CHOICETEL COMMUNICATIONS, INC.
800,000 UNITS(1)
CONSISTING OF 800,000 SHARES OF COMMON STOCK AND
800,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
UNDERWRITING AGREEMENT
____________, 1997
Equity Securities Investments, Inc.
0000 XXX Xxxxxx
00 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Ladies/Gentlemen:
ChoiceTel Communications, Inc., a Minnesota corporation (the "Company"),
hereby confirms its agreement to issue and sell to Equity Securities
Investments, Inc. (the "Underwriter") an aggregate of 800,000 units (the
"Units"), each Unit consisting of one share of the Company's common stock,
$0.01 par value per share ("Common Stock"), and one redeemable Common Stock
purchase warrant of the Company (the "Redeemable Warrants"). (Such 800,000
Units are collectively referred to in this Agreement as the "Firm Units.")
The Company also hereby confirms its agreement to grant to the Underwriter an
option to purchase up to 120,000 additional Units (the "Option Units") on the
terms and for the purposes set forth in Section 2(b) hereof. (As used in
this Agreement, the term "Units" shall consist of the Firm Units and the
Option Units.) The Company also hereby confirms its agreement to issue to
the Underwriter warrants for the purchase of a total of 80,000 Units as
described in Section 6 hereof (the "Underwriter's Warrants"), assuming
purchase by the Underwriter of the Firm Units. The Units issuable upon
exercise of the Underwriter's Warrants are referred to in this Agreement as
the "Warrant Units."
1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY.
(a) The Company represents and warrants to and agrees with the
Underwriter as follows:
(i) A registration statement on Form SB-2 (File No. 333-
______) with respect to the Units, including a prospectus subject to
completion, has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "SEC")
thereunder and has been filed with the SEC under the Securities Act;
one or more amendments to such registration statement have also been
so prepared and have been, or will be, so filed. Copies of the
registration statement and amendments and each related preliminary
prospectus to date have been delivered by the Company to the
Underwriter, and, to the extent applicable, were identical to the
electronically transmitted copies thereof filed with the SEC
pursuant to the SEC's Electronic Data Gathering Analysis and
Retrieval System ("XXXXX"), except to the extent permitted by
Regulation S-T under the Securities Act. If the Company has elected
not to rely upon Rule 430A of the Rules
-----------------------
(1) Plus an option to purchase up to 120,000 additional Units to cover over-
allotments.
and Regulations, the Company has prepared and will promptly file an
amendment to the registration statement and an amended prospectus.
If the Company has elected to rely upon Rule 430A of the Rules and
Regulations, it will prepare and file a prospectus pursuant to Rule
424(b) that discloses the information previously omitted from the
prospectus in reliance upon Rule 430A. Such registration statement
as amended at the time it is or was declared effective by the SEC
and, in the event of any amendment thereto after the effective date
and prior to the "First Closing Date" (as hereinafter defined), such
registration statement as so amended (but only from and after the
effectiveness of such amendment), including the information deemed
to be part of the registration statement at the time of
effectiveness pursuant to Rule 430A(b), if applicable, is
hereinafter called the "Registration Statement." The prospectus
included in the Registration Statement at the time it is or was
declared effective by the SEC is hereinafter called the
"Prospectus," except that if any prospectus filed by the Company
with the SEC pursuant to Rule 424(b) of the Rules and Regulations or
any other prospectus provided to the Underwriter by the Company for
use in connection with the offering of the Units (whether or not
required to be filed by the Company with the SEC pursuant to Rule
424(b) of the Rules and Regulations) differs from the prospectus on
file at the time the Registration Statement is or was declared
effective by the SEC, the term "Prospectus" shall refer to such
differing prospectus from and after the time such prospectus is
filed with the SEC or transmitted to the SEC for filing pursuant to
such Rule 424(b) or from and after the time it is first provided to
the Underwriter by the Company for such use. The term "Preliminary
Prospectus" as used herein means any preliminary prospectus included
in the Registration Statement prior to the time it becomes or became
effective under the Securities Act and any prospectus subject to
completion as described in Rule 430A of the Rules and Regulations.
For purposes of this Agreement, all references to the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement to any of the foregoing shall be deemed to
include the respective copies thereof filed with the SEC pursuant to
XXXXX.
(ii) At the time the Registration Statement is or was
declared effective by the SEC and at all times subsequent thereto up
to the "First Closing Date" and the "Second Closing Date" (as such
terms are hereinafter defined), the Registration Statement and
Prospectus, and all amendments thereof and supplements thereto, will
comply or complied with the provisions and requirements of the
Securities Act and the Rules and Regulations. Neither the SEC nor
any state securities authority has issued any order preventing or
suspending the use of any Preliminary Prospectus or requiring the
recirculation of a Preliminary Prospectus, or issued a stop order
with respect to the offering of the Units (if the Registration
Statement has been declared effective), or instituted or, to the
Company's knowledge, threatened the institution of, proceedings for
any of such purposes. When the Registration Statement shall become
effective and when any post-effective amendment thereto shall become
effective, the Registration Statement (as amended, if the Company
shall have filed with the SEC any post-effective amendments thereto)
will not or did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading. When the
Registration Statement is or was declared effective by the SEC and
at all times subsequent thereto up to the First Closing Date and the
Second Closing Date, the Prospectus (as amended or supplemented, if
the Company shall have filed with the SEC any amendment thereof or
supplement thereto) will not or did not contain any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein,
in light of the circumstances in which they were made, not
misleading. When any Preliminary Prospectus was first filed with
the SEC and when any amendment thereof or supplement thereto was
first filed with the SEC, such Preliminary Prospectus and any
amendment thereof and supplement thereto complied in all material
respects with the applicable provisions of the Securities Act and
the Rules and Regulations and did not contain an untrue statement of
a material fact and did not omit to state any material fact required
to be stated therein or necessary in order to make the statements
therein not misleading. None of the representations and warranties
in this Subsection 1(a) shall apply to statements in, or omissions
from, the Registration Statement or the Prospectus, or any
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amendment thereof or supplement thereto, which are based upon and
conform to written information relating to the Underwriter furnished
to the Company by the Underwriter specifically for use in the
preparation of the Registration Statement or the Prospectus, or any
such amendment or supplement.
(iii) The Company has no subsidiaries other than those
identified in Exhibit 21.1 to the Registration Statement (each one a
"Subsidiary" and collectively the "Subsidiaries") and is not
affiliated with any other company or business entity, except as
disclosed in the Prospectus. The Company and each Subsidiary has
been duly incorporated and is validly existing as a corporation in
good standing under the laws of the jurisdiction of its
incorporation, with full power and authority (corporate and other)
to own, lease and operate its properties and conduct its business as
described in the Registration Statement and Prospectus; the Company
owns all of the outstanding capital stock of each of the
Subsidiaries free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest; the Company and each
Subsidiary is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction in which the ownership
or lease of its properties or the conduct of its business requires
such qualification and in which the failure to be qualified or in
good standing would have a material adverse effect on the condition
(financial or otherwise), earnings, operations or business of the
Company; and no proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing, or seeking to revoke,
limit or curtail, such power and authority or qualification.
(iv) The Company and each Subsidiary has operated and is
operating in material compliance with all authorizations, licenses,
certificates, consents, permits, approvals and orders of and from
all state, federal and other governmental regulatory officials and
bodies necessary to own its properties and to conduct its business
as described in the Registration Statement and Prospectus, all of
which are, to the Company's knowledge, valid and in full force and
effect; the Company and each Subsidiary is conducting its business
in substantial compliance with all applicable laws, rules and
regulations of the jurisdictions in which it is conducting business;
and neither the Company nor any Subsidiary is in material violation
of any applicable law, order, rule, regulation, writ, injunction,
judgment or decree of any court, government or governmental agency
or body, domestic or foreign, having jurisdiction over the Company
or any Subsidiary or over their respective properties. Except as
set forth in the Registration Statement and Prospectus, (A) the
Company is in material compliance with all material rules, laws and
regulations relating to the use, treatment, storage and disposal of
toxic substances and protection of health or the environment (the
"Environmental Laws") which are applicable to its business, (B) the
Company has received no notice from any governmental authority or
third party of an asserted claim under Environmental Laws, which
claim is required to be disclosed in the Registration Statement and
the Prospectus, (C) the Company will not be required to make any
future material capital expenditures to comply with Environmental
Laws, and (D) no property which is owned, leased or occupied by the
Company has been designated as a Superfund site pursuant to the
Comprehensive Response, Compensation and Liability Act of 1980, as
amended (42 U.S.C. Section 9601, ET SEQ.), or otherwise designated
as a contaminated site under applicable state or local law.
(v) Neither the Company nor any Subsidiary is in
violation of its respective articles of incorporation or bylaws or
in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any bond, debenture,
note or other evidence of indebtedness or in any contract, lease,
indenture, mortgage, loan agreement, joint venture or other
agreement or instrument to which it is a party or by which it or its
respective properties are bound, which default is material to the
business of the Company and its Subsidiaries taken as a whole.
(vi) The Company has full requisite power and authority to
enter into this Agreement and perform the transactions contemplated
hereby. This Agreement has been duly
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authorized, executed and delivered by the Company and is a valid and
binding agreement on the part of the Company, enforceable against
the Company in accordance with its terms, except as enforceability
may be limited by the application of bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
rights of creditors generally and by judicial limitations on the
right of specific performance, and except as the enforceability of
the indemnification or contribution provisions hereof may be
affected by applicable law or the public policies underlying such
law. The performance of this Agreement and the consummation of the
transactions herein contemplated will not result in a material
breach or violation of any of the terms and provisions of, or
constitute a material default under, (A) any indenture, mortgage,
deed of trust, loan agreement, bond, debenture, note, agreement or
other evidence of indebtedness, any lease, contract, joint venture
or other agreement or instrument to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary or
their respective properties may be bound, (B) the respective
articles of incorporation or bylaws of the Company or any
Subsidiary, or (C) any material applicable law, order, rule,
regulation, writ, injunction, judgment or decree of any court,
government or governmental agency or body, domestic or foreign,
having jurisdiction over the Company or any Subsidiary or over their
respective properties. No consent, approval, authorization or order
of or qualification with any court, governmental agency or body,
domestic or foreign, having jurisdiction over the Company or any
Subsidiary or over their respective properties is required for the
execution and delivery of this Agreement and the consummation by the
Company of the transactions herein contemplated, except such as may
be required under the Securities Act, the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or under state or other
securities or Blue Sky laws, all of which requirements have been
satisfied.
(vii) Except as is otherwise expressly described in the
Registration Statement or Prospectus, there is neither pending nor,
to the best of the Company's knowledge, threatened, any action,
suit, claim or proceeding against the Company, any Subsidiary, or
any of their respective officers or any of their respective
properties, assets or rights before any court, government or
governmental agency or body, domestic or foreign, having
jurisdiction over the Company or any Subsidiary or over their
respective officers or properties or otherwise which (i) might
result in any material adverse change in the condition (financial or
otherwise), earnings, operations or business of the Company and its
Subsidiaries taken as a whole or might materially and adversely
affect their properties, assets or rights, or (ii) might prevent
consummation of the transactions contemplated hereby.
(viii) The Company has, and at the First Closing Date and
Second Closing Date (collectively, the "Closing Dates") will have,
the duly authorized and outstanding capitalization set forth in the
Prospectus. All outstanding shares of capital stock of the Company
are duly authorized and validly issued, fully paid and non-
assessable, have been issued in compliance with all federal and
state securities laws, were not issued in violation of or subject to
any preemptive rights or other rights to subscribe for or purchase
securities, and the authorized and outstanding capital stock of the
Company conforms in all material respects with the statements
relating thereto contained in the Registration Statement and the
Prospectus; the shares of Common Stock included in the Units to be
sold hereunder by the Company have been duly authorized for issuance
and sale to the Underwriter pursuant to this Agreement and, when
issued and delivered by the Company against payment therefor in
accordance with the terms of this Agreement, will be duly and
validly issued and fully paid and non-assessable and will be sold
free and clear of any pledge, lien, security interest, encumbrance,
claim or equitable interest; and no preemptive right, co-sale right,
registration right, right of first refusal or other similar right of
shareholders exists with respect to any of the shares of Common
Stock included in the Units to be sold hereunder by the Company or
the issuance and sale thereof, or the issuance and sale or exercise
of the Redeemable Warrants, or the issuance and sale or exercise of
the Underwriter's Warrants, other than those that have been
expressly waived prior to the date hereof. Except as disclosed in
the Prospectus, the Company has no outstanding options to purchase,
or any preemptive rights or
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other rights to subscribe for or to purchase, any securities or
obligations convertible into, or any contracts or commitments to
issue or sell, shares of its capital stock or any such options,
rights, convertible securities or obligations. The certificates
evidencing the shares of Common Stock and the Redeemable Warrants
comply as to form with all applicable provisions of the laws of the
State of Minnesota.
(ix) The Redeemable Warrants included in the Units to be
sold by the Company have been duly and validly authorized and, when
authenticated by Norwest Bank Minnesota, National Association (the
"Warrant Agent") and issued, delivered and sold in accordance with
this Agreement and the Warrant Agreement dated as of the date
hereof, between the Company and the Warrant Agent, will have been
duly and validly executed, authenticated, issued, and delivered and
will constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms,
except as enforceability may be limited by the application of
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the rights of creditors generally and by judicial
limitations on the right of specific performance. A sufficient
number of shares of Common Stock of the Company has been reserved
for issuance by the Company upon exercise of the Redeemable
Warrants.
(x) The Underwriter's Warrants and the Common Stock
and Redeemable Warrants included in the Warrant Units have been
duly authorized. The Underwriter's Warrants, when issued and
delivered to the Underwriter, will constitute valid and binding
obligations of the Company in accordance with their terms,
except as enforceability may be limited by the application of
bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the rights of creditors generally and by
judicial limitations on the right of specific performance and
except insofar as the indemnification provisions thereof may be
limited by applicable law and the policies underlying such law.
The Common Stock included in the Warrant Units, when issued in
accordance with the terms of this Agreement and pursuant to the
Underwriter's Warrants, will be fully paid and non-assessable
and subject to no preemptive rights or similar rights on the
part of any person or entity. The Redeemable Warrants included
in the Warrant Units, when authenticated by the Warrant Agent
and issued, delivered and sold in accordance with this
Agreement, the Warrant Agreement between the Company and the
Warrant Agent, and the Underwriter's Warrants, will have been duly
and validly executed, authenticated, issued and delivered and
will constitute valid and binding obligations of the Company,
enforceable by the Company in accordance with their terms, except as
enforceability may be limited by the application of bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting the rights of creditors generally and by judicial
limitations on the right of specific performance. The Common
Stock issuable upon exercise of the Redeemable Warrants included
in the Warrant Units has been duly authorized and, when issued
and delivered upon such exercise, will be validly issued, fully
paid and non-assessable, and subject to no preemptive rights or
similar rights on the part of any person or entity. A sufficient
number of shares of Common Stock of the Company has been reserved
for issuance by the Company upon exercise of the Underwriter's
Warrants and upon exercise of the Redeemable Warrants included in
the Warrant Units.
(xi) Xxxxxxxxx Xxxxxx Xxxxxx Xxxxxxx & Xxxxxx, Ltd.,
which has expressed its opinion with respect to the financial
statements filed as part of the Registration Statement and included
in the Registration Statement and Prospectus, are independent
accountants within the meaning of the Securities Act and the Rules
and Regulations. The financial statements of the Company set forth
in the Registration Statement and Prospectus comply in all material
respects with the requirements of the Securities Act and fairly
present the financial position and the results of operations of the
Company and the Subsidiaries at the respective dates and for the
respective periods to which they apply in accordance with generally
accepted accounting principles consistently applied throughout the
periods involved (subject, in the case of unaudited financial
statements, to normal year-end adjustments which in the opinion of
management of the Company are not material, and except as otherwise
stated therein); and the supporting schedules included in the
Registration Statement present fairly the information required to be
stated therein. The selected and summary financial and statistical
data included in the Registration Statement present fairly the
information shown therein and have been compiled on a basis
consistent with the audited financial statements presented therein.
No other financial statements or schedules are required by the
Securities Act or the Rules and Regulations to be included in the
Registration Statement.
(xii) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus,
and at each Closing Date, except as is otherwise disclosed in the
Registration Statement or Prospectus, there has not been: (A) any
change in the capital stock or long-term debt (including any
capitalized lease obligation) or material increase in the short-term
debt of the Company or any Subsidiary (other than issuances of
Common Stock upon
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the exercise of options outstanding as of the Effective Date and
options granted under the Company's 1997 Long-Term Incentive and
Stock Option Plan (the "Stock Plan")); (B) any issuance of options,
warrants, convertible securities or other rights to purchase the
capital stock of the Company (other than options granted under the
Stock Plan); (C) any material adverse change, or any development
involving a material adverse change, in or affecting the condition
(financial or otherwise), earnings, operations, business, or
business prospects, management, financial position, stockholders'
equity, results of operations or general condition of the Company;
(D) any transaction entered into by the Company or any Subsidiary
that is material to the Company; (E) any obligation, direct or
contingent, incurred by the Company or any Subsidiary, except
obligations incurred in the ordinary course of business that, in the
aggregate, are not material; (F) any dividend or distribution of any
kind declared, paid or made on the capital stock of the Company; or
(G) any loss or damage (whether or not insured) to the property of
the Company or any Subsidiary which has been sustained which has a
material adverse effect on the condition (financial or otherwise),
earnings, operations or business of the Company or a Subsidiary.
(xiii) Except as is otherwise expressly disclosed in the
Registration Statement or Prospectus, (A) the Company and each
Subsidiary has good and marketable title to all of the property,
real and personal, and assets described in the Registration
Statement or Prospectus as being owned by it, free and clear of any
and all pledges, liens, security interests, encumbrances, equities,
charges or claims, other than such as would not have a material
adverse effect on the condition (financial or otherwise), earnings,
operations or business of the Company, (B) the agreements to which
the Company or any Subsidiary is a party described in the
Registration Statement and Prospectus are valid agreements,
enforceable by the Company or the Subsidiary (as applicable), except
as the enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by judicial
limitations on the right of specific performance, and (C) each of
the Company and the Subsidiaries has valid and enforceable leases
for all properties described in the Registration Statement and
Prospectus as leased by it, except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors'
rights generally or by judicial limitations on the right of specific
performance. Except as set forth in the Registration Statement and
Prospectus, the Company owns or leases all such properties as are
necessary to its operations as now conducted.
(xiv) The Company and each Subsidiary has timely filed (or
has timely requested an extension of time to file) all necessary
federal and state income and franchise tax returns and has paid all
taxes shown thereon as due; there is no tax deficiency that has been
or, to the best of the Company's knowledge, could be asserted
against the Company or any Subsidiary that might have a material
adverse effect on the condition (financial or otherwise), earnings,
operations, business or properties of the Company or a Subsidiary;
and all tax liabilities are adequately provided for in the books of
the Company and each Subsidiary.
(xv) No labor disturbance by the employees of the Company
or any Subsidiary exists or, to the best of the Company's knowledge,
is imminent. Except as disclosed in the Registration Statement and
the Prospectus, no collective bargaining agreement exists with any
of the employees of the Company or any Subsidiary and, to the best
of the Company's knowledge, no such agreement is imminent.
(xvi) The Company and each Subsidiary owns, or possesses
adequate rights to use, all patents, patent rights, inventions,
trade secrets, know-how, technology, service marks, trade names,
copyrights, trademarks and proprietary rights or information which
are necessary for the conduct of its present or intended business as
described in the Registration Statement or Prospectus; the
expiration of any patents, patent rights, trade secrets, trademarks,
service marks, trade names or copyrights would not have a material
adverse effect on the condition (financial or
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otherwise), earnings, operations or business of the Company or any
of its Subsidiaries, taken as a whole; and the Company has not
received any notice of, and has no knowledge of, any infringement of
or conflict with the asserted rights of others with respect to any
patent, patent rights, inventions, trade secrets, know-how,
technology, trademarks, service marks, trade names or copyrights
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, might have a material adverse effect on
the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company or any Subsidiary.
Except as disclosed in the Registration Statement or Prospectus, the
Company is not obligated or under any liability whatsoever to make
any payments by way of royalties, fees or otherwise to any owner of,
licensor of, or other claimant to, any patent, patent rights,
inventions, trade secrets, know-how, technology, service marks,
trade names, trademark, copyright or other intangible asset, with
respect to the use thereof or in connection with the conduct of its
business or otherwise.
(xvii) The Common Stock and the Redeemable Warrants have
been approved for quotation on The Nasdaq SmallCap Market.
(xviii) The Company has no defined benefit pension plan or
other pension benefit plan which is intended to comply with the
provisions of the Employee Retirement Income Security Act of 1974 as
amended from time to time, except as disclosed in the Registration
Statement.
(xix) The Company has not taken and will not take, directly
or indirectly, any action (and does not know of any action by its
directors, officers, shareholders or others) which has constituted
or is designed to, or which might reasonably be expected to, cause
or result in stabilization or manipulation, as defined in the
Exchange Act or otherwise, of the price of any security of the
Company to facilitate the sale or resale of the Units. The Company
has not distributed and will not distribute prior to the later of
(A) the First Closing Date or the Second Closing Date, as the case
may be, and (B) completion of the distribution of the Units, any
offering material in connection with the offering and sale of the
Units other than any Preliminary Prospectus, the Prospectus, the
Registration Statement and other materials, if any, permitted by the
Securities Act. Except as is otherwise disclosed in the
Registration Statement or Prospectus, and to the best of the
Company's knowledge, no person is entitled, directly or indirectly,
to compensation from the Company or the Underwriter for services as
a "finder" or otherwise in connection with the transactions
contemplated by this Agreement.
(xx) The Company and each Subsidiary maintains insurance,
which is in full force and effect, with insurers of recognized
financial responsibility of the types and in the amounts generally
deemed adequate for their respective businesses and, to the best of
the Company's knowledge, in line with the insurance maintained by
similar companies and businesses; and neither the Company nor any
Subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not
materially and adversely affect the condition (financial or
otherwise), earnings, operations, business or business prospects of
the Company.
(xxi) Each executive officer and director of the Company
and each beneficial owner of five percent (5%) or more of the Common
Stock to be outstanding after the sale of the Firm Units (calculated
in accordance with Rule 13d-3 under the Exchange Act) has agreed
pursuant to the form of Two-Year Lock-up Agreement attached hereto
as APPENDIX A-1 (the "Two-Year Lock-up Agreement") that such person
will not, for a period of two years from the date (the "Effective
Date") that the Registration Statement is declared effective by the
SEC (the "Two-Year Lock-up Period"), without the prior written
consent of the Underwriter, offer to sell, contract to sell, sell,
pledge, hypothecate, transfer or otherwise dispose of, or grant any
rights with respect to (collectively, a "Disposition"), any shares
of Common Stock and any options, warrants and other rights to
purchase any shares of Common Stock or any securities convertible
into or
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exchangeable or exercisable for shares of Common Stock now owned or
hereafter acquired by such person (collectively, "Securities"), or
with respect to which such person has or hereafter acquires the
power of Disposition, other than as permitted by the Two-Year Lock-
up Agreement. In addition, each other beneficial owner of Common
Stock of the Company has agreed pursuant to the Lock-up Agreement
attached hereto as APPENDIX A-2 (the "Six-Month Lock-up Agreement")
that such person shall not, for a period of six (6) months from the
Effective Date ("Six-Month Lock-up Period"), Dispose of any
Securities now owned or hereafter acquired by such person or with
respect to which such person has or hereafter acquires the power of
Disposition, other than as permitted by the Six-Month Lock-up
Agreement. (The Two-Year Lock-up Agreement and the Six-Month Lock-
up Agreement shall hereinafter be collectively referred to as the
"Lock-up Agreements.") The Company has provided to counsel for the
Underwriter ("Underwriter's Counsel") true, accurate and complete
copies of all of the Lock-up Agreements. The Company has provided
to Underwriter's Counsel a complete and accurate list of all holders
of Securities of the Company and the number and type of Securities
held by each holder of Securities.
(xxii) Neither the Company nor any Subsidiary has at any
time during the last five (5) years (or, if formed during the last
five years, since its inception) made any unlawful contribution to
any candidate for an office or failed to disclose fully any
contribution in violation of law, or made any payment to any federal
or state governmental officer or official, domestic or foreign, or
other person charged with similar public or quasi-public duties,
other than payments required or permitted by the laws of the United
States or any jurisdiction thereof. The Company maintains a system
of internal accounting controls sufficient to provide reasonable
assurances that transactions are executed in accordance with
management's general or specific authorizations, transactions are
recorded as necessary to permit preparation of financial statements
in conformity with generally accepted accounting principles and to
maintain accountability for assets, access to assets is permitted
only in accordance with management's general or specific
authorization, and the recorded accountability for assets is
compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(xxiii) Neither the Company nor any of its affiliates is
presently doing business with the government of Cuba or with any
person or affiliate located in Cuba.
(b) Any certificate signed by any officer of the Company and
delivered to you or to Underwriter's Counsel shall be deemed a
representation and warranty by the Company to the Underwriter as to the
matters covered thereby.
2. PURCHASE, SALE, DELIVERY AND PAYMENT.
(a) On the basis of the representations, warranties and
agreements herein contained, and subject to the terms and conditions
herein set forth, the Company agrees to sell to the Underwriter, and the
Underwriter agrees to purchase from the Company, the Firm Units at a
purchase price of $__________ per Unit. The Underwriter will purchase all
of the Firm Units if any are purchased.
The Firm Units will be delivered by the Company to the Underwriter
for the account of the Underwriter against payment of the purchase price
therefor by wire transfer or other same-day funds payable to the order of
the Company at the offices of Equity Securities Investments, Inc., 2820
IDS Center, 00 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000 (or at
such other place as may be agreed upon by the Underwriter and the
Company), at 9:00 a.m., Minneapolis, Minnesota time, on (i) the third
(3rd) full business day following the date hereof if the Registration
Statement is declared effective before 3:30 p.m., Minneapolis, Minnesota
time on the date hereof, (ii) the fourth (4th) full business day following
the date hereof if the Registration Statement is declared effective after
3:30 p.m., Minneapolis, Minnesota time on the date hereof, or (iii) such
other time and date as the Underwriter and the Company may determine, such
time and date of payment and delivery being herein called the "First
Closing Date."
-8-
Delivery of the Firm Units will be made by credit to "full fast" transfer
to the account or accounts at The Depository Trust Company designated by
the Underwriter.
(b) On the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions
herein set forth, the Company hereby grants an option to the Underwriter
to purchase an aggregate of up to 120,000 Option Units at the same
purchase price as the Firm Units, for use solely in covering any over-
allotments made by the Underwriter in the sale and distribution of the
Firm Units. The option granted hereunder may be exercised by the
Underwriter at any time (but not more than once), in whole or in part,
during the period of forty-five (45) days after the date of this Agreement
by giving written notice to the Company and the Company's counsel, which
notice shall set forth the aggregate number of Option Units as to which
the Underwriter is exercising the option, the names and denominations in
which the Option Units are to be registered, and the date and time, as
determined by the Underwriter, when the Option Units are to be delivered,
such time and date being herein referred to as the "Second Closing Date;"
provided, however, that the Second Closing Date shall not be earlier than
the First Closing Date nor earlier than the second business day after the
date on which the option shall have been exercised. No Option Units shall
be sold and delivered unless the Firm Units previously have been, or
simultaneously are, sold and delivered.
The Option Units will be delivered by the Company to the Underwriter
for the account of the Underwriter against payment of the purchase price
therefor by wire transfer or other same-day funds payable to the order of
the Company at the offices of Equity Securities Investments, Inc. 2820 IDS
Center, 00 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000 (or at such
other place as may be agreed upon by the Underwriter and the Company) at
9:00 a.m., Minneapolis, Minnesota time, on the Second Closing Date.
Delivery of the Option Units will be made by credit to "full fast"
transfer to the account or accounts at The Depository Trust Company
designated by the Underwriter.
3. COVENANTS OF THE COMPANY. The Company hereby covenants and agrees with
the Underwriter as follows:
(a) If the Registration Statement has not already been declared
effective by the SEC, the Company will use its best efforts to cause the
Registration Statement and any post-effective amendments thereto to become
effective as promptly as possible; the Company will notify the Underwriter
promptly of the time when the Registration Statement or any post-effective
amendment to the Registration Statement has become effective or any
supplement to the Prospectus has been filed and of any request by the SEC
for any amendment or supplement to the Registration Statement or
Prospectus or additional information; if the Company has elected to rely
on Rule 430A of the Rules and Regulations, the Company will file a
Prospectus containing the information omitted therefrom pursuant to such
Rule 430A with the SEC within the time period required by, and otherwise
in accordance with the provisions of, Rules 424(b) and 430A of the Rules
and Regulations; the Company will prepare and file with the SEC, promptly
upon your request, any amendments or supplements to the Registration
Statement or Prospectus that, in your opinion, may be necessary or
advisable in connection with the distribution of the Units by the
Underwriter; and the Company will not file any amendment or supplement to
the Registration Statement or Prospectus to which the Underwriter shall
reasonably object by notice to the Company after having been furnished a
copy a reasonable time prior to the filing.
(b) The Company will advise the Underwriter, promptly after it
shall receive notice or obtain knowledge thereof, of the issuance by the
SEC of any stop order suspending the effectiveness of the Registration
Statement, of the suspension of the qualification of the Units for
offering or sale in any jurisdiction, or of the initiation or threatening
of any proceeding for any such purpose; and the Company will promptly use
its best efforts to prevent the issuance of any stop order or to obtain
its withdrawal if such a stop order should be issued.
(c) Within the time during which a prospectus relating to the
Units is required to be delivered under the Securities Act, the Company
will comply as far as it is able with all requirements imposed upon it by
the Securities Act, as now and hereafter amended, and by the Rules and
Regulations,
-9-
as from time to time in force, so far as necessary to permit the
continuance of sales of or dealings in the Units as contemplated by the
provisions hereof and the Prospectus. If, during such period, any event
occurs as a result of which the Prospectus would include an untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances then
existing, not misleading, or if, during such period, it is necessary to
amend the Registration Statement or supplement the Prospectus to comply
with the Securities Act, the Company will promptly notify the Underwriter
and will amend the Registration Statement or supplement the Prospectus (at
the expense of the Company) so as to correct such statement or omission or
effect such compliance.
(d) The Company will use its best efforts to arrange for the
qualification of the Units for offering and sale under the securities laws
of such jurisdictions as the Underwriter may designate and to continue
such qualifications in effect for so long as may be required for purposes
of the distribution of the Units; provided, however, that in no event
shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action which
would subject it to the service of process in suits, other than those
arising out of the offering or sale of the Units, in any jurisdiction
where it is not now so subject. In each jurisdiction in which the Units
shall have been qualified as herein provided, the Company will make and
file such statements and reports in each year as are or may be reasonably
required by the laws of such jurisdiction.
(e) The Company will furnish to the Underwriter copies of the
Registration Statement (two of which will be signed and will include all
exhibits), each Preliminary Prospectus, the Prospectus, and all amendments
and supplements to such documents, in each case as soon as available and
in such quantities as the Underwriter may from time to time reasonably
request.
(f) For a period of five years from the Effective Date, the
Company will furnish directly to the Underwriter as soon as the same shall
be sent to its shareholders generally copies of all annual or interim
shareholder reports of the Company and will, for the same period, also
furnish the Underwriter with the following:
(i) One copy of any report, application or document
(other than exhibits, which, however, will be furnished on your
request) filed by the Company with the SEC, Nasdaq, the NASD or any
securities exchange;
(ii) As soon as the same shall be sent to shareholders
generally, copies of each communication sent to shareholders; and
(iii) From time to time, such other information concerning
the Company as the Underwriter may reasonably and specifically
request, provided that the Company shall not be required to furnish
any information pursuant hereto that is not furnished to its
shareholders or not otherwise made publicly available.
(g) The Company will, for a period of two (2) years from the
Effective Date, furnish directly to the Underwriter quarterly profit and
loss statements, reports of the Company's cash flow and statements of
application of the proceeds of the offering of the Units by the Company in
such reasonable detail as the Underwriter may request.
(h) The Company will make generally available to its security
holders as soon as practicable, but in any event not later than the
fifteen (15) months after the end of the Company's current fiscal quarter,
an earnings statement (which will be in reasonable detail but need not be
audited) complying with the provisions of Section 11(a) of the Securities
Act and Rule 158 of the Rules and Regulations and covering a twelve (12)-
month period beginning after the Effective Date of the Registration
Statement.
-10-
(i) The Company will prepare and file with the SEC any required
reports on Form SR in accordance with the Securities Act and the Rules and
Regulations.
(j) After completion of the offering of the Units, the Company
will make all filings required to maintain the quotation of the Common
Stock and the Redeemable Warrants on The Nasdaq SmallCap Market, The
Nasdaq National Market, or any national stock exchange.
(k) The Company will apply the net proceeds from the sale of the
Units substantially in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(l) For a period of six months after the Second Closing Date, the
Company will not, without the prior written consent of the Underwriter,
directly or indirectly, effect the Disposition of any Securities
including, without limitation, any Securities that are convertible into or
exchangeable or exercisable for Common Stock, and shall not accelerate the
exercisability of any Securities that are convertible into or exchangeable
or exercisable for Common Stock, except for the sale of Units by the
Company pursuant to this Agreement, the exercise of options granted under
the Company's Stock Plan and other options outstanding on the date of this
Agreement, and the grant of options under the Plan in the ordinary course.
(m) For a period of six months from the Effective Date, the
Company will not, without the prior written consent of the Underwriter,
file a registration statement with the SEC or any state securities or
"Blue Sky" law authority relating to any of the Company's Securities,
whether such shares are to be offered and sold by the Company or by its
shareholders, except for a Registration Statement on Form S-8 (or any
successor or replacement form of registration statement) relating only to
shares of Common Stock subject to options granted under the Stock Plan;
provided, however, that the Company may file a registration statement at
any time beginning ninety (90) days after the Effective Date if the
holders of certain demand registration rights granted by the Company to
shareholders who purchased shares of Common Stock from the Company in an
unregistered private placement completed on January 15, 1997 properly
exercise such demand registration rights. Notwithstanding the foregoing,
all of the shares of Common Stock owned by such holders shall remain
subject to either the Six-Month Lock-up Agreement or the Two-Year Lock-up
Agreement executed by such holders.
(n) The Company will not take, and will use its best efforts to
cause each of its officers and directors not to take, directly or
indirectly, any action designed to or which might reasonably be expected
to cause or result in the stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the Units.
(o) The Company will inform the Florida Department of Banking and
Finance at any time prior to the consummation of the distribution of the
Units by the Underwriter if it commences engaging in business with the
government of Cuba or with any person or affiliate located in Cuba. Such
information shall be provided within ninety (90) days after the
commencement thereof or after a change occurs with respect to previously
reported information.
(p) For a period of three (3) years from the Effective Date, the
Underwriter shall have the right, but not the obligation, to act as (i)
managing underwriter or sole or lead selling agent in any public or
private offering of equity or debt securities by the Company, and (ii) the
Company's investment banker or financial advisor in connection with any
strategic partnership, sale of the Company or its assets, merger,
acquisition of stock or assets of another entity, or any similar
transaction. If the Company intends to consider or enter into any of the
transactions described in this Section 3(p), it will notify the
Underwriter in writing, which notification shall contain a description of
such transaction in reasonable detail.
(q) For a period of three years from the Effective Date, and if
the Underwriter so requests, the Company will use its best efforts to
secure the election to the Company's Board of Directors of a
representative selected by the Underwriter.
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(r) The Company will cause the Common Stock, the Redeemable
Warrants and the Units to be registered under the Exchange Act, which
registrations shall be effective concurrently with the effectiveness of
the Registration Statement.
4. EXPENSES.
(a) The Company agrees with the Underwriter that:
(i) Whether or not this Agreement becomes effective or is
terminated or cancelled or the sale of the Units hereunder is
consummated, and regardless of the reason for or cause of any such
termination, cancellation, or failure to consummate, the Company
will pay or cause to be paid (A) all expenses (including any
transfer taxes) incurred in connection with the delivery to the
Underwriter of the Units, (B) all expenses and fees (including,
without limitation, fees and expenses of the Company's accountants
and of counsel to the Company, excluding, however, fees of
Underwriter's Counsel) in connection with the preparation, printing,
filing, delivery, and shipping of the Registration Statement
(including the financial statements therein and all amendments,
schedules, and exhibits thereto), each Preliminary Prospectus, the
Prospectus, and any amendment thereof or supplement thereto, (C) all
fees and reasonable expenses, including all reasonable counsel fees
of Underwriter's Counsel, incurred in connection with the
qualification of the Units for offering and sale by the Underwriter
or by dealers under the securities or Blue Sky laws of the states
and other jurisdictions which the Underwriter may designate in
accordance with Section 3(d) hereof, (D) all costs and expenses
incident to qualification with The Nasdaq SmallCap Market, (E)
postage and express charges and other expenses in connection with
delivery to the Underwriter of the Preliminary Prospectus and
Prospectus, and (F) all other costs and expenses incident to the
performance of the Company's obligations hereunder that are not
otherwise specifically described herein. In addition to and not in
lieu of the foregoing, the Company shall pay to the Underwriter on
each Closing Date for out-of-pocket expenses (including fees of
Underwriter's Counsel other than fees and expenses incurred in
connection with Blue Sky or state securities qualifications) a
nonaccountable expense allowance equal to two percent (2.0%) of the
aggregate Price to Public for all the Units sold to the Underwriter
on each Closing Date, including Units sold pursuant to orders
received through the Company. If the Underwriter withdraws from the
sale of the Units as herein proposed (A) for any reason within the
control of the Company such as, for example, the sale of the Units
as herein proposed is abandoned by the Company; (B) based upon the
fact that there has been a material adverse change in the financial
or other affairs of the Company since the date of the last financial
statements of the Company provided to the Underwriter; (C) because
any of the Company's representations or warranties in this Agreement
prove to be untrue; (D) because there shall have occurred any
general suspension of trading in securities on the New York Stock
Exchange or any limitation on prices for such trading or because any
new restrictions on the distribution of securities shall have been
established by the New York Stock Exchange or by the SEC or by any
federal or state agency, all to such a degree as, in the
Underwriter's judgment, would restrict materially a free market for
the Units, shares of Common Stock included in the Units, or the
Redeemable Warrants; (E) because there shall have occurred such a
materiel change in general economic, political or financial
conditions, or because the effect of international conditions on the
financial markets in the United States become such as, in the
Underwriter's judgment, makes it inadvisable to proceed with the
sale of the Units; (F) because the Company's financial condition or
its business prospects do not fulfill the Underwriter's expectations
based on representations made by the Company prior to March 3, 1997;
(G) because the offering of the Units lacks public interest prior to
the Effective Date; or (H) because adverse market or other
conditions make the offering of the Units not feasible in the
Underwriter's judgment, the Company will pay to the Underwriter the
amount of all actual accountable, out-of-pocket expenses (including
fees and disbursements of Underwriter's Counsel) incurred by the
Underwriter in connection with the contemplated purchase, offer and
sale of the Units, including,
-12-
without limitation, expenses incurred in its investigation,
preparation to market, and marketing of the Units, and in
contemplation of performing and in performance of its obligations
hereunder, up to a maximum of $35,000.00. All reimbursements
pursuant to this Section 4(a)(i) shall occur within ten (10) days
after the Underwriter delivers to the Company a written itemization
of such expenses. The provisions of this Section 4(a)(i) are
intended to relieve the Underwriter from the payment of the expenses
and costs which the Company hereby agrees to pay and shall not
impair the obligations of the Company hereunder to the Underwriter.
(ii) In addition to its other obligations under Sections
7(a) and 8 hereof, the Company agrees that, as an interim measure
during the pendency of any claim, action, investigation, inquiry or
other proceeding described in Section 7(a), it will reimburse the
Underwriter on a monthly basis for all reasonable legal or other
expenses incurred in connection with investigating or defending any
such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the
propriety and enforceability of the Company's obligation to
reimburse the Underwriter for such expenses and the possibility that
such payments might later be held to have been improper by a court
of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the
Underwriter shall promptly return such payment to the Company
together with interest, compounded daily, determined on the basis of
the prime rate (or other commercial lending rate for borrowers of
the highest credit standing) listed from time to time in The Wall
Street Journal which represents the base rate on corporate loans
posted by a substantial majority of the nation's thirty (30) largest
banks (the "Prime Rate"). Any such interim reimbursement payments
which are not made to the Underwriter within thirty (30) days of a
request for reimbursement shall bear interest at the Prime Rate from
the date of such request.
(b) It is agreed that any controversy rising out of the operation
of the interim reimbursement arrangements set forth in Section 4(a)(ii)
hereof, including the amounts of any requested reimbursement payments and
the method of determining such amounts, shall be settled by arbitration
conducted pursuant to the Code of Arbitration Procedure of the National
Association of Securities Dealers, Inc. ("NASD"). Any such arbitration
must be commenced by service of a written demand for arbitration or a
written notice of intention to arbitrate, therein electing the arbitration
tribunal. If the party demanding arbitration does not make such
designation of an arbitration tribunal in such demand or notice, then the
party responding to said demand or notice is authorized to do so. Any
such arbitration will be limited to the operation of the interim
reimbursement provisions contained in Section 4(a)(ii) hereof and will not
resolve the ultimate propriety or enforceability of the obligation to
indemnify for expenses which is created by the provisions of Sections 7(a)
and 7(b) hereof or the obligation to contribute to expenses which is
created by the provisions of Section 8(a) hereof.
5. CONDITIONS OF THE UNDERWRITER'S OBLIGATIONS. The obligation of the
Underwriter to purchase and pay for the Units as provided herein shall be
subject to the accuracy of the representations and warranties of the Company, in
the case of the Firm Units, as of the date hereof and the First Closing Date (as
if made on and as of the First Closing Date), and in the case of the Option
Units, as of the date hereof and the Second Closing Date (as if made on and as
of the Second Closing Date); to the performance by the Company of its
obligations hereunder; and to the satisfaction of the following additional
conditions on or before the First Closing Date in the case of the Firm Units and
on or before the Second Closing Date in the case of the Option Units:
(a) The Registration Statement shall have become effective not
later than 4:00 p.m. Minneapolis, Minnesota time on the date of this
Agreement, or such later date or time as shall be consented to in writing
by you (the "Effective Date"); and no stop order suspending the
effectiveness thereof shall have been issued and no proceedings for that
purpose shall have been initiated or, to the knowledge of the Company, or
the Underwriter, threatened by the SEC or any state securities commission
or similar regulatory body; and any request of the SEC for additional
information (to be included in the Registration Statement or the
Prospectus or otherwise) shall have been complied with to the satisfaction
of the Underwriter and Underwriter's Counsel.
-13-
(b) The Underwriter shall not have advised the Company that the
Registration Statement or Prospectus, or any amendment thereof or
supplement thereto, contains any untrue statement of a fact which is
material or omits to state a fact which is material and is required to be
stated therein or is necessary to make the statements contained therein,
in light of the circumstances under which they were made, not misleading;
provided, however, that this Section 5(b) shall not apply to statements
in, or omissions from, the Registration Statement or Prospectus, or any
amendment thereof or supplement thereto, which are based upon and conform
to written information furnished to the Company by the Underwriter
specifically for use in the preparation of the Registration Statement or
the Prospectus, or any such amendment or supplement.
(c) Subsequent to the Effective Date and prior to each Closing
Date, there shall not have occurred any change, or any development
involving a prospective change, which materially and adversely affects the
Company's condition (financial or otherwise), earnings, operations,
properties, business or business prospects from that set forth in the
Registration Statement or Prospectus, and which, in the Underwriter's sole
judgment, is material and adverse and that makes it, in the Underwriter's
sole judgment, impracticable or inadvisable to proceed with the public
offering of the Units as contemplated by the Prospectus and this
Agreement.
(d) All corporate proceedings and other legal matters in
connection with this Agreement, the form of Registration Statement and the
Prospectus, and the registration, authorization, issue, sale and delivery
of the Units shall have been reasonably satisfactory to Underwriter's
Counsel, and Underwriter's Counsel shall have been furnished with such
papers and information as it may reasonably have requested to enable it to
pass upon the matters referred to in this Section.
(e) On each Closing Date, the Underwriter shall have received the
opinion of Robins, Kaplan, Xxxxxx & Xxxxxx L.L.P., counsel for the
Company, dated as of such Closing Date, satisfactory in form and substance
to the Underwriter and Underwriter's Counsel, to the effect that:
(i) Each of the Company and the Subsidiaries has been
duly incorporated and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation and
has the corporate power and authority to own, lease and operate its
properties and to conduct its business as currently being carried on
and as described in the Registration Statement and Prospectus.
(ii) Each of the Company and the Subsidiaries is duly
qualified to do business as a foreign corporation and is in good
standing in each jurisdiction, if any, in which the ownership or
leasing of its properties or the conduct of its business requires
such qualification, except where the failure to be so qualified or
be in good standing would not have a material adverse effect on the
condition (financial or otherwise), earnings, operations or business
of the Company and the Subsidiaries considered as one enterprise.
To the best of such counsel's knowledge, the Company does not own or
control, directly or indirectly, any corporation, association or
other entity other than the Subsidiaries.
(iii) The capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus under
the caption "Description of Securities." The issued and outstanding
Units of the Company have been duly and validly issued and are fully
paid and non-assessable, and the holders thereof are not subject to
any personal liability solely by reason of being such holders.
(iv) The Units to be issued by the Company pursuant to the
terms of this Agreement have been duly authorized and, upon issuance
and delivery against payment therefor in accordance with the terms
hereof, will be duly and validly issued and fully paid and non-
assessable, and the holders thereof will not be subject to personal
liability solely by reason of
-14-
being such holders. Except as otherwise stated in the Registration
Statement and Prospectus, there are no preemptive rights or other
rights to subscribe for or to purchase, or any restriction upon the
voting or transfer of, any shares of capital stock pursuant to the
Company's articles of incorporation, bylaws or any agreement or
other instrument known to such counsel to which the Company is a
party or by which the Company is bound. To the best of such
counsel's knowledge, except as set forth in the Prospectus, neither
the filing of the Registration Statement nor the offering or sale of
the Units as contemplated by this Agreement gives rise to any rights
for or relating to the registration of any shares of capital stock
or other securities of the Company and no such rights exist, other
than those rights described in Section 3(m) hereof. To the best of
such counsel's knowledge, except as described in the Registration
Statement and Prospectus, there are no options, warrants,
agreements, contracts or rights in existence to purchase or acquire
from the Company any shares of capital stock of the Company.
(v) The Redeemable Warrants included in the Units to be
sold by the Company have been duly and validly authorized and, when
authenticated by the Warrant Agent and issued, delivered and sold in
accordance with this Agreement and the Warrant Agreement dated as of
the date hereof between the Company and the Warrant Agent, will have
been duly and validly executed, authenticated, issued and delivered
and will constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms,
except as enforceability may be limited by the application of
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the rights of creditors generally and by judicial
limitations on the right of specific performance. A sufficient
number of shares of Common Stock of the Company has been reserved
for issuance by the Company upon exercise of the Redeemable
Warrants.
(vi) The Underwriter's Warrants and the Common Stock
and Redeemable Warrants included in the Warrant Units have been
duly authorized. The Underwriter's Warrants, when issued and
delivered to the Underwriter, will constitute valid and binding
obligations of the Company in accordance with their terms,
except as enforceability may be limited by the application of
bankruptcy, insolvency, reorganization, moratorium, or other
similar laws affecting the rights of creditors generally and by
judicial limitations on the right of specific performance. The
Common Stock included in the Warrant Units, when issued in
accordance with the terms of this Agreement and pursuant to the
Underwriter's Warrants, will be fully paid and non-assessable
and subject to no preemptive rights or similar rights on the
part of any person or entity. The Redeemable Warrants included
in the Warrant Units, when authenticated by the Warrant Agent
and issued, delivered and sold in accordance with this
Agreement, the Warrant Agreement between the Company and the
Warrant Agent, and the Underwriter's Warrants, will have been
duly and validly executed, authenticated, issued and delivered
and will constitute valid and binding obligations of the
Company, enforceable against the Company in accordance with
their terms, except as enforceability may be limited by the
application of bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the rights of
creditors generally and by judicial limitations of the right of
specific performance. The Common Stock issuable upon exercise of
the Redeemable Warrants included in the Warrant Units has been
duly authorized and, when issued and delivered upon such
exercise, will be validly issued, fully paid and non-assessable
and, to such counsel's knowledge, subject to no preemptive
rights or similar rights on the part of any person or entity. A
sufficient number of shares of Common Stock of the Company has
been reserved for issuance by the Company upon exercise of the
Underwriter's Warrants and upon exercise of the Redeemable
Warrants included in the Warrant Units.
(vii) The Company has the requisite corporate power and
authority to enter into this Agreement and to issue, sell and
deliver to the Underwriter the Units to be issued and sold by it
hereunder. This Agreement has been duly authorized by all necessary
corporate action on the part of the Company and has been duly
executed and delivered by the Company and, assuming due
authorization, execution and delivery by the Underwriter, is a
valid, legal and binding agreement of the Company, enforceable in
accordance with its terms, except insofar as indemnification and
contribution provisions may be limited by applicable law or the
public policies underlying such law and except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or similar laws relating to or affecting
creditors' rights generally or by general equitable principles.
(viii) The Registration Statement has become effective under
the Securities Act and, to the best of such counsel's knowledge, no
stop order suspending the effectiveness of the Registration
Statement has been issued and no proceeding for that purpose has
been instituted or is pending or threatened under the Securities
Act.
(ix) The Registration Statement and the Prospectus, and
each amendment thereof or supplement thereto (other than the
financial statements, including the notes thereto and the
-15-
supporting schedules, and other financial, numerical, statistical
and accounting data derived therefrom, as to which such counsel need
express no opinion), comply as to form in all material respects with
the requirements of the Securities Act and the Rules and
Regulations.
(x) The forms of certificates evidencing the Common Stock
and the Redeemable Warrants and filed as exhibits to the
Registration Statement comply with Minnesota law.
(xi) The description in the Registration Statement and the
Prospectus of the Company's articles of incorporation and bylaws and
of statutes, legal and governmental proceedings, contracts and other
documents are accurate in all material respects and fairly present
the information required to be presented by the Securities Act and
the applicable Rules and Regulations; and such counsel does not know
of any statutes or legal or governmental proceedings required to be
described in the Prospectus that are not described as required, or
of any agreements, contracts, leases or documents of a character
required to be described or referred to in the Registration
Statement or Prospectus or to be filed as an exhibit to the
Registration Statement which are not described or referred to
therein or filed as required.
(xii) The execution, delivery and performance of this
Agreement and the consummation of the transactions herein
contemplated (other than performance of the Company's
indemnification and contribution obligations hereunder, concerning
which no opinion need be expressed) do not result in any violation
of the Company's articles of incorporation or bylaws or result in a
breach or violation of any of the terms and provisions of, or
constitute a default under, any bond, debenture, note or other
evidence of indebtedness, or any material lease, contract,
indenture, mortgage, deed of trust, loan agreement, joint venture or
other material agreement or instrument known to such counsel to
which the Company is a party or by which its properties are bound,
or any applicable statute, rule or regulation known to such counsel
or, to the best of such counsel's knowledge, any order, writ or
decree of any court, government or governmental agency or body
having jurisdiction over the Company or the Subsidiaries or other
any of their material properties or operations.
(xiii) No consent, approval, authorization or order of, or
filing with, or qualification with, any court, government or
governmental agency or body is necessary in connection with the
execution, delivery and performance of this Agreement or for the
execution, delivery and performance of this Agreement or for the
consummation of the transactions herein contemplated, except such as
have been obtained under the Securities Act or such as may be
required under state or other securities or Blue Sky laws in
connection with the purchase and the distribution of the Units by
the Underwriter.
(xiv) To the best of such counsel's knowledge, there are no
legal or governmental proceedings pending or threatened against the
Company or any of the Subsidiaries of a character required to be
disclosed in the Registration Statement or the Prospectus by the
Securities Act or the Rules and Regulations, other than those
described therein.
(xv) To the best of such counsel's knowledge, neither the
Company nor any of the Subsidiaries is presently (A) in violation of
its respective articles of incorporation or bylaws, (B) in material
breach or violation of any applicable statute, rule or regulation
known to such counsel or any order, writ or decree of any court or
governmental agency or body, or (C) in breach of or otherwise in
default in the performance of any material obligation, agreement or
condition contained in any bond, debenture, note, loan agreement or
any other material contract, lease or other instrument to which the
Company is subject or by which it may be bound, or to which any of
the material assets or property of the Company is subject.
(xvi) To the best of such counsel's knowledge, the Company
holds, and is operating in compliance in all material respects with,
all franchises, grants, authorizations, licenses,
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permits, easements, consents, certificates and orders of any
government or self-regulatory body required for the conduct of its
business, and all such franchises, grants, authorizations, licenses,
permits, easements, consents, certifications and orders are valid
and in full force and effect.
(xvii) To the best of such counsel's knowledge, after due
inquiry, the Company has not received any notice of, and has no
knowledge of, any infringement of or conflict with the asserted
rights of others with respect to any patent, patent rights,
inventions, trade secrets, know-how, technology, trade marks,
service marks, trade names, or copyrights which, singularly or in
the aggregate, if the subject of an unfavorable decision, ruling or
finding, would have a material adverse effect on the condition
(financial or otherwise), earnings, operations, business or business
prospects of the Company.
(xviii) To the best of such counsel's knowledge, after due
inquiry, the Company owns, or possesses adequate rights to use, all
patents, patent rights, inventions, trade secrets, know-how,
technology, service marks, trade names, copyrights, trade marks and
proprietary rights or information which are necessary for the
conduct of its present or intended business as described in the
Registration Statement or Prospectus.
(xix) On the basis of information obtained as a result of
discussions and meetings with officers and other Underwriter of the
Company, discussions with Underwriter of the independent public
accountants for the Company in connection with the preparation of
the Registration Statement and the Prospectus, and the examination
of other information and documents requested by such counsel,
nothing has come to such counsel's attention that has caused them to
believe that the Registration Statement and any amendment thereof,
at the time it became effective and at all times subsequent thereto
up to and on that Closing Date, contained any untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein
not misleading, or that the Prospectus, and any amendment or
supplement thereto, at the first date of its issuance and up to and
at all times subsequent thereto up to and on that Closing Date,
contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Such counsel may
further state that in making the foregoing comments, such counsel
does not intend them to include or cover the financial statements
and notes thereto and related schedules and other financial,
numerical, statistical and accounting data contained or omitted from
the Registration Statement and any amendment or supplement thereto
and the Prospectus.
Counsel rendering the foregoing opinion may rely as to
questions of law not involving the laws of the United States or the State
of Minnesota upon opinions of local counsel, and, as to questions of fact,
upon representations or certificates of officers of the Company or its
Subsidiaries and of government officials, in which case their opinion is
to state the extent of such reliance. Copies of any opinion,
representation or certificate so relied upon shall be delivered to the
Underwriter and to Underwriter's Counsel.
(f) The Underwriter shall have received from Winthrop &
Weinstine, P.A., Underwriter's Counsel, such opinion or opinions as the
Underwriter may reasonably require, dated as of the First Closing Date and
the Second Closing Date, which are satisfactory in form and substance to
the Underwriter, with respect to the sufficiency of corporate proceedings
and other legal matters relating to this Agreement and the transactions
contemplated hereby, and the Company shall have furnished to Underwriter's
Counsel such documents as it may have requested for the purpose of
enabling it to pass upon such matters. In connection with such opinion,
as to matters of fact relevant to conclusions of law, Underwriter's
Counsel may rely, to the extent that it deems proper, upon representations
or certificates of public officials and of responsible officers of the
Company.
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(g) At the time of execution of this Agreement, the Underwriter
shall have received from Xxxxxxxxx Dokken Kanter Xxxxxxx & Xxxxxx, Ltd.
a letter dated the date of such execution, in form and substance
satisfactory to the Underwriter, to the effect that they are independent
accountants with respect to the Company within the meaning of the
Securities Act and the applicable published instructions, and the Rules
and Regulations thereunder, and further stating in effect that:
(i) In their opinion, the audited financial statements
included in the Registration Statement and Prospectus covered by
their report included therein comply as to form in all material
respects with the applicable requirements of the Securities Act, the
published instructions and the Rule and Regulations.
(ii) On the basis of (A) a reading of the minutes of the
shareholders' and directors' meetings of the Company since January
1, 1994, (B) inquiries of certain officials of the Company
responsible for financial and accounting matters, (C) a reading of
the Company's monthly operating statements for the months beginning
on January 1, 1994, and (D) other specified procedures and inquiries
(but not an audit in accordance with generally accepted accounting
principles), nothing came to their attention causing them to believe
that:
(1) the unaudited consolidated financial statements
of the Company and its Subsidiaries contained in the
Prospectus and any amendment thereof or supplement thereto do
not comply as to form, in all material respects, with the
applicable accounting requirements of the Securities Act and
the published Rules and Regulations or were not prepared in
conformity with generally accepted accounting principles and
practices applied on a basis consistent in all material
respects with those followed in the preparation of the
audited consolidated financial statements of the Company and
its Subsidiaries included therein; or
(2) the unaudited consolidated amounts of revenues,
income before provision for income taxes, net income and
ratio of earnings to fixed charges of the Company and its
Subsidiaries, if any, contained in the Prospectus, or any
amendment thereof or supplement thereto, were not derived
from consolidated financial statements prepared in conformity
with generally accepted accounting principles and practices
applied on a basis consistent in all material respects with
those followed in the preparation of the audited consolidated
financial statements of the Company and its Subsidiaries
included therein; or
(3) the unaudited pro forma consolidated financial
statements of the Company and its Subsidiaries and recently-
acquired companies, if any, contained in the Prospectus or
any amendment thereof or supplement thereto, were not
properly compiled in accordance with generally accepted
accounting principles or did not provide for all adjustments
necessary for a fair presentation of the information
purported to be shown thereby; or
(4) with respect to the period subsequent to March
31, 1997, there were, at a specified date, not more than five
(5) business days prior to the date of the letter, any
changes or any material increases or decreases in capital
stock, long-term or short-term debt or shareholders' equity,
decreases in net assets, net current assets, or net worth or
any material decrease, as compared with the corresponding
period of the prior year, in revenues or net income of the
Company as compared with the amounts shown in the
consolidated balance sheet included in the Registration
Statement, except as disclosed or referred to in the
Prospectus and Registration Statement.
(iii) Certain information set forth on the cover of the
Prospectus and in the Prospectus under the headings "Prospectus
Summary" (including the subheading "Summary
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Combined Financial Data"), "Risk Factors," "Use of Proceeds,"
"Dividend Policy," "Capitalization," "Dilution," "Selected Combined
Financial Data," "Recent Acquisitions," "Management's Discussion and
Analysis of Financial Condition and Results of Operations,"
"Business," "Management," "Certain Transactions," "Principal
Shareholders," "Securities Eligible for Future Sale," and
"Description of Securities" and that are expressed in dollars (or
percentages derived from dollar amounts) or numbers have been
compared to accounting records of the Company which were subject to
the internal accounting controls of the Company and are in agreement
with such records or computations made therefrom, excluding any
questions of legal interpretation.
(h) The Underwriter shall have received from Xxxxxxxxx Dokken
Kanter Xxxxxxx & Xxxxxx, Ltd. a letter dated as of each Closing Date to
the effect that such accountants reaffirm, as of such Closing Date, and as
though made on such Closing Date, the statements made in the letter
furnished by such accountants pursuant to Section 5(g), except that the
specified date referred to in such letter will be a date not more than
five (5) business days prior to such Closing Date.
(i) The Underwriter shall have received from the Company a
certificate, dated as of the First Closing Date and the Second Closing
Date, of the principal executive officer and the principal financial or
accounting officer of the Company, to the effect that:
(i) The representations and warranties of the Company in
this Agreement are true and correct as if made on and as of such
Closing Date, and the Company has complied with all the agreements
and satisfied all the conditions on its part to be performed or
satisfied at, or prior to, such Closing Date;
(ii) No stop order or other order suspending the
effectiveness of the Registration Statement or any amendment thereof
or the qualification of the Units for offering or sale have been
issued, and no proceedings for that purpose have been instituted or,
to the best of their knowledge, are contemplated by the SEC or any
state or regulatory body; and
(iii) The signers of said certificate have carefully
examined the Registration Statement and the Prospectus and any
amendments thereof or supplements thereto, and (A) such documents
contain all statements and information required to be included
therein; the Registration Statement, or any amendment thereof, does
not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make
the statements therein not misleading; and the Prospectus, as
amended or supplemented, does not include any untrue statement of
material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading; (B) since the Effective Date of the
Registration Statement, there has occurred no event required to be
set forth in an amended or supplemented Prospectus which has not
been so set forth; (C) subsequent to the respective dates as of
which information is given in the Registration Statement and the
Prospectus, the Company has not incurred any material liabilities or
material obligations, direct or contingent, or entered into any
material transactions, not in the ordinary course of business
consistent with past practice, or declared or paid any dividends or
made any distribution of any kind with respect to its capital stock,
and except as disclosed in the Prospectus, there has not been any
change in the capital stock (other than a change in the number of
outstanding shares of Common Stock due to the offering of the Units
or the issuance of shares upon the exercise of options outstanding
as of the Effective Date or options granted pursuant to the Stock
Plan described to in the Registration Statement), or any material
increase in the short-term debt or long-term debt, or in the
issuance of options, warrants, convertible securities or other
rights to purchase the capital stock, of the Company, or any
material adverse change or any development involving a prospective
material adverse change (whether or not arising in the ordinary
course of business) in the general affairs, condition (financial or
otherwise), business, key personnel, property, prospects, net worth
or results of operations of the Company, and (D)
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except as stated in the Registration Statement and Prospectus, there
is not pending or, to their knowledge, threatened or contemplated,
any action, suit or proceeding to which the Company is a party
before or by any court or governmental agency, authority or body, or
any arbitrator, which might result in any material adverse change of
the condition, (financial or otherwise), business, prospects, or
results of operations of the Company.
(j) On each Closing Date, there shall have been furnished to you
a certificate of Secretary of the Company, dated as of such Closing Date,
with the documents listed herein attached, and to the effect and
certifying as follows:
(i) Attached thereto are true and correct copies of the
articles of incorporation of the Company, as amended to the date of
the certificate, and stating that there have been no changes or
amendments to the attached articles of incorporation of the Company,
and no resolutions have been adopted by the Board of Directors or
shareholders of the Company relating to (A) the amendment of said
articles of incorporation, (B) the merger, consolidation or
dissolution of the Company, or (C) the sale of all or substantially
all of the assets or business of the Company, and that the Company
is in good standing in the State of Minnesota and has paid all of
its corporate franchise taxes due as of the date of such
certificate.
(ii) Attached thereto is a true and correct copy of the
bylaws of the Company as in effect as of the date of such
certificate and no resolutions have been adopted by the Board of
Directors or shareholders of the Company relating to changes or
amendments to the attached Bylaws.
(iii) Attached thereto are true and correct copies of the
resolutions of the Board of Directors of the Company relating to the
preparation and signing of the Registration Statement and this
Agreement, the issuance and sale of the Units and other related
matters, and such resolutions have not been amended, modified or
rescinded and are in full force and effect as of the date of such
certificate and are the only resolutions adopted by the Board of
Directors of the Company with respect to the offering contemplated
by the Registration Statement.
(iv) Attached thereto are true and correct copies of all
material correspondence with respect to the Registration Statement
and Prospectus and related matters between the Company, its counsel,
and/or Xxxxxxxxx Xxxxxx Xxxxxx Xxxxxxx & Xxxxxx, Ltd., on the one
hand, and the SEC, on the other.
(v) This Agreement, as executed and delivered by the
Company, is in the form presented to and approved by officers
authorized to do so by the Board of Directors of the Company.
(vi) Attached thereto are specimens of the certificates
for the Common Stock and the Redeemable Warrants in the forms
authorized and approved for use by the Board of Directors of the
Company.
(vii) The persons who have signed the Registration
Statement and all amendments thereto were duly elected at the
respective times of such signing and duly acting as officers and
directors of the Company or as an attorney-in-fact therefor, as set
forth in the Registration Statement.
(k) The Underwriter shall have received from each of the
executive officers and directors of the Company and each beneficial owner
of five percent (5%) or more of the Common Stock to be outstanding after
the sale of the Firm Units (calculated in accordance with Rule 13d-3 under
the Exchange Act) the Two-Year Lock-up Agreement in the form of APPENDIX
A-1 hereto whereby each such person agrees that during the Two-Year Lock-
up Period such person will not, without the Underwriter's prior
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written consent, effect the Disposition of any Securities except as
permitted by the Two-Year Lock-up Agreement, and the Underwriter shall
have received from each other shareholder of the Company the Six-Month
Lock-up Agreement in the form of APPENDIX A-2 hereto whereby each such
person agrees that during the Six-Month Lock-up Period such person will
not, without the Underwriter's prior written consent, effect the
Disposition of any Securities other than as permitted by the Six-Month
Lock-up Agreement.
(l) The Common Stock of the Company shall be included and quoted
on The Nasdaq SmallCap Market.
(m) Winthrop & Weinstine, P.A. shall deliver to the Underwriter a
Blue Sky Memorandum reasonably satisfactory to the Underwriter confirming
that all requisite actions for the offer and sale of the Units in all
jurisdictions requested by the Underwriter have been taken.
(n) The Company shall have furnished to the Underwriter and to
Underwriter's Counsel such additional certificates, documents and evidence
as the Underwriter shall reasonably request.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
to the Underwriter and Underwriter's Counsel. All statements contained in any
certificate, letter or other document delivered pursuant hereto by, or on behalf
of, the Company shall be deemed to constitute representations and warranties of
the Company.
The Underwriter may waive in writing the performance of any one or more of
the conditions specified in this Section 5 or extend the time for their
performance.
If any of the conditions specified in this Section 5 shall not have been
fulfilled when and as required by this Agreement to be fulfilled and if the
fulfillment of said condition has not been waived by the Underwriter, this
Agreement and all obligations of the Underwriter hereunder may be canceled at,
or at any time prior to, each Closing Date by the Underwriter. Any such
cancellation shall be without liability of the Underwriter to the Company and
shall not relieve the Company of its obligations under Section 4(a) hereof.
Notice of such cancellation shall be given to the Company at the address
specified in Section 12 hereof in writing, or by telegraph or telephone
confirmed in writing.
6. UNDERWRITER'S WARRANTS. In consideration of the agreement of the
Underwriter to act as Underwriter, and upon payment of a purchase price of
$100.00, on the First Closing Date the Company will issue and deliver to the
Underwriter, for its account, the Underwriter's Warrants to purchase the
Warrant Units in an amount equal to ten percent (10%) of the number of Firm
Units purchased by the Underwriter in the offering. The Underwriter's
Warrants shall be issued on the First Closing Date and shall be dated as of
the Effective Date. The Underwriter's Warrants shall be exercisable
commencing one year after the Effective Date and for a period ending five years
after the Effective Date at a price equal to 120% of the Per Unit Price to
Public set forth on the cover page of the Prospectus. As to other terms, the
Underwriter's Warrants shall be in form and substance substantially the same
as APPENDIX B hereto.
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7. INDEMNIFICATION.
(a) The Company hereby agrees to indemnify and hold harmless the
Underwriter, and each person, if any, who controls the Underwriter within
the meaning of Section 15 of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which the Underwriter
or each such controlling person may become subject under the Securities
Act, the Exchange Act, the common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of, or are based upon, (i) any breach of any representation,
warranty, agreement or covenant of the Company contained in this
Agreement, (ii) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any amendment
thereof or supplement thereto, or the omission or alleged omission to
state in the Registration Statement or any amendment thereof or supplement
thereto a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading; (iii) any
untrue statement or alleged untrue statement of a material fact contained
in any Preliminary Prospectus, if used prior to the Effective Date of the
Registration Statement, or in the Prospectus (as amended or as
supplemented, if the Company shall have filed with the SEC any amendment
thereof or supplement thereto), or the omission or alleged omission to
state therein a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; or (iv) any untrue statement or alleged untrue statement of a
material fact contained in any application or other statement executed by
the Company or based upon written information furnished by the Company
filed in any jurisdiction in order to qualify the Units under, or exempt
the Units or the sale thereof from qualification under, the securities
laws of such jurisdiction, or the omission or alleged omission to state in
such application or statement a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company
will reimburse each Underwriter and each such controlling person for any
legal or other expenses reasonably incurred by such Underwriter or
controlling person in connection with investigating or defending against
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 reliance upon and in conformity with written information
relating to the Underwriter furnished to the Company by the Underwriter
specifically for use in the preparation of the Registration Statement or
any such post-effective amendment thereof, any such Preliminary
Prospectus, or the Prospectus, or any such amendment thereof or supplement
thereto, or in any application or other statement executed by the Company
or the Underwriter filed in any jurisdiction in order to qualify the Units
under, or exempt the Units or the sale thereof from qualification under,
the securities laws of such jurisdiction; and provided further that the
foregoing indemnity agreement is subject to the condition that, insofar as
it relates to any untrue statement, alleged untrue statement, omission or
alleged omission made in any Preliminary Prospectus but eliminated or
remedied in the Prospectus, such indemnity agreement shall not inure to
the benefit of the Underwriter (or to the benefit of any person who
controls the Underwriter) if the person asserting any loss, claim, damage
or liability purchased the Units from the Underwriter if a copy of the
Prospectus was not sent or given to such person with, or prior to, the
written confirmation of the sale of such Units to such person. This
indemnity agreement is in addition to any liability which the Company may
otherwise have.
(b) The Underwriter agrees to indemnify and hold harmless the
Company, each of its directors, each of its officers who has signed the
Registration Statement, and each person who controls the Company within
the meaning of Section 15 of the Securities Act against any losses,
claims, damages or liabilities to which the Company or any such director,
officer or controlling person may become subject under the Securities Act,
the Exchange Act, the common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out
of, or are based upon, (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or
any amendment thereof or supplement thereto, or the omission or alleged
omission to state in the Registration Statement or any amendment thereof
or supplement thereto, a material fact required to be stated therein or
necessary to make the statements therein not misleading; (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, if used prior to the Effective Date of
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the Registration Statement, or in the Prospectus (as amended or as
supplemented, if the Company shall have filed with the SEC any amendment
thereof or supplement thereto), or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading; or (iii) any untrue statement
or alleged untrue statement of a material fact contained in any
application or other statement executed by the Company or by the
Underwriter and filed in any jurisdiction in order to qualify the Units
under, or exempt the Units or the sale thereof from qualification under,
the securities laws of such jurisdiction, or the omission or alleged
omission to state in such application or statement a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
in each 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 and in conformity with written information furnished
to the Company by, or on behalf of, the Underwriter specifically for use
in the preparation of the Registration Statement or any such post-
effective amendment thereof, any such Preliminary Prospectus, or the
Prospectus or any such amendment thereof or supplement thereto, or in any
application or other statement executed by the Company or by the
Underwriter and filed in any jurisdiction; and the Underwriter will
reimburse any legal or other expenses reasonably incurred by the Company
or any such director, officer, or controlling person in connection with
investigating or defending against any such loss, claim, damage, liability
or action. This indemnity agreement is in addition to any liability which
the Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against any
indemnifying party under this Section 7, notify in writing the
indemnifying party of the commencement thereof. The omission so to notify
the indemnifying party will relieve it from any liability under this
Section 7 as to the particular item for which indemnification is then
being sought, but not from any other liability which it may have to any
indemnified party. In case any such action is brought against any
indemnified party, and the indemnified party notifies an indemnifying
party of the commencement thereof, the indemnifying party will be entitled
to participate therein and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, to assume the defense
thereof, with counsel who shall be reasonably satisfactory to such
indemnified party; and after notice from the indemnifying party to such
indemnified party of the indemnifying party's election so to assume the
defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section 7 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation; provided,
however, that if the defendants in any such action include both the
indemnified party and the indemnifying party, and the indemnified party
shall have reasonably concluded that there may be legal defenses available
to it and/or other indemnified parties which are different from or
additional to those available to the indemnifying party, the indemnified
party or parties shall have the right to select separate counsel to assume
such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties, in which event the
fees and expenses of one such separate counsel shall be borne by the
indemnifying party. Any such indemnifying party shall not be liable to
any such indemnified party on account of any settlement of any claim or
action effected without the consent of such indemnifying party.
8. CONTRIBUTION.
(a) In order to provide for just and equitable contribution in
any action in which the Underwriter or the Company (or any person who
controls the Underwriter or the Company within the meaning of Section 15
of the Securities Act) makes claim for indemnification pursuant to Section
7 hereof, but such indemnification is unavailable or insufficient to hold
harmless and indemnify a party under Section 7, 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 Section 7 above (i) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and the
Underwriter on the other from the offering of the Units hereunder or (ii)
if the allocation provided by the foregoing clause (i) is not permitted by
applicable law, in such proportion as is
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appropriate to reflect not only the relative benefits referred to in such
clause (i) but also the relative fault of the Company on the one hand and
the Underwriter on the other in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Underwriter on
the other shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Units (before deducting expenses)
received by the Company bear to the total underwriting discounts received
by the Underwriter, in each case as set forth in the table on the cover
page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged 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. The Company and the Underwriter agree that it would not be just
and equitable if contributions pursuant to this Section 8 were to be
determined by pro rata allocation or by any other method of allocation
which does not take into account the equitable considerations referred to
in the first sentence of this Section 8. The amount paid by an
indemnified party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this Section 8 shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending against
any action or claim which is the subject of this Section 8.
Notwithstanding the provisions of this Section 8, the Underwriter shall
not be required to contribute any amount in excess of the amount by which
the total price at which the Units underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages
that the Underwriter has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution
from any person who is not guilty of such fraudulent misrepresentation.
(b) Promptly after receipt by a party to this Agreement of
notice of the commencement of any action, suit or proceeding, such person
will, if a claim for contribution in respect thereof is to be made against
another party (the "Contributing Party"), notify the Contributing Party of
the commencement thereof; but the omission so to notify the Contributing
Party will not relieve the Contributing Party from any liability which it
may have to any party other than under this Section 8. Any notice given
pursuant to Section 7 hereof shall be deemed to be like notice hereunder.
In case any such action, suit or proceeding is brought against any party,
and such person notifies a Contributing Party of the commencement thereof,
the Contributing Party will be entitled to participate therein with the
notifying party and any other Contributing Party similarly notified.
9. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION.
(a) This Agreement shall become effective at immediately after
the time at which the Registration Statement shall become effective under
the Securities Act upon the Effective Date of the Registration Statement.
(b) Until the First Closing Date, this Agreement may be
terminated by the Underwriter, at its option, by giving notice to the
Company, and the option referred to in Section 2(b), if exercised, may be
cancelled at any time prior to the Second Closing Date, if (i) the Company
shall have failed, refused, or been unable, at or prior to such Closing
Date, to perform any agreement on its part to be performed hereunder, (ii)
any other condition of the Underwriter's obligations hereunder is not
fulfilled or waived by the Underwriter, (iii) trading in securities
generally on the New York Stock Exchange, the American Stock Exchange or
in the over-the-counter market shall have been suspended, (iv) minimum or
maximum prices for trading shall have been fixed, or maximum ranges for
prices for securities shall be required, on the New York Stock Exchange,
the American Stock Exchange, or in the over-the-counter market, by such
Exchange or by Nasdaq or by order of the SEC or any other governmental
authority having jurisdiction, (v) a banking moratorium shall have been
declared by federal, New York, or Minnesota authorities, (vi) there shall
have been such a serious, unusual and material change in general economic,
monetary, political or financial conditions, or the effect of
international conditions on the financial markets in the
-00-
Xxxxxx Xxxxxx shall be such as, in the judgment of the Underwriter, makes
it inadvisable to proceed with the delivery of the Units, (vii) the
enactment, publication, decree or other promulgation of any federal or
state statute, regulation, rule or order of any court or other
governmental authority which, in the judgment of the Underwriter,
materially and adversely affects or will materially and adversely affect
the business or operations of the Company, or (viii) there shall be a
material outbreak of hostilities or material escalation and deterioration
in the political and military situation between the United States and any
foreign power, or a formal declaration of war by the United States of
America shall have occurred. Any such termination shall be without
liability of any party to any other party, except as provided in Sections
7 and 8 hereof; provided, however, that the Company shall remain obligated
to pay costs and expenses to the extent provided in Section 4 hereof.
(c) If the Underwriter elects to prevent this Agreement from
becoming effective or to terminate this Agreement as provided in this
Section 9, it shall notify the Company and the Company's counsel promptly
by telegram or telephone, confirmed by letter sent to the address
specified in Section 11 hereof. If the Company shall elect to prevent
this Agreement from becoming effective, it shall notify the Underwriter
promptly by telegram or telephone, confirmed by letter sent to the
addresses specified in Section 11 hereof.
10. SURVIVAL OF INDEMNITIES, CONTRIBUTION AGREEMENTS, WARRANTIES AND
REPRESENTATIONS. The respective indemnity and contribution agreements of the
Company and the Underwriter contained in Sections 7 and 8, the representations
and warranties of the Company set forth in Section 1 hereof, and the covenants
and agreements of the Company set forth in Section 3 hereof, shall remain
operative and in full force and effect, regardless of any investigation made by,
or on behalf of, the Underwriter, the Company, any of its officers and
directors, or any controlling person referred to in Sections 7 and 8, and shall
survive the delivery of and payment for the Units. The aforesaid indemnity and
contribution agreements shall also survive any termination or cancellation of
this Agreement. Any successor of any party or of any such controlling person,
or any legal representative of such controlling person, as the case may be,
shall be entitled to the benefit of the respective indemnity and contribution
agreements.
11. NOTICES. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be mailed,
delivered or telegraphed, and confirmed, as follows:
If to the Underwriter, to: Equity Securities Investments,
2820 IDS Center
00 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Mr. Xxxxxx Xxxxxx
with a copy to: Winthrop & Weinstine, P.A.
0000 Xxxx Xxxxxxxx Xxxxx
00 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
If to the Company, to: ChoiceTel Communications, Inc.
0000 00xx Xxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attention: Xx. Xxxx X. Xxxxxx
with a copy to: Robins, Kaplan, Xxxxxx & Xxxxxx L.L.P.
0000 XxXxxxx Xxxxx
000 XxXxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
-25-
12. INFORMATION FURNISHED BY THE UNDERWRITER. The statements relating to the
stabilization activities of the Underwriter and the statements under the caption
"Underwriting" in any Preliminary Prospectus and in the Prospectus constitute
the written information furnished by, or on behalf of, the Underwriter
specifically for use with reference to the Underwriter referred to in Section
1(a)(ii) and Sections 7(a) and 7(b) hereof.
13. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and
be binding upon the Underwriter and the Company and their respective successors
and assigns, and the officers, directors and controlling persons referred to in
Sections 7 and 8. Nothing expressed in this Agreement is intended or shall be
construed to give any person or corporation, other than the parties hereto,
their respective successors and assigns, and the controlling persons, officers
and directors referred to in Sections 7 and 8 any legal or equitable right,
remedy or claim under, or in respect of, this Agreement or any provision herein
contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of the parties
hereto and their respective executors, administra-tors, successors, assigns and
such controlling persons, officers and directors, and for the benefit of no
other person or corporation. No purchaser of any Units from the Underwriter
shall be construed a successor or assign merely by reason of such purchase.
14. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Minnesota.
If the foregoing is in accordance with your under-standing of our
agreement, please sign and return to us the enclosed counterpart of this
Agreement, whereupon it will become a binding agreement between the Company and
the Underwriter in accordance with its terms.
Very truly yours,
CHOICETEL COMMUNICATIONS, INC.
By
--------------------------------
Signature
--------------------------------
Name Typed or Printed
Its
---------------------------
Title Typed or Printed
ACCEPTANCE
The foregoing Underwriting Agreement is
hereby confirmed and accepted by us
as of the date first above written.
Equity Securities Investments, Inc.
By
-------------------------------------
Signature
----------------------------------
Name Type or Printed
Its
------------------------------
Title Typed or Printed
-00-
XXXXXXXX X-0
TWO-YEAR LOCK-UP AGREEMENT
Equity Securities Investments, Inc.
2800 IDS Center
00 Xxxxx 0xx Xxxxxx
Xxxxxxxxxxx, XX 00000
Re: ChoiceTel Communications, Inc.
Ladies and Gentlemen:
The undersigned, a beneficial owner of common stock, $.01 par value per share
(the "Common Stock"), of ChoiceTel Communications, Inc. (the "Company"),
understands and acknowledges that the Company is intending to file or has filed
with the Securities and Exchange Commission a Registration Statement on Form SB-
2 (the "Registration Statement") for the registration of the offer and sale of
units (the "Units"), each Unit consisting of one share of Common Stock of the
Company and a redeemable warrant to purchase one share of Common Stock,
including units subject to the over-allotment option described in the
Registration Statement (collectively, the "Units"). The undersigned further
understands that the Company, as issuer, and Equity Securities Investments,
Inc., as the underwriter (the "Underwriter") to be named in that certain
proposed underwriting agreement expected to be entered into in connection with
the public offering of the Units by the Underwriter (the "Underwriting
Agreement"), contemplate entering into such Underwriting Agreement.
In order to induce the Underwriter to proceed with the public offering, the
undersigned agrees, for the benefit of the Company and the Underwriter, that
should such public offering be effectuated, the undersigned will not, without
the prior written consent of the Underwriter, during the two years commencing on
the effective date of the Registration Statement ("Effective Date"):
(i) offer to sell, contract to sell, pledge, hypothecate, transfer or
otherwise dispose of, grant any rights with respect to
(collectively, a "Disposition"), any shares of Common Stock of the
Company, and options, warrants or other rights to purchase any
shares of Common Stock or any securities convertible into or
exchangeable or exercisable for shares of Common Stock
(collectively, "Securities") now owned or hereafter acquired by the
undersigned or with respect to which the undersigned has or
hereafter acquires the power of Disposition; or
(ii) effect any Disposition of any Securities
other than by gifts to donees who agree in writing to be bound by the same
restrictions, or by will or the laws of descent and distribution; in which case
the Securities also will be subject to the same restriction.
Notwithstanding the foregoing, the Underwriter hereby agrees to release from
this Lock-up Agreement ten percent (10%) of the Securities beneficially owned by
the undersigned one (1) year following the Effective Date.
The undersigned hereby agrees to the entry of stop transfer instructions with
the Company's transfer agent against the transfer of the Securities except in
compliance with this Agreement.
The undersigned hereby further agrees that during the two years commencing on
the Effective Date, the undersigned will effect all sales of Securities only
through the Underwriter.
Dated: ________________, 1997 Very truly yours,
-----------------------------------
Signature
-----------------------------------
Name Typed or Printed
X-0
XXXXXXXX X-0
SIX-MONTH LOCK-UP AGREEMENT
Equity Securities Investments, Inc.
2800 IDS Center
00 Xxxxx 0xx Xxxxxx
Xxxxxxxxxxx, XX 00000
Re: ChoiceTel Communications, Inc.
Ladies and Gentlemen:
The undersigned, a beneficial owner of common stock, $.01 par value per share
(the "Common Stock"), of ChoiceTel Communications, Inc. (the "Company"),
understands and acknowledges that the Company is intending to file or has filed
with the Securities and Exchange Commission a Registration Statement on Form SB-
2 (the "Registration Statement") for the registration of the offer and sale of
units (the "Units"), each Unit consisting of one share of Common Stock of the
Company and a redeemable warrant to purchase one share of Common Stock,
including Units subject to the over-allotment option described in the
Registration Statement (collectively, the "Units"). The undersigned further
understands that the Company, as issuer, and Equity Securities Investments,
Inc., as the underwriter (the "Underwriter") to be named in that certain
proposed underwriting agreement expected to be entered into in connection with
the public offering of the Units by the Underwriter (the "Underwriting
Agreement"), contemplate entering into such Underwriting Agreement.
In order to induce the Underwriter to proceed with the public offering, the
undersigned agrees, for the benefit of the Company and the Underwriter, that
should such public offering be effectuated, the undersigned will not, without
the prior written consent of the Underwriter, for six months commencing on the
effective date of the Registration Statement ("Effective Date"):
(i) offer to sell, contract to sell, pledge, hypothecate, transfer or
otherwise dispose of, grant any rights with respect to
(collectively, a "Disposition"), any shares of Common Stock of the
Company, and options, warrants or other rights to purchase any
shares of Common Stock or any securities convertible into or
exchangeable or exercisable for shares of Common Stock
(collectively, "Securities") now owned or hereafter acquired by the
undersigned or with respect to which the undersigned has or
hereafter acquires the power of Disposition; or
(ii) effect any Disposition of any Securities
other than by gifts to donees who agree in writing to be bound by the same
restrictions, or by will or the laws of descent and distribution; in which case
the Securities also will be subject to the same restriction.
The undersigned hereby agrees to the entry of stop transfer instructions with
the Company's transfer agent against the transfer of the Securities except in
compliance with this Agreement.
The undersigned hereby further agrees that during the two years commencing on
the Effective Date, the undersigned will effect all sales of Securities only
through the Underwriter.
Dated: ________________, 1997 Very truly yours,
-----------------------------------
Signature
-----------------------------------
Name Typed or Printed
X-0
XXXXXXXX X
FORM OF
WARRANT
TO PURCHASE 80,000 UNITS
(EACH UNIT CONSISTING OF ONE SHARE OF COMMON STOCK
AND ONE REDEEMABLE COMMON STOCK PURCHASE WARRANT)
OF
CHOICETEL COMMUNICATIONS, INC.
N0. ______ 80,000 UNITS
FOR GOOD AND VALUABLE CONSIDERATION, ChoiceTel Communications,
Inc., a Minnesota corporation (the "Company"), hereby certifies that Equity
Securities Investments, Inc., Minneapolis, Minnesota (the "Underwriter"), or
its registered assigns, is entitled to subscribe for and purchase from the
Company at any time or from time to time after [ONE YEAR FROM EFFECTIVE DATE]
, to and including [FIVE YEARS FROM EFFECTIVE DATE] Eighty Thousand (80,000)
Units (the "Units"), each Unit consisting of one share of the Company's
Common Stock and one redeemable Common Stock purchase warrant of the Company.
The per Unit exercise price of this Warrant is $_____ (the "Warrant
Exercise Price"), subject to adjustment as provided herein.
This Warrant is one of the Underwriter's Warrants referred to in
the Underwriting Agreement dated_____________, 1997 by and between the
Company and the Underwriter (the "Offering") entered into in connection with
the offering by the Company of 800,000 Units (the "Units"), plus an
additional 120,000 Units solely to cover over-allotments.
As used herein, (i) this Warrant and all warrants hereafter
issued in exchange or substitution for this Warrant are referred to as the
"Warrants;" (ii) the Units which may be acquired upon exercise of the
Warrants are referred to herein as the "Warrant Units;" (iii) the term
"Holder" means the Underwriter, any party who acquires all or a part of this
Warrant as a registered transferee of the Underwriter, or any record holder
or holders of the Warrant Units issued upon exercise, whether in whole or in
part, of the Warrant; (iv) the term "Common Stock" means and includes the
Company's presently authorized common stock, par value $.01 per share,
together with any other equity securities which may be issued by the Company
with respect thereto or in substitution therefor; (v) the term "Redeemable
Warrants" means the redeemable common stock purchase warrants subject to the
Warrant Agreement dated _____________, 1997 between the Company and Norwest
Bank Minnesota, National Association, as warrant agent (the "Warrant Agent"),
each Redeemable Warrant representing the right to purchase at any time on or
before ____________, 2002 one share of Common Stock at a price of $9.50 per
share, subject to adjustment as provided in said Warrant Agreement; and (vi)
the term "Convertible Securities" means any stock or other securities
convertible into, or exchangeable for, Common Stock.
This Warrant is subject to the following provisions, terms and
conditions, to which each Holder hereof consents and agrees:
1. EXERCISE; TRANSFERABILITY.
(a) The rights represented by this Warrant may be exercised by
the Holder hereof, in whole or in part (but not as to a fractional share of
Unit) by written notice of exercise (in the form attached hereto) delivered
to the Company at the principal office of the Company prior to the expiration
of this Warrant and accompanied or preceded by the surrender of this Warrant
along with a check in payment of the Warrant Exercise Price for such Units.
(b) This Warrant may not be sold, assigned, hypothecated, or
otherwise transferred for a period of one year from the effective date of the
Offering (other than by will, pursuant to the operation of law, or where
directed by a court of competent jurisdiction upon the dissolution or
liquidation of a corporate Holder hereof), except to (i) a person who is an
officer or partner of the Underwriter, (ii) a successor in interest to the
business of the Underwriter, (iii) a person who is an officer or partner of a
successor, (iv) a member of the selling group, or (v) a person who is an officer
or partner of a member of the selling group; such transfer to be by endorsement
(by the Holder hereof executing the form of assignment attached hereto) and
delivery in the same manner as in the case of a negotiable instrument
transferable by endorsement and delivery. Further, this Warrant
B-1
may not be sold, transferred, assigned, hypothecated or divided into two or
more Warrants of smaller denominations, nor may any shares of Common Stock
or Redeemable Warrants issued pursuant to exercise of this Warrant be
transferred, except as provided in Section 7 hereof.
2. EXCHANGE AND REPLACEMENT. Subject to Sections 1 and 7 hereof, this
Warrant is exchangeable upon the surrender hereof by the Holder to the Company
at its office for new Warrants of like tenor and date representing in the
aggregate the right to purchase the number of Warrant Units purchasable
hereunder, each of such new Warrants to represent the right to purchase such
number of Warrant Units (not to exceed the aggregate total number purchasable
hereunder) as shall be designated by the Holder at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction, or mutilation of this Warrant, and, in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to it,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
will make and deliver a new Warrant of like tenor, in lieu of this Warrant;
provided, however, that if the Underwriter shall be such Holder, an agreement of
indemnity by such Holder shall be sufficient for all purposes of this Section 2.
This Warrant shall be promptly canceled by the Company upon the surrender hereof
in connection with any exchange or replacement. The Company shall pay all
expenses, taxes (other than stock transfer taxes), and other charges payable in
connection with the preparation, execution, and delivery of Warrants pursuant to
this Section 2.
3. ISSUANCE OF THE WARRANT UNITS.
(a) The Company agrees that the shares of Common Stock and the
Redeemable Warrants comprising the Warrant Units purchased upon exercise of
this Warrant shall be and are deemed to be issued to the Holder as of the
close of business on the date on which this Warrant shall have been
surrendered and the payment made for such Warrant Units as aforesaid.
Subject to the provisions of Section 3(b), certificates for the shares of
Common Stock and the Redeemable Warrants comprising the Warrant Units so
purchased shall be delivered to the Holder within a reasonable time, not
exceeding fifteen (15) days after the rights represented by this Warrant
shall have been so exercised, and, unless this Warrant has expired, a new
Warrant representing the right to purchase the number of Warrant Units, if
any, with respect to which this Warrant shall not then have been exercised
shall also be delivered to the Holder within such time.
(b) Notwithstanding the foregoing, the Company shall not be
required to deliver any shares of Common Stock or the Redeemable Warrants
comprising the Warrant Units upon exercise of this Warrant except in
accordance with exemptions from the applicable securities registration
requirements or registrations under applicable securities laws. Nothing
herein, however, shall obligate the Company to effect registrations under
federal or state securities laws, except as provided in Section 9. If
registrations are not in effect and if exemptions are not available when the
Holder seeks to exercise the Warrant, the Warrant exercise period will be
extended, if need be, to prevent the Warrant from expiring, until such time
as either registrations become effective or exemptions are available, and
the Warrant shall then remain exercisable for a period of at least thirty
(30) calendar days from the date the Company delivers to the Holder written
notice of the availability of such registrations or exemptions. The Holder
agrees to execute such documents and make such representations, warranties,
and agreements as may be reasonably required solely to comply with the
exemptions relied upon by the Company, or the registrations made, for the
issuance of the shares of Common Stock and the Redeemable Warrants comprising
the Warrant Units.
4. COVENANTS OF THE COMPANY. The Company covenants and agrees that
(a) all shares of Common Stock included in the Warrant Units will, upon
issuance, be duly authorized and issued, fully paid, non-assessable and free
from all taxes, liens and charges with respect to the issue thereof; (b) all
Redeemable Warrants included in the Warrant Units, when authenticated by the
Warrant Agent and issued, delivered and sold in accordance with this Warrant
and the Warrant Agreement between the Company and the Warrant Agent, will be
duly and validly executed, authenticated, issued and delivered and will
constitute valid and binding obligations of the Company, enforceable against
the Company in accordance with their terms, except as enforceability may be
limited by the application of bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the rights of creditors generally
and by judicial limitations on the right of specific performance; and (c) all
shares of Common Stock issuable upon exercise of the Redeemable Warrants
included in the Warrant Units will, upon issuance, be duly authorized and
issued, fully paid, non-assessable and free from all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees
that during the period within which the rights represented by this Warrant
may be exercised, the Company will at all times have authorized and reserved
for the purpose of issue or transfer upon exercise of the subscription rights
evidenced by this Warrant a sufficient number of shares of Common Stock and
Redeemable Warrants to provide for the exercise of the rights represented by
this Warrant.
5. ANTI-DILUTION ADJUSTMENTS. The provisions of this Warrant are
subject to adjustment as provided in this Section 5.
(a) The Warrant Exercise Price shall be adjusted from time to time
such that in case the Company shall hereafter:
B-2
(i) pay any dividends on any class of stock of the Company
payable in Common Stock or securities convertible into Common Stock;
(ii) subdivide its then outstanding shares of Common Stock
into a greater number of shares; or
(iii) combine outstanding shares of Common Stock, by
reclassification or otherwise;
then, in any such event, the Warrant Exercise Price in effect immediately prior
to such event shall (until adjusted again pursuant hereto) be adjusted
immediately after such event to a price (calculated to the nearest full cent)
determined by dividing (A) the number of shares of Common Stock outstanding
immediately prior to such event, multiplied by the then existing Warrant
Exercise Price, by (B) the total number of shares of Common Stock outstanding
immediately after such event (including in each case the maximum number of
shares of Common Stock issuable in respect of any securities convertible into
Common Stock), and the resulting quotient shall be the adjusted Warrant Exercise
Price per share. An adjustment made pursuant to this subsection shall become
effective immediately after the record date in the case of a dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination, reclassification or other event. If,
as a result of an adjustment made pursuant to this subsection, the Holder of any
Warrant thereafter surrendered for exercise shall become entitled to receive
shares of two or more classes of capital stock or shares of Common Stock and
other capital stock of the Company, the Board of Directors (whose determination
shall be conclusive) shall determine the allocation of the adjusted Warrant
Exercise Price between or among shares of such classes of capital stock or
shares of Common Stock and other capital stock. All calculations under this
subsection shall be made to the nearest cent or to the nearest 1/100 of a share,
as the case may be. In the event that at any time, as a result of an adjustment
made pursuant to this sub-section, the holder of any Warrant thereafter
surrendered for exercise shall become entitled to receive any shares of the
Company other than shares of Common Stock, thereafter the Warrant Exercise Price
of such other shares so receivable upon exercise of any Warrant 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 Common Stock contained in this
subsection.
(b) If the Company shall distribute to all holders of Common Stock
(including any such distribution made to the shareholders of the Company in
connection with a consolidation or merger in which the Company is the continuing
corporation) evidences of its indebtedness, cash (other than any cash dividend
which, together with any cash dividends paid within the 12 months prior to the
record date for such distribution, does not exceed 5% of the "Current Market
Price" (as hereinafter defined) at the record date for such distribution) or
assets (other than dividends payable in shares of its capital stock), or rights,
options, or warrants to subscribe for or purchase Common Stock or securities
convertible into or exchangeable for shares of Common Stock, then, in each such
case, the Warrant Exercise Price shall be adjusted by multiplying the Warrant
Exercise Price in effect immediately prior to the record date for the
determination of shareholders entitled to receive such distribution by a
fraction, the numerator of which shall be the Current Market Price per share of
Common Stock on such record date, less the fair market value (as determined in
good faith by the Company's Board of Directors, whose determination shall be
conclusive, absent manifest error) of the portion of the evidences of
indebtedness or assets so to be distributed, or of such rights, options, or
warrants or convertible or exchangeable securities, or the amount of such cash,
applicable to one share, and the denominator of which shall be such Current
Market Price per share of Common Stock. Such adjustment shall be made whenever
any such distribution is made, and shall become effective on the record date for
the determination of shareholders entitled to receive such distribution.
(c) For the purpose of any computation under this Warrant, the
"Current Market Price" per share of Common Stock on any date shall be the
average of the daily closing prices for the 30 consecutive trading days
immediately preceding the date in question. The closing price for each day
shall be the last reported sales price regular way or, in case no such reported
sale takes place on such day, the closing bid price regular way, in either case
on the principal national securities exchange (including, for purposes hereof,
The Nasdaq National Market and The Nasdaq SmallCap Market) on which the Common
Stock is listed or admitted to trading or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, the highest reported
bid
B-3
price for the Common Stock as furnished by the National Association of
Securities Dealers, Inc. through Nasdaq or a similar organization if Nasdaq is
no longer reporting such information. If, on any such date, the Common Stock is
not listed or admitted to trading on any national securities exchange and is not
quoted by Nasdaq or any similar organization, the fair value of a share of
Common Stock on such date, as determined in good faith by the Company's Board of
Directors, whose determination shall be conclusive, absent manifest error, shall
be used.
(d) No adjustment in the Warrant Exercise Price shall be required
if such adjustment is less than $.05; provided, however, that any adjustments
which by reason of this Section 5 are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 5 shall be made to the nearest cent or to the nearest whole
share, as the case may be.
(e) In any case in which this Section 5 shall require that an
adjustment in the Warrant Exercise Price may be made effective as of a record
date for a specified event, the Company may elect to defer, until the occurrence
of such event, issuing to the Holder, if the Holder exercised or converted this
Warrant after such record date, the shares of Common Stock, if any, issuable
upon such exercise or conversion over and above the shares of Common Stock, if
any, issuable upon such exercise or conversion on the basis of the Warrant
Exercise Price in effect prior to such adjustment; provided, however, that the
Company shall deliver to the Holder a due xxxx or other appropriate instrument
evidencing the Holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
(f) Upon each adjustment of the Warrant Exercise Price pursuant to
Section 5(a) above, the Holder of each Warrant shall thereafter (until another
such adjustment) be entitled to purchase at the adjusted Warrant Exercise Price
the number of Warrant Units, calculated to the nearest full Unit, obtained by
multiplying the number of Units specified in such Warrant (as adjusted as a
result of all adjustments in the Warrant Exercise Price in effect prior to such
adjustment) by the Warrant Exercise Price in effect prior to such adjustment and
dividing the product so obtained by the adjusted Warrant Exercise Price.
(g) In case of any consolidation or merger to which the Company is
a party other than a merger or consolidation in which the Company is the
continuing corporation, or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety, or in the case of any statutory exchange of securities with another
corporation (including any exchange effected in connection with a merger of a
third corporation into the Company), there shall be no adjustment under
Subsection (a) of this Section above but the Holder of each Warrant then
outstanding shall have the right thereafter to convert such Warrant into the
kind and amount of shares of stock and other securities and property which he
would have owned or have been entitled to receive immediately after such
consolidation, merger, statutory exchange, sale, or conveyance had such Warrant
been converted immediately prior to the effective date of such consolidation,
merger, statutory exchange, sale, or conveyance and in any such case, if
necessary, appropriate adjustment shall be made in the application of the
provisions set forth in this subsection with respect to the rights and interests
thereafter of any Holders of the Warrant, to the end that the provisions set
forth in this subsection shall thereafter correspondingly be made applicable, as
nearly as may reasonably be, in relation to any shares of stock and other
securities and property thereafter deliverable on the exercise of the Warrant.
The provisions of this subsection shall similarly apply to successive
consolidations, mergers, statutory exchanges, sales or conveyances.
(h) Upon any adjustment of the Warrant Exercise Price, then and
in each such case, the Company shall (i) give written notice thereof, by
first-class mail, postage prepaid, within ten (10) calendar days after the
date when the circumstances giving rise to the adjustment occurred, addressed
to the Holder as shown on the books of the Company, which notice shall state
the Warrant Exercise Price resulting from such adjustment and the increase or
decrease, if any, in the number of Units purchasable at such price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based; and (ii)
prepare and retain on file a statement describing in reasonable detail the
method used in arriving at the new Warrant Exercise Price.
6. NO VOTING RIGHTS. This Warrant shall not entitle the Holder to any
voting rights or other rights as a shareholder of the Company.
B-4
7. NOTICE OF TRANSFER OF WARRANT OR RESALE OF THE SHARES OR
REDEEMABLE WARRANTS COMPRISING WARRANT UNITS.
(a) Subject to the sale, assignment, hypothecation, or other
transfer restrictions set forth in Section 1 hereof, the Holder, by
acceptance hereof, agrees to give written notice to the Company before
transferring this Warrant, or any shares of Common Stock or Redeemable
Warrants comprising the Warrant Units, of such Holder's intention to do so,
describing briefly the manner of any proposed transfer. Promptly upon
receiving such written notice, the Company shall present copies thereof to
the Company's counsel and to counsel to the original purchaser of this
Warrant. If, in the opinion of each such counsel, the proposed transfer may
be effected without registration or qualification (under any federal or state
securities laws), the Company, as promptly as practicable, shall notify the
Holder of such opinion, whereupon the Holder shall be entitled to transfer
this Warrant or to dispose of shares of Common Stock and Redeemable Warrants
comprising Warrant Units received upon the previous exercise of this Warrant,
all in accordance with the terms of the notice delivered by the Holder to the
Company; provided that an appropriate legend may be endorsed on this Warrant
or the certificates for such shares of Common Stock or Redeemable Warrants
comprising the Warrant Units describing restrictions upon transfer thereof
necessary or advisable in the opinion of counsel and satisfactory to the
Company to prevent further transfers which would be in violation of Section 5
of the Securities Act of 1933, as amended (the "Securities Act"), and
applicable state securities laws; and provided further that the prospective
transferee or purchaser shall execute such documents and make such
representations, warranties, and agreements as may be required solely to
comply with the exemptions relied upon by the Company for the transfer or
disposition of the Warrant or shares of Common Stock or Redeemable Warrants
comprising the Warrant Units.
(b) If, in the opinion of either of the counsel referred to in
this Section 7, the proposed transfer or disposition of this Warrant, or
of such shares of Common Stock or Redeemable Warrants comprising the Warrant
Units, Warrant Shares described in the written notice given pursuant to this
Section 7 may not be effected without registration or qualification of this
Warrant or such shares of Common Stock or Redeemable Warrants, the Company
shall promptly give written notice thereof to the Holder, and the Holder will
limit its activities in respect to such transfer or disposition as, in the
opinion of both such counsel, are permitted by law.
(c) Until this Warrant is duly transferred on the books of the
Company, the Company shall treat the registered Holder of this Warrant as
absolute owner hereof for all purposes without being affected by any notice to
the Company.
8. FRACTIONAL UNITS. Fractional Units shall not be issued upon the
exercise of this Warrant, but in any case where the holder would, except for
the provisions of this Section, be entitled under the terms hereof to receive
a fractional Unit, the Company shall, upon the exercise of this Warrant for
the largest number of whole Units then called for, pay a sum in cash equal to
the sum of (a) the excess, if any, of the "Fair Market Value" (as defined in
Section 10(d) hereof) of such fractional Unit over the proportional part of
the Warrant Exercise Price represented by such fractional Unit, plus (b) the
proportional part of the Warrant Exercise Price represented by such
fractional Unit.
9. REGISTRATION RIGHTS.
(a) The Company agrees that, if at any time (but on a one-time
basis only) during the period commencing [ONE YEAR FROM EFFECTIVE DATE] and
ending [FIVE YEARS FROM EFFECTIVE DATE], the Holder of this Warrant and/or
the Holders of any other Warrants and/or shares of Common Stock or Redeemable
Warrants comprising Warrant Units who collectively shall hold not less than
50% of the Warrants, shares of Common Stock or Redeemable Warrants comprising
Warrant Units outstanding at such time and not previously sold pursuant to
this Section 9 shall request that the Company file a registration statement
covering all or any part of the shares of Common Stock or Redeemable Warrants
comprising Warrant Units:
(i) the Company will promptly notify the Holder and all
other registered Holders, if any, of other Warrants, shares of Common
Stock, and/or Redeemable Warrants comprising Warrant Units that such
registration statement will be filed and that the shares of Common
Stock or Redeemable Warrants comprising Warrant Units which are then
held and/or which may be acquired upon the exercise of the Warrants by
the Holder and such other Holders will be included in such registration
statement at the Holder's and such Holders' request; and
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(ii) the Company will cause such registration statement to
include all shares of Common Stock and/or Redeemable Warrants
comprising Warrant Units which it has been so requested to include,
will take all necessary steps to register or qualify such shares of
Common Stock and/or Redeemable Warrants under the Securities Act and
the securities laws of such states as the holders may reasonably
request, and will use its best efforts to cause such registration
statement and qualifications to become effective as soon as
practicable; provided, however, that the Company shall not be required
to register any shares of Common Stock and/or Redeemable Warrants
comprising Warrant Units that are eligible for resale under Rule
144(k) promulgated under the Securities Act.
The Company shall keep effective and maintain any registration,
qualification, notification, or approval specified in this Section 9(a) for
such period as may be reasonably necessary for such Holder or Holders of such
shares of Common Stock and/or Redeemable Warrants to dispose thereof and from
time to time shall amend or supplement the prospectus used in connection
therewith to the extent necessary in order to comply with applicable law;
provided, however, that the Company need not maintain the effectiveness of
any such registration, qualification, notification or approval, whether or
not at the request of the Holders, more than nine (9) months following the
effective date thereof.
(b) The Company agrees that, if at any time and from time to time
during the period commencing [ONE YEAR FROM EFFECTIVE DATE] and ending two (2)
years after complete exercise of this Warrant (but not later than [SEVEN YEARS
AFTER THE EFFECTIVE DATE]), the Company proposes to file a registration
statement under the Securities Act (other than a Form S-4 or Form S-8
Registration Statement or any successor or replacement forms thereto) with
respect to, or qualify for a public distribution under Section 3(b) of the
Securities Act, any of its securities in connection with the proposed offer of
such securities by the Company or any of its shareholders:
(i) the Company will promptly notify the Holder and all
other registered Holders, if any, of other Warrants, shares of Common
Stock and/or Redeemable Warrants comprising Warrant Units at least
thirty (30) days prior to each such filing, that it intends to file
such registration statement or effect such qualification, and that the
shares of Common Stock and/or Redeemable Warrants comprising Warrant
Units which are then held and/or which may be acquired upon the
exercise of the Warrants by the Holder and such other Holders will be
included in such registration statement or qualification at the
Holder's and such Holders' request; and
(ii) the Company will use its best efforts to cause such
registration statement or qualification to include all shares of
Common Stock and/or Redeemable Warrants comprising Warrant Units which
it has been so requested to include; provided, however, that if a
greater number of shares of Common Stock and/or Redeemable Warrants
comprising Warrant Units is offered for participation in the proposed
offering than in the reasonable opinion of the managing underwriter of
the proposed offering can be accommodated without adversely affecting
the proposed offering, then the amount of shares of Common Stock
and/or Redeemable Warrants comprising Warrant Units proposed to be
offered by such Holders for registration, as well as the number of
securities of any other selling shareholders participating in the
registration (other than selling shareholders participating in the
registration as holders of demand registration rights granted to them
by the Company), shall be excluded or proportionately reduced to a
number deemed satisfactory by the managing underwriter.
The Holder and such other Holders may request that their shares of Common
Stock and/or Redeemable Warrants comprising Warrant Units be included in such
registration statement or qualification by making written request to the
Company specifying the number of shares of Common Stock and/or Redeemable
Warrants comprising Warrant Units to be so included. Such request shall be
made within twenty (20) days after receipt from the Company of notice of such
intended registration or qualification.
(c) With respect to each inclusion of securities in a registration
or qualification pursuant to this Section 9, the Company shall bear all fees,
costs, and expenses thereof, including, without limitation, all filing fees,
fees imposed by the National Association of Securities Dealers, Inc., printing
expenses, fees and disbursements of counsel and accountants for the Company,
fees and disbursements of counsel for the underwriter or Underwriter of such
securities (if the Company is required to bear such fees and disbursements), all
internal expenses, the premiums and other costs of policies of insurance against
liability arising out of the public offering, and legal fees and disbursements
and other expenses of complying with state securities laws of any jurisdictions
in which the securities to be offered are to be registered or qualified. Fees
and disbursements of special counsel and
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accountants for the selling Holders, underwriting discounts and commissions, and
transfer taxes for selling Holders shall be borne by the selling Holders.
(d) The Company will furnish the Holders whose shares of
Common Stock and/or Redeemable Warrants comprising Warrant Units are
included in a registration or qualification pursuant to this Section 9
with a reasonable number of copies of any prospectus and/or other
offering materials included in such filings and will amend or
supplement the same as required during the period of required use
thereof. In connection with any registration filed or qualification
made pursuant to this Section 9 in which shares of Common Stock and/or
Redeemable Warrants comprising Warrant Units are included, and to the
extent permissible under the Securities Act and controlling precedent
thereunder, the Company and each Holder whose shares of Common Stock
and/or Redeemable Warrants comprising Warrant Units are so included in
such registration or qualification shall provide cross-indemnification
agreements to each other in customary scope covering the accuracy and
completeness of the information furnished by each in connection
therewith.
(e) Each Holder of shares of Common Stock and/or
Redeemable Warrants comprising Warrant Units included in a
registration or qualification pursuant to this Section 9 agrees to
cooperate with the Company in the preparation and filing of any such
registration statement or other offering materials and in the
furnishing of information concerning the Holder for inclusion therein,
or in any efforts by the Company to establish that the proposed sale
is exempt under the Securities Act as to any proposed distribution.
10. RIGHT TO CONVERT.
(a) The Holder of this Warrant shall have the right (but
not the obligation) to require the Company to convert this Warrant
(the "Conversion Right"), at any time after one year from the date of
this Warrant and prior to its expiration, into shares of Warrant Units
as provided for in this Section 10. Upon exercise of the Conversion
Right by the Holder, the Company shall deliver to the Holder (without
payment by the Holder of any exercise price) that number of Warrant
Units equal to the quotient obtained by dividing (i) the value of the
Warrant at the time the Conversion Right is exercised (determined by
subtracting the aggregate Warrant Exercise Price for the Warrant Units
in effect immediately prior to the exercise of the Conversion Right
from the aggregate "Fair Market Value" (as determined below) for the
Warrant Units immediately prior to the exercise of the Conversion
Right) by (ii) the Fair Market Value of one Unit immediately prior to
the exercise of the Conversion Right.
(b) The Conversion Right may be exercised by the Holder,
at any time or from time to time, prior to its expiration, on any
business day, by delivering a written notice (the "Conversion Notice")
to the Company at the offices of the Company exercising the Conversion
Right and specifying (i) the total number of Units the Holder will
purchase pursuant to such conversion, and (ii) a place, and a date not
less than five (5) nor more than twenty (20) business days from the
date of the Conversion Notice, for the closing of such purchase.
(c) At any closing under Section 10(b) hereof, (i) the
Holder will surrender the Warrant, (ii) the Company will deliver or
cause to be delivered to the Holder a certificate or certificates for
the number of shares of Common Stock and Redeemable Warrants
comprising the Warrant Units issuable upon such conversion, together
with cash, in lieu of any fraction of a Unit, and (iii) the Company
will deliver to the Holder a new Warrant representing the number of
Units, if any, with respect to which the Warrant shall not have been
converted.
(d) "Fair Market Value" of a Unit as of a particular
date (the "Determination Date") shall mean the aggregate market price
of shares of Common Stock and Redeemable Warrants comprising the Units
as of the Determination Date. "Fair Market Value" of a share of Common
Stock or of the Redeemable Warrants as of the Determination Date shall mean:
(i) If the Company's Common Stock and Redeemable
Warrants are traded on an exchange or quoted on The Nasdaq National
Market or The Nasdaq SmallCap Market, then the average closing or last
sale prices, respectively, reported for the ten (10) business days
immediately preceding the Determination Date.
(ii) If the Company's Common Stock and Redeemable
Warrants are not traded on an exchange or on The Nasdaq National
Market or The Nasdaq SmallCap Market but are traded in the
over-the-counter market, then the average of the closing bid and asked
prices as reported by Metro Data Company, Inc. (or a
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similar organization) from quotations by market makers in such Common
Stock or Redeemable Warrants on the Minneapolis-St. Xxxx local
over-the-counter market for the ten (10) business days immediately
preceding the Determination Date.
11. MISCELLANEOUS. The Company shall not, by amendment of its articles
of incorporation or through reorganization, consolidation, merger, dissolution
or sale of assets, or by any other voluntary act or deed, avoid or seek to avoid
the observance or performance of any of the covenants, stipulations or
conditions to be observed or performed hereunder by the Company, but will, at
all times in good faith, assist, insofar as it is able, in the carrying out of
all provisions hereof and in the taking of all other action which may be
necessary in order to protect the rights of Holders against dilution.
Upon written request of the Holder of this Warrant, the Company will
promptly provide such Holder with a then current written list of the names and
addresses of all Holders of warrants originally issued under the terms of, and
concurrent with, this Warrant.
The representations, warranties and agreements herein contained shall
survive the exercise of this Warrant. This Warrant shall be interpreted under
the laws of the State of Minnesota.
IN WITNESS WHEREOF, ChoiceTel Communications, Inc. has caused this
Warrant to be signed by its duly authorized officer and to be dated
______________, 1997.
CHOICETEL COMMUNICATIONS, INC.
By
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Signature
-----------------------------------------
Name Typed or Printed
----------------------------------------
Its
------------------------------------
Title Typed or Printed
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NOTICE OF EXERCISE OF WARRANT
(To be signed upon the exercise of the Warrant for cash or by check)
The undersigned hereby irrevocably elects to exercise the attached
Warrant and to purchase thereunder, for cash, ________________ of the Units
of ChoiceTel Communications, Inc. issuable upon the exercise of such Warrant,
herewith makes payment of $___________ therefor in cash or by check, and
requests that certificates for the shares of Common Stock and Redeemable
Warrants comprising such Units (together with a new Warrant to
purchase the number of Units, if any, with respect to which this Warrant is
not exercised) be issued in the name set forth below and be delivered to the
address set forth below.
Dated: ________________
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(Signature)
----------------------------------------
(Name Typed or Printed)
----------------------------------------
(Address)
----------------------------------------
(Social Security or Tax Ident. No.)
* The signature on the Notice of Exercise of Warrant must exactly correspond
to the name as written upon the face of the Warrant in every particular
without alteration or any change whatsoever. When signing on behalf of a
corporation, partnership, trust or other entity, PLEASE indicate your
position(s) and title(s) with such entity.
NOTICE OF WARRANT CONVERSION
(To be signed only upon conversion of warrant)
The undersigned hereby irrevocably elects to exercise the conversion
right provided in Section 10 of the attached Warrant and to purchase
thereunder _______ Units of ChoiceTel Communications, Inc. to which such
Warrant relates and herewith tenders the Warrant in full payment of the
shares and requests that the certificates for the shares of Common Stock and
Redeemable Warrants comprising such Units be issued in the name of, and be
delivered to _______________________, whose address is set forth below the
signature of the undersigned.
Dated: _________________
----------------------------------------
(Signature)
----------------------------------------
(Name Typed or Printed)
----------------------------------------
----------------------------------------
(Address)
* The signature on the Notice of Warrant Conversion must exactly correspond
to the name as written upon the face of the Warrant in every particular
without alteration or any change whatsoever. When signing on behalf of a
corporation, partnership, trust or other entity, PLEASE indicate your
position(s) and title(s) with such entity.
ASSIGNMENT OF WARRANT
(To be signed only upon authorized transfer of the Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto _________________________________ the right to purchase
_______________ Units of ChoiceTel Communications, Inc. to which the within
Warrant relates and appoints _________________________________, as
attorney-in-fact, to transfer said right on the books of ChoiceTel
Communications, Inc. with full power of substitution in the premises.
Dated: ________________
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(Signature)
----------------------------------------
(Name Typed or Printed)
----------------------------------------
(Address)
----------------------------------------
(Social Security or Tax Ident. No.)
* The signature on the Assignment of Warrant must exactly correspond to the
name as written upon the face of the Warrant in every particular without
alteration or any change whatsoever. When signing on behalf of a
corporation, partnership, trust or other entity, PLEASE indicate your
position(s) and title(s) with such entity.
RESTRICTION ON TRANSFER
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE DISTRIBUTED FOR VALUE
UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR LAWS
COVERING SUCH SECURITY OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE
COMPANY STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT, PLEDGE OR DISTRIBUTION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE
SECURITIES ACT OF 1933 AND ALL APPLICABLE STATE SECURITIES LAWS.
