WARRANT TO PURCHASE
150,000 Units
RACOM SYSTEMS, INC.
UNDERWRITER'S WARRANT
Dated: January __, 1997
THIS CERTIFIES that Xxxxxxx Xxxxxxx, Inc. (herein sometimes called the
"Holder" and/or the "Underwriter") is entitled to purchase from Racom Systems,
Inc., a Delaware corporation (the "Company"), at the price and during the period
as hereinafter specified, up to 150,000 Units of the Company's securities with
each Unit (the "Underwriter's Warrant Unit") consisting of one (1) share of the
Company's $.01 par value per share Common Stock (the "Warrant Unit Shares") and
one Redeemable Warrant (the "Underlying Warrant") entitling the holder thereof
to purchase for $_____ (the "Underlying Warrant Exercise Price"), one share of
Common Stock (the "Underlying Warrant Shares") for a term of five (5) years from
the effective date of the Registration Statement described below. The Warrant
Unit Shares and the Underlying Warrant Shares are sometimes referred to herein
collectively as the "Warrant Shares."
This Underwriter's Warrant (the "Underwriter's Warrant") is issued pursuant
to an Underwriting Agreement between the Company and the Underwriter in
connection with a public offering, through the Underwriter, of 1,500,000 Units
(the "Units") as more fully described in the Underwriting Agreement, (and up to
225,000 additional Units covered by an over-allotment option granted by the
Company to the Underwriter) pursuant to a Registration Statement on Form SB-2
(the "Registration Statement") under the Securities Act of 1933, as amended (the
"Act"), and in consideration of $100 received by the Company for the
Underwriter's Warrant.
1. The rights represented by the Underwriter's Warrant shall be exercised
at the price, subject to adjustment in accordance with Sections 9 and 10 hereof
(the "Exercise Price") and during the periods as follows:
(a) The Underwriter's Warrant shall be numbered and shall be registered in
a warrant register. The Company shall be entitled to treat the registered owner
of any Underwriter's Warrant (the "Warrantholder") 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 Underwriter's Warrant on the part of any other
person, and shall not be liable for any registration or transfer of
Underwriter's Warrants which are registered or to be registered in the name of a
fiduciary or the nominee of a fiduciary unless made with the actual knowledge
that a fiduciary or nominee is committing a breach of trust in requesting such
registration or transfer, or with such knowledge of such facts that its
participation therein amounts to gross negligence or bad faith.
(b) During the 12 month period from the Effective Date of the Registration
Statement (the "First Anniversary Date"), the Warrantholder shall have no right
to purchase any
Underwriter's Warrant Units hereunder, except that in the event of any
merger, consolidation or sale of substantially all the assets of the Company
as an entirety prior to the First Anniversary Date, the Warrantholder shall
have the right to exercise the Underwriter's Warrant at such time and into
the kind and amount of Underwriter's Warrant Units and other securities and
property (including cash) receivable by a holder of the number of
Underwriter's Warrant Units into which the Underwriter's Warrant would have
been convertible or exercisable immediately prior thereto.
(c) Between January __, 1998 and 2002 (five years from the Effective Date,
i.e. the "Expiration Date") inclusive, the Warrantholder shall have the option
to purchase Underwriter's Warrant Units hereunder at a price ("Exercise Price")
of $_____ per Underwriter's Warrant Unit.
(d) Between January __, 1998 and 2002 (five years from the Effective Date)
inclusive, the holders of the Underlying Warrants shall have the option to
purchase the number of fully paid and nonassessable Underlying Warrant Shares
which the holder of the Underlying Warrant may at that time be entitled to
purchase on the same terms and conditions as the Redeemable Warrants offered and
sold to the public. The Underlying Warrants are redeemable by the Company on
the same terms and conditions as the Redeemable Warrants offered and sold to the
public. Holders of the Underwriter's Warrants and the Underlying Warrants are
sometimes herein referred to collectively as "Warrantholders."
(e) After the Expiration Date, the Warrantholder shall have no right to
purchase any Underwriter's Warrant Units hereunder.
2. The rights represented by the Underwriter's Warrant or Underlying
Warrant may be exercised at any time within the periods above specified, in
whole or in part, by (i) the surrender of the Underwriter's Warrant or
Underlying Warrant (with the purchase form at the end hereof properly executed)
at the principal executive office of the Company (or such other office or agency
of the Company as it may designate by notice in writing to the Warrantholder at
the address of the Warrantholder appearing on the books of the Company); (ii)
payment to the Company of the Exercise Price then in effect for the number of
Underwriter's Warrant Units or Underlying Warrant Shares, as the case may be,
specified in the above-mentioned purchase form together with applicable transfer
taxes, if any; and (iii) delivery to the Company of a duly executed agreement
signed by the person(s) designated in the purchase form to the effect that such
person(s) agree(s) to be bound by the provisions of paragraph 7 and
subparagraphs (b), (c) and (d) of paragraph 8 hereof. The Underwriter's Warrant
or Underlying Warrant shall be deemed to have been exercised, in whole or in
part to the extent specified, immediately prior to the close of business on the
date the Underwriter's Warrant or Underlying Warrant is surrendered and payment
is made in accordance with the foregoing provisions of this paragraph 2.
3. Upon such surrender of an Underwriter's Warrant or Underlying Warrant
and payment of the Exercise Price or Underlying Warrant Exercise Price, as
applicable, the Company shall issue and cause to be delivered with all
reasonable dispatch to or upon the
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written order of the Warrantholder exercising such Warrant or Underlying
Warrant and in such name or names as such Warrantholder may designate, a
certificate or certificates for the number of Warrant Units Shares or
Underlying Warrant Shares or Underlying Warrants, as the case may be, so
purchased upon the exercise of such Underwriter's Warrant or Underlying
Warrant; and in the case of a fractional Warrant Share and/or Underlying
Warrant, such fraction shall be rounded to the nearest whole Warrant Share
and/or Underlying Warrant otherwise issuable upon such surrender. Such
certificate, certificates or Underlying Warrants shall be deemed to have been
issued and any person so designated to be named therein shall be deemed to
have become a holder of record of such Warrant Unit Shares, Underlying
Warrants and/or Underlying Warrant Shares, as the case may be, as of the date
of receipt by the Company or the warrant agent, if any, of such Warrant or
Underlying Warrant and payment of the applicable Exercise Price or Underlying
Warrant Exercise Price; provided, however, that if, at the date of surrender
of such Warrant or Underlying Warrant and payment of the applicable Exercise
Price or Underlying Warrant Exercise Price therefor, the transfer books for
the Common Stock or other class of stock purchasable upon the exercise of
such Underwriter's Warrants or Underlying Warrants shall be closed, the
certificates for the components of the Underwriter's Warrant Units or
Underlying Warrant Shares, as the case may be, in respect of which such
Underwriter's Warrant or Underlying Warrant is then exercised shall be
issuable as of the date on which such books shall next be opened (whether
before or after the date the Underwriter's Warrant or Underlying Warrants
would otherwise terminate (the "Termination Date")) and until such date the
Company shall be under no duty to deliver any Warrant Shares or Underlying
Warrants. The rights of purchase represented by the Underwriter's Warrants
and Underlying Warrants shall be exercisable, at the election of the
Warrantholders thereof, either in full or from time to time in part and, in
the event that an Underwriter's Warrant or Underlying Warrant is exercised in
respect of less than all of the Underwriter's Warrant Units or Underlying
Warrant Shares purchasable on such exercise at any time prior to the
Termination Date, a new Warrant and/or Underlying Warrant evidencing the
remaining Underwriter's Warrants and/or Underlying Warrants will be issued;
and the Company shall deliver, or the warrant agent, if any, is hereby
irrevocably authorized to countersign and to deliver the required new Warrant
and/or Underlying Warrant pursuant to the provisions of this Section; and the
Company whenever required by the warrant agent, if any, and will supply the
warrant agent with Underwriter's Warrant or Underlying Warrant duly executed
on behalf of the Company for such purpose.
4. The Underwriter's Warrant shall not be transferred, sold, assigned, or
hypothecated for a period of one year commencing on the Effective Date except
that it may be transferred to successors of the Warrantholder, and may be
assigned in whole or in part to any person who is an officer of the
Warrantholder or to any member of the selling group and/or the officers or
partners thereof during such period. Any such assignment shall be effected by
the Warrantholder by (i) executing the form of assignment at the end hereof and
(ii) surrendering the Underwriter's Warrant for cancellation at the office or
agency of the Company referred to in paragraph 2 hereof, accompanied by a
certificate (signed by an officer of the Warrantholder if the Warrantholder is a
corporation), stating that each transferee is a permitted transferee under this
paragraph 4; whereupon the Company shall issue, in the name or names specified
by the Warrantholder (including the Warrantholder) a new Underwriter's Warrant
or Warrants of like
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tenor and representing in the aggregate rights to purchase the same number of
Underwriter's Warrant Units as are purchasable hereunder. Such transfers
shall be made in compliance with the rules and regulations of the National
Association of Securities Dealers ("NASD") as well as the Act, the Exchange
Act of 1934, as amended and the respective rules and regulations promulgated
thereunder.
5. The Company covenants and agrees that all Warrant Unit Shares and
Underlying Warrant Shares issued hereunder will, upon issuance, be duly and
validly issued, fully paid and nonassessable, and no personal liability will
attach to the holder thereof. The Company further covenants and agrees that,
during the periods within which the Underwriter's Warrant and the Underlying
Warrant may be exercised, the Company will at all times have authorized and
reserved a sufficient number of Shares.
6. The Underwriter's Warrant and the Underlying Warrants shall not
entitle the Warrantholder to any voting rights or other rights as a shareholder
of the Company.
7. (a) If at any time for a period of four (4) years commencing one (1)
year from the Effective Date, the Company files a registration statement under
the 1933 Act which relates to a current offering of securities of the Company
(except a Registration Statement on Form S-4, S-8 or any other inappropriate
form), such registration statement and the prospectus included therein shall
also, at the written request of the Company by any of the then owners of the
Underwriter's Warrants, Warrant Units, Underlying Warrants or Warrant Shares
(the "Owners"), include and relate to the Underlying Warrants and/or Warrant
Shares issuable upon exercise of such Underwriter's Warrants and/or Underlying
Warrants so as to permit the public sale thereof in compliance with the 1933
Act. The Company shall give written notice to the Owners of its intention to
file a registration statement under the 1933 Act relating to a current offering
of the securities of the Company, at least 30 days prior to the filing of such
registration statement, and the written request provided for in the first
sentence of this subsection shall be made by the Owners at least 10 days prior
to the date specified in the notice as the date on which the Company intends to
file such registration statement. Neither the delivery of such notice by the
Company nor of such request by the Owners shall in any way obligate the Company
to file such registration statement and, notwithstanding the filing of such
registration statement, the Company may, at any time prior to the effective date
thereof, determine not to offer those securities to which such registration
statement relates, without liability to the Owners, except that the Company
shall pay such expenses incurred in connection with the preparation and filing
of such registration statement and as otherwise set forth in subsection (d)
hereof.
(b) In addition, for a period of four (4) years commencing one (1) year
from the Effective Date, upon written notice at any time from a Majority Holder
(as such term is defined in subsection (f) of this Section 7) that he, she or it
contemplates the transfer of all or any part of his, her or its Underlying
Warrants or Warrant Shares under such circumstances that a public offering
thereof would be involved within the meaning of the 1933 Act, the Company, as
promptly as possible after the receipt of such notice, shall file, at its
expense, a post-effective amendment or a new registration statement with respect
to the offering, sale or other disposition
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of the Underlying Warrants and/or Warrant Shares as to which the Company
shall have received such notice. Within 10 days after receiving any such
notice, the Company shall give notice to the other Owners advising them that
the Company is proceeding with such post-effective amendment or new
registration statement and offering to include therein the Underlying
Warrants and/or Warrant Shares of such Owners. The Company shall not be
obligated to any such other Owner unless such other Owner shall accept such
offer by written notice to the Company within 30 days of the Company's
notice. The Owners will bear the expense of fees of counsel for the Owners
and any sales commissions for the Underlying Warrants and/or Warrant Shares
sold by the Owners. In no event shall the Company be required to file a
post-effective amendment or a new registration statement pursuant to the
requirements of this subsection (b) more than once.
(c) In any exercise of the registration rights afforded pursuant to
subsection (a) and (b) of this Section 7, the Company shall:
(i) Supply to the Owner or its designee, as representative of the
Owners intending to make a public distribution of their Underlying
Warrants and/or Warrant Shares (the holder of the Underwriter's
Warrant by his, her or its receipt of the Underwriter's Warrant and/or
Underlying Warrant thereby acknowledging his, her or its appointment
of the Owners' representative or its designee as his, her or its
representative for purposes of this Agreement), four executed copies
of each post-effective amendment or registration statement and as many
copies of the preliminary and final prospectus which shall have been
prepared in conformity with the requirements of the 1933 Act and the
rules and regulations promulgated thereunder and such other documents
as the representative of the Owners shall reasonably request;
(ii) Cooperate in taking such action as may be necessary to register
or qualify the Underlying Warrants and/or Warrant Shares under the
securities acts or blue sky laws of such jurisdictions as the
representative of the Owners shall reasonably request and the Company
shall do any and all other acts and things which may be necessary or
advisable to enable the Owners to consummate such proposed sale or
other disposition of the Underlying Warrants and/or Warrant Shares in
any such jurisdiction; provided, however, that in no event shall the
Company be obligated, in connection therewith, to qualify to do
business or to file a general consent to service of process in any
jurisdiction where it shall not then be so qualified; and
(iii) Use its best efforts to cause any such post-effective
amendment or new registration statement to become effective and remain
effective for a period of not less than 12 months after the initial
effectiveness thereof. The Company shall cooperate in taking such
other action as may be necessary to permit the public sale or other
disposition of the Underlying Warrants and/or Warrant Shares by the
Owners.
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(d) The Company shall comply with the requirements of subsections (a) and
(b) of this Section (including the related requirements of subsection (c) of
this Section), at its own expense, including the costs to register/qualify the
securities under the securities laws of those states as the Owners shall
reasonably request; but excluding underwriting commissions, transfer taxes and
underwriter's expense allowance attributable to the securities being offered by
the Owners.
(e) The term "Majority Holder" as used in this Section shall include any
owner or combination of owners of Underwriter's Warrants, Underlying Warrants
and/or Warrant Shares, in any combination, if the aggregate amount of:
A. the Warrant Unit Shares and/or Underlying Warrant Shares then
held by him, her, it or among them, plus
B. the Warrant Unit Shares and/or Underlying Warrant Shares then
issuable upon exercise of the Underwriter's Warrants and/or Underlying Warrants
then held by him, her, it or among them would constitute more than fifty percent
of the Underwriter's Warrant Unit Shares and/or Underlying Warrant Shares
originally issuable upon exercise of all of the Underwriter's Warrants and
Underlying Warrants.
(f) The provisions contained herein shall continue in effect regardless of
the exercise or surrender of any of the Warrants. Notwithstanding anything in
this Section 7 to the contrary, the Company shall not be obligated to register
any Underlying Warrants or Underlying Warrant Shares if the Underlying Warrants
shall have expired unexercised or if the Underlying Warrants shall have been
redeemed by the Company; and the Underlying Warrant Shares shall not be used to
calculate a Majority Holder if the Underlying Warrants shall have expired
unexercised or shall have been redeemed by the Company.
8. (a) Whenever pursuant to paragraph 7 a registration statement
relating to the Underlying Warrants and/or Warrant Shares is filed under the
Act, amended or supplemented, the Company will indemnify and hold harmless each
holder of the securities covered by such registration statement, amendment or
supplement (such holder being hereinafter called the "Distributing Holder"), and
each person, if any, who controls (within the meaning of the Act) the
Distributing Holder, and each underwriter (within the meaning of the Act) of
such securities and each person, if any, who controls (within the meaning of the
Act) any such underwriter, against any losses, claims, damages or liabilities,
joint or several, to which the Distributing Holder, any such controlling person
or any such underwriter may become subject, under the Act or otherwise, insofar
as such losses, claims, damages or liabilities, or actions in respect thereof,
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any such registration statement or any
preliminary prospectus or final prospectus constituting a part thereof or any
amendment or supplement thereto, or arise out of or are based upon the omission
or the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading and will
reimburse the Distributing Holder or such controlling person or underwriter in
connection with
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investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case 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 said registration statement, said preliminary
prospectus, said final prospectus or said amendment or supplement in reliance
upon and in conformity with written information furnished by such
Distributing Holder or any other Distributing Holder for use in the
preparation thereof.
(b) The Distributing Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed said
registration statement and such amendments and supplements thereto, and each
person, if any, who controls the Company (within the meaning of the Act)
against any losses, claims, damages or liabilities, joint or several, to
which the Company or any such director, officer or controlling person may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities, or actions in respect thereof, arise out of or are
based upon any untrue or alleged untrue statement of any material fact
contained in said registration statement, said preliminary prospectus, said
final prospectus, or said amendment or supplement, or arise out of or are
based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent,
that 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 said registration statement, said preliminary prospectus, said final
prospectus or said amendment or supplement in reliance upon and in conformity
with written information furnished by such Distributing Holder for use in the
preparation thereof; and will reimburse the Company or any such director,
officer or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action.
(c) Promptly after receipt by an indemnified party under this paragraph 8
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party, give the
indemnifying party notice of the commencement thereof, but the omission so to
notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party otherwise than under this paragraph 7.
(d) In case any such action is brought against any indemnified party, and
it notifies an indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified party,
and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this paragraph 8 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. No settlement
shall be made without the consent of the indemnifying party.
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9. In case of any reclassification, capital reorganization or other
change of outstanding Shares of Common Stock, or in case of any consolidation or
merger of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the continuing corporation and
which does not result in any reclassification, capital, reorganization or other
change of outstanding Shares of Common Stock), or in case of any sale or
conveyance to another corporation of the property of the Company as, or
substantially as, an entirety (other than a sale/leaseback, mortgage or other
financing transaction), the Company shall cause effective provision to be made
so that each holder of this Warrant shall have the right thereafter, by
exercising such Warrant, to purchase the kind and number of Shares of stock or
other securities or property (including cash) receivable upon such
reclassification, capital reorganization or other change, consolidation, merger,
sale or conveyance by a holder of the number of Shares of Common Stock that
might have been purchased upon exercise of such Warrant, immediately prior to
such reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance. The foregoing provision shall similarly apply to
successive reclassifications, capital reorganizations and other changes of
outstanding Shares of Common Stock and to successive consolidations, mergers,
sales or conveyances.
10. If, prior to the expiration of this Warrant by exercise or by its
terms the Company shall issue any of its shares of Common Stock as a share
dividend or subdivide the number of outstanding shares of Common Stock into a
greater number of shares, then, in either such case, the Exercise Price per
Underwriter's Warrant Unit shall be proportionately reduced, and the number of
Underwriter's Warrant Units at the time purchasable pursuant to this Warrant
shall be proportionately increased; and conversely, if the Company shall
contract the number of outstanding shares of Common Stock by combining such
shares into a smaller number of shares, then, in such case, the Exercise Price
per Underwriter's Warrant Unit in effect at the time of such action shall be
proportionately increased and the number of Underwriter's Warrant Units at that
time purchasable pursuant to this Warrant shall be proportionately decreased.
If the Company shall, at any time during the life of this Warrant declare a
dividend payable in cash on its shares of Common Stock and shall at
substantially the same time offer to its shareholders a right to purchase new
shares of Common Stock from the proceeds of such dividend or for an amount
substantially equal to the dividend, all shares of Common Stock so issued shall,
for the purpose of this Warrant, be deemed to have been issued as a share
dividend. Any dividend paid or distributed upon the shares of Common Stock in
shares of any other class of securities convertible into shares of Common Stock
shall be treated as a dividend paid in shares of Common Stock to the extent that
shares of Common Stock are issuable upon the conversion thereof.
11. This Agreement shall be governed by and construed in accordance with
the internal substantive laws of the State of Colorado, without regard for the
conflict of laws.
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IN WITNESS WHEREOF, Racom Systems, Inc. has caused this Underwriter's
Warrant to be signed by its duly authorized officers under its corporate seal
and this Underwriter's Warrant to be dated ____________________, 1997.
RACOM SYSTEMS, INC.
By__________________________________________
Xxxxxxx X. Xxxxxx, President
Attest:_____________________________________
Secretary
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PURCHASE FORM
(To be signed only upon exercise of Underwriter's Warrant)
The undersigned, the holder of the foregoing Underwriter's Warrant, hereby
irrevocably elects to exercise the purchase rights represented by such
Underwriter's Warrant for, and to purchase thereunder, __________ Units ("Unit")
of Racom Systems, Inc. with each Unit comprised of one (1) shares of Racom
Systems, Inc. $.01 par value common stock and one (1) warrant to purchase an
additional share of such common stock at $_____ per share and herewith makes
payment of $__________ therefor and requests that the certificates for Units be
issued in the name(s) of, and delivered to ______________________________, whose
address(es) is (are): ____________
____________________.
Dated:__________________, 19__
By:_____________________________________________
TRANSFER FORM
(To be signed only upon transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto __________________________ the right to purchase Shares represented by the
foregoing Underwriter's Warrant to the extent of ____________ Units and appoints
______________________________________ attorney to transfer such rights on the
books of Racom Systems, Inc., with full power of substitution in the premises.
Dated:_________________, 19__
By:_____________________________________________
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