[LETTERHEAD]
July 22, 1994
To former DynEco International, Inc shareholders:
Effective March 31, 1994, the shares of DynEco International, Inc. were
exchanged for shares of DynEco Corporation. In this exchange, DynEco
Corporation assumed certain outstanding Warrants of DynEco International,
Inc. The Warrants assumed included a Warrant to all DynEco International,
Inc. shareholders to purchase one (1) additional common share of DynEco
International, Inc. share at $7.00 per share until December 31, 1995, subject
to the terms and conditions of the Warrant, for each ten (10) shares held.
Upon your exercise and return of the enclosed Warrant Purchase Agreement
(no payment required), a DynEco Corporation Warrant certificate will promptly
be forwarded to you.
If you have any questions regarding the Warrant, please call me at
612-633-1501.
Also enclosed for your information is a Research Report on DynEco
Corporation issued by Mathews, Holmquist & Associates, Inc.
Respectfully,
/s/ Donald Hewitt
Donald Hewitt
Assistant Secretary
Enclosures:
WARRANT PURCHASE AGREEMENT
DYNECO CORPORATION
July 1, 1994
TOTAL Shares
Dear Sir/Madam:
On May 1, 1993, DynEco International, Inc. ("DII") issued you a Warrant
to purchase up to 392,600 shares of common stock of DII for the purchase
price of $7.00 per share (the "DII Warrant"). On March 31, 1994 (the
"Effective Date"), the shareholders of DII exchanged all of their shares of
DII common stock for the common stock of DynEco Corporation (the "Exchange")
pursuant to the terms and provisions of that certain Agreement and Plan of
Exchange dated June 18, 1993. On the Effective Date of the Exchange, DynEco
Corporation (the "Company") assumed the DII Warrant and, in connection
therewith, the Company and you agree to enter into this Warrant Purchase
Agreement, which incorporates all of the terms and provisions of the DII
Warrant previously issued to you.
The Company hereby agrees with you as follows:
1. Concurrently with the execution of the Warrant Purchase Agreement
(the "Agreement"), the Company will sell and deliver to you for one ($1.00)
Dollar and other good and valuable consideration, a Warrant to purchase up to
392,600 shares of Common Stock of the Company for the purchase price of Seven
Dollars ($7.00) per share of Common Stock (the "Warrant").
2. The Warrant purchase right may be exercised at any time after May
1, 1993, and up until 5:00 o'clock p.m. on December 31, 1995 except that if
the Company at any time after the Warrant first becomes exercisable and prior
to December 31, 1995 proposes to register any of its securities, either for
its own account or the account of security holders, other than a registration
on Forms S-8 or S-14, or any registration on a form which does not permit
secondary sales, the Company shall give written notice of such intention to
each holder of Warrants ("Holder"), and, said Holder must exercise the
Warrant purchase right within thirty (30) days of such notice or the Warrant
shall expire with no further action taken on the part of the company.
3. The Company covenants that all shares that may be issued upon the
exercise of the Warrant will, upon issuance, be validly issued, fully paid
and non assessable and free from all taxes, liens and charges with respect to
the issuance thereof. The Company further covenants that during the period
within which the Warrant may be exercised, the Company will at all times have
authorized and reserved a sufficient number of shares of Common Stock to
permit the exercise of the Warrant.
4. Neither the Warrant nor your right under this Agreement shall be
transferable except (i) by consent of the Company and (ii) in compliance with
all applicable federal and state securities laws to the satisfaction of the
Company. The provisions of this Section 4 shall be binding upon any
transferee of the Warrant. The Warrant and shares issued upon the exercise
of the Warrant shall bear the following legend:
NO SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION OF THIS WARRANT OR THE SHARES
PURCHASABLE HEREUNDER SHALL BE MADE EXCEPT PURSUANT TO REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR PURSUANT TO AN OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED. TRANSFER OF THIS
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WARRANT IS ALSO RESTRICTED BY AN AGREEMENT DATED MAY 1, 1993. A COPY OF WHICH
IS AVAILABLE FROM THE ISSUER.
5.
(a) The provision of this Section 5 shall be binding upon any
transferee of the Warrant and upon each holder of shares of Common
Stock or other Company securities issued upon exercise of the Warrant
(the "Shares") until such Shares shall have been sold to the public
pursuant to either an effective registration statement under the
Securities Act of 1933, as amended (the 1933 Act") or an exemption
from registration established to the satisfaction of the Company. You
and each transferee will cause any proposed transferee of the Shares
to agree to take and hold the Shares subject to the provisions of this
Section 5. As used in this Section 5, the term "Shares" includes any
shares of the Company's Common Stock or other securities issued in
respect of the Shares pursuant to any stock split, stock dividend,
recapitalization or otherwise; and the term "Warrant" includes any
warrant or warrants issued in exchange for the original Warrant.
(b) Prior to any proposed transfer of the Warrant or of the Shares,
the holder thereof shall give written notice to the Company stating
such holder's intention to effect such transfer and describing the
circumstances of the proposed transfer in sufficient detail,
accompanied by either (i) an opinion of counsel reasonably
satisfactory to the Company to the effect that the proposed transfer
may be effected without registration under the Securities Act, or (ii)
a "no action" letter from the staff of the Securities and Exchange
Commission to the effect that the staff will not recommend that
enforcement action be taken if the proposed transfer is effected
without registration. Subject to evidence of compliance with any
applicable state securities or "blue sky" law or laws, the Company
shall promptly notify the holder in writing that such holder may
proceed with its transfer as described, and, if the transfer is of
Shares, shall instruct its transfer agent to remove any stop-transfer
restrictions against the Shares when transferred as proposed.
(c) If the Company at any time after the Warrant first becomes
exercisable and prior to December 31, 1995 proposes to register any of
its securities, either for its own account or the account of security
holders, other than a registration on Forms S-8 or S-14, or any
registration on a form which does not permit secondary sales, the
Company shall, each such time, give written notice of such intention
to each holder of Warrants or Shares ("Holder"), and, upon written
request of any Holder received by the company within twenty (20) days
after the Company has given such notice, include in such registration
(and all related qualifications under state securities laws) all
Shares (whether issued or issuable) specified in such written request.
If the registration involves any underwriting, the Company shall so
advise the Holders in the notice, and the right of each Holder to have
its Shares included in the registration shall be conditioned upon such
Holder's Shares being included in the underwriting arrangements with
underwriters (selected by the Company) on the same terms as other
persons selling common stock or other Company securities to the
underwriters. Notwithstanding the foregoing, if the underwriters
determine that marketing factors require a limitation of the number of
shares to be underwritten, the number of Shares to be registered for
the account of all Holders may be limited in proportion to limitations
imposed on other holders of Company Common Stock or other Company
securities seeking to have their securities included in the
registration pursuant to registration rights similar to those
conferred upon Holders by this paragraph (c); provided, however, that
priority may be given to securities to be sold for the account of the
Company. The allocation shall be made in proportion, as nearly as
practicable, to the respective number of shares requested to be
included in such registration by each person selling Company Common
Stock or other company securities to the underwriters, including
Holders. Any Holder disapproving of the terms of the underwriting may
withdraw therefrom by written notice to the Company, and such Holder's
Shares shall be withdrawn from registration.
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(d) All expenses of registration and qualification incurred in
connection with a registration under paragraph (c) of this Section 5
shall be borne by the Company, except that each Holder whose Shares
are being registered shall bear the fees and expenses of its own
counsel, if any, and the underwriting commission or discount
applicable to its Shares being sold. The Company will keep the
Holders participating in a registration advised of the status of the
registration and will furnish such number of preliminary and final
prospectuses as such Holders may reasonably request; and such Holders
will furnish to the Company such information regarding such Holders as
may be required in connection with the registration.
(e) The following provisions shall apply to any registration effected
pursuant to paragraph (c) of this Section 5:
(i) The Company shall indemnify and hold harmless such Holder
and each underwriter of the Shares so registered or qualified
(including any broker or dealer through whom such securities may
be sold) and each person, if any, who controls any such Holder or
any such underwriter within the meaning of the Securities Act
from and against any and all losses, claims, damages, expenses or
liabilities, joint and several, to which they or any of them may
become subject under the Securities Act or under any other
statute or at common law or otherwise, and, except as hereinafter
provided, will reimburse each Holder and each of the underwriters
and each such controlling person, if any, for any legal or other
expenses reasonably incurred by any of them in connection with
investigating or defending any actions, whether or not resulting
in any liability, insofar as such losses, claims, damages,
expenses, liabilities or actions arise out of or are based upon
any untrue statement or alleged untrue statement of a material
fact contained in the registration statement, any preliminary
prospectus or the final prospectus (or the registration statement
or prospectus as from time to time amended or supplemented by the
Company) or arise out of or are based upon 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 not misleading, unless such untrue statement or omission
was made in reliance upon and in conformity with information
furnished in writing to the Company in connection therewith by
such Holder or underwriter expressly for use therein. Promptly
after receipt by any Holder or any underwriter or any person
controlling such Holder or such underwriter of notice of the
commencement of any action in respect of which indemnity may be
sought against the Company, such Holder or such underwriter, as
the case may be, will notify the Company in writing of the
commencement thereof, and, subject to the provisions hereinafter
stated, the Company shall assume the defense of such action
(including the employment of counsel, who shall be counsel
satisfactory to such Holder or such underwriter or such person,
as the case may be, and the payment of legal expenses) insofar as
such action shall relate to any alleged liability in respect of
which indemnity may be sought against the Company. Any Holder or
any underwriter or any such controlling person shall have the
right to employ separate counsel in any such action and to
participate in the defense thereof but the fees and expenses of
such counsel shall not be at the expense of the Company unless
the employment of such counsel has been specifically authorized
by the Company, which authorization shall be given whenever the
party seeking indemnity has been advised by its counsel that one
or more legal defenses may be available to it that are not
available to the Company or that for other reasons separate
representation may be necessary, to avoid a conflict. The
Company shall not be liable to indemnify any person for any
settlement of any such action effected without the consent of the
Company.
(ii) Any Holder will indemnify and hold harmless the Company,
each of its directors and each of its officers who have signed
the registration statement and each person, if any, who controls
the Company within the meaning of the Securities Act from and
against any and all losses, claims, damages, expenses of
liabilities, joint and several, to which they are or any of them
may become subject under the
Page 3 of 4
Securities Act or under any other statute or at common law or
otherwise, and, except as hereinafter provided, will reimburse
the Company and each such director, officer or controlling
person for any legal and other expenses reasonably incurred by
any of them in connection with investigating or defending any
actions, whether or not resulting in any liability, insofar as
such losses, claims, damages, expenses, liabilities or actions
arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the
registration statement, in any preliminary prospectus or in
the final prospectus (or the registration statement or
prospectus as from time to time amended or supplemented) or
arise out of or are based upon 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 not misleading, but only insofar as any such statement
or omission was made in reliance upon and in conformity with
information furnished in writing to the Company in connection
therewith by such Holder expressly for use therein. Promptly
after receipt of notice of the commencement of any action in
respect of which indemnity may be sought against any Holder,
the Company will notify such Holder in writing of the
commencement thereof, and such Holder shall, subject to the
provisions hereinafter stated, assume the defense of such
action (including the employment of counsel, who shall be
counsel satisfactory to the Company, and the payment of legal
expenses) insofar as such action shall relate to an alleged
liability in respect of which indemnity may be sought against
such Holder. The Company and each such director, officer or
controlling person shall have the right to employ separate
counsel in any such action and to participate in the defense
thereof but the fees and expenses of such counsel shall not be
at the expense of such Holder unless the employment of such
counsel has been specifically authorized by such Holder, which
authorization shall be given whenever separate representation
may be necessary to avoid a conflict. No Holder shall be
liable to indemnify any person or any settlement of any such
action effected without the consent of such Holder.
(iii) The indemnity provisions of this paragraph (e) shall be
in addition to any liability the indemnitor may otherwise have.
If the foregoing correctly sets forth our understanding, please sign below.
Very truly yours,
DYNECO CORPORATION,
By /s/ Donald Hewitt
----------------------------------
Donald Hewitt, Assistant Secretary
Accepted as of the date written above:
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- -----------------------------------
Warrant Holder(s)
DYNECO CORPORATION
5151 Edina Industrial Blvd - Suite 105
Minneapolis, MN 55439
612-832-0832
Donald Hewitt 612-633-1501
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