but only from the offending party, in addition to any other
relief to which it may be entitled.
10.10 REPRESENTATION BY COUNSEL. Each party acknowledges that it has
had the opportunity to be represented by separate independent counsel in the
negotiation of this Agreement, that any such respective attorneys were of its
own choosing, that each authorized representative has read this Agreement and
that he understands its meaning and legal consequences to each party. Each Party
warrants and represents that he has consulted with his attorney of choice, or
voluntarily chose not to do so, concerning the execution, the meaning and the
import of this Agreement, and has read this Agreement and fully understands the
terms hereof as signified by his signature below, and is executing the same of
his own free will for the purposes and consideration herein expressed. Each
Party warrants and represents that he has had sufficient time to consider
whether to enter into this Agreement and that he is relying solely on his own
judgment and the advice of his own counsel, if any, in deciding to execute this
Agreement. Each Party warrants and represents that he has read this Agreement in
its entirety and has consulted with his attorney, if any concerning the
execution of this Agreement. If any or all Parties have chosen not to seek
counsel, said party or parties hereby acknowledge that he or they refrained from
seeking counsel entirely of his or their own volition and with full knowledge of
the consequences of such a decision.
11
10.11 PRESUMPTION AGAINST SCRIVENER. Each party waives the presumption
that this Agreement is presumed to be in favor of the party which did not
prepare it, in case of a dispute as to interpretation.
10.12 CAPACITY. Each party represents and warrants that he has the
authority to enter into this Agreement either on his own behalf or in an
official capacity on behalf of a corporate party.
10.13 FURTHER ASSURANCES. At any time and from time to time after the
date hereof, at the request of any Party, and without further consideration,
every other party will execute and deliver such other and further instruments
and documents, and take such other action as the other Party may reasonably deem
necessary, convenient or desirable in order to more effectively assist any Party
in exercising all rights with respect thereto, and carrying out the business,
duties, and obligations created by this Agreement.
10.14 AMENDMENTS. This Agreement may not be modified, amended,
superceded, cancelled, renewed or extended, except in writing, signed by the
party or parties to be bound thereby or signed by their respective attorneys.
10.15 BINDING EFFECT AND ASSIGNMENT. This Agreement and the terms,
covenants, conditions, provisions, obligations, undertakings, rights and
benefits hereof, shall be binding upon, and shall inure to the benefit of, the
undersigned parties and their respective heirs, executors, administrators,
representatives, officers, directors, Corporation, successors, agents, servants,
employees, attorneys, and assigns. This Agreement and any rights hereunder are
not assignable except by operation of law. Any other purported assignment shall
be null and void. This Agreement shall inure to the benefit of and bind the
Parties hereto and their respective legal representatives, successors, and
permitted assigns. Notwithstanding the forgoing, all Warrants issued hereunder
shall be freely assignable in accordance with the terms of each such Warrant.
10.16 COUNTERPARTS. This Agreement may be executed in several
counterparts by one or more of the undersigned and all such counterparts so
executed shall together be deemed and constitute one final Agreement, as if one
document had been signed by all parties hereto; and each such counterpart shall
be deemed an original, binding the parties subscribed hereto and multiple
signature pages affixed to a single copy of this Agreement shall be deemed to be
a fully executed original Agreement. Several counterparts consisting of multiple
copies hereof each signed by less than all parties, but together signed by all
parties shall constitute and be deemed a fully executed original Agreement.
10.17 CORPORATE AUTHORITY. RSIS and Active Management, L.L.C. represent
and warrant to each other that each has previously taken the necessary corporate
or similar action authorizing the execution of this Agreement and the
undertakings to be accomplished hereunder by their officer recited below.
12
IN WITNESS THEREOF, the undersigned have executed this Agreement
effective as of the date first above written.
RSI SYSTEMS, INC.
-------------------------------------
By: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Its: Chairman
ACTIVE MANAGEMENT, L.L.C.
-------------------------------------
By: ▇▇▇▇ ▇▇▇▇▇▇
Its: Manager
13
EXHIBIT "A"
FORM OF WARRANT
------------------------------------------------------------------------
RSI SYSTEMS, INC.
Common Stock Purchase Warrant
Dated as of February 23, 2001
------------------------------------------------------------------------
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAW OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. THIS WARRANT AND SUCH
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THIS WARRANT AND IN THE REGISTRATION
RIGHTS AGREEMENT, DATED THE DATE HEREOF, BY AND BETWEEN RSI SYSTEMS, INC., AND
THE HOLDERS SPECIFIED THEREIN.
ii
TABLE OF CONTENTS
Page
----
1. Exercise of Warrant................................................................................ 2
1.1. Manner of Exercise........................................................................ 2
1.2. When Exercise Effective................................................................... 2
1.3. Delivery of Stock Certificates, etc....................................................... 3
1.4. Company to Reaffirm Obligations........................................................... 3
1.5. Payment by Application of Shares Otherwise Issuable....................................... 3
1.6. Tax Basis................................................................................. 2
2. Adjustment of Common Stock Issuable Upon Exercise.................................................. 3
2.1. General; Warrant Quantity................................................................. 4
2.2. Extraordinary Dividends an Distributions.................................................. 3
2.3. Treatment of Option and Convertible Securities............................................ 3
2.4. Computation of Consideration.............................................................. 4
2.5. Minimum Adjustment of Warrant Quantity.................................................... 5
2.6. Abandoned Dividend or Distribution........................................................ 5
3. Consolidation, Merger, etc. ....................................................................... 4
3.1. Adjustments for Consolidation, Merger, Sale of Assets, Reorganization, etc. .............. 4
3.2. Assumption of Obligations................................................................. 5
4. Other Dilutive Events.............................................................................. 6
5. No Dilution or Impairment.......................................................................... 6
6. Accountants' Report as to Adjustments.............................................................. 6
7. Financial and Business Information................................................................. 7
7.1. Filings................................................................................... 7
7.2. Notices of Corporate Action............................................................... 7
8. Registration of Common Stock....................................................................... 8
9. Restrictions on Transfer........................................................................... 8
9.1. Restrictive Legends....................................................................... 8
9.2. Transfers to Comply With the Securities Act............................................... 9
9.3. Termination of Restrictions............................................................... 9
10. Reservation of Stock, etc.......................................................................... 10
i
11. Registration and Transfer of Warrants, etc......................................................... 10
11.1. Warrant Register; Ownership of Warrants................................................... 10
11.2. Transfer of Warrants...................................................................... 10
11.3. Replacement of Warrants................................................................... 10
11.4. Adjustments To Warrant Quantity........................................................... 11
11.5 Fractional Shares......................................................................... 11
12. Definitions........................................................................................ 11
13. Remedies; Specific Performance..................................................................... 14
14. No Rights or Liabilities as Shareholder............................................................ 14
15. Notices............................................................................................ 14
16. Amendments......................................................................................... 15
17. Descriptive Headings, Etc.......................................................................... 15
18. Law Governing Agreement............................................................................ 15
19. Registration Rights Agreement...................................................................... 15
RSI SYSTEMS, INC.
Common Stock Purchase Warrant
Void After February 23, 2006
No. ________ Minneapolis, Minnesota
February 23, 2001
RSI SYSTEMS, INC. (the "Company"), a Nevada corporation, for value
received, hereby certifies that Active Management, L.L.C., a Nevada limited
liability company, or registered assigns (the "Holder"), is entitled to purchase
from the Company Five Hundred Thousand (500,000) shares of Common Stock of the
Company (the "Warrant Quantity") duly authorized, validly issued, fully paid and
nonassessable shares of common stock, par value $0.01 per share, of the Company
(the "Common Stock") at the purchase price per share of $0.45, at any time or
from time to time prior to 5:00 p.m. Central Standard time, on February 23, 2006
(the "Expiration Date"), all subject to the terms, conditions and adjustments
set forth below in this Warrant.
This Warrant is the Warrant (the "Warrant", such term to
include any such warrants issued in substitution therefor) originally
issued in connection with the Management and Consulting Agreement,
dated as of the date hereof, by and among the Company and the Holder
(as amended or otherwise modified from time to time, the "Management
and Consulting Agreement"). The Warrant originally so issued evidences
the right to purchase a number of shares of Common Stock equal to the
Warrant Quantity, subject to adjustment as provided herein. Certain
capitalized terms used in this Warrant are defined in Section 12;
references to an "Exhibit" are, unless otherwise specified, to one of
the Exhibits attached to this Warrant and references to a "Section"
are, unless otherwise specified, to one of the Sections of this
Warrant.
ii
1. EXERCISE OF WARRANT.
1.1 MANNER OF EXERCISE. This Warrant may be exercised by the Holder, in
whole or in part, during normal business hours on any Business Day, by surrender
of this Warrant to the Company at its principal office, accompanied by the Form
of Subscription in substantially the form attached as Exhibit A to this Warrant
(or a reasonable facsimile thereof) duly executed by the Holder and accompanied
by payment, in cash, by wire transfer, certified or official bank check payable
to the order of the Company, or in the manner provided in Section 1.5 or Section
1.6 (or by any combination of such methods), in the amount obtained by
multiplying (a) the number of shares of Common Stock (adjusted as provided in
Sections 2 through 4) designated in such Form of Subscription by (b) $0.35, and
such Holder shall thereupon be entitled to receive such number of duly
authorized, validly issued, fully paid and nonassessable shares of Common Stock
(or Other Securities).
1.2 WHEN EXERCISE EFFECTIVE. Each exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
Business Day on which this Warrant shall have been surrendered to the Company as
provided in Section 1.1. At such time the Person or Persons in whose name or
names any certificate or certificates for shares of Common Stock (or Other
Securities) shall be issuable upon such exercise, as provided in Section 1.3,
shall be deemed to have become the Holder or holders of record thereof.
1.3 DELIVERY OF STOCK CERTIFICATES, ETC. As soon as practicable after
each exercise of this Warrant, in whole or in part, and in any event within
three Business Days thereafter, the Company at its expense (including the
payment by it of any applicable transfer taxes) will cause to be issued in the
name of and delivered to the Holder hereof or, subject to Section 9, as such
Holder (upon payment by such Holder of any applicable transfer taxes) may
direct,
(a) a certificate or certificates for the number of duly
authorized, validly issued, fully paid and nonassessable shares,
including, if the Company so elects, fractional shares, of Common Stock
(or Other Securities) to which such Holder shall be entitled upon such
exercise plus, at the discretion of the Company, in lieu of any
fractional share to which such Holder would otherwise be entitled, cash
in an amount equal to the same fraction of the Current Market Price per
share on the Business Day next preceding the date of such exercise, and
(b) in case such exercise is in part only, a new Warrant or
Warrants of like tenor, calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock equal (without giving
effect to any adjustment thereof) to the number of such shares called
for on the face of this Warrant minus the number of such shares
designated by the Holder upon such exercise as provided in Section 1.1.
1.4 COMPANY TO REAFFIRM OBLIGATIONS. The Company will, at the time of
each exercise of this Warrant, upon the request of the Holder, acknowledge in
writing its continuing obligation to afford to such Holder all rights
(including, without limitation, any rights to registration of the shares of
Common Stock or Other Securities issued upon such exercise) to which such Holder
shall continue to be entitled after such exercise in accordance with the terms
of this Warrant, provided that if the Holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford such rights to such Holder.
1.5 PAYMENT BY APPLICATION OF SHARES OTHERWISE ISSUABLE. Upon any
exercise of this Warrant, the Holder may, at its option, instruct the Company,
by written notice accompanying the surrender of this Warrant at the time of such
exercise, to apply to the payment required by Section 1.1
such number of the shares of Common Stock otherwise issuable to such Holder upon
such exercise as shall be specified in such notice, in which case an amount
equal to the excess of the aggregate Current Market Price of such specified
number of shares on the date of exercise over the portion of the payment
required by Section 1.1 attributable to such shares shall be deemed to have been
paid to the Company and the number of shares issuable upon such exercise shall
be reduced by such specified number.
1.6 TAX BASIS. The Company and the Holder shall mutually agree as to
the tax basis of this Warrant for purposes of the Internal Revenue Code of 1986,
as amended (the "Code"), and the treatment of this Warrant under the Code by
each of the Company and the Holder shall be consistent with such agreement.
2. Adjustment of Common Stock Issuable Upon Exercise.
2.1 GENERAL; WARRANT QUANTITY. This Warrant initially evidences the
right to purchase a number of shares of Common Stock equal to the Warrant
Quantity, subject to adjustment as provided in this Section 2. The "Warrant
Price" shall be fixed at $0.45 per share of Common Stock received upon exercise
of this Warrant.
2.2 EXTRAORDINARY DIVIDENDS AND DISTRIBUTIONS. In case the Company at
any time or from time to time after the date hereof shall declare, order, pay or
make a dividend or other distribution (including, without limitation, any
distribution of other or additional stock or other securities or property or
Options by way of dividend or spin-off, reclassification, recapitalization or
similar corporate rearrangement) on the Common Stock other than (a) a dividend
payable in Additional Shares of Common Stock or (b) a regularly scheduled cash
dividend payable out of consolidated earnings or earned surplus, determined in
accordance with generally accepted accounting principles, then, in each such
case, subject to Section 2.8, the Warrant Quantity in effect immediately prior
to the close of business on the record date fixed for the determination of
holders of any class of securities entitled to receive such dividend or
distribution shall be increased, effective as of the close of business on such
record date, to an amount determined by multiplying such Warrant Quantity by a
fraction
(x) the numerator of which shall be the Current Market Price
in effect on such record date or, if the Common Stock trades on an
ex-dividend basis, on the date prior to the commencement of ex-dividend
trading, and
(y) the denominator of which shall be such Current Market
Price, less the amount of such dividend or distribution (as determined
in good faith by the Board of Directors of the Company) applicable to
one share of Common Stock,
provided that, in the event that the amount of such dividend as so determined is
equal to or greater than 10% of such Current Market Price or in the event that
such fraction is greater than 10/9, in lieu of the foregoing adjustment,
adequate provision shall be made so that the Holder of this Warrant shall
receive a pro rata share of such dividend based upon the maximum number of
shares of Common Stock at the time issuable to such Holder.
2.3 TREATMENT OF STOCK DIVIDENDS, STOCK SPLITS, ETC. In case the
Company at any time or from time to time after the date hereof shall declare or
pay any dividend on the Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, and in each such case, Additional Shares of
Common Stock shall be deemed to have been issued (a) in the case of any such
dividend, immediately after the close of business
on the record date for the determination of holders of any class of securities
entitled to receive such dividend, or (b) in the case of any such subdivision,
at the close of business on the day immediately prior to the day upon which such
corporate action becomes effective.
2.4 COMPUTATION OF CONSIDERATION. For the purposes of this Section 2,
(a) the consideration for the issue or sale of any Additional
Shares of Common Stock shall, irrespective of the accounting treatment
of such consideration,
(i) insofar as it consists of cash, be computed at
the net amount of cash received by the Company, without
deducting any expenses paid or incurred by the Company or any
commissions or compensations paid or concessions or discounts
allowed to underwriters, dealers or others performing similar
services in connection with such issue or sale,
(ii) insofar as it consists of property (including
securities) other than cash, be computed at the fair value
thereof at the time of such issue or sale, as determined in
good faith by the Board of Directors of the Company, and
(iii) in case Additional Shares of Common Stock are
issued or sold together with other stock or securities or
other assets of the Company for a consideration which covers
both, be the portion of such consideration so received,
computed as provided in clauses (i) and (ii) above, allocable
to such Additional Shares of Common Stock, all as determined
in good faith by the Board of Directors of the Company;
(b) Additional Shares of Common Stock deemed to have been
issued pursuant to Section 2.2, relating to stock dividends, stock
splits, etc., shall be deemed to have been issued for no consideration.
2.5 MINIMUM ADJUSTMENT OF WARRANT QUANTITY. If the amount of any
adjustment of the Warrant Quantity required pursuant to this Section 2 would be
less than one tenth (1/10) of one percent (1%) of the Warrant Quantity in effect
at the time such adjustment is otherwise so required to be made, such amount
shall be carried forward and adjustment with respect thereto made at the time of
and together with any subsequent adjustment which, together with such amount and
any other amount or amounts so carried forward, shall aggregate at least one
tenth (1/10) of one percent (1%) of such Warrant Quantity. All calculations
under this Warrant shall be made to the nearest one-hundredth of a share.
2.6 ABANDONED DIVIDEND OR DISTRIBUTION. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or other distribution (which results in an adjustment to the
Warrant Quantity under the terms of this Warrant) and shall, thereafter, and
before such dividend or distribution is paid or delivered to shareholders
entitled thereto, legally abandon its plan to pay or deliver such dividend or
distribution, then any adjustment made to the Warrant Quantity by reason of the
taking of such record shall be reversed, and any subsequent adjustments, based
thereon, shall be recomputed.
3. Consolidation, Merger, etc.
3.1 ADJUSTMENTS FOR CONSOLIDATION, MERGER, SALE OF ASSETS,
REORGANIZATION, ETC. In case the Company after the date hereof (a) shall
consolidate with or merge into any other Person and shall not
be the continuing or surviving corporation of such consolidation or merger, or
(b) shall permit any other Person to consolidate with or merge into the Company
and the Company shall be the continuing or surviving Person but, in connection
with such consolidation or merger, the Common Stock or Other Securities shall be
changed into or exchanged for stock or other securities of any other Person or
cash or any other property, or (c) shall transfer all or substantially all of
its properties or assets to any other Person, or (d) shall effect a capital
reorganization or reclassification of the Common Stock or Other Securities
(other than a capital reorganization or reclassification resulting in the issue
of Additional Shares of Common Stock for which adjustment in the Warrant
Quantity is provided in Section 2.2.1), then, and in the case of each such
transaction, proper provision shall be made so that, upon the basis and the
terms and in the manner provided in this Warrant, the Holder, upon the exercise
hereof at any time after the consummation of such transaction, shall be entitled
to receive (at the aggregate Warrant Price in effect at the time of such
consummation for all Common Stock or Other Securities issuable upon such
exercise immediately prior to such consummation), in lieu of the Common Stock or
Other Securities issuable upon such exercise prior to such consummation, the
highest amount of securities, cash or other property to which such Holder would
actually have been entitled as a shareholder upon such consummation if such
Holder had exercised the rights represented by this Warrant immediately prior
thereto, subject to adjustments (subsequent to such consummation) as nearly
equivalent as possible to the adjustments provided for in Sections 2 through 4,
provided that if a purchase, tender or exchange offer shall have been made to
and accepted by the holders of more than 50% of the outstanding shares of Common
Stock, and if the Holder so designates in a notice given to the Company on or
before the date immediately preceding the date of the consummation of such
transaction, the Holder shall be entitled to receive the highest amount of
securities, cash or other property to which such Holder would actually have been
entitled as a shareholder if the Holder had exercised this Warrant prior to the
expiration of such purchase, tender or exchange offer and accepted such offer,
subject to adjustments (from and after the consummation of such purchase, tender
or exchange offer) as nearly equivalent as possible to the adjustments provided
for in Sections 2 through 4.
3.2 ASSUMPTION OF OBLIGATIONS. Notwithstanding anything contained in
the Warrant or in the Management and Consulting Agreement to the contrary, the
Company will not effect any of the transactions described in clauses (a) through
(d) of Section 3.1 unless, prior to the consummation thereof, each Person (other
than the Company) which may be required to deliver any stock, securities, cash
or property upon the exercise of this Warrant as provided herein shall assume,
by written instrument delivered to, and reasonably satisfactory to, the Holder,
(a) the obligations of the Company under this Warrant (and if the Company shall
survive the consummation of such transaction, such assumption shall be in
addition to, and shall not release the Company from, any continuing obligations
of the Company under this Warrant), (b) the obligations of the Company under the
Registration Rights Agreement, and (c) the obligation to deliver to such Holder
such shares of stock, securities, cash or property as, in accordance with the
foregoing provisions of this Section 3, such Holder may be entitled to receive,
and such Person shall have similarly delivered to such Holder an opinion of
counsel for such Person, which counsel shall be reasonably satisfactory to such
Holder, stating that this Warrant shall thereafter continue in full force and
effect and the terms hereof (including, without limitation, all of the
provisions of this Section 3) shall be applicable to the stock, securities, cash
or property which such Person may be required to deliver upon any exercise of
this Warrant or the exercise of any rights pursuant hereto. .
4. OTHER DILUTIVE EVENTS. In case any event shall occur as to which the
provisions of Section 2 or Section 3 are not strictly applicable but the failure
to make any adjustment would not fairly protect the purchase rights represented
by this Warrant in accordance with the essential intent and principles of such
Sections, then, in each such case, the Company shall appoint a firm of
independent certified public
accountants of recognized national standing (which may be the regular auditors
of the Company), which shall give their opinion upon the adjustment, if any, on
a basis consistent with the essential intent and principles established in
Sections 2 and 3, necessary to preserve, without dilution, the purchase rights
represented by this Warrant. Upon receipt of such opinion, the Company will
promptly mail a copy thereof to the Holder and shall make the adjustments
described therein.
5. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its articles
of incorporation or through any consolidation, merger, reorganization, transfer
of assets, dissolution, issue or sale of securities or any other voluntary
action, 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 against dilution or
other impairment. Without limiting the generality of the foregoing, the Company
(a) shall not permit the par value of any shares of stock receivable upon the
exercise of this Warrant to exceed the amount payable therefor upon such
exercise, (b) will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of stock, free from all taxes, liens, security interests,
encumbrances, preemptive rights and charges on the exercise of the Warrants from
time to time outstanding, (c) will not take any action which results in any
adjustment of the Warrant Quantity if the total number of shares of Common Stock
(or Other Securities) issuable after the action upon the exercise of all of the
Warrants would exceed the total number of shares of Common Stock (or Other
Securities) then authorized by the Company's certificate of incorporation and
available for the purpose of issue upon such exercise, and (d) will not issue
any capital stock of any class which is preferred as to dividends or as to the
distribution of assets upon voluntary or involuntary dissolution, liquidation or
winding-up, unless the rights of the holders thereof shall be limited to a fixed
sum or percentage of par value or a sum determined by reference to a formula
based on a published index of interest rates, an interest rate publicly
announced by a financial institution or a similar indicator of interest rates in
respect of participation in dividends and to a fixed sum or percentage of par
value in any such distribution of assets.
6. ACCOUNTANTS' REPORT AS TO ADJUSTMENTS. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable upon
the exercise of this Warrant, the Company at its expense will promptly compute
such adjustment or readjustment in accordance with the terms of this Warrant and
cause independent certified public accountants of recognized national standing
(which may be the regular auditors of the Company) selected by the Company to
verify such computation (other than any computation of the fair value of
property as determined in good faith by the Board of Directors of the Company)
and prepare a report setting forth such adjustment or readjustment and showing
in reasonable detail the method of calculation thereof and the facts upon which
such adjustment or readjustment is based, including a statement of (a) the
consideration received or to be received by the Company for any Additional
Shares of Common Stock issued or sold or deemed to have been issued, (b) the
number of shares of Common Stock outstanding or deemed to be outstanding, and
(c) the Warrant Quantity in effect immediately prior to such issue or sale and
as adjusted and readjusted (if required by Section 2) on account thereof. The
Company will forthwith mail a copy of each such report to each Holder of a
Warrant and will, upon the written request at any time of any Holder of a
Warrant, furnish to such Holder a like report setting forth the Warrant Quantity
at the time in effect and showing in reasonable detail how it was calculated.
The Company will also keep copies of all such reports at its principal office
and will cause the same to be available for inspection at such office during
normal business hours by any Holder of a Warrant or any prospective purchaser of
a Warrant designated by the Holder thereof.
7. FINANCIAL AND BUSINESS INFORMATION
7.1 FILINGS. During any period when the Company is a Public Company,
the Company will file on or before the required date all required regular or
periodic reports (pursuant to the Exchange Act) with the Commission and will
deliver to the Holder promptly upon their becoming available one copy of each
report, notice or proxy statement sent by the Company to its stockholders
generally, and of each regular or periodic report (pursuant to the Exchange Act)
and any registration statement, prospectus or written communication (other than
transmittal letters) (pursuant to the Securities Act), filed by the Company with
(i) the Commission or (ii) any securities exchange on which shares of Common
Stock are listed.
7.2 NOTICES OF CORPORATE ACTION. In the event of
(a) any taking by the Company of a record of the holders of
any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than a regular
periodic dividend payable in cash out of earned surplus in an amount
not exceeding the amount of the immediately preceding cash dividend for
such period) or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any
other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any consolidation or merger involving the Company and any
other Person, any transaction or series of transactions in which more
than 50% of the Voting Securities of the Company are transferred to
another Person or any transfer, sale or other disposition of all or
substantially all the assets of the Company to any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
the Company will mail to the Holder a notice specifying (i) the date or expected
date on which any such record is to be taken for the purpose of such dividend,
distribution or right, and the amount and character of such dividend,
distribution or right, and (ii) the date or expected date on which any such
reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and the time,
if any such time is to be fixed, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of Common
Stock (or Other Securities) for the securities or other property deliverable
upon such reorganization, reclassification, recapitalization, consolidation,
merger, transfer, dissolution, sale, disposition, liquidation or winding-up.
Such notice shall be mailed at least 45 days prior to the date therein
specified.
8. REGISTRATION OF COMMON STOCK. If any shares of Common Stock required to be
reserved for purposes of exercise of this Warrant require registration with or
approval of any governmental authority under any federal or state law (other
than the Securities Act) before such shares may be issued upon exercise, the
Company will, at its expense and as expeditiously as possible, use its best
efforts to cause such shares to be duly registered or approved, as the case may
be. At any such time as Common Stock is listed on any national securities
exchange, the Company will, at its expense, obtain promptly and maintain the
approval for listing on each such exchange, upon official notice of issuance,
the shares of Common Stock issuable upon exercise of the then outstanding
Warrants and maintain the listing of such shares after their issuance; and the
Company will also list on such national securities exchange, will register under
the Exchange Act and will maintain such listing of, any Other Securities that at
any time are issuable upon exercise of the Warrants, if and at the time that any
securities of the same class shall be listed on such national securities
exchange by the Company.
9. RESTRICTIONS ON TRANSFER.
9.1 RESTRICTIVE LEGENDS. Except as otherwise permitted by this Section
9, each Warrant (including each Warrant issued upon the transfer of any Warrant)
shall be stamped or otherwise imprinted with a legend in substantially the
following form:
"THIS WARRANT AND ANY SECURITIES ACQUIRED UPON EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR THE SECURITIES LAW OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF
SUCH ACT AND SUCH LAWS. THIS WARRANT AND SUCH SECURITIES MAY NOT BE
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH
THE CONDITIONS SPECIFIED IN THIS WARRANT AND IN THE REGISTRATION RIGHTS
AGREEMENT, DATED THE DATE HEREOF, BY AND BETWEEN RSI SYSTEMS, INC., AND
THE HOLDERS SPECIFIED THEREIN."
Except as otherwise permitted by this Section 9, each certificate for Common
Stock (or Other Securities) issued upon the exercise of any Warrant, and each
certificate issued upon the transfer of any such Common Stock (or Other
Securities), shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAW OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF
SUCH ACT AND SUCH LAWS. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE CONDITIONS
SPECIFIED IN CERTAIN COMMON STOCK PURCHASE WARRANTS ISSUED BY RSI
SYSTEMS, INC., PURSUANT TO THE COMMON STOCK PURCHASE WARRANT, DATED
FEBRUARY 23, 2001, AND PURSUANT TO THE REGISTRATION RIGHTS AGREEMENT
DATED THE DATE THEREOF, BY AND BETWEEN RSI SYSTEMS, INC. AND THE
HOLDERS SPECIFIED THEREIN. A COMPLETE AND CORRECT COPY OF THE FORM OF
SUCH WARRANT AND REGISTRATION RIGHTS AGREEMENT IS AVAILABLE FOR
INSPECTION AT THE PRINCIPAL OFFICE OF RSI SYSTEMS, INC., OR AT THE
OFFICE OR AGENCY MAINTAINED BY RSI SYSTEMS, INC., AS PROVIDED IN SUCH
WARRANTS AND SUCH REGISTRATION RIGHTS AGREEMENT AND WILL BE FURNISHED
TO THE HOLDER OF SUCH SECURITIES UPON WRITTEN REQUEST AND WITHOUT
CHARGE."
9.2 TRANSFER TO COMPLY WITH THE SECURITIES ACT. Restricted Securities
may not be sold, assigned, pledged, hypothecated, encumbered or in any manner
transferred or disposed of, in whole or in part, except in compliance with the
provisions of the Securities Act and state securities or Blue Sky laws and the
terms and conditions hereof.
9.3 TERMINATION OF RESTRICTIONS. The restrictions imposed by this
Section 9 on the transferability of Restricted Securities shall cease and
terminate as to any particular Restricted Securities (a) when a registration
statement with respect to the sale of such securities shall have been declared
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (b) when such securities are
sold pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act, or (c) when, in the opinion of both counsel for the Holder and
counsel for the Company, such restrictions are no longer required or necessary
in order to protect the Company against a violation of the Securities Act upon
any sale or other disposition of such securities without registration
thereunder. Whenever such restrictions shall cease and terminate as to any
Restricted Securities, the Holder shall be entitled to receive from the Company,
without expense, new securities of like tenor not bearing the applicable legends
required by Section 9.1.
10. RESERVATION OF STOCK, ETC. The Company shall at all times reserve and keep
available, solely for issuance and delivery upon exercise of the Warrants, the
number of shares of Common Stock (or Other Securities) from time to time
issuable upon exercise of all Warrants at the time outstanding. All shares of
Common Stock (or Other Securities) issuable upon exercise of any Warrants shall
be duly authorized and, when issued upon such exercise, shall be validly issued
and, in the case of shares, fully paid and nonassessable with no liability on
the part of the holders thereof, and, in the case of all securities, shall be
free from all taxes, liens, security interests, encumbrances, preemptive rights
and charges. The transfer agent for the Common Stock, which may be the Company
("Transfer Agent"), and every subsequent Transfer Agent for any shares of the
Company's capital stock issuable upon the exercise of any of the purchase rights
represented by this Warrant, are hereby irrevocably authorized and directed at
all times until the Expiration Date to reserve such number of authorized and
unissued shares as shall be requisite for such purpose. The Company shall keep
copies of this Warrant on file with the Transfer Agent for the Common Stock and
with every subsequent Transfer Agent for any shares of the Company's capital
stock issuable upon the exercise of the rights of purchase represented by this
Warrant. The Company shall supply such Transfer Agent with duly executed stock
certificates for such purpose. All Warrant certificates surrendered upon the
exercise of the rights thereby evidenced shall be canceled, and such canceled
Warrants shall constitute sufficient evidence of the number of shares of stock
that have been issued upon the exercise of such Warrants. Subsequent to the
Expiration Date, no shares of stock need be reserved in respect of any
unexercised Warrant.
11. REGISTRATION AND TRANSFER OF WARRANTS, ETC.
11.1 WARRANT REGISTER; OWNERSHIP OF WARRANTS. Each Warrant issued by
the Company shall be numbered and shall be registered in a warrant register (the
"Warrant Register") as it is issued and transferred, which Warrant Register
shall be maintained by the Company at its principal office or, at the Company's
election and expense, by a Warrant Agent or the Company's transfer agent. The
Company shall be entitled to treat the registered Holder of any Warrant on the
Warrant Register as the owner in fact thereof for all purposes and shall not be
bound to recognize any equitable or other claim to or interest in such Warrant
on the part of any other Person, and shall not be affected by any notice to the
contrary, except that, if and when any Warrant is properly assigned in blank,
the Company may (but shall not be obligated to) treat the bearer thereof as the
owner of such Warrant for all purposes. Subject to Section 9, a Warrant, if
properly assigned, may be exercised by a new holder without a new Warrant first
having been issued.
11.2 TRANSFER OF WARRANTS. Subject to compliance with Section 9, if
applicable, this Warrant and all rights hereunder are transferable in whole or
in part, without charge to the Holder hereof, upon surrender of this Warrant
with a properly executed Form of Assignment attached hereto as Exhibit B at the
principal office of the Company. Upon any partial transfer, the Company shall at
its expense issue
and deliver to the Holder a new Warrant of like tenor, in the name of the
Holder, which shall be exercisable for such number of shares of Common Stock
with respect to which rights under this Warrant were not so transferred.
11.3 REPLACEMENT OF WARRANTS. On receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft or
destruction of this Warrant, on delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender of such Warrant to the Company at its principal office
and cancellation thereof, the Company at its expense shall execute and deliver,
in lieu thereof, a new Warrant of like tenor.
11.4 ADJUSTMENTS TO WARRANT QUANTITY. Notwithstanding any adjustment in
the Warrant Quantity or in the number or kind of shares of Common Stock
purchasable upon exercise of this Warrant, any Warrant theretofore or thereafter
issued may continue to express the same number and kind of shares of Common
Stock as are stated in this Warrant, as initially issued.
11.5 FRACTIONAL SHARES. Notwithstanding any adjustment pursuant to
Section 2 in the number of shares of Common Stock covered by this Warrant or any
other provision of this Warrant, the Company may, but shall not be required to,
issue fractions of shares upon exercise of this Warrant or to distribute
certificates which evidence fractional shares. In lieu of fractional shares, the
Company shall make payment to the Holder, at the time of exercise of this
Warrant as herein provided, in an amount in cash equal to such fraction
multiplied by the Current Market Price of a share of Common Stock on the date of
Warrant exercise.
12. DEFINITIONS. As used herein, unless the context otherwise requires, the
following terms have the following respective meanings:
ADDITIONAL SHARES OF COMMON STOCK: All shares (including
treasury shares) of Common Stock issued or sold (or, pursuant to Section 2.2,
deemed to be issued) by the Company after the date hereof, whether or not
subsequently reacquired or retired by the Company, other than
(a) shares issued upon the exercise of the Warrant,
(b) such additional number of shares as may become issuable
upon the exercise of the Warrant by reason of adjustments required
pursuant to anti-dilution provisions applicable to the Warrant as in
effect on the date hereof,
(c) shares, warrants, options and other securities issued at
any time to the Holder or any Affiliate thereof.
AFFILIATE: Any person that directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common control
with, the applicable person. For purposes of this definition "control" has the
meaning specified in Rule 12b-2 under the Exchange Act.
BUSINESS DAY: Any day other than a Saturday or a Sunday or a
day on which commercial banking institutions in the City of Nevada are
authorized by law to be closed. Any reference to "days" (unless Business Days
are specified) shall mean calendar days.
CODE: As defined in Section 1.6.
COMMISSION: The Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
COMMON STOCK: As defined in the introduction to this Warrant,
such term to include any stock into which such Common Stock shall have been
changed or any stock resulting from any reclassification of such Common Stock,
and all other stock of any class or classes (however designated) of the Company
the holders of which have the right, without limitation as to amount, either to
all or to a share of the balance of current dividends and liquidating dividends
after the payment of dividends and distributions on any shares entitled to
preference.
COMPANY: As defined in the introduction to this Warrant, such
term to include any corporation, which shall succeed to or assume the
obligations of the Company hereunder in compliance with Section 3.
CONVERTIBLE SECURITIES: Any evidences of indebtedness, shares
of stock (other than Common Stock) or other securities directly or indirectly
convertible into or exchangeable for Additional Shares of Common Stock.
EXCHANGE ACT: The Securities Exchange Act of 1934, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
EXPIRATION DATE: As defined in the introduction to this
Warrant.
HOLDER: As defined in the introduction to this Warrant.
MARKET PRICE: On any date specified herein, the amount per
share of the Common Stock, equal to (a) the last reported sale price of such
Common Stock, regular way, on such date or, in case no such sale takes place on
such date, the average of the closing bid and asked prices thereof regular way
on such date, in either case as officially reported on the principal national
securities exchange on which such Common Stock is then listed or admitted for
trading, or (b) if such Common Stock is not then listed or admitted for trading
on any national securities exchange but is designated as a national market
system security by the NASD, the last reported trading price of the Common Stock
on such date, or (c) if there shall have been no trading on such date or if the
Common Stock is not so designated, the average of the closing bid and asked
prices of the Common Stock on such date as shown by the NASD automated quotation
system, or (d) if such Common Stock is not then listed or admitted for trading
on any national exchange or quoted in the over-the-counter market, the higher of
(x) the book value thereof as determined by any firm of independent public
accountants of recognized standing selected by the Board of Directors of the
Company as of the last day of any month ending within 60 days preceding the date
as of which the determination is to be made and (y) the fair value thereof (as
of a date which is within 20 days of the date as of which the determination is
to be made) determined in good faith by the Board of Directors of the Company.
NASD: The National Association of Securities Dealers, Inc.
OPTIONS: Rights, options or warrants to subscribe for,
purchase or otherwise acquire either Additional Shares of Common Stock or
Convertible Securities.
OTHER SECURITIES: Any stock (other than Common Stock) and
other securities of the Company or any other Person (corporate or otherwise)
which the holders of the Warrants at any time shall be entitled to receive, or
shall have received, upon the exercise of the Warrants, in lieu of or in
addition to Common Stock, or which at any time shall be issuable or shall have
been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 3 or otherwise.
PERSON: An individual, firm, partnership, corporation,
professional corporation, trust, joint venture, association, joint stock
company, limited liability company, unincorporated organization or any other
entity or organization, including a government or agency or political
subdivision thereof, and shall include any successor (by merger or otherwise) of
such entity.
REGISTRATION RIGHTS AGREEMENT: The Registration Rights
Agreement, dated the date hereof, by and between the Company and the holders
specified therein.
RESTRICTED SECURITIES: (a) any Warrants bearing the applicable
legend set forth in Section 9.1, (b) any shares of Common Stock (or Other
Securities) issued or issuable upon the exercise of Warrants which are evidenced
by a certificate or certificates bearing the applicable legend set forth in such
Section, and (c) any shares of Common Stock (or Other Securities) issued
subsequent to the exercise of any of the Warrants as a dividend or other
distribution with respect to, or resulting from a subdivision of the outstanding
shares of Common Stock (or other Securities) into a greater number of shares by
reclassification, stock splits or otherwise, or in exchange for or in
replacement of the Common Stock (or Other Securities) issued upon such exercise,
which are evidenced by a certificate or certificates bearing the applicable
legend set forth in such Section.
SECURITIES ACT: The Securities Act of 1933, or any similar
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
MANAGEMENT AND CONSULTING AGREEMENT: As defined in the
introduction to this Warrant.
VOTING SECURITIES: Stock of any class or classes (or
equivalent interests), if the holders of the stock of such class or classes (or
equivalent interests) are ordinarily, in the absence of contingencies, entitled
to vote for the election of the directors (or persons performing similar
functions) of such business entity, even though the right so to vote has been
suspended by the happening of such a contingency.
WARRANT: As defined in the introduction to this Warrant.
WARRANT PRICE: As defined in Section 2.1.
WARRANT QUANTITY: As defined in the introduction to this
Warrant.
13. REMEDIES; SPECIFIC PERFORMANCE. The Company stipulates that there would be
no adequate remedy at law to the Holder of this Warrant in the event of any
default or threatened default by the Company in the performance of or compliance
with any of the terms of this Warrant and accordingly, the Company agrees that,
in addition to any other remedy to which the Holder may be entitled at law or in
equity, the Holder shall be entitled to seek to compel specific performance of
the obligations of the Company under this Warrant, without the posting of any
bond, in accordance with the terms and conditions of this Warrant in any court
of the United States or any State thereof having jurisdiction, and if any action
should be brought in equity to enforce any of the provisions of this Warrant,
the Company shall not raise the defense that there is an adequate remedy at law.
Except as otherwise provided by law, a delay or omission by the Holder hereto in
exercising any right or remedy accruing upon any such breach shall not impair
the right or remedy or constitute a waiver of or acquiescence in any such
breach. No remedy shall be exclusive of any other remedy. All available remedies
shall be cumulative.
14. NO RIGHTS OR LIABILITIES AS SHAREHOLDER. Nothing contained in this Warrant
shall be construed as conferring upon the Holder hereof any rights as a
shareholder of the Company or as imposing any obligation on the Holder to
purchase any securities or as imposing any liabilities on the Holder as a
shareholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company.
15. NOTICES. Any notice or other communication required or permitted hereunder
shall be deemed given if in writing and delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally or sent by overnight air courier or facsimile transmission
or, if mailed, two days after the date of deposit in the United States mail, as
follows:
IF TO RSIM:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, #▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
WITH A COPY TO:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, #▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
IF TO RSIS:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
WITH A COPY TO:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may be given notice in accordance with this Section by any other party
at another address or person for receipt of notices, if such party so designates
such other person or address in writing in accordance with this Section 15. The
Company shall give Notice to any subsequent Holder at such address as it appears
in the Warrant Register.
All such notices and communications (and deliveries) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; when receipt is acknowledged, if telecopied; on the next Business
Day, if timely delivered to a courier guaranteeing overnight delivery; and five
days after being deposited in the mail, if sent first class or certified mail,
return receipt requested, postage prepaid; provided, that the exercise of any
Warrant shall be effective in the manner provided in Section 1.
16. AMENDMENTS. This Warrant and any term hereof may not be amended, modified,
supplemented or terminated, and waivers or consents to departures from the
provisions hereof may not be given, except by written instrument duly executed
by the party against which enforcement of such amendment, modification,
supplement, termination or consent to departure is sought.
17. DESCRIPTIVE HEADINGS, ETC. The headings in this Warrant are for convenience
of reference only and shall not limit or otherwise affect the meaning of terms
contained herein. Unless the context of this Warrant otherwise requires: (1)
words of any gender shall be deemed to include each other gender; (2) words
using the singular or plural number shall also include the plural or singular
number, respectively; (3) the words "hereof", "herein" and "hereunder" and words
of similar import when used in this Warrant shall refer to this Warrant as a
whole and not to any particular provision of this Warrant, and Section and
paragraph references are to the Sections and paragraphs of this Warrant unless
otherwise specified; (4) the word "including" and words of similar import when
used in this Warrant shall mean "including, without limitation," unless
otherwise specified; (5) "or" is not exclusive; and (6) provisions apply to
successive events and transactions.
18. LAW GOVERNING AGREEMENT. This Agreement shall be interpreted, construed and
enforced and its construction and performance shall be governed by the laws of
the State of Minnesota without regard to principles of conflicts of laws, except
to the extent that Federal law may apply.
19. REGISTRATION RIGHTS AGREEMENT. The shares of Common Stock (and Other
Securities) issuable upon exercise of this Warrant (or upon conversion of any
shares of Common Stock issued upon such exercise) shall constitute Registrable
Securities (as such term is defined in the Registration Rights Agreement). Each
holder of this Warrant shall be entitled to all of the benefits afforded to a
holder of any such Registrable Securities under the Registration Rights
Agreement and such holder, by its acceptance of this Warrant, agrees to be bound
by and to comply with the terms and conditions of the Registration Rights
Agreement applicable to such holder as a holder of such Registrable Securities.
RSI SYSTEMS, INC.
------------------------------------
By: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Its: Chairman
Exhibit A
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To: RSI SYSTEMS, INC.
The undersigned registered holder of the within Warrant hereby irrevocably
exercises such Warrant for, and purchases thereunder, ________________* shares
of Common stock of RSI SYSTEMS, INC. and herewith makes payment of $ ___________
therefor, and requests that the certificates for such shares be issued in the
name of, and delivered to _________________________, whose address is __________
_______________________________________________________________________________.
Dated: _______________________ ____________________________________________
(Signature must conform in all respects to
the name of holder as specified on the face
of Warrant)
____________________________________________
(▇▇▇▇▇▇ ▇▇▇▇▇▇▇)
____________________________________________
(City) (State) Zip Code)
----------------------------
* Insert here the number of shares called for on the face of this Warrant
(or, in the case of a partial exercise, the portion thereof as to which
this Warrant is being exercised), in either case without making any
adjustment for Additional Shares of Common Stock or any other stock or
other securities or property or cash which, pursuant to the adjustment
provisions of this Warrant, may be delivered upon exercise. In the case
of partial exercise, a new Warrant or Warrants will be issued and
delivered, representing the unexercised portion of the Warrant, to the
holder surrendering the Warrant.
Exhibit B
FORM OF ASSIGNMENT
[To be executed only upon assignment of Warrant]
For value received, the undersigned registered holder of the within Warrant
hereby sells, assigns and transfers unto
_________________________________________ the right represented by such Warrant
to purchase _________________________________________________ shares of Common
Stock of RSI SYSTEMS, INC. to which such Warrant relates, and appoints
_______________________________________, Attorney to make such transfer on the
books of RSI SYSTEMS, INC., maintained for such purpose, with full power of
substitution in the premises.
Dated: _______________________ ____________________________________________
(Signature must conform in all respects to
the name of holder as specified on the face
of Warrant)
____________________________________________
(▇▇▇▇▇▇ ▇▇▇▇▇▇▇)
____________________________________________
(City) (State) Zip Code)
Signed in the presence of:
____________________________________
____________________________________
(printed name)