Exhibit No. 1.2 Form of Representative's Share Option Agreement.
Exhibit 1.2
FIRSTLINK COMMUNICATIONS, INC.
XXXXXXX XXXXXXXX SECURITIES CORPORATION
REPRESENTATIVE'S SHARE OPTION AGREEMENT
Dated as of ________
TABLE OF CONTENTS
Section Title Page Number
1 Definitions 1
2 Options and Issuance of Option Certificates 2
3 Form of Option 2
4 Term of Options; Exercise of Options 3
5 Reservation of Option Securities 4
6 Payment of Taxes 5
7 Option Securities to be Fully Paid 5
8 Limitation on Transfer 5
9 Adjustment of Exercise Price and Number of Shares 5
10 Merger or Consolidation of Company 8
11 Modification of Agreement 8
12 Notice to Holders 8
13 Registration Rights 9
14 Payment of Taxes 12
15 Indemnification and Contribution 12
16 Restrictions on Transfer 14
17 Fractional Shares 15
18 No Rights as Stockholder; Notices to Option Holder 15
19 Charges Due Upon Exercise 15
20 Notices 15
21 Arbitration 16
22 Applicable Law 16
23 Miscellaneous Provisions 16
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REPRESENTATIVE'S SHARE OPTION AGREEMENT
This Representative's Share Option Agreement (the "Agreement"), dated as
of ____, is made and entered into by and between FirstLink Communications,
Inc., an Oregon corporation (the "Company"), and Xxxxxxx Davidson Securities
Corporation ("Xxxxxxx Xxxxxxxx").
The Company agrees to issue and sell, and Xxxxxxx Davidson agrees to
purchase, for the price of $100, Options to purchase up to an aggregate of
100,000 shares ("Shares") of the Company's Common Stock, subject to the terms
and conditions set forth below.
In consideration of the foregoing and for the purpose of defining the
terms and provisions of the Options and the respective rights and obligations
thereunder, the Company and Xxxxxxx Xxxxxxxx, for value received, hereby
agree as follows:
SECTION 1. DEFINITIONS
The following terms used in this agreement shall have the following
meanings (unless otherwise expressly provided herein):
THE "ACT." The Securities Act of 1933, as amended.
THE "COMMISSION." The Securities and Exchange Commission.
THE "COMPANY." FirstLink Communications, Inc., an Oregon corporation.
"COMMON STOCK." The Common Stock, no par value per share, of the
Company, whether now or hereafter authorized, holders of which have the right
to participate in the distribution of earnings and assets of the Company
without limit as to the amount or percentage.
"CURRENT MARKET PRICE." The Current Market Price shall be determined as
follows:
(a) if the security at issue is listed on a national securities
exchange or admitted to unlisted trading privileges on such an exchange or
quoted on either the Nasdaq National Market or the Nasdaq Small Cap Market,
the Current Market Price shall be the last reported sale price of that
security on such exchange or system on the day immediately before the event;
or, if no such sale is made on such day, the average of the highest closing
bid and lowest asked price for such day on such exchange or system; or
(b) if the security at issue is not so listed or quoted or admitted to
unlisted trading privileges, the Current Market Price shall be the last
reported sale price of that security on the OTC Bulletin Board on the day
immediately before the event; or if no such sale is made on such day, the
average of the last reported highest bid and lowest asked prices quoted on
the OTC Bulletin Board on the last business day prior to the day of the
event; or
(c) if the security at issue is not so listed or quoted or admitted to
unlisted trading privileges and bid and asked prices are not reported, the
Current Market Price shall be determined in such reasonable manner as may be
prescribed from time to time by the Board of Directors of the Company,
subject to the objection and arbitration procedure as described in Section
9.9 below.
"EFFECTIVE DATE." _________
"EXERCISE DATE." __________
"EXERCISE PRICE." $ per Share, as modified in accordance with
Section 4, below.
"EXPIRATION DATE." ________
"HOLDER" OR "WARRANT HOLDER." The person to whom a warrant
certificate is issued, and any valid transferee thereof pursuant to Section
8, below.
"MAJORITY HOLDER." Any Holder, any holder of Option Securities, or
any combination of Holders and such holders of Option Securities; and any
Holder of Warrant Options, any holder of Warrant Option Securities, or any
combination of such Holders and such holders of Warrant Option Securities, if
they hold, in the aggregate, unexercised Options plus issued and outstanding
Option Securities equal to more than 50% of the total of (i) all Option
Securities issued and outstanding as a result of the exercise of the Option,
and (ii) all Option Securities that may at that time be purchased by
exercising the unexercised portion of the Option. For purposes hereof, a
Holder of an Option which entitles the Holder to purchase more than one share
or Warrant shall be deemed to hold Options equal to the number of shares or
Warrants which may be acquired pursuant to any such Option.
"NASD." The National Association of Securities Dealers, Inc.
"NASDAQ." The Nasdaq Stock Market, Inc.
"OPTIONS." The Options issued in accordance with the terms of this
Agreement and any Options issued in substitution for or replacement of such
Options, or any Options into which such Options may be divided or exchanged.
"OPTION SECURITIES." The Common Stock purchasable upon exercise of an
Option.
"PUBLIC OFFERING." The public offering by the Company of 1,000,000
shares of Common Stock and 1,000,000 warrants pursuant to an underwriting
agreement dated as of ______, between the Company and Xxxxxxx Davidson as
Representative of the several Underwriters named in the underwriting
agreement.
"TERMINATION OF BUSINESS." Any sale, lease or exchange of all, or
substantially all, of the Company's assets or business or any dissolution,
liquidation or winding up of the Company.
"UNDERWRITER." A broker-dealer identified as an Underwriter in the Final
Prospectus for the Public Offering.
"WARRANT OPTIONS." Those options to purchase Warrants issued to the
Holder concurrently with the issuance of the Share Options under this
Agreement, pursuant to a Representative's Warrant Option Agreement dated the
date of this Agreement.
SECTION 2 OPTIONS AND ISSUANCE OF OPTION CERTIFICATES
2.1 DESCRIPTION OF OPTIONS. Each Option shall initially entitle the
Option Holder to purchase one share of Common Stock on exercise thereof,
subject to modification and adjustment as hereinafter provided in Section 10.
Option Certificates representing up to 100,000 Options and evidencing the
right to purchase an aggregate of up to 100,000 shares of Common Stock of the
Company shall be executed by the proper officers of the Company. The Company
shall deliver Option Certificates in required whole number denominations to
the person entitled thereto in connection with the original issuance of
Option Certificates or any transfer or exchange permitted under this
Agreement.
2.2 OPTION SECURITIES. Except as provided in Section 3.4 hereof,
Certificates representing the Option Securities shall be issued only on or
after the Exercise Date upon exercise of the Options or upon transfer or
exchange of the Option Securities following exercise of the Options.
SECTION 3 FORM OF OPTION
3.1 FORM OF CERTIFICATES. The Option Certificates shall be
substantially in the form attached hereto as Exhibit A and may have such
letters, numbers or other marks of identification and such legends, summaries
or endorsements printed, lithographed or engraved thereon as the Company may
deem appropriate and as are not inconsistent with the provisions of this
Agreement. The Option Certificates shall be dated as of the date of issuance,
whether on initial issuance, transfer, exchange or in lieu of mutilated,
lost, stolen or destroyed Option Certificates.
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3.2 EXECUTION OF CERTIFICATES. The Option Certificates shall be
executed on behalf of the Company by its President and Secretary, by manual
signatures thereon, and shall have imprinted thereon a facsimile of the
Company's seal. Any Option Certificate may be signed by any person who at
the actual date of the preparation of such Option Certificate shall be a
proper officer of the Company to sign such Option Certificate even though
such person was not such an officer upon the date of this Agreement.
3.3 MUTILATED, LOST, STOLEN, OR DESTROYED CERTIFICATE. In case the
certificate or certificates evidencing the Options shall be mutilated, lost,
stolen or destroyed, the Company shall, at the request of the Option Holder,
issue and deliver in exchange and substitution for and upon cancellation of
the mutilated certificate or certificates, or in lieu of and substitution for
the certificate or certificates lost, stolen or destroyed, a new Option
Certificate or Certificates of like tenor and representing an equivalent
right or interest, but only upon receipt of evidence satisfactory to the
Company of such loss, theft or destruction of such Option and a bond of
indemnity, if requested, also satisfactory in form and amount, at the
applicant's cost. Applicants for such substitute Option Certificate shall
also comply with such other reasonable regulations and pay such other
reasonable charges as the Company may prescribe.
3.4 EXCHANGE OF CERTIFICATE. Any Option Certificate may be exchanged
for another certificate or certificates entitling the Option Holder to
purchase a like aggregate number of Shares as the certificate or certificates
surrendered then entitled such Option Holder to purchase. Any Option Holder
desiring to exchange a Option Certificate shall make such request in writing
delivered to the Company, and shall surrender, properly endorsed, with
signatures guaranteed, the certificate evidencing the Option to be so
exchanged. Thereupon, the Company shall execute and deliver to the person
entitled thereto a new Option Certificate as so requested.
SECTION 4. TERM OF OPTIONS; EXERCISE OF OPTION
4.1 EXERCISE OF OPTION. Subject to the terms of this Agreement, the
Optionholder shall have the right, at any time during the four-year period
commencing at 9:00 a.m., Portland, Oregon Time, on the Exercise Date and
ending at 5:00 p.m., Portland Time, on the Expiration Date to purchase from
the Company up to the number of fully paid and nonassessable Shares to which
the Optionholder may at the time be entitled to purchase pursuant to this
Agreement, upon surrender to the Company, at its principal office, of the
certificate evidencing the Options to be exercised, together with the
purchase form on the reverse thereof; or to convert the Options into Option
Securities pursuant to Section 4.5 herein, duly filled in and signed, and
upon payment to the Company of the Exercise Price for the number of Shares in
respect of which such Options are then exercised, but in no event for less
than 100 Shares (unless fewer than an aggregate of 100 shares are then
purchasable under all outstanding Options held by a Optionholder).
4.2 PAYMENT OF EXERCISE PRICE. Payment of the aggregate Exercise
Price shall be made in cash or by check, or any combination thereof.
4.3. ISSUANCE OF SHARES. Upon such surrender of the Options and
payment of such Exercise Price as aforesaid, the Company shall issue and
cause to be delivered with all reasonable dispatch to or upon the written
order of the Optionholder and in such name or names as the Optionholder may
designate, a certificate or certificates for the number of full Shares so
purchased upon the exercise of the Option, together with cash, as provided in
Section 12 hereof, in respect of any fractional Shares otherwise issuable
upon such surrender. Such certificate or certificates shall be deemed to
have been issued and any person so designated to be named therein shall be
deemed to have become the holder of record of such securities as of the date
of surrender of the Options and be divided or combined, upon request to the
Company by the Optionholder, into a certificate or certificates representing
the right to purchase the same aggregate number of Shares. Unless the
context indicates otherwise, the term "Optionholder" shall include any
transferee or transferees of the Options pursuant to this Subsection 4.3, and
the term "Options" shall include any and all Options outstanding pursuant to
this Agreement, including those evidenced by a certificate or certificates
issued upon division, exchange, substitution or transfer pursuant to this
Agreement.
4.4 CANCELLATION OF CERTIFICATES. All Warrant Certificates
surrendered upon exercise of Warrants shall be cancelled.
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4.5 DELIVERY OF PROCEEDS OF EXERCISE. Within two days after the
receipt thereof in cleared funds, the Warrant Agent shall deliver to the
Company all proceeds received from Warrant Holders on exercise of the
Warrants.
4.6 CONVERSION RIGHT. In addition to and without limiting the rights
of the Warrantholder under the terms of the Warrant, the Holder shall have
the right (the "Conversion Right") to convert the Warrant evidenced by this
certificate or any portion thereof into Shares as provided in this Section
4.6 at any time or from time to time prior to its expiration.
a. Upon exercise of the Conversion Right with respect to a
particular number of Shares (the "Conversion 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 equal to the quotient
obtained by dividing the Net Value (as hereinafter defined in this paragraph
4.6(a)) of the Converted Shares by the Current Market Price of a single
Share, determined in each case as of the close of business on the Conversion
Date (as hereinafter defined). The "Net Value" of the Converted Shares shall
be determined by subtracting the aggregate Exercise Price of the Converted
Shares from the aggregate Current Market Price of the Converted Shares. No
fractional securities shall be issuable upon exercise of the Conversion
Right, and if the number of securities to be issued 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 Current Market Price of the resulting
fractional Share.
b. The Conversion Right may be exercised by the Holder by the
surrender of the Warrant at the principal office of the Company or at the
office of the Company's stock transfer agent, if any, together with a written
statement specifying that the Holder thereby intends to exercise the
Conversion Right and indicating the number of Shares subject to the Warrant
which are being surrendered (referred to in subparagraph 4.(a) above as the
Converted Shares), on the reverse side of the Warrant, in exercise of the
Conversion Right. Such conversion shall be effective upon receipt by the
Company of the Warrant, or on such later date as is specified therein (the
"Conversion Date"), but not later than the Expiration Date. Certificates for
the Converted Shares issuable upon exercise of the Conversion Right, together
with a check in payment of any fractional Warrant Share and, in the case of a
partial exercise a new Warrant evidencing the Warrant Shares remaining
subject to the Warrant, shall be issued as of the Conversion Date and shall
be delivered to the Holder within seven (7) days following the Conversion
Date.
4.7 FRACTIONAL SHARES. On exercise of the Warrants by the Warrant
Holders, the Company shall not be required to deliver fractions of shares of
Common Stock; provided, however, that the Company shall purchase such
fraction for an amount in cash equal to the Current Market Price of such
fraction, computed on the trading day immediately preceding the day upon
which such Warrant Certificate was surrendered for exercise. By accepting a
Warrant Certificate, the holder thereof expressly waives any right to receive
a Warrant Certificate evidencing any fraction of a Warrant or to receive any
fractional share of securities upon exercise of a Warrant, except as
expressly provided in this Section 4.7.
4.8. STATUS AS SHAREHOLDER. Upon receipt of the Warrant Certificate
by the company as described in Sections 4.1 or 4.3 above, the Holder shall be
deemed to be the holder of record of the Shares issuable upon such exercise,
notwithstanding that the transfer books of the Company may then be closed or
that certificates representing such Shares may not have been prepared or
actually delivered to the Holder.
SECTION 5. RESERVATION OF OPTION SECURITIES
There has been reserved, and the Company shall at all times keep
reserved so long as the Options remain outstanding, out of its authorized and
unissued Common Stock, such number of shares of Common Stock as shall be
subject to purchase under the Options. Every transfer agent for the Common
Stock and other securities of the Company issuable upon the exercise of the
Options will be irrevocably authorized and directed at all times to reserve
such number of authorized shares and other securities as shall be requisite
for such purpose. The Company will keep a copy of this Agreement on file with
every transfer agent for the Common Stock and other securities of the Company
issuable upon the exercise of the Options. The Company will supply every
such transfer agent with duly executed stock and other certificates, as
appropriate, for such purpose and will provide or otherwise make available
any cash which may be payable as provided in Section 10 hereof.
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SECTION 6. PAYMENT OF TAXES
The Company will pay all documentary stamp taxes, if any, attributable
to the initial issuance of the Options or the securities comprising the
Shares; provided, however, the Company shall not be required to pay any tax
which may be payable in respect of any transfer of the Options or the
securities comprising the Shares.
SECTION 7. OPTION SECURITIES TO BE FULLY PAID
The Company covenants that all Option Securities that may be issued and
delivered to a Holder of this Option upon the exercise of this Option and
payment of the Exercise Price will be, upon such delivery, validly and duly
issued, fully paid and nonassessable.
SECTION 8. LIMITATION ON TRANSFER
This Option may not be sold, transferred, assigned, pledged or
hypothecated until the Exercise Date, except for (a) the sale, transfer, or
assignment, in whole or in part, to or among the officers of Xxxxxxx Xxxxxxxx
and other Underwriters and the officers or partners of those Underwriters,
(b) the transfer by operation of law as a result of the death of any
transferee to whom all or a portion of this Option may be transferred, and
(c) the transfer to any successor to the business of an Underwriter. All
sales, transfers, assignments or hypothecations of this Option must be in
compliance with Section 8 hereof. Any assignment or transfer of this Option
shall be made by the presentation and surrender of this Option to the Company
at its principal office or the office of its transfer agent, if any,
accompanied by a duly executed Assignment Form, in the form attached to and
by this reference incorporated in this Option as Exhibit B. Upon the
presentation and surrender of these items to the Company, the Company, at its
sole expense, shall execute and deliver to the new Holder or Holders a new
Option or Options, containing the same terms and conditions as this Option,
in the name of the new Holder or Holders as named in the Assignment Form, and
this Option shall at that time be cancelled.
SECTION 9. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES
8.1. ADJUSTMENTS. The number and kind of securities purchasable upon
the exercise of the Options and the Option Price shall be subject to
adjustment from time to time upon the happening of certain events, as
follows:
(a) In case the Company shall (i) pay a dividend in Common Stock or
make a distribution to its stockholders in Common Stock, (ii) subdivide its
outstanding Common Stock, (iii) combine its outstanding Common Stock into a
smaller number of shares of Common Stock, or (iv) issue by classification
of its Common Stock other securities of the Company, the number of Shares
purchasable upon exercise of the Options immediately prior thereto shall be
adjusted so that the Optionholder shall be entitled to receive the kind and
number of Shares or other securities of the Company which it would have owned
or would have been entitled to receive immediately after the happening of any
of the events described above, had the Options been exercised immediately
prior to the happening of such event or any record date with respect thereto.
Any adjustment made pursuant to this subsection 9.1(a) shall become
effective immediately after the effective date of such event retroactive to
the record date, if any, for such event.
(b) If, prior to the expiration of the Options by exercise, by their
terms, or by redemption, the Company shall be recapitalized by reclassifying
its outstanding shares of Common Stock into shares with a different par
value, or by changing its outstanding shares of Common Stock into shares
without par value or in the event of any other material change of the capital
structure of the Company or of any successor corporation by reason of any
reclassification, recapitalization or conveyance, prompt, proportionate,
equitable, lawful and adequate provision shall be made whereby any Option
Holder shall thereafter have the right to purchase, on the basis and the
terms and conditions specified in this Agreement, in lieu of the Option
Securities theretofore purchasable on the exercise of any Option, such
securities or assets as may be issued or payable with respect to or in
exchange for the number of Option Securities theretofore purchasable on
exercise of the Option had such reclassification, recapitalization or
conveyance not taken place; and in any such event, the rights of any Option
Holder to any adjustment in the number of Option Securities purchasable on
exercise of such Option, as set forth above, shall continue to be preserved
in respect of any stock, securities or assets which the Option Holder becomes
entitled to purchase.
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(c) In case the Company shall issue rights, options, warrants, or
convertible securities to all or substantially all holders of its Common
Stock, without any charge to such holders, entitling them to subscribe for or
purchase Common Stock at a price per share which is lower at the record date
mentioned below than the then Current Market Price, the number of Shares
thereafter purchasable upon the exercise of each Option shall be determined
by multiplying the number of Shares theretofor purchasable upon exercise of
the Options by a fraction, of which the numerator shall be the number of
shares of Common Stock outstanding immediately prior to the issuance of such
rights, options, warrants or convertible securities plus the number of
additional shares of Common Stock offered for subscription or purchase, and
of which the denominator shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such rights, options,
warrants, or convertible securities plus the number of shares which the
aggregate offering price of the total number of shares offered would purchase
at such Current Market Price. Such adjustment shall be made whenever such
rights, options, warrants, or convertible securities are issued, and shall
become effective immediately and retroactively to the record date for the
determination of stockholders entitled to receive such rights, options,
warrants, or convertible securities.
(d) In case the Company shall distribute to all or substantially all
holders of its Common Stock evidences of its indebtedness or assets
(excluding cash dividends or distributions out of earnings) or rights,
options, warrants, or convertible securities containing the right to
subscribe for or purchase Common Stock (excluding those referred to in
subsection 9.1(b) above), then in each case the number of Shares thereafter
purchasable upon the exercise of the Options shall be determined by
multiplying the number of Shares theretofor purchasable upon exercise of the
Options by a fraction, of which the numerator shall be the then Current
Market Price on the date of such distribution, and of which the denominator
shall be such Current Market Price on such date minus the then fair value
(determined as provided in subsection 9.1(g) below) of the portion of the
assets or evidences of indebtedness so distributed or of such subscription
rights, options, warrants, or convertible securities applicable to one share.
Such adjustment shall be made whenever any such distribution is made and
shall become effective on the date of distribution retroactive to the record
date for the determination of stockholders entitled to receive such
distribution.
(e) No adjustment in the number of Shares purchasable pursuant to
the Options shall be required unless such adjustment would require an
increase or decrease of at least one percent in the number of Shares then
purchasable upon the exercise of the Options or, if the Options are not then
exercisable, the number of Shares purchasable upon the exercise of the
Options on the first date thereafter that the Options become exercisable;
provided, however, that any adjustments which by reason of this subsection
9.1(d) are not required to be made immediately shall be carried forward and
taken into account in any subsequent adjustment.
(f) Whenever the number of Shares purchasable upon the exercise of
the Option is adjusted, as herein provided, the Exercise Price payable upon
exercise of the Option shall be adjusted by multiplying such Exercise Price
immediately prior to such adjustment by a fraction, of which the numerator
shall be the number of Option Shares purchasable upon the exercise of the
Option immediately prior to such adjustment, and of which the denominator
shall be the number of Option Shares so purchasable immediately thereafter.
(g) Whenever the number of Shares purchasable upon exercise of the
Options is adjusted as herein provided, the Company shall cause to be
promptly mailed to the Optionholder by first class mail, postage prepaid,
notice of such adjustment and a certificate of the chief financial officer
of the Company setting forth the number of Shares purchasable upon the
exercise of the Options after such adjustment, a brief statement of the
facts requiring such adjustment and the computation by which such
adjustment was made.
(h) For the purpose of this subsection 9.1, the term "Common Stock"
shall mean (i) the class of stock designated as the Common Stock of the
Company at the date of this Agreement, or (ii) any other class of stock
resulting from successive changes or reclassifications of such Common Stock
consisting solely of changes in par value, or from par value to no par value,
or from no par value to par value. In the event that at any time, as a
result of an adjustment made pursuant to this Section 9, the Optionholder
shall become entitled to purchase any securities of the Company other than
Common Stock, (y) if the Optionholder's right to purchase is on any other
basis than that available to all holders of the Company's Common Stock, the
Company shall obtain an opinion of an independent investment banking firm
valuing such other securities; and (z) thereafter the number of such other
securities so purchasable upon exercise of the Options shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent
as practicable to the provisions with respect to the Shares contained in this
Section 9.
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(j) Upon the expiration of any rights, options, warrants, or
conversion privileges, if such shall have not been exercised, the number of
Shares purchasable upon exercise of the Options, to the extent the Options
have not then been exercised, shall, upon such expiration, be readjusted and
shall thereafter be such as they would have been had they been originally
adjusted (or had the original adjustment not been required, as the case may
be) on the basis of (i) the fact that the only shares of Common Stock so
issued were the shares of Common Stock, if any, actually issued or sold upon
the exercise of such rights, options, warrants, or conversion privileges, and
(ii) the fact that such shares of Common Stock, if any, were issued or sold
for the consideration actually received by the Company upon such exercise
plus the consideration, if any, actually received by the Company for the
issuance, sale or grant of all such rights, options, warrants, or conversion
privileges whether or not exercised; provided, however, that no such
readjustment shall have the effect of decreasing the number of Shares
purchasable upon exercise of the Options by an amount in excess of the amount
of the adjustment initially made in respect of the issuance, sale, or grant
of such rights, options, warrants, or conversion rights.
9.2. NO ADJUSTMENT FOR DIVIDENDS. Except as provided in subsection
9.1, no adjustment in respect of any dividends or distributions out of
earnings shall be made during the term of the Options or upon the exercise of
the Options.
9.3. NO ADJUSTMENT IN CERTAIN CASES. No adjustments shall be made
pursuant to Section 9 hereof in connection with the issuance of the Common
Stock sold as part of the public sale pursuant to the Underwriting Agreement
or the issuance of Shares upon exercise of the Options. No adjustments shall
be made pursuant to Section 9 hereof in connection with the grant or exercise
of presently authorized or outstanding options to purchase, or the issuance
of shares, aggregating up to 487,805 shares of Common Stock, under the
Company's director or employee benefit plans disclosed in the Registration
Statement relating to the Public Offering.
9.4. PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION,
CONSOLIDATION, ETC. In case of any consolidation of the Company with or merger
of the Company into another corporation, or in case of any sale or conveyance to
another corporation of the property, assets, or business of the Company as an
entirety or substantially as an entirety, the Company or such successor or
purchasing corporation, as the case may be, shall execute with the Optionholder
an agreement that the Optionholder shall have the right thereafter upon payment
of the Exercise Price in effect immediately prior to such action to purchase,
upon exercise of the Options, the kind and amount of shares and other securities
and property which it would have owned or have been entitled to receive after
the happening of such consolidation, merger, sale, or conveyance had the Options
been exercised immediately prior to such action. In the event of a merger
described in Section 368(a)(2)(E) of the Internal Revenue Code of 1986, in which
the Company is the surviving corporation, the right to purchase Shares under the
Options shall terminate on the date of such merger and thereupon the Options
shall become null and void, but only if the controlling corporation shall agree
to substitute for the Options, its Options which entitle the holder thereof to
purchase upon their exercise the kind and amount of shares and other securities
and property which it would have owned or been entitled to receive had the
Options been exercised immediately prior to such merger. Any such agreements
referred to in this subsection 9.4 shall provide for adjustments, which shall
be as nearly equivalent as may be practicable to the adjustments provided for
in Section 9 hereof. The provisions of this subsection 9.4 shall similarly
apply to successive consolidations, mergers, sales, or conveyances.
9.5. PAR VALUE OF SHARES OF COMMON STOCK. Before taking any action
which would cause an adjustment effectively reducing the portion of the
Exercise Price allocable to each Share below the par value per share of the
Common Stock issuable upon exercise of the Options, the Company will take any
corporate action which may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue fully paid and
nonassessable Common Stock upon exercise of the Options.
9.6. INDEPENDENT PUBLIC ACCOUNTANTS. The Company may retain a firm of
independent public accountants of recognized national standing (which may be
any such firm regularly employed by the Company) to make any computation
required under this Section 9, and a certificate signed by such firm shall be
conclusive evidence of the correctness of any computation made under this
Section 9.
9.7. STATEMENT ON OPTION CERTIFICATES. Irrespective of any
adjustments in the number of securities issuable upon exercise of the
Options, Option certificates theretofore or thereafter issued may continue to
express the same number of securities as are stated in the similar Option
certificates initially issuable pursuant to this Agreement. However, the
Company may, at any time in its sole discretion (which shall be conclusive),
make any change in the
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form of Option certificate that it may deem appropriate and that does not
affect the substance thereof; and any Option certificate thereafter issued,
whether upon registration of transfer of, or in exchange or substitution for,
an outstanding Option certificate, may be in the form so changed.
9.8. TREASURY STOCK. For purposes of this Section 9, shares of Common
Stock owned or held at any relevant time by, or for the account of, the
Company, in its treasury or otherwise, shall not be deemed to be outstanding
for purposes of the calculations and adjustments described.
9.9. OFFICERS' CERTIFICATE. Whenever the Exercise Price or the
aggregate number of Option Securities purchasable pursuant to this Option
shall be adjusted as required by the provisions of this Section 9, the
Company shall promptly file with its Secretary or an Assistant Secretary at
its principal office, and with its transfer agent, if any, an officers'
certificate executed by the Company's President and Secretary or Assistant
Secretary, describing the adjustment and setting forth, in reasonable detail,
the facts requiring such adjustment and the basis for and calculation of such
adjustment in accordance with the provisions of this Option. Each such
officers' certificate shall be made available to the Holder or Holders of
this Option for inspection at all reasonable times, and the Company, after
each such adjustment, shall promptly deliver a copy of the officers'
certificate relating to that adjustment to the Holder or Holders of this
Option. If the officers' certificate is not accompanied by the certificate
described in Section 8.6, the officers' certificate described in this Section
6 shall be deemed to be conclusive as to the correctness of the adjustment
reflected therein if, and only if, no Holder of this Option delivers written
notice to the Company of an objection to the adjustment within 30 days after
the officers' certificate is delivered to the Holder or Holders of this
Option. The Company will make its books and records available for inspection
and copying during normal business hours by the Holder so as to permit a
determination as to the correctness of the adjustment. If written notice of
an objection is delivered by a Holder to the Company and the parties cannot
reconcile the dispute, the Holder and the Company shall submit the dispute to
arbitration pursuant to the provisions of Section 19 below. Failure to
prepare or provide the officers' certificate shall not modify the parties'
rights hereunder.
SECTION 10. MERGER OR CONSOLIDATION OF THE COMPANY
The Company will not merge or consolidate with or into any other
corporation or sell all or substantially all of its property to another
corporation, unless the provisions of Section 9.3 are complied with.
SECTION 11. MODIFICATION OF AGREEMENT.
The Company may by supplemental agreement make any changes or
corrections in this Agreement it shall deem appropriate to cure any ambiguity
or to correct any defective or inconsistent provision or mistake or error
herein contained. Additionally, the Company may make any changes or
corrections deemed necessary which shall not adversely affect the interests
of the Warrant Holders, including lowering the exercise price or extending
the Exercise Period of the Warrants; provided, however, this Agreement shall
not otherwise be modified, supplemented or altered in any respect except with
the consent in writing of the Warrant Holders who hold not less than a
majority of the Warrants then outstanding and provided further that no such
amendment shall accelerate the Warrant Expiration Date or increase the
Exercise Price without the approval of all the holders of all outstanding
Warrants.
SECTION 12. NOTICE TO HOLDERS
If, prior to the expiration of this Option either by its terms or by its
exercise in full, any of the following shall occur:
(i) the Company shall declare a dividend or authorize any other
distribution on its Common Stock; or
(ii) the Company shall authorize the granting to the shareholders of
its Common Stock of rights to subscribe for or purchase any securities or any
other similar rights; or
(iii) any reclassification, reorganization or similar change of the
Common Stock, or any consolidation or merger to which the Company is a party,
or the sale, lease, or exchange of any significant portion of the assets of
the Company; or
(iv) the voluntary or involuntary dissolution, liquidation or winding
up of the Company; or
8
(v) any purchase, retirement or redemption by the Company of its Common
Stock;
then, and in any such case, the Company shall deliver to the Holder or Holders
written notice thereof at least 30 days prior to the earliest applicable date
specified below with respect to which notice is to be given, which notice shall
state the following:
(x) the date on which a record is to be taken for the purpose of such
dividend, distribution or rights, or, if a record is not to be taken, the date
as of which the shareholders of Common Stock of record to be entitled to such
dividend, distribution or rights are to be determined;
(y) the date on which such reclassification, reorganization,
consolidation, merger, sale, transfer, dissolution, liquidation, winding up or
purchase, retirement or redemption is expected to become effective, and the
date, if any, as of which the Company's shareholders of Common Stock of record
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reclassification, reorganization, consolidation,
merger, sale, transfer, dissolution, liquidation, winding up, purchase,
retirement or redemption; and
(z) if any matters referred to in the foregoing clauses (x) and (y) are
to be voted upon by shareholders of Common Stock, the date as of which those
shareholders to be entitled to vote are to be determined.
SECTION 13. REGISTRATION RIGHTS
13.1. DEMAND REGISTRATION RIGHT. Upon the written request of a Majority
Holder, made at any time after the Exercise Date, but before the Expiration
Date, the Company shall file within 90 days of such written request a
registration statement or Regulation A offering statement pursuant to the Act,
and all necessary amendments thereto, to register or qualify the Option, Option
Securities and the Option Securities underlying the unexercised portion of this
Option. No additional securities shall be included in such registration
statement or offering statement without the written consent of the Majority
Holder. The Company may use the Regulation A exemption if available, but the
Company must file a registration statement if the securities that are to be
covered cannot be sold pursuant to Regulation A because of the limitations
applicable to the use of the Regulation A exemption. The Company agrees to use
its best efforts to cause this registration or qualification to become effective
as promptly as practicable and to keep such registration effective for a period
of the lesser of 180 days or the date of completion of the distribution
described in the Registration Statement; and its officers, directors,
consultants, auditors and counsel shall cooperate in all matters necessary or
advisable to pursue this objective. All of the expenses of this registration or
qualification shall be borne by the Company, including, but not limited to,
legal, accounting, consulting, printing, filing and NASD fees, out-of-pocket
expenses incurred by counsel, accountants, and consultants retained by the
Company and miscellaneous expenses directly related to the registration
statement or offering statement and the offering, and the underwriter's
accountable and nonaccountable expense allowances and fees; but the Company
shall not pay any brokerage fees, commissions or underwriting discounts except
to the extent they are attributable to other securities that the Company has
been permitted to register or qualify or to offer in conjunction with the
registration and qualification of the Option, Option Securities or the Option
Securities underlying the unexercised portion of this Option. Notwithstanding
the foregoing, if, as a qualification of any offering in any state or
jurisdiction in which the Company (by vote of its Board of Directors) or any
underwriter determines in good faith that it wishes to offer securities
registered in the offering, it is required that offering expenses be allocated
in a manner different from that provided above, then the offering expenses shall
be allocated in whatever manner is most nearly in compliance with the provisions
set out above. The Majority Holder shall be entitled to exercise the rights
described in this subsection 13.1 one time only.
Within 10 days after the delivery by the Majority Holder to the Company of
the notice described above, the Company shall deliver written notice to all
other Holders of this Option and holders of the Option Securities, if any,
advising them that the Company is proceeding with a registration statement or
offering statement and offering them the right to include the Option and Option
Securities of those Holders or holders therein. If any Holder of a Option and
Option Securities delivers written acceptance of that offer to the Company
within 30 days after the delivery of the Company's notice, the Company shall be
obligated to include that holder's Option and that holder's Option Securities in
the contemplated registration statement or offering statement.
9
13.2. PIGGY-BACK REGISTRATION RIGHT. If at any time prior to the
Expiration Date the Company files a registration statement with the Commission
pursuant to the Act, or pursuant to any other act passed after the date of this
Agreement, which filing provides for the sale of securities by the Company to
the public, or files a Regulation A offering statement under the Act, the
Company shall offer to the Holder or Holders of this Option and the holders of
any Option Securities the opportunity to register or qualify the Option
Securities and any Option Securities underlying the unexercised portion of this
Option, if any, at the Company's sole expense, regardless of whether the Holder
or Holders of this Option or the holders of Option Securities or both may have
previously availed themselves of any of the registration rights described in
this Section 13; provided, however, that in the case of a Regulation A offering,
the opportunity to qualify shall be limited to the amount of the available
exemption after taking into account the securities that the Company wishes to
qualify. Notwithstanding anything to the contrary, this subsection 13.2 shall
not be applicable to a registration statement registering securities issued
pursuant to an employee benefit plan or as to a transaction subject to Rule 145
promulgated under the Act or which a form S-4 registration statement could be
used.
The Company shall deliver written notice to the Holder or Holders of this
Option and to any holders of the Option Securities of its intention to file a
registration statement or Regulation A offering statement under the Act at least
60 days prior to the filing of such registration statement or offering
statement, and the Holder or Holders and holders of Option Securities shall have
30 days thereafter to request in writing that the Company register or qualify
the Option Securities or the Option Securities underlying the unexercised
portion of this Option in accordance with this subsection 13.2. Upon the
delivery of such a written request within the specified time, the Company shall
be obligated to include in its contemplated registration statement or offering
statement all information necessary or advisable to register or qualify the
Option Securities or Option Securities underlying the unexercised portion of
this Option for a public offering, if the Company does file the contemplated
registration statement or offering statement; provided, however, that neither
the delivery of the notice by the Company nor the delivery of a request by a
Holder or by a holder of Option Securities shall in any way obligate the Company
to file a registration statement or offering statement. Furthermore,
notwithstanding the filing of a registration statement or offering statement,
the Company may, at any time prior to the effective date thereof, determine not
to offer the securities to which the registration statement or offering
statement relates, other than the Option, Option Securities and Option
Securities underlying the unexercised portion of this Option. Notwithstanding
the foregoing, if, as a qualification of any offering in any state or
jurisdiction in which the Company (by vote of its Board of Directors) or any
underwriter determines in good faith that it wishes to offer securities
registered in the offering, it is required that offering expenses be allocated
in a manner different from that provided above, then the offering expenses shall
be allocated in whatever manner is most nearly in compliance with the provisions
set out above.
The Company shall comply with the requirements of this subsection 13.2 and
the related requirements of subsection 13.7 at its own expense. That expense
shall include, but not be limited to, legal, accounting, consulting, printing,
federal and state filing fees, NASD fees, out-of-pocket expenses incurred by
counsel, accountants and consultants retained by the Company, and miscellaneous
expenses directly related to the registration statement or offering statement
and the offering. However, this expense shall not include the portion of any
underwriting commissions, transfer taxes and the underwriter's accountable and
nonaccountable expense allowances attributable to the offer and sale of the
Option, Option Securities and the Option Securities underlying the unexercised
portion of this Option, all of which expenses shall be borne by the Holder or
Holders of this Option and the holders of the Option Securities registered or
qualified.
If the registration for which the Company gives notice is for a registered
public offering involving an underwriting, the Company shall so advise as part
of the written notice given pursuant to this Section. In such event, the right
of any Optionholder or holder of Shares to registration pursuant to Section 13.2
shall be conditioned upon such holder's participation in such underwriting, and
the inclusion of Shares in the underwriting shall be limited to the extent
provided herein. All holders proposing to distribute their Shares through such
underwriting shall (together with the Company and the other holders distributing
their Shares through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by
the Company. Notwithstanding any other provision of this Section, if the
managing underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, such underwriter may limit the amount
of securities to be included in the registration and underwriting by the holders
of Company securities exercising "piggyback" registration rights (including the
Optionholder and each holder of Options and Shares). The Company shall so
advise all such holders, and the number of shares of such securities that may be
included in the registration and underwriting shall be allocated among all of
such holders, in proportion, as nearly as practicable, to
10
the respective amounts of securities requested to be included in such
registration held by such holders at the time of filing the registration
statement, PROVIDED, HOWEVER, that no security holder other than one
exercising a demand registration right shall have superior rights with
respect to inclusion in a registration than those of the Optionholder and
each holder of Options and Shares and if any party is granted such superior
rights hereafter the Optionholder and each holder of Options and Shares shall
be deemed to be automatically granted similar rights. The Company shall
advise all such holders of any such limitations and of the number or
securities that may be included in the registration. Any securities excluded
or withdrawn from such underwriting shall not be transferred prior to one
hundred twenty (120) days after the effective date of the registration
statement relating thereto, or such shorter period of time as the
underwriters may require.
13.3. INCLUSION OF INFORMATION. In the event that the Company registers
or qualifies the Option, Option Securities or the Option Securities underlying
the unexercised portion of this Option pursuant to subsections 13.1 or 13.2
above, the Company shall include in the registration statement or qualification,
and the prospectus included therein, all information and materials necessary or
advisable to comply with the applicable statutes and regulations so as to permit
the public sale of the Option Securities or the Option Securities underlying the
unexercised portion of this Option. As used in subsections 13.1 and 13.2,
reference to the Company's securities shall include, but not be limited to, any
class or type of the Company's securities or the securities of any of the
Company's subsidiaries or affiliates.
13.4. REGISTRATION STATEMENT FILED BY HOLDER. In addition to the
registration rights described in subsections 13.1 and 13.2 above, upon the
written request of any Majority Holder, the Company, as promptly as possible
after delivery of such request, shall cooperate with the requesting Majority
Holder or holder in preparing and signing any registration statement or offering
statement that the Holder or holder may desire to file in order to sell or
transfer the Option and Option Securities. Within 10 days after the delivery of
the written request described above, the Company shall deliver written notice to
all other Holders of this Option and holders of Option Securities, if any,
advising them that the Company is proceeding with a registration statement or
offering statement and that their Option and Option Securities will be included
therein if they so desire and agree to pay their pro rata share of the cost of
registration or qualification and provided that the Holder or holder delivers
written notice to the Company of their desire to be included and their agreement
to pay their pro rata share of the cost within 30 days after the delivery of the
Company's notice to them. The Company will supply all information necessary or
advisable for any such registration statements or offering statements; provided,
however, that all the costs and expenses of such registration statements or
offering statements shall be borne, in a manner proportionate to the number of
securities for which they indicate a desire to register, by the Holders of this
Option and the holders of Option Securities who seek the registration or
qualification of their Option, Option Securities or Option Securities underlying
the unexercised portion of their Option. In determining the amount of costs and
expenses to be borne by those Holders or holders, the only costs and expenses of
the Company to be included are the additional costs and expenses that would not
have otherwise been incurred by the Company if those Holders or holders had not
desired to file a registration statement or offering statement. As an example,
and without limitation, audit fees would not be charged to those Holders or
holders if or to the extent that the Company would have incurred the same audit
fees for its year-end or other use in the absence of the registration statement
or offering statement. The Holders or holders responsible for the costs and
expenses shall reimburse the Company for those reimbursable costs and expenses
reasonably incurred by the Company within 30 days after the initial effective
date of the registration statement or qualification at issue.
13.5. PAYMENT OF EXERCISE PRICE FROM PROCEEDS. In the event that any
such Registration Statement is utilized for a public offering of any of the
Shares to be received upon exercise of the Options pursuant to this Section 13,
the Optionholder may elect to pay the exercise price of the Options to the
Company out of the proceeds of the sale of the Shares pursuant to the
Registration Statement concurrently with the closing of such sale of the Shares;
provided that if such sale is not closed within 90 days of the effective date of
such Registration Statement, then the Optionholder shall be obligated to pay the
exercise price of the Options to the Company on such 90th day.
13.6. CONDITION OF COMPANY'S OBLIGATIONS. As to each registration
statement or offering statement, the Company's obligations contained in this
Section 13 shall be conditioned upon a timely receipt by the Company in writing
of the following:
11
(a) Information as to the terms of the contemplated public offering
furnished by and on behalf of each Holder or holder intending to make a public
distribution of the Option Securities or Option Securities underlying the
unexercised portion of the Option; and
(b) Such other information as the Company may reasonably require from
such Holders or holders, or any underwriter for any of them, for inclusion in
the registration statement or offering statement.
13.7. ADDITIONAL REQUIREMENTS. In each instance in which the Company
shall take any action to register or qualify the Option Securities or the Option
Securities underlying the unexercised portion of this Option, if any, pursuant
to this Section 13, the Company shall do the following:
(a) Supply to Xxxxxxx Xxxxxxxx, as the representative of the Holders of
the Option and the holders of Option Securities whose Option Securities are
being registered or qualified, two (2) manually signed copies of each
registration statement or offering statement, and all amendments thereto, and a
reasonable number of copies of the preliminary, final or other prospectus or
offering circular, all prepared in conformity with the requirements of the Act
and the rules and regulations promulgated thereunder, and such other documents
as Xxxxxxx Davidson shall reasonably request;
(b) Cooperate with respect to (i) all necessary or advisable actions
relating to the preparation and the filing of any registration statements or
offering statements, and all amendments thereto, arising from the provisions of
this Section 13, (ii) all reasonable efforts to establish an exemption from the
provisions of the Act or any other federal or state securities statutes, (iii)
all necessary or advisable actions to register or qualify the public offering at
issue pursuant to federal securities statutes and the state "blue sky"
securities statutes of each jurisdiction that the Holders of the Option or
holders of Option Securities shall reasonably request, and (iv) all other
necessary or advisable actions to enable the Holders of the Option Securities to
complete the contemplated disposition of their securities in each reasonably
requested jurisdiction; and
(c) Keep all registration statements or offering statements to which
this Section 13 applies, and all amendments thereto, effective under the Act for
a period of at least 180 days after their initial effective date and cooperate
with respect to all necessary or advisable actions to permit the completion of
the public sale or other disposition of the securities subject to a registration
statement or offering statement.
13.8. RECIPROCAL INDEMNIFICATION. In each instance in which pursuant to
this Section 13 the Company shall take any action to register or qualify the
Securities or the Option Securities underlying the unexercised portion of this
Option, prior to the effective date of any registration statement or offering
statement, the Company and each Holder or holder of Options or Option Securities
being registered or qualified shall enter into reciprocal indemnification and
contribution agreements, in the form customarily used by reputable investment
bankers with respect to public offerings of securities, containing substantially
the same terms as described in Section 10 .
13.9. XXXXXXX XXXXXXXX AS REPRESENTATIVE. For purposes of subsection
13.6 (a) above, by the receipt of this Option or any Option Securities, all
Holders and all holders of Option Securities acknowledge and agree that Xxxxxxx
Davidson is and shall be their representative.
13.10. SURVIVAL. The Company's obligations described in this Section 13
shall continue in full force and effect regardless of the exercise, surrender,
cancellation or expiration of this Option.
SECTION 14. PAYMENT OF TAXES
The Company will pay all documentary stamp taxes, if any, attributable to
the initial issuance of the Options or the securities comprising the Shares;
provided, however, the Company shall not be required to pay any tax which may be
payable in respect of any transfer of the Options or the securities comprising
the Shares.
SECTION 15. INDEMNIFICATION AND CONTRIBUTION
15.1. INDEMNIFICATION BY COMPANY. In the event of the filing of any
Registration Statement with respect to the Shares pursuant to Section 8 hereof,
the Company agrees to indemnify and hold harmless the Optionholder or any holder
of Shares and each person, if any, who controls the Optionholder or any holder
of Shares within the
12
meaning of the Act, against any and all loss, claim, damage or liability,
joint or several (which shall, for all purposes of this Agreement include,
but not be limited to, all costs of defense and investigation and all
attorneys' fees), to which such Optionholder or any holder of Shares may
become subject, under the Act or otherwise, insofar as such loss, claim,
damage, or liability (or action with respect thereto) arises out of or is
based upon (a) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, any Preliminary Prospectus, the
Effective Prospectus, or the Final Prospectus or any amendment or supplement
thereto; or (b) the omission or alleged omission to state in the Registration
Statement, any Preliminary Prospectus, the Effective Prospectus or the Final
Prospectus or any amendment or supplement thereto a material fact required to
be stated therein or necessary to make the statements therein not misleading;
except that the Company shall not be liable in any such case to the extent,
but only to the extent, that any such loss, claim, damage, or liability
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company by such
Optionholder or the holder of such Shares specifically for use in the
preparation of the Registration Statement, any Preliminary Prospectus, the
Effective Prospectus and the Final Prospectus or any amendment or supplement
thereto. This indemnity will be in addition to any liability which the
Company may otherwise have.
15.2. INDEMNIFICATION BY UNDERWRITERS. The Optionholders and the holders
of Shares agree that they, severally, but not jointly, shall indemnify and hold
harmless the Company, each other person referred to in subparts (1), (2) and (3)
of Section 11(a) of the Act in respect of the Registration Statement and each
person, if any, who controls the Company within the meaning of the Act, against
any and all loss, claim, damage or liability, joint or several (which shall, for
all purposes of this Agreement include, but not be limited to, all costs of
defense and investigation and all attorneys' fees), to which the Company may
become subject under the Act or otherwise, insofar as such loss, claim, damage,
liability (or action in respect thereto) arises out of or are based upon (a) any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement, any Preliminary Prospectus, the Effective Prospectus or
the Final Prospectus or any amendment or supplement thereto; or (b) the omission
or alleged omission to state in the Registration Statement, any Preliminary
Prospectus, the Effective Prospectus or the Final Prospectus or any amendment or
supplement thereto a material fact required to be stated therein or necessary to
make the statements therein not misleading; except that such indemnification
shall be available in each such case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon information and in conformity with written
information furnished to the Company by the Optionholder or the holder of
Shares specifically for use in the preparation thereof. This indemnity will be
in addition to any liability which the Company may otherwise have.
15.3. RIGHT TO PROVIDE DEFENSE. Promptly after receipt by an indemnified
party under subsection 15.1 or 15.2 above of written notice of the commencement
of any action, the indemnified party shall, if a claim in respect thereof is to
be made against the indemnifying party under such section, notify the
indemnifying party in writing of the claim or the commencement of that action;
the failure to notify the indemnifying party shall not relieve it of any
liability which it may have to an indemnified party, except to the extent that
the indemnifying party did not otherwise have knowledge of the commencement of
the action and the indemnifying party's ability to defend against the action was
prejudiced by such failure. Such failure shall not relieve the indemnifying
party from any other liability which it may have to the indemnified party. If
any such claim or action shall be brought against an indemnified party, and it
shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. After notice
from the indemnifying party to the indemnified party of its election to assume
the defense of such claim or action, the indemnifying party shall not be liable
to the indemnified party under such section for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; except that Xxxxxxx
Xxxxxxxx shall have the right to employ counsel to represent it and the other
Optionholders of holders of Shares who may be subject to liability arising out
of any claim in respect of which indemnity may be sought by such persons against
the Company under such section if, in Xxxxxxx Davidson's reasonable judgment, it
is advisable for Xxxxxxx Xxxxxxxx and those Optionholders or holders of Shares
to be represented by separate counsel, and in that event the fees and expenses
of such separate counsel shall be paid by the Company.
15.4. CONTRIBUTION. If the indemnification provided for in subsections
15.1 and 15.2 of this Agreement is unavailable or insufficient to hold harmless
an indemnified party, then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of the losses,
claims, damages, or liabilities referred to in subsections 15.1 or 15.2 above
(a) in such proportion as is appropriate to reflect the relative benefits
received
13
by the Company on the one hand and the Optionholders on the other; or (b) if
the allocation provided by clause (a) above is not permitted by applicable
law, in such proportion as is appropriate to reflect the relative benefits
referred to in clause (a) above but also the relative fault of the Company on
the one hand and the Optionholders on the other in connection with the
statements or omissions which resulted in such losses, claims, damages, or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Optionholders shall be
deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company bear to the
total underwriting discounts and un-itemized expenses received by the
Underwriters, in each case as set forth in the table on the cover page of the
Final Prospectus. Relative fault shall be determined by reference to, among
other things, whether the untrue statement of a material fact or the omission
to state a material fact relates to information supplied by the Company or
the Underwriter and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such untrue statement or
omission. For purposes of this subsection 15.4, the term "damages" shall
include any counsel fees or other expenses reasonably incurred by the Company
or the Underwriters in connection with investigating or defending any action
or claim which is the subject of the contribution provisions of this
subsection 15.4. No person adjudged guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted against
it in respect of which contribution may be sought, it shall promptly give
written notice of such service to the party or parties from whom contribution
may be sought, but the omission so to notify such party or parties of any such
service shall not relieve the party from whom contribution may be sought from
any obligation it may have hereunder or otherwise (except as specifically
provided in subsection 15.4 hereof).
SECTION 16. RESTRICTIONS ON TRANSFER
16.1. RESTRICTIONS ON TRANSFER. This Option, the Option Securities, and
all other securities issued or issuable upon exercise of this Option, may not be
offered, sold or transferred, in whole or in part, except in compliance with the
Act, and except in compliance with all applicable state securities laws. The
Optionholder agrees that prior to making any disposition of the Options, other
than to persons or entities identified in Section 2.1, the Optionholder shall
give written notice to the Company describing briefly the manner in which any
such proposed disposition is to be made; and no such disposition shall be made
if the Company has notified the Optionholder that in the opinion of counsel
reasonably satisfactory to the Optionholder a registration statement or other
notification or post-effective amendment thereto (hereinafter collectively a
"Registration Statement") under the Act is required with respect to such
disposition and no such Registration Statement has been filed by the Company
with, and declared effective, if necessary, by, the Commission.
16.2. RESTRICTIVE LEGEND. The Company may cause substantially the
following legends, or their equivalents, to be set forth on each certificate
representing the Options, the Option Securities, or any other security issued or
issuable upon exercise of this Option, not theretofore distributed to the public
or sold to underwriters, as defined by the Act, for distribution to the public
pursuant to Section 8 above:
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES
LAWS AND MAY NOT BE SOLD, EXCHANGED, HYPOTHECATED OR TRANSFERRED IN
ANY MANNER EXCEPT IN COMPLIANCE WITH THE AGREEMENT PURSUANT TO WHICH
THEY WERE ISSUED.
(b) Any legend required by applicable state securities laws.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legends (except a new certificate issued upon
completion of a public distribution pursuant to a registration statement under
the Securities Act of 1933, as amended (the "Act"), or the securities
represented thereby) shall also bear the above legends unless, in the opinion of
the Company's counsel, the securities represented thereby need no longer be
subject to such restrictions.
14
SECTION 17. FRACTIONAL SHARES
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of all or any part of this Option. With respect to any
fraction of a share of any security called for upon any exercise of this Option,
the Company shall pay to the Holder an amount in money equal to that fraction
multiplied by the Current Market Price of that share.
SECTION 18. NO RIGHTS AS STOCKHOLDER; NOTICES TO OPTIONHOLDER
Nothing contained in this Agreement or in the Options shall be construed as
conferring upon the Optionholder or its transferees any rights as a stockholder
of the Company, including the right to vote, receive dividends, consent or
receive notices as a stockholder in respect to any meeting of stockholders for
the election of directors of the Company or any other matter. The Company
covenants, however, that for so long as this Option is at least partially
unexercised, it will furnish any Holder of this Option with copies of all
reports and communications furnished to the shareholders of the Company. In
addition, if at any time prior to the expiration of the Options and prior to
their exercise, any one or more of the following events shall occur:
(a) Any action which would require an adjustment pursuant to Section
4.1 (except subsections 4.1(e) and 4.1(h)) or 4.4; or
(b) A dissolution, liquidation, or winding up of the Company (other
than in connection with a consolidation, merger, or sale of its property,
assets, and business as an entirety or substantially as an entirety) shall be
proposed:
then the Company shall give notice in writing of such event to the
Optionholder, as provided in Section 16 hereof, at least 20 days prior
to the date fixed as a record date or the date of closing the transfer
books for the determination of the stockholders entitled to any relevant
dividend, distribution, subscription rights or other rights or for the
determination of stockholders entitled to vote on such proposed
dissolution, liquidation, or winding up. Such notice shall specify such
record date or the date of closing the transfer books, as the case may
be. Failure to mail or receive notice or any defect therein shall not
affect the validity of any action taken with respect thereto.
SECTION 19. CHARGES DUE UPON EXERCISE
The Company shall pay any and all issue or transfer taxes, including, but
not limited to, all federal or state taxes, that may be payable with respect to
the transfer of this Option or the issue or delivery of Option Securities upon
the exercise of this Option.
SECTION 20. NOTICES
Any notice pursuant to this Agreement by the Company or by an Optionholder
or a holder of Shares shall be in writing and shall be deemed to have been duly
given if delivered or mailed by certified mail, return receipt requested:
(a) If to an Optionholder or a holder of Shares, addressed to Xxxxxxx
Davidson Securities Corporation, 00 Xxxxx Xxxx Xxxxxx, Xxxxxxxx, Xxxxxxx 00000,
Attention: President.
(b) If to the Company addressed to it at FirstLink Communications,
Inc., 000 XX Xxxxxxxx, Xxxxxxxx, Xxxxxx 00000, Attention: President.
Each party may from time to time change the address to which notices to it
are to be delivered or mailed hereunder by notice in accordance herewith to the
other party.
15
SECTION 21. ARBITRATION
The Company and the Holder, and by receipt of this Option or any Option
Securities, all subsequent Holders or holders of Option Securities, agree to
submit all controversies, claims, disputes and matters of difference with
respect to this Option, including, without limitation, the application of this
Section 21 to arbitration in Portland, Oregon, according to the rules and
practices of the American Arbitration Association from time to time in force;
provided, however, that if such rules and practices conflict with the applicable
procedures of Oregon courts of general jurisdiction or any other provisions of
Oregon law then in force, those Oregon rules and provisions shall govern. This
agreement to arbitrate shall be specifically enforceable. Arbitration may
proceed in the absence of any party if notice of the proceeding has been given
to that party. The parties agree to abide by all awards rendered in any such
proceeding. These awards shall be final and binding on all parties to the
extent and in the manner provided by the rules of civil procedure enacted in
Oregon. All awards may be filed, as a basis of judgment and of the issuance of
execution for its collection, with the clerk of one or more courts, state or
federal, having jurisdiction over either the party against whom that award is
rendered or its property. No party shall be considered in default hereunder
during the pendency of arbitration proceedings relating to that default.
SECTION 22. APPLICABLE LAW
This Option shall be governed by and construed in accordance with the laws
of the State of Oregon, and courts located in Oregon shall have exclusive
jurisdiction over all disputes arising hereunder.
SECTION 23. MISCELLANEOUS PROVISIONS
(a) Subject to the terms and conditions contained herein, this Option
shall be binding on the Company and its successors and shall inure to the
benefit of the original Holder, its successors and assigns and all holders of
Option Securities and the exercise of this Option in full shall not terminate
the provisions of this Option as it relates to holders of Option Securities.
(b) If the Company fails to perform any of its obligations hereunder,
it shall be liable to the Holder for all damages, costs and expenses resulting
from the failure, including, but not limited to, all reasonable attorney's fees
and disbursements.
(c) This Option cannot be changed or terminated or any performance or
condition waived in whole or in part except by an agreement in writing signed by
the party against whom enforcement of the change, termination or waiver is
sought; provided, however, that any provisions hereof may be amended, waived,
discharged or terminated upon the written consent of the Company and Xxxxxxx
Davidson.
(d) If any provision of this Option shall be held to be invalid,
illegal or unenforceable, such provision shall be severed, enforced to the
extent possible, or modified in such a way as to make it enforceable, and the
invalidity, illegality or unenforceability shall not affect the remainder of
this Option.
(e) The Company agrees to execute such further agreements, conveyances,
certificates and other documents as may be reasonably requested by the Holder to
effectuate the intent and provisions of this Option.
(f) Paragraph headings used in this Option are for convenience only and
shall not be taken or construed to define or limit any of the terms or
provisions of this Option. Unless otherwise provided, or unless the context
shall otherwise require, the use of the singular shall include the plural and
the use of any gender shall include all genders.
16
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, all as of the day and year first above written.
FIRSTLINK COMMUNICATIONS, INC.
By:
-----------------------------------------
A. Xxxxx Xxxxx, President
XXXXXXX DAVIDSON SECURITIES
CORPORATION
By:
-----------------------------------------
EXHIBIT A
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, EXCHANGED,
HYPOTHECATED OR TRANSFERRED IN ANY MANNER EXCEPT IN COMPLIANCE WITH THE
AGREEMENT PURSUANT TO WHICH THEY WERE ISSUED.
Option Certificate No. RSO-
REPRESENTATIVE'S OPTIONS TO PURCHASE
SHARES OF COMMON STOCK
FIRSTLINK COMMUNICATIONS, INC.
INCORPORATED UNDER THE LAWS
OF THE STATE OF OREGON
This certifies that, for value received,______________________, the
registered holder hereof or assigns (the "Optionholder"), is entitled to
purchase from FirstLink Communications, Inc. (the "Company"), at any time
during the period commencing at 9:00 a.m., Portland, Oregon time,
on_______________ at the purchase price per Share of __________________ (the
"Exercise Price"), the number of shares of Common Stock of the Company set
forth above (the "Shares"). The number of shares of Common Stock of the
Company purchasable upon exercise of the Options evidenced hereby shall be
subject to adjustment from time to time as set forth in the Representative's
Option Agreement.
The Options evidenced hereby may be exercised in whole or in part by
presentation of this Option Certificate with the Purchase Form attached hereto
duly executed (with a signature guarantee as provided thereon) and simultaneous
payment of the Exercise Price at the principal office of the Company. Payment
of such price shall be made at the option of the Optionholder in cash or by
check or by Cashless Exercise subject to the provisions of Section 3 of the
Representative's Option Agreement (as that term is defined herein).
The Options evidenced hereby represent the right to purchase an
aggregate of up to 100,000 Shares and are issued under and in accordance with
a Representative's Share Option Agreement, dated as of________________ ,
between the Company and Xxxxxxx Xxxxxxxx Securities Corporation and are
subject to the terms and provisions contained in the Representative's Option
Agreement, to all of which the Optionholder by acceptance hereof consents.
1
Upon any partial exercise of the Options evidenced hereby, there shall be
signed and issued to the Optionholder a new Option Certificate in respect of the
Shares as to which the Options evidenced hereby shall not have been exercised.
These Options may be exchanged at the office of the Company by surrender of this
Option Certificate properly endorsed for one or more new Options of the same
aggregate number of Shares as here evidenced by the Option or Options exchanged.
No fractional shares of Common Stock will be issued upon the exercise of rights
to purchase hereunder, but the Company shall pay the cash value of any fraction
upon the exercise of one or more Options. These Options are transferable at the
office of the Company in the manner and subject to the limitations set forth in
the Representative's Option Agreement.
This Option Certificate does not entitle any Optionholder to any of the
rights of a stockholder of the Company.
FIRSTLINK COMMUNICATIONS, INC.
By:
-----------------------------------------
Dated:
[Seal]
Attest:
------------------------------
Secretary
2
NOTICE OF EXERCISE
(To be executed by a Holder desiring to exercise the right to purchase Shares
pursuant to a Option.)
The undersigned Holder of a Option hereby:
(a) irrevocably elects to exercise the Option to the extent of
purchasing _______________ Shares;
(b) makes payment in full of the aggregate Exercise Price for those
Shares in the amount of $_________________ by the delivery of certified funds or
a bank cashier's check in the amount of $_________________;
(c) requests that certificates evidencing the securities underlying
such Shares be issued in the name of the undersigned, or, if the name and
address of some other person is specified below, in the name of such other
person:
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
(Name and address of person OTHER than the
undersigned in whose name Shares are to be registered)
(d) requests, if the number of Shares purchased are not all the Shares
purchasable pursuant to the unexercised portion of the Option, that a new Option
of like tenor for the remaining Shares purchasable pursuant to the Option be
issued and delivered to the undersigned at the address stated below.
Dated: --------------------------------------------
--------------------- Signature
(This signature must conform in all respects
to the name of the Holder as specified on the
face of the Option.)
--------------------------- --------------------------------------------
Social Security Number Printed Name
or Employer ID Number
Address:
-----------------------------------------
-----------------------------------------
3
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned, __________________________________, hereby
sells, assigns and transfers unto:
Name:
-------------------------------------------------
(Please type or print in block letters)
Address:
----------------------------------------------
----------------------------------------------
the right to purchase _________________ Shares of FirstLink Communications, Inc.
(the "Company") pursuant to the terms and conditions of the Option held by the
undersigned. The undersigned hereby authorizes and directs the Company (i) to
issue and deliver to the above-named assignee at the above address a new Option
pursuant to which the rights to purchase being assigned may be exercised, and
(ii) if there are rights to purchase Shares remaining pursuant to the
undersigned's Option after the assignment contemplated herein, to issue and
deliver to the undersigned at the address stated below a new Option evidencing
the right to purchase the number of Shares remaining after issuance and delivery
of the Option to the above-named assignee. Except for the number of Shares
purchasable, the new Options to be issued and delivered by the Company are to
contain the same terms and conditions as the undersigned's Option. To complete
the assignment contemplated by this Assignment Form, the undersigned hereby
irrevocably constitutes and appoints ____________________________________ as the
undersigned's attorney-in-fact to transfer the Options and the rights thereunder
on the books of the Company with full power of substitution for these purposes.
Dated:
-------------------- --------------------------------------------
Signature
(This signature must conform in all
respects to the name of the Holder as
specified on the face of the Option.)
--------------------------------------------
Printed Name
Address:
--------------------------------------------
--------------------------------------------
4
OPTION CONVERSION EXERCISE FORM
TO: FirstLink Communications, Inc.
Pursuant to Section 4.6 of the Representative's Share Option Agreement, the
Holder hereby irrevocably elects to convert Options into_________________Shares
of the Company. A conversion calculation is attached hereto as Exhibit B-1.
The undersigned requests that certificates for such Shares be issued as
follows:
Name:
---------------------------------------------------------------------
Address:
------------------------------------------------------------------
Deliver to:
---------------------------------------------------------------
and that a new Option Certificate for the balance remaining of the Options, if
any, be registered in the name of, and delivered to, the undersigned at the
address stated above.
Signature Dated
---------------------------------- ------------------------
5
Exhibit B-1
CALCULATION OF OPTION CONVERSION
Converted Securities = NET VALUE
---------
FMV
FMV = $
---------------------------------
Net Value = Aggregate FMV - Aggregate Exercise Price
= $ -
-------------- ----------------
= $
---------------------------------
Converted Shares = ---------------------------------
Fractional Converted Shares = ---------------------------------(1)
(1) FirstLink Communications, Inc. to pay for fractional Shares in cash @
$___________________ per Share.
6
