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OMB APPROVAL
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 1)*
Datalink Systems Corporation
- -------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, par value $.001 per share
- -------------------------------------------------------------------------------
(Title of Class of Securities)
23804 A 10 7
- -------------------------------------------------------------------------------
(CUSIP Number)
Michael Lyall, 830 Third Avenue, Fourth Floor, New York, NY 10022
- -------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
November 5, 1997
- -------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box /_/.
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
(Continued on the following page(s))
Page 1 of 65 Pages
<PAGE>
- -------------------------------------------------------------------------------
CUSIP No. 23804 A 10 7 13D Page 2 of 65 Pages
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Commonwealth Associates
13-3467952
- ------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- ------------------------------------------------------------------------------
3 SEC USE ONLY
- ------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- ------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
- ------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OR ORGANIZATION
NEW YORK
- -------------------------------------------------------------------------------
| |
NUMBER OF | 7 | SOLE VOTING POWER
SHARES | |
BENEFICIALLY |_____|________________________________________________________
OWNED BY | |
EACH | 8 | SHARED VOTING POWER
REPORTING | | 1,000,000
PERSON WITH |_____|________________________________________________________
| |
| 9 | SOLE DISPOSITIVE POWER
| |
|-----|--------------------------------------------------------
| |
| 10 | SHARED DISPOSITIVE POWER
| | 9,243,826
- ---------------|-----|---------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
9,243,826
- ------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
- ------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
32.5%
- ------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT
<PAGE>
- -------------------------------------------------------------------------------
CUSIP No. 23804 A 10 7 13D Page 3 of 65 Pages
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Michael S. Falk
- ------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- ------------------------------------------------------------------------------
3 SEC USE ONLY
- ------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- ------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
- ------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OR ORGANIZATION
USA
- -------------------------------------------------------------------------------
| |
NUMBER OF | 7 | SOLE VOTING POWER
SHARES | | 400,000
BENEFICIALLY |_____|________________________________________________________
OWNED BY | |
EACH | 8 | SHARED VOTING POWER
REPORTING | | 1,000,000
PERSON WITH |_____|________________________________________________________
| |
| 9 | SOLE DISPOSITIVE POWER
| | 400,000
|-----|--------------------------------------------------------
| |
| 10 | SHARED DISPOSITIVE POWER
| | 9,243,826
- ---------------|-----|---------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
9,643,826
- ------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
- ------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
33.5%
- ------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT
<PAGE>
- -------------------------------------------------------------------------------
CUSIP No. 23804 A 10 7 13D Page 4 of 65 Pages
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Robert Priddy
- ------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- ------------------------------------------------------------------------------
3 SEC USE ONLY
- ------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- ------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
- ------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OR ORGANIZATION
USA
- -------------------------------------------------------------------------------
| |
NUMBER OF | 7 | SOLE VOTING POWER
SHARES | | 1,000,000
BENEFICIALLY |_____|________________________________________________________
OWNED BY | |
EACH | 8 | SHARED VOTING POWER
REPORTING | |
PERSON WITH |_____|________________________________________________________
| |
| 9 | SOLE DISPOSITIVE POWER
| | 1,000,000
|-----|--------------------------------------------------------
| |
| 10 | SHARED DISPOSITIVE POWER
| |
- ---------------|-----|---------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,000,000
- ------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
- ------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
4.7%
- ------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT
<PAGE>
Page 5 of 65 Pages
Item 1. Security and Issuer.
This statement relates to the common stock, par value $.001 per
share ("Common Stock"), of Datalink Systems Corporation, a Nevada
corporation (the "Company"). The address of the Company's principal
executive office is 1735 Technology Drive, Suite 790, San Jose, CA
95110.
The shares of Common Stock that are the subject of this statement
are issuable (i) upon exercise of warrants (the "Agent's Warrants")
issued to Commonwealth to purchase 8,243,826 shares of Common
Stock, subject to adjustment in certain instances, at an exercise
price of $.375 per share, and (ii) upon conversion of the shares of
the Company's Series A Convertible Preferred stock, par value $.001
per share (the "Series A Preferred Stock"), initially at a
conversion rate of ten shares of Common Stock for each share of
Series A Preferred Stock, subject to adjustment in certain
instances.
Item 2. Identity and Background.
This statement is filed jointly by Commonwealth Associates
("Commonwealth"), a limited partnership organized under the laws of
New York, whose principal business is investment banking and
advisory services, Michael S. Falk and Robert Priddy (the
"Reporting Persons"). Mr Falk is the Chairman and controlling
equity owner of Commonwealth and Mr. Priddy, a director and
principal equity owner of Commonwealth, is Chairman of ValuJet
Airlines. The business address for Commonwealth and Mr. Falk is 830
Third Avenue, 4th Floor, New York, New York 10022 and the business
address for Mr. Priddy is 1800 Phoenix Blvd., Atlanta, GA 30349.
During the past five years, none of the Reporting Persons has been
convicted in a criminal proceeding or been a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding, was or is subject
to a judgment, decree or final order enjoining future violations
of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such
laws.
Item 3. Source and Amount of Funds or Other Consideration.
Commonwealth acquired the Agent's Warrants on November 5, 1997 for
a purchase price of $37.50 with funds provided from working capital
pursuant to an Agency Agreement dates as of September 24, 1997, and
as amended on October 31, 1997 with the Company (together, the
"Agency Agreement") filed as Exhibit (1) hereto, pursuant to which
Commonwealth acted as placement agent in connection with a private
placement (the "Private Placement") of Units (the "Units"), each
Unit consisting of 40,000 shares of Series A Preferred Stock and
200,000 warrants (the "Warrants") to purchase the Company's Common
Stock. In no case were any funds borrowed. The Warrants are
exercisable at $.50 per share for a period commencing the later of
November 5, 1998 or the date which the Company files an amendment
to its articles of incorporation increasing its authorized shares
of Common Stock to not less than 70,000,000 and expiring on
November 5, 2002. The Agent's Warrants are exercisable at any time
during the five-year period commencing November 5, 1997 and
terminating on November 5, 2002 at an exercise price of $.375 per
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Page 6 of 65 Pages
share. Further, the Agent's Warrants are convertible, at the option
of Commonwealth, into an equal number of warrants with identical
terms as the Warrants.
Mr. Falk acquired 40,000 Shares of Series A Preferred Stock in the
Private Placement, initially convertible into 400,000 shares of
Common Stock, for a purchase price of $150,000, which amount was
provided form Mr. Falk's personal funds. In no case were any funds
borrowed.
Mr. Priddy acquired 100,000 Shares of Series A Preferred Stock in
the Private Placement, initially convertible into 1,000,000 shares
of Common Stock, for a purchase price of $375,000, which amount was
provided by Mr. Priddy's personal funds. In no case were any funds
borrowed.
Item 4. Purpose of Transaction.
The Agent's Warrants were acquired by Commonwealth as compensation
for its services in connection with the Private Placement solely
for investment purposes and not for the purpose of acquiring
control of the Company. The Series A Preferred Stock was acquired
by each of Messrs. Falk and Priddy to make a profitable investment.
The text of Item 5 of the Company's Current Report on Form 8-K
filed on December 5, 1997, and Item 1 of the Company's Quarterly
Report on Form 10QS-B for its fiscal quarter ended September 30,
1997, are hereby incorporated herein by reference to describe the
components of the transaction pursuant to which the Series A
Preferred Stock, Warrants and Agent's Warrants were issued by the
Company.
The Company does not currently have available sufficient shares of
Common Stock to issue such shares to all persons who are entitled
thereto upon the conversion of currently outstanding Shares of
Series A Preferred Stock and exercise of the Warrants and the
Agent's Warrants. Accordingly, the Company has agreed to propose,
at its next annual meeting of stockholders, an increase in the
number of shares of Common Stock authorized for issuance to
80,000,000 shares. The Reporting Persons intend to vote in favor of
such proposal.
Other than as set forth above, the Reporting Persons have no
present plans or proposals which relate to, or could result in, any
of the matters referred to in paragraphs (a) through (j),
inclusive, of Item 4 of Schedule 13D. The Reporting Persons may, at
any time and from time to time, review or reconsider their position
and formulate plans or proposals with respect thereto, but have no
present intention of doing so.
Item 5. Interest in Securities of the Issuer.
(a) Commonwealth is the beneficial owner of a total of 9,243,826
shares of Common Stock, representing approximately 32.5% of
the issued and outstanding shares of Common Stock of the
Company. Mr. Falk is the beneficial owner of an aggregate
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Page 7 of 65 Pages
of 9,643,826 shares of Common Stock, consisting of 400,000
Shares of Common Stock which he has the right to acquire at
any time upon conversion of the shares of Series A Preferred
Stock held by him and the 9,243,826 shares of Common Stock
beneficially owned by Commonwealth, representing
approximately 33.5% of the issued and outstanding shares of
Common Stock of the Company. In his capacity as Chairman and
controlling equity owner of Commonwealth, Mr. Falk shares
voting and dispositive power with respect to the securities
beneficially owned by Commonwealth and may be deemed to be
the beneficial owner of such securities. The shares
beneficially owned by Mr. Falk do not include shares of
Common Stock issuable upon exercise of 200,000 Warrants
issued to him in connection with his purchase of Units in
the Private Placement, which Warrants are not exercisable
within 60 days of the date hereof. Mr. Priddy is the
beneficial owner of 1,000,000 Shares of Common Stock which
he has the right to acquire at any time upon conversion of
the shares of Series A Preferred Stock held by him. The
shares beneficially owned by Mr. Priddy do not include (i)
shares of Common Stock issuable upon exercise of 500,000
Warrants issued to him in connection with his purchase of
Units in the Private Placement, which Warrants are not
exercisable within 60 days of the date hereof, and (ii) the
shares of Common Stock beneficially owned by Commonwealth,
as to which Mr. Priddy disclaims beneficial ownership.
The percentages of outstanding shares of Common Stock of the
Company set out in the preceding paragraph is computed based
on a total of 20,182,925 shares of Common Stock outstanding
as of November 20, 1997.
(b) Number of shares as to which each such person has:
(i) sole power to vote or to direct the vote:
Mr. Falk and Mr. Priddy have the sole power to vote
or to direct the vote of the 400,000 shares and
1,000,000 shares of Common Stock beneficially owned
by each of them.
(ii) shared power to vote or to direct the vote:
Commonwealth and Mr. Falk share the power to vote
or direct the vote of the 1,000,000 shares of
Common Stock beneficially owned by Commonwealth. On
November 13, 1997, Commonwealth granted to Anthony
LaPine, president of the Company, an irrevocable
proxy (the "Proxy") filed as Exhibit 3 hereto to
vote the 8,243,826 shares of Common Stock issuable
upon exercise of the Agent's Warrants for a period
of one year and, accordingly, neither Commonwealth
or Mr. Falk has the power to vote or to direct the
vote of such shares during the term of the Proxy.
<PAGE>
Page 8 of 65 Pages
(iii) sole power to dispose or to direct the disposition of:
Mr. Falk and Mr. Priddy have the sole power to
dispose or to direct the disposition of the 400,000
shares and 1,000,000 shares of Common Stock
beneficially owned by each of them.
(iv) shared power to dispose of or to direct the disposition
of:
Commonwealth and Mr. Falk share the power to
dispose or direct the disposition of all of the
9,243,826 shares of Common Stock beneficially owned
by Commonwealth.
(c) Inapplicable
(d) Inapplicable
(e) Inapplicable
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
Under the terms of the Proxy, Commonwealth granted Anthony LaPine a
one-year irrevocable proxy to vote the 8,243,826 shares of Common
Stock issuable upon exercise of the Agent's Warrants and any
additional shares of Common Stock issued or issuable in respect of
the Agent's Warrants during the term of the Proxy. The Proxy shall
terminate prior to November 5, 1998 (i) upon the death or
disability of Mr. LaPine, (ii) if Mr. LaPine is no longer serving
as the Chairman or Chief Executive Officer of the Company, or (iii)
if Commonwealth and its affiliates beneficially own less than 10%
of the outstanding Common Stock of the Company.
Pursuant to the Agency Agreement, Commonwealth has the right until
November 5, 1999 to nominate one person for election to the Board
of Directors of the Company.
Under the terms of the Subscription Agreement filed as Exhibit 4
hereto between the Company and the purchasers of Series A Preferred
Stock in the Private Placement, the Company is required to prepare
and file a registration statement with the Securities and Exchange
Commission (the "SEC") with respect to the Series A Preferred
Stock, the Warrants and the shares of Common Stock underlying the
Warrants and the Series A Preferred Stock. Pursuant to the terms of
the Agent's Warrant filed as Exhibit 5 hereto, the Company has
agreed to register the shares of Common Stock underlying the
Agent's Warrants with the SEC under certain circumstances.
<PAGE>
Page 9 of 65 Pages
Item 7. Materials to be Filed as Exhibits.
(1) Agency Agreement dated as of September 24, 1997 and
Amendment No. 1 thereto dated as of October 31, 1997 between
Commonwealth and the Company.
(2) Certificate of Designation relating to Series A Preferred
Stock, incorporated by reference to Exhibit 99 of the
Company's Current Report on Form 8-K filed with the SEC on
December 5, 1997.
(3) Irrevocable Proxy dated as of November 13, 1997 between
Commonwealth and Anthony LaPine.
(4) Subscription Agreement regarding purchase of the Company's
Series A Preferred Stock.
(5) Warrant dated November 5, 1997 to purchase 8,243,826 shares
of Common Stock issued to Commonwealth.
(6) Joint Statement on Schedule 13D, as required by Rule
13d-1(f)(1) under the Exchange Act.
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Page 10 of 65 Pages
SIGNATURES
After reasonable inquiry and to the best of my knowledge and
belief, the undersigned certify that the information set forth in this
statement is true, complete and correct.
Dated: December 9, 1997 Commonwealth Associates
New York, New York
By: /s/ Michael S. Falk
-----------------------------
Michael S. Falk
Chief Executive Officer
Dated: December 9, 1997 /s/ Michael S. Falk
New York, New York -----------------------------
Michael S. Falk
Dated: December 9, 1997 /s/ Robert Priddy
Atlanta, Georgia -----------------------------
Robert Priddy
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Page 11 of 65 Pages
EXHIBIT INDEX
Exhibit No. Page
(1) Agency Agreement dated as of September 24, 1997 and
Amendment No. 1 thereto dated as of October 31, 1997
between Commonwealth and the Company...................................12
(2) Certificate of Designation relating to Series A Preferred Stock,
incorporated by reference to Exhibit 99 of the Company's Current Report
on Form 8-K filed with the SEC on December 5, 1997
(3) Irrevocable Proxy dated as of November 13, 1997 between
Commonwealth and Anthony LaPine........................................34
(4) Subscription Agreement regarding purchase of the Company's
Series A Preferred Stock...............................................36
(5) Warrant dated November 5, 1997 to purchase 8,243,826 shares
of Common Stock issued to Commonwealth.................................50
(6) Joint Statement on Schedule 13D, as required by Rule 13d-1(f)(1)
under the Exchange Act.................................................65
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Page 12 of 65 Pages
Exhibit 1
DATALINK SYSTEMS CORPORATION
AGENCY AGREEMENT
Commonwealth Associates
830 Third Avenue
New York, New York 10023
September 24, 1997
Gentlemen:
Datalink Systems Corporation, a Nevada corporation (the
"Company"), proposes to offer for sale to "accredited investors", in a private
placement, units ("Units"), each Unit consisting 40,000 shares (the "Shares")
of Series A Convertible Preferred Stock, par value $.001 per share (the
"Preferred Stock") and 200,000 common stock purchase warrants ("Warrants").
Such offering and sale are referred to herein as the "Offering." Each Warrant
will be exercisable during the four-year period commencing one year after the
initial closing to purchase one share of the Company's Common Stock, $.001 par
value (the "Common Stock"), at a an exercise price of $.50 per share. A
minimum of 27 Units ("Minimum Offering") and a maximum of 54 Units ("Maximum
Offering") will be sold in the Offering at $150,000 per Unit. The Units will
be offered pursuant to those terms and conditions acceptable to you as
reflected in the Private Placement Memorandum (the "Memorandum"). Of the
Units, 27 will be offered on a "best efforts - all-or-none" basis and the
remaining 27 Units will be offered on a "best efforts" basis. The Maximum
Offering may be increased by up to seven Units at the discretion of the
Company and the Placement Agent (as defined below) in the event of
over-subscription (the "Over-Allotment Option"). The Units are being offered
pursuant to the Memorandum and related documents in accordance with Section
4(2) of the Securities Act of 1933, as amended (the "Securities Act") and
Regulation D promulgated thereunder.
Commonwealth Associates is sometimes referred to herein as
the "Placement Agent." The Memorandum (including the exhibits thereto), as it
may be amended from time to time, and the form of proposed subscription
agreement between the Company and each subscriber (the "Subscription
Agreement") and the exhibits which are part of the Memorandum and/or
Subscription Agreement are collectively referred to herein as the "Offering
Documents."
The Company will prepare and deliver to the Placement Agent
a reasonable number of copies of the Offering Documents in form and substance
satisfactory to counsel to the Placement Agent.
Each prospective investor subscribing to purchase Units
("Subscriber") will be required to deliver, among other things, a Subscription
Agreement and a confidential purchaser
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Page 13 of 65 Pages
questionnaire ("Questionnaire") in the form to be provided to offerees.
Capitalized terms used herein, unless otherwise defined or unless the context
otherwise indicates, shall have the same meanings provided in the Offering
Documents.
1. Appointment of Placement Agent.
(a) You are hereby appointed exclusive Placement
Agent of the Company (subject to your right to have Selected Dealers, as
defined in Section 1(c) hereof, participate in the Offering) during the
Offering Period herein specified for the purposes of assisting the Company in
finding qualified Subscribers pursuant to the offering (the "Offering")
described in the Offering Documents. The Offering Period shall commence on the
day (the "Commencement Date") the Offering Documents are first made available
to you by the Company for delivery in connection with the offering for sale of
the Units and shall continue until the earlier to occur of (i) the sale of all
of the Maximum Offering or (ii) 60 days after the Commencement Date (unless
extended for a period of up to 60 days under circumstances specified in the
Memorandum). If the Minimum Offering is not sold prior to the end of the
Offering Period, the Offering will be terminated and all funds received from
Subscribers will be returned, without interest and without any deduction. The
day that the Offering Period terminates is hereinafter referred to as the
"Termination Date."
(b) Subject to the performance by the Company of
all of its obligations to be performed under this Agreement and to the
completeness and accuracy of all representations and warranties of the Company
contained in this Agreement, Commonwealth Associates hereby accepts such
agency and agrees to use its best efforts to assist the Company in finding
qualified subscribers pursuant to the Offering described in the Offering
Documents. It is understood that the Placement Agent has no commitment to sell
the Units. Your agency hereunder is not terminable by the Company except upon
termination of the Offering Period.
(c) You may engage other persons, selected by you
in your discretion, that are members of the National Association of Securities
Dealers, Inc., ("NASD") and that have executed a Selected Dealers Agreement
substantially in the form attached hereto as Schedule A, to assist you in the
Offering (each such person being hereinafter referred to as a "Selected
Dealer") and you may allow such persons such part of the compensation and
payment of expenses payable to you hereunder as you shall determine. Each
Selected Dealer shall be required to agree in writing to comply with the
provisions of, and to make the representations, warranties and covenants
contained in, this Section 1.
(d) Subscriptions for Units shall be evidenced by
the execution by Subscribers of a Subscription Agreement. No Subscription
Agreement shall be effective unless and until it is accepted by the Company.
Until the Closing, all subscription funds received shall be held as described
in the Subscription Agreement. The Placement Agent shall not have any
obligation to independently verify the accuracy or completeness of any
information contained in any Subscription Agreement or the authenticity,
sufficiency, or validity of any check delivered by any prospective investor in
payment for Units.
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Page 14 of 65 Pages
(e) The Placement Agent and its affiliates may
purchase Units sold in the Offering.
2. Representations and Warranties of the Company. The
Company represents and warrants to the Placement Agent and each Selected
Dealer, if any, as follows:
(a) Securities Law Compliance. The Offering
Documents conform in all respects with the requirements of Section 4(2) of the
Securities Act and Regulation D promulgated thereunder and with the
requirements of all other published rules and regulations of the Securities
and Exchange Commission (the "Commission") currently in effect relating to
"private offerings" to "accredited investors" of the type contemplated by the
Company. The Offering Documents will not contain an untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements therein, in light of the circumstances in which they were made,
not misleading. If at any time prior to the completion of the Offering or
other termination of this Agreement any event shall occur as a result of which
it might become necessary to amend or supplement the Offering Documents so
that they do not include any untrue statement of any material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances then existing, not misleading, the Company will
promptly notify you and will supply you with amendments or supplements
correcting such statement or omission. The Company will also provide the
Placement Agent for delivery to all offerees and purchasers and their
representatives, if any, any information, documents and instruments which the
Placement Agent deems necessary to comply with applicable state and federal
law.
(b) Organization. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Nevada and has all requisite corporate power and authority to own and
lease its properties, to carry on its business as currently conducted and as
proposed to be conducted, to execute and deliver this Agreement and to carry
out the transactions contemplated by this Agreement, as appropriate, and is
duly licensed or qualified to do business as a foreign corporation in
California and in each other jurisdiction in which the conduct of its business
or ownership or leasing of its properties requires it to be so qualified,
except where the failure to be so licensed or qualified would not, in the
aggregate, have a material adverse effect on the business or financial
condition of the Company (a "Material Adverse Effect").
(c) Capitalization. The authorized, issued and
outstanding capital stock of the Company prior to the consummation of the
transactions contemplated hereby is as set forth in the Offering Documents.
All issued and outstanding shares of the Company are validly issued, fully
paid and nonassessable and have not been issued in violation of the preemptive
rights of any stockholder of the Company. All prior sales of securities of the
Company were either registered under the Act and applicable state securities
laws or exempt from such registration, and no security holder has any
rescission rights with respect thereto.
(d) Warrants, Preemptive Rights, Etc. Except for
the warrants to purchase shares of the Company's Common Stock to be issued to
you or your designees in consideration for your acting as Placement Agent
hereunder (the "Agent's Warrants"), and except as set forth in or contemplated
by the Memorandum, there are not, nor will there be immediately after the
Closing
<PAGE>
Page 15 of 65 Pages
(as hereinafter defined), any outstanding warrants, options, agreements,
convertible securities, preemptive rights to subscribe for or other
commitments pursuant to which the Company is, or may become, obligated to
issue any shares of its capital stock or other securities of the Company and
this Offering will not cause any anti-dilution adjustments to such securities
or commitments except as reflected in the Memorandum.
(e) Subsidiaries and Investments. The Company has
no subsidiaries other than Datalink Communications Corporation and DSC
Datalink Systems Corporation (each a "Subsidiary" and collectively, the
"Subsidiaries"), and the Company does not own, directly or indirectly, any
capital stock or other equity ownership or proprietary interests in any other
corporation, association, trust, partnership, joint venture or other entity.
Each of the Subsidiaries is a corporation duly organized and validly existing
under the laws of the state of its respective incorporation. The Company owns
all of the capital stock of the Subsidiaries free and clear of all liens,
security interests and encumbrances.
(f) Financial Statements. The financial
information contained in the Offering Documents is accurate in all material
respects. The financial statements attached to the Offering Documents are
hereinafter referred to collectively as the "Financial Statements". The
Financial Statements have been prepared in conformity with generally accepted
accounting principles consistently applied and show all material liabilities,
absolute or contingent, of the Company required to be recorded thereon and
present fairly the financial position and results of operations of the Company
as of the dates and for the periods indicated.
(g) Absence of Changes. Since the date of the
Memorandum, except with respect to matters of which the Company has notified
you in writing, the Company has not incurred any liabilities or obligations,
direct or contingent, not in the ordinary course of business, or entered into
any transaction not in the ordinary course of business, which is material to
the business of the Company, and, except as set forth in Schedule G to this
Agreement there has not been any change in the capital stock of, or any
incurrence of long-term debt by, the Company, or any issuance of options,
warrants or other rights to purchase the capital stock of the Company, or any
adverse change or any development involving, so far as the Company can now
reasonably foresee, a prospective adverse change in the condition (financial
or otherwise), net worth, results of operations, business, key personnel or
properties which would be material to the business or financial condition of
the Company, and the Company has not become a party to, and neither the
business nor the property of the Company has become the subject of, any
material litigation whether or not in the ordinary course of business.
(h) Title. Except as set forth on Schedule H
hereto, the Company has good and marketable title to all properties and
assets, owned by it, free and clear of all liens, charges, encumbrances or
restrictions, except such as are not significant or important in relation to
the Company's business; all of the material leases and subleases under which
the Company is the lessor or sublessor of properties or assets or under which
the Company holds properties or assets as lessee or sublessee are in full
force and effect, and the Company is not in default in any material respect
with respect to any of the terms or provisions of any of such leases or
subleases, and no material claim has been asserted by anyone adverse to rights
of the Company as lessor, sublessor, lessee or
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Page 16 of 65 Pages
sublessee under any of the leases or subleases mentioned above, or affecting
or questioning the right of the Company to continued possession of the leased
or subleased premises or assets under any such lease or sublease. The Company
owns or leases all such properties as are necessary to its operations as now
conducted.
(i) Proprietary Rights. Except as set forth in
Schedule I hereto, the Company owns or possesses adequate and enforceable
rights to use all patents, patent applications, trademarks, service marks,
copyrights, trade secrets, processes, formulations, technology or know-how
used in the conduct of its business as described in the Memorandum and will
own or possess such rights with respect to the business to be conducted as
contemplated by the Memorandum (the "Proprietary Rights"). The Company has not
received any notice of any claims, nor does it have any knowledge of any
threatened claims, and knows of no facts which would form the basis of any
claim, asserted by any person to the effect that the sale or use of any
product or process now used or offered by the Company or proposed to be used
or offered by the Company infringes on any patents or infringes upon the use
of any such Proprietary Rights of another person and, to the best of the
Company's knowledge, no others have infringed the Company's Proprietary
Rights.
(j) Litigation. There is no material action, suit,
investigation, customer complaint, claim or proceeding at law or in equity by
or before any arbitrator, governmental instrumentality or other agency now
pending or, to the knowledge of the Company, threatened against the Company
(or basis therefor known to the Company) the adverse outcome of which would
have a Material Adverse Effect. The Company is not subject to any judgment,
order, writ, injunction or decree of any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign which have a Material Adverse Effect.
(k) Non-Defaults; Non-Contravention. Except as set
forth in Sections 3(b)(ii) and 4(o) hereof, the Company is not in violation of
or default under, nor will the execution and delivery of this Agreement or any
of the Offering Documents, the Fund Escrow Agreement, the Shares, the
Warrants, the Advisory Agreement or the Agent's Warrants (all as defined
herein) or consummation of the transactions contemplated herein or therein
result in a violation of or constitute a default in the performance or
observance of any obligation under (i) its Articles of Incorporation, or its
By-laws, or (ii) any indenture, mortgage, contract, material purchase order or
other agreement or instrument to which the Company is a party or by which it
or its property is bound or affected, where such violation or default would
have a Material Adverse Effect, or (iii) any material order, writ, injunction
or decree of any court of any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, where such violation or default would have a Material Adverse Effect,
and there exists no condition, event or act which constitutes, nor which after
notice, the lapse of time or both, could constitute a default under any of the
foregoing, which in either case would have a Material Adverse Effect.
(l) Taxes. The Company has filed all Federal,
state, local and foreign tax returns which are required to be filed by it and
all such returns are true and correct in all material respects. The Company
has paid all taxes pursuant to such returns or pursuant to any assessments
received by it or which it is obligated to withhold from amounts owing to any
employee, creditor or third party. The Company has properly accrued all taxes
required to be accrued by generally
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Page 17 of 65 Pages
accepted accounting principals consistently applied. The tax returns of the
Company have never been audited by any state, local or Federal authorities.
The Company has not waived any statute of limitations with respect to taxes or
agreed to any extension of time with respect to any tax assessment or
deficiency.
(m) Compliance With Laws; Licenses, Etc. The
Company has not received notice of any violation of or noncompliance with any
Federal, state, local or foreign, laws, ordinances, regulations and orders
applicable to its business which has not been cured, the violation of, or
noncompliance with which, would have a Material Adverse Effect. The Company
has all licenses and permits and other governmental certificates,
authorizations and permits and approvals (collectively, "Licenses") required
by every Federal, state and local government or regulatory body for the
operation of its business as currently conducted and the use of its
properties, except where the failure to be licensed would not have a Material
Adverse Effect. The Licenses are in full force and effect and to the Company's
knowledge no violations currently exist in respect of any License and no
proceeding is pending or threatened to revoke or limit any thereof.
(n) Authorization of Agreement, Etc. This
Agreement has been duly and validly authorized, executed and delivered by the
Company and the execution, delivery and performance by the Company of this
Agreement, the Subscription Agreement, the Fund Escrow Agreement, the Warrant
Agreement and the Advisory Agreement have been duly authorized by all
requisite corporate action by the Company and when delivered, constitute or
will constitute the legal, valid and binding obligations of the Company,
enforceable in accordance with their respective terms, subject to applicable
laws regarding insolvency and to principles of equity.
(o) Authorization of Shares and Warrants Etc. The
issuance, sale and delivery of the Shares and Warrants and the Agent's
Warrants have been duly authorized by all requisite corporate action of the
Company. When so issued, sold and delivered, the Shares and the Warrants and
the Agent's Warrants will be duly executed, issued and delivered and will
constitute valid and legal obligations of the Company enforceable in
accordance with their respective terms and, in each case, will not be subject
to preemptive or any other similar rights of the stockholders of the Company
or others which rights shall not have been waived prior to the Initial
Closing.
(p) Authorization of Reserved Shares. The
issuance, sale and delivery by the Company of the shares of Common Stock
issuable upon conversion of the Shares and exercise of the Warrants and the
Agent's Warrants (the "Reserved Shares") have been duly authorized by all
requisite corporate action of the Company, and the Reserved Shares, upon
filing of the amendment to the Company's articles of incorporation as
described in 4(o) hereof, will be duly reserved for issuance upon conversion
of the Shares and exercise of all or any of the Warrants and exercise of the
Agent's Warrants and when so issued, sold, paid for and delivered, the
Reserved Shares will be validly issued and outstanding, fully paid and
nonassessable, and not subject to preemptive or any other similar rights of
the stockholders of the Company or others which rights shall not have been
waived prior to the Initial Closing.
(q) Exemption from Registration. Assuming (i) the
accuracy of the information provided by the respective Subscribers in the
Subscription Documents and (ii) that the
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Page 18 of 65 Pages
Placement Agent has complied in all material respects with the provisions of
Regulation D promulgated under the Securities Act, the offer and sale of the
Units pursuant to the terms of this Agreement are exempt from the registration
requirements of the Securities Act and the rules and regulations promulgated
thereunder (the "Regulations"). The Company is not disqualified from the
exemption under Regulation D by virtue of the disqualifications contained in
Rule 505(b)(2)(iii) or Rule 507 promulgated thereunder.
(r) Registration Rights. Except with respect to
holders of the Units and the Agent's Warrants, and except as set forth in the
Memorandum, no person has any right to cause the Company to effect the
registration under the Securities Act of any securities of the Company. The
Company shall grant registration rights under the Securities Act to the
investors in the Offering and/or their transferees as more fully described in
the Subscription Agreement between the Company and the investors. The Company
will also grant one demand registration and unlimited "piggyback"
registrations to Commonwealth Associates with respect to its Agent's Warrants
and the Common Stock underlying such securities. The procedure to implement
these registration rights, and limitations thereon, will be as described in
the Agent's Warrants.
(s) Brokers. Neither the Company nor any of its
officers, directors, employees or stockholders has employed any broker or
finder in connection with the transactions contemplated by this Agreement
other than the Placement Agent.
(t) Title to Units. When certificates representing
the securities comprising the Units and/or the Reserved Shares shall have been
duly delivered to the purchasers and payment shall have been made therefor,
the several purchasers shall have good and marketable title to the Shares and
Warrants and/or the Reserved Shares free and clear of all liens, encumbrances
and claims whatsoever (with the exception of claims arising through the acts
or omissions of the purchasers and except as arising from applicable Federal
and state securities laws), and the Company shall have paid all taxes, if any,
in respect of the original issuance thereof.
(u) Right of First Refusal. Except for the right
of first refusal granted to the Placement Agent under Section 4(h) hereof, no
person, firm or other business entity is a party to any agreement, contract or
understanding, written or oral entitling such party to a right of first
refusal with respect to the transactions described in Section 4(h) hereof.
(v) Non-Affiliated Directors. Upon or immediately
after the Initial Closing Date, the Company's Board of Directors will have not
less than one director who qualifies under the criteria of the Nasdaq Stock
Market as an independent director, which director may be a designee of
Commonwealth.
3. Closing; Placement and Fees.
(a) Closing. Provided the Minimum Offering shall
have been subscribed for and funds representing the sale thereof shall have
cleared, a closing (the "Initial Closing") shall take place at the offices of
the Placement Agent, 830 Third Avenue, New York, New York within ten (10) days
following the Termination Date (which date (the "Closing Date") may be
accelerated
<PAGE>
Page 19 of 65 Pages
or adjourned by agreement between the Company and the Placement Agent). At the
Initial Closing, payment for the Units issued and sold by the Company shall be
made against delivery of Shares and the Warrants comprising such Units. In
addition, subsequent closings (if applicable) may be scheduled at the
discretion of the Company and Placement Agent, each of which shall be deemed a
"Closing" hereunder.
(b) Conditions to Placement Agent's Obligations.
The obligations of the Placement Agent hereunder will be subject to the
accuracy of the representations and warranties of the Company herein contained
as of the date hereof and as of each Closing Date, to the performance by the
Company of its obligations hereunder and to the following additional
conditions:
(i) Due Qualification or Exemption. (A) The
offering contemplated by this Agreement will become qualified or be exempt
from qualification under the securities laws of the several states pursuant to
paragraph 4(e) below not later than the Closing Date, and (B) at the Closing
Date no stop order suspending the sale of the Units shall have been issued,
and no proceeding for that purpose shall have been initiated or threatened;
(ii) No Material Misstatements. Neither the
Blue Sky qualification materials nor the Memorandum, nor any supplement
thereto, will contain an untrue statement of a fact which in the opinion of
the Placement Agent is material, or omits to state a fact, which in the
opinion of the Placement Agent is material and is required to be stated
therein, or is necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(iii) Compliance with Agreements. The Company will have
complied with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder at or prior to each Closing;
(iv) Corporate Action. The Company will have taken all
necessary corporate action, including, without limitation, obtaining the
approval of the Company's board of directors, for the execution and delivery
of this Agreement, the performance by the Company of its obligations hereunder
and the offering contemplated hereby;
(v) Opinion of Counsel. The Placement Agent shall receive
the opinion of Pillsbury, Madison & Sutro LLP, dated the Closing(s),
substantially to the effect that:
(A) the Company is validly
existing and in good standing under the laws of the State of Nevada, has all
requisite corporate power and authority necessary to own or hold its
respective properties and conduct its business and is duly qualified or
licensed to do business as a foreign corporation and is in good standing in
the State of California and in each other jurisdiction in which the ownership
or leasing of its properties or conduct of its business requires such
qualification, except where the failure to so qualify or be licensed would not
have a Material Adverse Effect;
<PAGE>
Page 20 of 65 Pages
(B) each of this Agreement, the
Fund Escrow Agreement, the Warrant Agreement, the Subscription Agreement and
the Advisory Agreement has been duly and validly authorized, executed and
delivered by the Company, and is the valid and binding obligation of the
Company, enforceable against it in accordance with its terms, subject to any
applicable bankruptcy, insolvency or other laws affecting the rights of
creditors generally and to general equitable principles;
(C) the authorized, issued and
outstanding capital stock of the Company as of the date hereof (before giving
effect to the transactions contemplated by this Agreement) is as set forth in
the Offering Documents. Except for the Shares, the Warrants and the Agent's
Warrants to be issued as contemplated by this Agreement, to such counsel's
knowledge, there are no outstanding warrants, options, agreements, convertible
securities, preemptive rights or other commitments pursuant to which the
Company is, or may become, obligated to issue any shares of its capital stock
or other securities of the Company other than as set forth in the Memorandum.
All of the issued shares of capital stock of the Company have been duly and
validly authorized and issued, are fully paid and nonassessable and have not
been issued in violation of the preemptive rights of any securityholder of the
Company. The offers and sales of such outstanding securities were either
registered under the Act and applicable state securities laws or exempt from
such registration requirements. The Shares, the Warrants and the Agent's
Warrants have been duly and validly authorized and issued, and the Shares are
fully paid and nonassessable. Except as set forth in Sections 3(b)(xi) and
4(o) hereof, the Reserved Shares will have been duly reserved, and when issued
in accordance with the terms of the Shares and the Warrants and the Agent's
Warrants will be validly issued, fully paid and nonassessable and, to our
knowledge, not subject to preemptive or any other similar rights;
(D) assuming (i) the accuracy of
the information provided by the Subscribers in the Subscription Documents and
(ii) that the Placement Agent has complied with the requirements of section
4(2) of the Securities Act (and the provisions of Regulation D promulgated
thereunder), the issuance and sale of the Units is exempt from registration
under the Securities Act and Regulation D promulgated thereunder;
(E) except as set forth Sections
3(b)(xi) and 4(o) hereof, neither the execution and delivery of this
Agreement, the Warrant Agreement, the Subscription Agreement, or the Advisory
Agreement, nor compliance with the terms hereof or thereof, nor the
consummation of the transactions herein or therein contemplated, nor the
issuance of the Shares, the Warrants or the Agent's Warrants, has, nor will,
conflict with, result in a breach of, or constitute a default under the
Articles of Incorporation or By-laws of the Company, or any material contract,
instrument or document known to us to which the Company is a party, or by
which it or any of its properties is bound or violate any applicable law,
rule, regulation, judgment, order or decree known to us of any governmental
agency or court having jurisdiction over the Company or any of its properties
or business (such opinion to be given, with respect to the identity of
material contracts, instruments and documents, in reliance on a certificate of
the Company's Chief Executive Officer);
(F) there are no claims, actions,
suits, investigations or proceedings known to us before or by any arbitrator,
court, governmental authority or
<PAGE>
Page 21 of 65 Pages
instrumentality pending or threatened against or affecting the Company or
involving the properties of the Company which might materially and adversely
affect the business, properties or financial condition of the Company or which
might materially adversely affect the transactions or other acts contemplated
by this Agreement or the validity or enforceability of this Agreement, except
as set forth in or contemplated by the Offering Documents (such opinion to be
given in reliance on a certificate of the Company's Chief Executive Officer);
and
(G) such counsel has participated
in the preparation of the Offering Documents and nothing has come to the
attention of such counsel to cause them to have reason to believe that the
Offering Documents contained any untrue statement of a material fact required
to be stated therein or omitted to state any material fact required to be
stated therein or necessary to make the statements therein not misleading
(except for the financial statements, notes thereto and other financial
information and statistical data contained therein, as to which such counsel
need express no opinion).
(vi) Opinion of Special Counsel. The
Placement Agent shall receive the opinion of special patent counsel to the
Company, dated the Closing(s), in form and substance satisfactory to counsel
for the Placement Agent, to the effect that:
(i) we have carefully read and analyzed the
material set forth in the Memorandum under "Risk
Factors - Intellectual Property and Proprietary
Rights" and "Business-Intellectual Property and
Proprietary Rights" and, in our opinion, such
material accurately and adequately discloses the
Company's patent position and does not contain an
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 under which
they were made, not misleading;
(ii) the patent applications referred to in
the Memorandum were properly filed and the Patent
and Trademark Office has not taken substantive
action with respect thereto; there has not been any
public use or sale by the Company prior to the
filing of any of the patents or patent applications
which would affect their validity and, in such
counsel's opinion, the claims contained in the
applications represent valid patent claims; such
counsel has no reason to believe that patents will
not issue with respect thereto or that the claims
contained in the applications conflict with the
rights of others;
(iii) there are no facts which would preclude
the Company from having clear title to the United
States patents and United States patent
applications owned by the Company;
(iv) the Company has not received any notice
challenging the validity or enforceability of any
of the United States patents owned by, or licensed
to, the Company;
<PAGE>
Page 22 of 65 Pages
(v) there are no material legal or
governmental proceedings pending or threatened with
respect to any patents of the Company; and
(vi) there have been no claims asserted
against the Company relating to the potential
infringement of or conflict with any patents,
trademarks, copyrights or trade secrets of others;
such counsel has conducted a search for existing
United States patents with claims that might cover
the Company's technology and, in such counsel's
opinion, the Company's technology does not infringe
any United States patents.
(vii) Officers' Certificate. The Placement
Agent shall receive a certificate of the Company,
signed by the President and Secretary thereof, that
the representations and warranties contained in
Section 2 hereof are true and accurate in all
material respects at such Closing with the same
effect as though expressly made at such Closing.
(viii) Fund Escrow Agreement. On or prior to
the Initial Closing Date, the Placement Agent shall
receive a copy of a duly executed escrow agreement
in the form previously delivered to you regarding
the deposit of funds pending the Closing(s) with a
bank or trust company acceptable to the Placement
Agent (the "Fund Escrow Agreement").
(ix) Lock-Up Agreements. On or prior to the
Initial Closing Date, the Placement Agent shall
receive agreements from each officer and director
of the Company to the effect that such individual
shall not publicly sell, assign or transfer any of
their securities of the Company for a period
commencing on the date of this Agreement and ending
12 months after the final Closing of this offering
without the prior written consent of the Placement
Agent.
(x) Employment Agreements. On or prior to the
Initial Closing Date, the Placement Agent shall
receive copies of duly executed employment
agreements with each of Anthony LaPine and Nicholas
Miller containing appropriate confidentiality and
non-competition provisions.
(xi) Increase in Authorized Capital Stock. On
or prior to the Initial Closing Date, the Company
shall have received written consents (the "Share
Increase Written Consent") from shareholders
holding a majority of the outstanding shares of
Common Stock, approving an amendment to the
Company's articles of incorporation authorizing a
sufficient number of shares of Common Stock for
issuance of the Shares, the Warrants and the
Agent's Warrants, such approval to be subject to
subsequent compliance with the Securities Exchange
Act of 1934, as amended, and applicable rules
thereunder, with respect to solicitation of, and
action taken by, written consents.
(c) Blue Sky. A summary blue sky survey shall be
prepared by counsel to the Placement Agent stating the extent to which and the
conditions upon which offers and sales of the Units may be made in certain
jurisdictions. It is understood that such survey may be based on or rely upon
(i) the representations of each Subscriber set forth in the Subscription
Agreement delivered by such Subscriber, (ii) the representations, warranties
and agreements of the Company
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Page 23 of 65 Pages
set forth in Section 2 of this Agreement, (iii) the representations and
warranties of the Placement Agent, and (iv) the representations of the Company
set forth in the certificate to be delivered at the Closing pursuant to
paragraph (vii) of Section 3(b).
(d) Placement Fee and Expenses. Simultaneously with
payment for and delivery of the Units at each Closing as provided in paragraph
3(a) above, the Company shall at such Closing pay to the Placement Agent (i) a
commission equal to seven percent (7%) of the aggregate purchase price of the
Units sold; (ii) a structuring fee equal to 3% of the aggregate purchase price
of the Units sold; and (iii) a non-accountable expense allowance equal to 2%
of the aggregate purchase price of the Units sold (of which $15,000 has been
paid to date). The Company shall also pay all expenses in connection with the
qualification of the Units under the securities or Blue Sky laws of the states
which the Placement Agent shall designate. The Company will, at each Closing,
issue to you or your designees (which may include any Selected Dealer or any
officer of the Placement Agent or a Selected Dealer) the Agent's Warrants in
the form annexed hereto as Exhibit 1 to purchase 6,450,000 shares of Common
Stock at an exercise price of $.375 per share (such number to be reduced on a
pro rata basis for each $1.00 less than $8,000,000 raised). In the event that
the Over-Allotment Option is exercised in full or in part, the Placement Agent
shall receive up to an additional 806,250 Agent's Warrants on a pro rata basis
for each additional $1.00 raised in excess of $8,000,000. In the event that
less than $8,000,000 is raised in the Offering, the Company may, at its sole
discretion, during the nine month period following the final Closing, issue to
the Placement Agent additional Agent's Warrants (not to exceed 6,450,000 in
the aggregate), as compensation for financial advisory services. The Agent's
Warrants will be exercisable for a period of five years from the Initial
Closing of the Offering. At the Initial Closing, the Company shall enter into
a one-year financial advisory agreement with the Placement Agent under which
it will pay the Placement Agent $12,500 per month for the first three months
and an amount to be negotiated (but in no event more than $12,500 nor less
than $5,000 per month) for the following nine months.
(e) Bring-Down Opinions and Certificates. If there
is more than one Closing, then at each such Closing there shall be delivered
to the Placement Agent updated opinions and certificates as described in (v),
(vi) and (vii) of Section 3(b) above, respectively.
(f) No Adverse Changes. There shall not have
occurred, at any time prior to the Closing or, if applicable, any additional
Closing, (i) any domestic or international event, act or occurrence which has
materially disrupted, or in the Placement Agent's opinion will in the
immediate future materially disrupt, the securities markets; (ii) a general
suspension of, or a general limitation on prices for, trading in securities on
the New York Stock Exchange or the American Stock Exchange or in the
over-the-counter market; (iii) any outbreak of major hostilities or other
national or international calamity; (iv) any banking moratorium declared by a
state or federal authority; (v) any moratorium declared in foreign exchange
trading by major international banks or other persons; (vi) any material
interruption in the mail service or other means of communication within the
United States; (vii) any material adverse change in the business, properties,
assets, results of operations, or financial condition of the Company; or
(viii) any change in the market for securities in general or in political,
financial, or economic conditions which, in the Placement Agent's reasonable
judgment, makes it inadvisable to proceed with the offering, sale, and
delivery of the Units.
<PAGE>
Page 24 of 65 Pages
4. Covenants of the Company.
(a) Use of Proceeds. The net proceeds of the
Offering will be used by the Company substantially as set forth in the
Memorandum. The Company shall not use any of the proceeds from the Offering to
repay any indebtedness of the Company, including but not limited to
indebtedness to any current executive officers, directors or principal
stockholders of the Company.
(b) Expenses of Offering. The Company shall be
responsible for, and shall bear all expenses directly incurred in connection
with, the proposed Offering including, but not limited to, legal fees of the
Company's counsel relating to the costs of preparing the Offering Documents
and all amendments, supplements and exhibits thereto; preparing, delivering
and mailing all placement agent and selling documents, including, but not
limited to, the Agency Agreement with the Placement Agent and the blue sky
memorandum; Stock and Warrant certificates; blue sky fees, filing fees and the
fees and disbursements of counsel (not to exceed $3,000) in connection with
blue sky matters (the "Company Expenses"). Such expenses shall not include the
cost of the Placement Agent's telephone, telegraph, travel, due diligence
meetings, fees and expenses of counsel for the Placement Agent, or other
similar expenses (the "Placement Agent expenses") which are covered by the 2%
non-accountable expense allowance payable by the Company to the Placement
Agent.
If the Private Placement is terminated for any reason prior to the
date on which the Minimum Offering has been raised and is in escrow, the
Company shall be liable for the Placement Agent's legal fees as well as other
out-of-pocket expenses not to exceed $95,000. If the Private Placement is not
completed because the Company determines not to proceed with it or because of
a material breach by the Company of any covenants, representations or
warranties contained in this Agreement after the date on which the Minimum
Offering has been raised and is in escrow, the Company's liability to the
Placement Agent shall be equal to $480,000. In such event, the Placement Agent
shall also receive the Agent's Warrants for the purchase of 3,225,000 shares
of Common Stock.
(c) Reservation of Common Stock. The Company shall
reserve and keep available that maximum number of its authorized but unissued
shares of Common Stock which are issuable upon conversion of the Shares and,
conditioned on effectiveness of the Share Increase Written Consent, those
which are issuable upon exercise of the Warrants and the Agent's Warrants.
(d) Notification. The Company shall notify the
Placement Agent immediately, and in writing, (A) when any event shall have
occurred during the period commencing on the date hereof and ending on the
later of the last Closing or the Termination Date as a result of which the
Offering Documents would include 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 (B) of the receipt of any
notification with respect to the modification, rescission, withdrawal or
suspension of the qualification or registration of the Units, or of any
exemption from such registration or qualification, in any jurisdiction. The
Company will use its best efforts to prevent the issuance of any such
modification, rescission, withdrawal or suspension and, if any such
modification, rescission, withdrawal or suspension is issued and you so
request, to obtain the lifting thereof as promptly as possible.
<PAGE>
Page 25 of 65 Pages
(e) Blue Sky. The Company will use its best efforts
to qualify or register the Units for offering and sale under, or establish an
exemption from such qualification or registration under, the securities or
"blue sky" laws of such jurisdictions as you may reasonably request; provided
however, that the Company will not be obligated to qualify as a dealer in
securities in any jurisdiction in which it is not so qualified. The Company
will not consummate any sale of Units in any jurisdiction in which it is not
so qualified or in any manner in which such sale may not be lawfully made.
(f) Form D Filing. The Company shall file five
copies of a Notice of Sales of Securities on Form D with the Securities and
Exchange Commission (the "Commission") no later than 15 days after the first
sale of the Units. The Company shall file promptly such amendments to such
Notices on Form D as shall become necessary and shall also comply with any
filing requirement imposed by the laws of any state or jurisdiction in which
offers and sales are made. The Company shall furnish the Placement Agent with
copies of all such filings.
(g) Press Releases, Etc. The Company shall not,
during the period commencing on the date hereof and ending on the later of the
last Closing and the Termination Date, issue any press release or other
communication, or hold any press conference with respect to the Company, its
financial condition, results of operations, business, properties, assets, or
liabilities, or the Offering, without the prior consent of the Placement
Agent, which consent shall not be unreasonably withheld.
(h) Right of First Refusal. During the 12 month
period from the date of the Initial Closing Date, if the Company proposes to
use a manager, placement agent or investment banker or persons performing
similar services for a fee, the Placement Agent shall have the right of first
refusal (the "Right of First Refusal") (i) to purchase for the account of the
Placement Agent or to act as an underwriter or agent for any and all public or
private offerings of the securities of the Company, or any successor to or
subsidiary of the Company or other entity in which the Company has a
controlling equity interest (collectively referred to herein as the
"Company"), by the Company or any beneficial holder of at least 5% of the
Company's Common Stock (the "Subsequent Company Offering") or (ii) to act as
investment banker with respect to any merger, acquisition or disposition of
assets of the Company ("Acquisition Transaction"). Accordingly, if during such
period the Company intends to make a Subsequent Company Offering or enter into
an Acquisition Transaction, the Company shall notify you in writing of such
intention and of the proposed terms of the offering. The Company shall
thereafter promptly furnish you with such information concerning the business,
condition and prospects of the Company as you may reasonably request. If
within ten (10) business days of the mailing by registered mail addressed to
the Placement Agent with respect to a Subsequent Company Offering or
Acquisition Transaction of such notice of intention and statement of terms you
do not accept in writing such offer to act as underwriter or agent with
respect to such offering or investment banker with respect to such
transaction, upon the terms proposed, the Company shall be free to negotiate
terms with other underwriters or agents with respect to such offering or
investment banker with respect to such transaction, and to effect such
offering or transaction on such proposed terms. Before the Company shall
accept any proposal less favorable to the Company from such underwriter or
agent or investment banker or if such subsequent Company Offering is not
consummated within six (6) months or such Acquisition Transaction is not
<PAGE>
Page 26 of 65 Pages
consummated within three (3) months, your preferential right shall be
reinstated and the same procedure with respect to such modified proposal as
provided above shall be adopted; provided, however, that your preferential
right shall not be reinstated later than 12 months after the Initial Closing
Date. The failure by you to exercise your Right of First Refusal in any
particular instance shall not affect in any way such right with respect to any
other Subsequent Company Offering or Acquisition Transaction.
(i) Advisory Agreement. Prior to the initial
Closing Date, the Company shall execute and deliver to the Placement Agent an
agreement with the Placement Agent regarding advisory services to be provided
by the Placement Agent to the Company following the Closing, in the form
previously delivered to the Company by the Placement Agent (the "Advisory
Agreement").
(j) Key-Man Insurance. Prior to the Initial Closing
Date, the Company shall have obtained "key-man" life insurance policies in the
amount of at least $3,000,000 on the life of Anthony LaPine. Such policy will
be kept in effect for at least three years from the Initial Closing Date.
(k) Executive Compensation. Except as set forth in
the Memorandum, the cash compensation of the executive officers of the Company
shall not increase without majority approval of the members of the Board of
Directors who are not employed by the Company.
(l) Board Designee. During the period ending two
years after the Initial Closing Date, the Company shall, at the Placement
Agent's option, nominate a designee of the Placement Agent for election to the
Company's Board of Directors. Until two years following the Initial Closing
Date, the Placement Agent shall have the option to appoint an observer
selected by the Placement Agent to attend all meetings of the Company's Board
of Directors.
(m) Accounting Firm. The Company shall retain
Coopers & Lybrand L.L.P. as its accounting firm following the Initial Closing
Date and, for a period of three years following the Initial Closing Date,
shall not effect a change in such accounting firm, without the prior written
consent of the Placement Agent, unless such new firm is a "big six" accounting
firm.
(n) Budgets. During the period ending two years
after the Initial Closing Date, the Company shall prepare semi-annual budgets
reflecting its proposed operations and cash flow needs and submit such budgets
to Commonwealth Associates for review and to the Company Board of Directors
for its approval on a semi-annual basis.
(o) Amendment and Information Statement. Within 30
days after the Initial Closing, the Company shall have mailed to its
shareholders an information statement regarding adoption of the amendment to
the articles of incorporation described in the Share Increase Written Consent.
Such information statement shall comply with the Securities Exchange Act of
1934 and applicable rules thereunder, including the provisions of Rule 14c-2.
Within 25 days after the mailing of such information statement, the Company
shall file an amendment to its articles of incorporation with the Secretary of
State of the State of Nevada to provide for a sufficient number
<PAGE>
Page 27 of 65 Pages
of shares of Common Stock for conversion of the Shares and exercise of the
Warrants and the gent's Warrants.
(p) Transmittal Letters. Within five days after the
Closing, the Placement Agent shall receive copies of all letters from the
Company to the investors transmitting the Shares and Warrants and shall
receive a letter from the Company confirming transmittal of the securities to
the investors.
5. Indemnification.
(a) The Company agrees to indemnify and hold
harmless the Placement Agent and each Selected Dealer, if any, and their
respective shareholders, directors, officers, agents and controlling persons
(an "Indemnified Party") against any and all loss, liability, claim, damage
and expense whatsoever (and all actions in respect thereof), and to reimburse
the Placement Agent for legal fees and related expenses as incurred
(including, but not limited to the costs of investigating, preparing or
defending any such action or claim whether or not in connection with
litigation in which the Placement Agent is a party and, unless the Advisory
Agreement is in effect and the Company is current in its payments, the costs
of giving testimony or furnishing documents in response to a subpoena or
otherwise), arising out of any untrue statement or alleged untrue statement of
a material fact contained in the Offering Documents or the omission or alleged
omission therefrom of a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading;
(b) The Company agrees to indemnify and hold
harmless an Indemnified Party to the same extent as the foregoing indemnity,
against any and all loss, liability, claim, damage and expense whatsoever
directly arising out of the exercise by any person of any right under the
Securities Act or the Exchange Act or the securities or Blue Sky laws of any
state on account of violations of the representations, warranties or
agreements set forth in Section 2 hereof.
(c) Promptly after receipt by a person entitled to
indemnification pursuant to the foregoing subsection (a) or (b) (an
"indemnified party") under this Section of notice of the commencement of any
action, the indemnified party will, if a claim in respect thereof is to be
made against the Company under this Section, notify in writing the Company of
the commencement thereof; but the omission so to notify the Company will not
relieve it from any liability which it may have to the indemnified party
otherwise than under this Section except to the extent the defense of the
claim is prejudiced. In case any such action is brought against an indemnified
party, and it notifies the Company of the commencement thereof, the Company
will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, subject to the provisions herein stated, with counsel
reasonably satisfactory to the indemnified party, and after notice from the
Company to the indemnified party of its election so to assume the defense
thereof, the Company will not be liable to the indemnified party under this
Section for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation (provided the Company has been advised in writing that
such investigation is being undertaken). The indemnified party shall have the
right to employ separate counsel in any such action and to
<PAGE>
Page 28 of 65 Pages
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the Company if the Company has assumed the
defense of the action with counsel reasonably satisfactory to the indemnified
party; provided that the fees and expenses of such counsel shall be at the
expense of the Company if (i) the employment of such counsel has been
specifically authorized in writing by the Company or (ii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party or parties and the Company and, in the judgment of counsel for the
indemnified party, it is advisable for the indemnified party or parties to be
represented by separate counsel (in which case the Company shall not have the
right to assume the defense of such action on behalf of the indemnified party
or parties, it being understood, however, that the Company shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses
of more than one separate firm of attorneys for the indemnified party or
parties. No settlement of any action against an indemnified party shall be
made unless such indemnified party is fully and completely released in
connection therewith.
6. Contribution.
To provide for just and equitable contribution, if
(i) an indemnified party makes a claim for indemnification pursuant to Section
(5) but it is found in a final judicial determination, not subject to further
appeal, that such indemnification may not be enforced in such case, even
though this Agreement expressly provides for indemnification in such case, or
(ii) any indemnified or indemnifying party seeks contribution under the
Securities Act, the Exchange Act, or otherwise, then the Company (including
for this purpose any contribution made by or on behalf of any officer,
director, employee or agent for the Company, or any controlling person of the
Company), on the one hand, and the Placement Agent and any Selected Dealers
(including for this purpose any contribution by or on behalf of an indemnified
party), on the other hand, shall contribute to the losses, liabilities,
claims, damages, and expenses whatsoever to which any of them may be subject,
in such proportions as are appropriate to reflect the relative benefits
received by the Company, on the one hand, and the Placement Agent and the
Selected Dealers, on the other hand; provided, however, that if applicable law
does not permit such allocation, then other relevant equitable considerations
such as the relative fault of the Company and the Placement Agent and the
Selected Dealers in connection with the facts which resulted in such losses,
liabilities, claims, damages, and expenses shall also be considered. In no
case shall the Placement Agent or a Selected Dealer be responsible for a
portion of the contribution obligation in excess of the compensation received
by it pursuant to Section 3 hereof or the Selected Dealer Agreement, as the
case may be. No person guilty of a fraudulent misrepresentation shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 6, each person, if any, who
controls the Placement Agent or a Selected Dealer within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Exchange Act and each
officer, director, stockholder, employee and agent of the Placement Agent or a
Selected Dealer, shall have the same rights to contribution as the Placement
Agent or the Selected Dealer, and each person, if any who controls the Company
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act and each officer, director, employee and agent of the Company,
shall have the same rights to contribution as the Company, subject in each
case to the provisions of this Section 6.
<PAGE>
Page 29 of 65 Pages
Anything in this Section 6 to the contrary notwithstanding, no party shall be
liable for contribution with respect to the settlement of any claim or action
effected without its written consent. This Section 6 is intended to supersede
any right to contribution under the Securities Act, the Exchange Act, or
otherwise.
7. Miscellaneous.
(a) Survival. Any termination of the Offering
without consummation thereof shall be without obligation on the part of any
party except that the indemnification provided in Section 5 hereof and the
contribution provided in Section 6 hereof shall survive any termination and
shall survive the Closing for a period of five years.
(b) Representations, Warranties and Covenants to
Survive Delivery. The respective representations, warranties, indemnities,
agreements, covenants and other statements of the Company as of the date
hereof shall survive execution of this Agreement and delivery of the Units and
the termination of this Agreement.
(c) No Other Beneficiaries. This Agreement is
intended for the sole and exclusive benefit of the parties hereto and their
respective successors and controlling persons, and no other person, firm or
corporation shall have any third-party beneficiary or other rights hereunder.
(d) Governing Law; Resolution of Disputes. This
Agreement shall be governed by and construed in accordance with the law of the
State of New York without regard to conflict of law provisions. The Placement
Agent and the Company will attempt to settle any claim or controversy arising
out of this Agreement through consultation and negotiation in good faith and a
spirit of mutual cooperation. Should such attempts fail, then the dispute will
be mediated by a mutually acceptable mediator to be chosen by the Placement
Agent and the Company within 15 days after written notice from either party
demanding mediation. Neither party may unreasonably withhold consent to the
selection of a mediator, and the parties will share the costs of the mediation
equally. Any dispute which the parties cannot resolve through negotiation or
mediation within six months of the date of the initial demand for it by one of
the parties may then be submitted to the courts for resolution. The use of
mediation will not be construed under the doctrine of latches, waiver or
estoppel to affect adversely the rights of either party. Nothing in this
paragraph will prevent either party from resorting to judicial proceedings if
(a) good faith efforts to resolve the dispute under these procedures have been
unsuccessful or (b) interim relief from a court if necessary to prevent
serious and irreparable injury.
(e) Counterparts. This Agreement may be signed in
counterparts with the same effect as if both parties had signed one and the
same instrument.
(f) Notices. Any communications specifically
required hereunder to be in writing, if sent to the Placement Agent, will be
sent by overnight courier providing a receipt of delivery or by certified or
registered mail to it at Commonwealth Associates, 830 Third Avenue, New York,
New York 10022, Att: Seth Elliott, with a copy to Bachner, Tally, Polevoy &
Misher LLP, 380 Madison Avenue, New York, New York 10017, Att: Fran Stoller
and if sent to
<PAGE>
Page 30 of 65 Pages
the Company, will be sent by overnight courier providing a receipt of delivery
or by certified or registered mail to it at 2105 Hamilton Avenue, Suite 240,
San Jose, California 95125, Att: Anthony LaPine, with a copy to Pillsbury
Madison & Sutro LLP, P.O. Box 7880, San Francisco, California 94120, Att:
Richard Grey.
(g) Entire Agreement. This Agreement constitutes
the entire agreement of the parties with respect to the matters herein
referred and supersedes all prior agreements and understandings, written and
oral, between the parties with respect to the subject matter hereof. Neither
this Agreement nor any term hereof may be changed, waived or terminated
orally, but only by an instrument in writing signed by the party against which
enforcement of the change, waiver or termination is sought.
If you find the foregoing is in accordance with our
understanding, kindly sign and return to us a counterpart hereof, whereupon
this instrument along with all counterparts will become a binding agreement
between us.
Very truly yours,
DATALINK SYSTEMS CORPORATION
By:
----------------------------------------
Name: Anthony LaPine
Title: Chief Executive Officer
Agreed:
COMMONWEALTH ASSOCIATES,
a New York limited partnership
By: COMMONWEALTH MANAGEMENT CO., INC.
a New York corporation, its general partner
By:____________________________________
Name:
Title:
<PAGE>
Page 31 of 65 Pages
Exhibit 1
AMENDMENT NO. 1 TO AGENCY AGREEMENT
This Amendment No. 1 made as of this 31st day of October, 1997 by and
between DATALINK SYSTEMS CORPORATION, a Nevada corporation (the "Company")and
COMMONWEALTH ASSOCIATES, a New York limited partnership ("Placement Agent"),
to an Agency Agreement dated as of September 24, 1997 (the "Agency Agreement")
between the Company and the Placement Agent. All terms used in this Amendment,
unless otherwise defined herein, shall have such meaning as ascribed to them
in the Agency Agreement.
WHEREAS, the Company and the Placement Agent entered into the Agency
Agreement pursuant to which the Placement Agent agreed to assist the Company
in connection with a private placement of Units, as defined in the Agency
Agreement; and
WHEREAS, the parties desire to amend the Agency Agreement in order to
reflect an increase in the maximum number of Units being offered for sale in
the Offering and certain other modifications to the terms of the Offering;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants set forth below, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereby agree as follows:
1. The fifth and sixth sentences of paragraph on Page 1 of
the Agency Agreement are hereby deleted in their entirety and
replaced by the following:
"Datalink Systems Corporation, a Nevada
corporation (the "Company"), proposes to offer for sale to
"accredited investors", in a private placement, units
("Units"), each Unit consisting 40,000 shares (the "Shares")
of Series A Convertible Preferred Stock, par value $.001 per
share (the "Preferred Stock") and 200,000 common stock
purchase warrants ("Warrants"). Such offering and sale are
referred to herein as the "Offering." Each Warrant will be
exercisable during the four-year period commencing one year
after the initial closing to purchase one share of the
Company's Common Stock, $.001 par value (the "Common
Stock"), at a an exercise price of $.50 per share. A minimum
of 27 Units ("Minimum Offering") and a maximum of 68.5 Units
("Maximum Offering") will be sold in the Offering at
$150,000 per Unit. The Units will be offered pursuant to
those terms and conditions acceptable to you as reflected in
the Private Placement Memorandum (the "Memorandum"). Of the
Units, 27 will be offered on a "best efforts - all-or-none"
basis and the remaining 41.5 Units will be offered on a
"best efforts" basis. The Units are being offered pursuant
to the Memorandum and related documents in accordance with
Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act") and Regulation D promulgated thereunder."
<PAGE>
Page 32 of 65 Pages
2. Section 3(d) on Page 12 of the Agency Agreement is hereby
amended by replacing the third and fourth sentences with the following
sentence:
"The Company will, at each Closing, issue to you or
your designees (which may include any Selected Dealer or any officer of the
Placement Agent or a Selected Dealer) the Agent's Warrants in the form annexed
hereto as Exhibit 1 to purchase 6,450,000 shares of Common Stock at an
exercise price of $.375 per share, such number to be (i) reduced on a pro rata
basis for each $1.00 less than $8,000,000 raised or (ii) increased (a) by up
to 806,250 Agent's Warrants for the first $1,050,000 raised over $8,000,000
and (b) on a pro rata basis based on 806,250 additional Agent's Warrants for
each additional $1,000,000 raised in excess of $9,050,000."
3. Section 4(j) on Page 16 of the Agency Agreement is hereby
deleted in its entirety and replaced by the following:
"(j) Key-Man Insurance. Within thirty (30) days from the
Initial Closing Date, the Company shall have obtained a "key-man" life
insurance policy in the amount of at least $3,000,000 on the life of Anthony
LaPine. Such policy will be kept in effect for at least three years from the
Initial Closing Date."
4. Section 5 of the Agency Agreement is hereby amended by
adding the following subsection (d) on Page 18:
"Notwithstanding anything to the contrary contained in
this Section 5 or Section 6 below, the Company shall have no obligation to
indemnify any Indemnified Party or any other person for, nor to contribute any
amount towards, any loss, liability, claim, damage or expense, arising out of
(i) any untrue statement or alleged untrue statement regarding the Placement
Agent contained in the Offering Documents or (ii) any omission or alleged
omission from the Offering Documents regarding the Placement Agent."
5. Section 7(f) on Page 20 of the Agency Agreement is hereby
amended by substituting the address provided for notices to be sent to the
Company as follows:
"... and if sent to the Company, will be sent by
overnight courier providing a receipt of delivery or by certified or
registered mail to it at 1735 Technology Drive, Suite 790,San Jose, California
95110,..."
All other terms and provisions of the Agency Agreement not modified
by the provisions hereof shall remain in full force and effect.
<PAGE>
Page 33 of 65 Pages
IN WITNESS WHEREOF, the parties have executed this Amendment
No. 1 to Agency Agreement as of the date first written above.
DATALINK SYSTEMS CORPORATION
By:_______________________________
Anthony LaPine, President
COMMONWEALTH ASSOCIATES,
a New York limited partnership
By: COMMONWEALTH
MANAGEMENT CO., INC.
a New York corporation,
its general partner
By:_______________________________
Name:
Title:
<PAGE>
Page 34 of 65 Pages
Exhibit 3
IRREVOCABLE PROXY
For good and valuable consideration, receipt of which is
hereby acknowledged, the undersigned, Commonwealth Associates, hereby appoints
Anthony L. LaPine ("LaPine"), the proxy of the undersigned for a period of one
year (the "Proxy Term") commencing on the date hereof, with full power to vote
at any meeting of DataLink Systems Corp.(the "Company") in such manner as he,
in his sole discretion, deems proper with respect to (i) the 8,243,826 shares
of Common Stock, $.001 par value per share, of the Company ("Common Stock")
issuable upon exercise of the Warrants to purchase Common Stock of the
Company, dated November 5, 1997, owned by the undersigned (the "Warrants") and
(ii) any additional shares of Common Stock issued or issuable in respect of
the Warrants during the Proxy Term.
This proxy is irrevocable. At any time and from time to time
during the Proxy Term, the undersigned shall execute and deliver to LaPine or
his designees such additional proxies or instruments as may be deemed by
LaPine necessary or desirable to effectuate the purposes of this Proxy or
further to evidence the right and powers granted hereby.
Upon the death or disability of LaPine or his no longer
serving as the Chairman or Chief Executive Officer of the Company, this proxy
will terminate. This proxy shall terminate at such time that the undersigned
and its affiliates beneficially own less than 10% of the outstanding Common
Stock of the Company. If the undersigned sells or otherwise transfers any of
the Warrants or the shares issued upon exercise of the Warrants to any
affiliate of the undersigned, such shares underlying the Warrants will remain
subject to this proxy during the remainder of the Proxy Term. If the
undersigned sells or otherwise transfers any of the Warrants or the shares
issued upon the exercise of Warrants to a person unaffiliated with the
undersigned, this proxy will terminate in respect to the shares underlying the
Warrants.
<PAGE>
Page 35 of 65 Pages
IN WITNESS WHEREOF, the undersigned has executed this
irrevocable proxy as of the 13th day of November 1997.
COMMONWEALTH ASSOCIATES
By: Commonwealth Management Co., Inc.,
its General Partner
By: __________________
Authorized Officer
Anthony L. LaPine hereby in good faith affirms that he will
independently vote the stock without influence from the grantor of the above
proxy and will vote the stock in accord with what he believes to be the best
interests of the Company and independently of the interests of the grantor of
such proxy.
_______________________
Anthony L. LaPine
<PAGE>
Page 36 of 65 Pages
Exhibit 4
DATALINK SYSTEMS CORPORATION
SUBSCRIPTION AGREEMENT made as of this 5th day of November,
1997 between Datalink Systems Corporation, a Nevada corporation with its
principal offices at 1735 Technology Drive, Suite 790, San Jose, CA 95110 (the
"Company") and the undersigned (the "Subscriber").
WHEREAS, the Company desires to issue a minimum of 27 and a
maximum of 54 units ("Units") in a private placement, containing a minimum of
1,080,000 shares and a maximum of 2,160,000 shares (the "Shares") of Series A
Convertible Preferred Stock, par value $.001 per share (the "Convertible
Preferred Stock"), each Unit consisting of 40,000 Shares (which Shares are
each convertible into 10 shares of the Company's Common Stock, $.001 par value
(the "Common Stock") as described in the Certificate of the Designations,
Powers, Preferences and Rights of the Series A Convertible Preferred Stock
included as Exhibit A to the Memorandum (defined below)) and 200,000 common
stock purchase warrants (the "Warrants") in the form under the Warrant
Agreement attached hereto as Exhibit B on the terms and conditions hereinafter
set forth and the Subscriber desires to acquire the number of Units set forth
on the signature page hereof;
NOW, THEREFORE, for and in consideration of the premises and
the mutual covenants hereinafter set forth, the parties hereto do hereby agree
as follows:
I. SUBSCRIPTION FOR UNITS AND REPRESENTATIONS BY AND
COVENANTS OF SUBSCRIBER
1.1 Subject to the terms and conditions
hereinafter set forth, the Subscriber hereby subscribes for and agrees to
purchase from the Company such number of Units as is set forth upon the
signature page hereof at a price equal to $150,000 per Unit, and the Company
agrees to sell such Units to the Subscriber for said purchase price subject to
the Company's right to sell to the Subscriber such lesser number of Units as
the Company may, in its sole discretion, deem necessary or desirable. The
purchase price is payable by certified or bank check made payable to United
States Trust Company of New York, as Escrow Agent for Datalink Systems
Corporation, or by wire transfer of funds, contemporaneously with the
execution and delivery of this Subscription Agreement. Certificates
representing the Shares and Warrants will be delivered by the Company within
ten (10) days following the consummation of this offering as set forth in
Article III hereof. The Subscriber understands however, that this purchase of
Units is contingent upon the Company making sales of a minimum of 27 Units
prior to the Termination Date as defined in Article III hereof.
1.2 The Subscriber recognizes that the purchase of
Units involves a high degree of risk in that (i) the Company has generated
only nominal revenues and has incurred
<PAGE>
Page 37 of 65 Pages
substantial losses since its inception (ii) an investment in the Company is
highly speculative and only investors who can afford the loss of their entire
investment should consider investing in the Company and the Units; (iii) he
may not be able to liquidate his investment; (iv) transferability of the
securities comprising the Units is extremely limited; and (v) in the event of
a disposition, an investor could suffer the loss of his entire investment, as
well as other risk factors as more fully set forth herein and in the Private
Placement Memorandum dated September 23, 1997 (including all exhibits and
other attachments thereto, the "Memorandum").
1.3 The Subscriber represents and warrants that he
is an "accredited investor" as such term in defined in Rule 501 of Regulation
D promulgated under the United States Securities Act of 1933, as amended (the
"Act"), as indicated by his responses to the Investor Questionnaire, and that
he is able to bear the economic risk of an investment in the Units. The
Subscriber further represents and warrants that the information furnished in
the Investor Questionnaire is accurate and complete in all material respects.
1.4 The Subscriber acknowledges that he has prior
investment experience, including investment in non-listed and non-registered
securities, or he has employed the services of an investment advisor, attorney
or accountant to read all of the documents furnished or made available by the
Company both to him and to all other prospective investors in the Units and to
evaluate the merits and risks of such an investment on his behalf, and that he
recognizes the highly speculative nature of this investment.
1.5 The Subscriber acknowledges receipt and careful
review of the Memorandum and all other documents furnished in connection with
this transaction (collectively, the "Offering Documents") and hereby
represents that he has been furnished by the Company during the course of this
transaction with all information regarding the Company which he has requested
or desires to know; and that such information and documents have, in his
opinion, afforded the Subscriber with all of the same information that would
be provided him in a registration statement filed under the Act; that he has
been afforded the opportunity to ask questions of and receive answers from
duly authorized officers or other representatives of the Company concerning
the terms and conditions of the offering, and any additional information which
he had requested.
1.6 The Subscriber acknowledges that this offering
of Units may involve tax consequences and that the contents of the Offering
Documents do not contain tax advice or information. The Subscriber
acknowledges that he must retain his own professional advisors to evaluate the
tax and other consequences of an investment in the Units.
1.7 The Subscriber acknowledges that this offering
of Units has not been reviewed by the United States Securities and Exchange
Commission ("SEC") because of the Company's representations that this is
intended to be a nonpublic offering pursuant to Sections 4(2) or 3(b) of the
Act. The Subscriber represents that the Shares and Warrants comprising his
Units are being purchased for his own account, for investment and not for
distribution or resale to others. The
<PAGE>
Page 38 of 65 Pages
Subscriber agrees that he will not sell or otherwise transfer such securities
unless they are registered under the Act or unless an exemption from such
registration is available.
1.8 The Subscriber understands that the Shares and
Warrants comprising the Units have not been registered under Act by reason of
a claimed exemption under the provisions of the Act which depends, in part,
upon his investment intention. In this connection, the Subscriber understands
that it is the position of the SEC that the statutory basis for such exemption
would not be present if his representation merely meant that his present
intention was to hold such securities for a short period, such as the capital
gains period of tax statutes, for a deferred sale, for a market rise, assuming
that a market develops, or for any other fixed period. The Subscriber realizes
that, in the view of the SEC, a purchase now with an intent to resell would
represent a purchase with an intent inconsistent with his representation to
the Company, and the SEC might regard such a sale or disposition as a deferred
sale to which such exemptions are not available.
1.9 The Subscriber understands that there is no
public market for the Shares and Warrants comprising the Units and that only a
limited public market exists for the Common Stock issuable upon conversion of
the Shares and exercise of the Warrants (the "Reserved Shares"). Rule 144 (the
"Rule") promulgated under the Act requires, among other conditions, a one year
holding period prior to the resale (in limited amounts) of securities acquired
in a non-public offering without having to satisfy the registration
requirements under the Act. The Subscriber understands that the Company makes
no representation or warranty regarding its fulfillment in the future of any
reporting requirements under the Securities Exchange Act of 1934, as amended,
or its dissemination to the public of any current financial or other
information concerning the Company, as is required by the Rule as one of the
conditions of its availability. The Subscriber understands and hereby
acknowledges that the Company is under no obligation to register the
securities comprising the Units under the Act, with the exception of certain
registration rights relating to the Warrants and the Reserved Shares set forth
in Article IV herein. The Subscriber consents that the Company may, if it
desires, permit the transfer of the securities comprising the Units or
issuable upon conversion or exercise thereof out of his name only when his
request for transfer is accompanied by an opinion of counsel reasonably
satisfactory to the Company that neither the sale nor the proposed transfer
results in a violation of the Act or any applicable state "blue sky" laws
(collectively "Securities Laws") and subject to the provisions of Section 1.10
hereof. The Subscriber agrees to hold the Company and its directors, officers
and controlling persons and their respective heirs, representatives,
successors and assigns harmless and to indemnify them against all liabilities,
costs and expenses incurred by them as a result of any misrepresentation made
by him contained herein or in the Investor Questionnaire or any sale or
distribution by the undersigned Subscriber in violation of any Securities
Laws.
1.10 The Subscriber agrees not to sell, transfer,
assign, hypothecate or otherwise dispose of the Shares, the Warrants or the
Reserved Shares for a period of one year from the Initial Closing.
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Page 39 of 65 Pages
1.11 The Subscriber consents to the placement of a
legend on any certificate or other document evidencing the Shares and Warrants
comprising his Units and the Reserved Shares stating that they have not been
registered under the Act and setting forth or referring to the restrictions on
transferability and sale thereof.
1.12 The Subscriber understands that the Company
will review this Subscription Agreement and the Investor Questionnaire and
otherwise review the financial standing of the Subscriber; and it is agreed
that the Company reserves the unrestricted right to reject or limit any
subscription.
1.13 The Subscriber hereby represents that the
address of Subscriber furnished by him at the end of this Subscription
Agreement is the undersigned's principal residence if he is an individual or
its principal business address if it is a corporation or other entity.
1.14 The Subscriber acknowledges that if he is a
Registered Representative of an NASD member firm, he must give such firm the
notice required by the NASD's Rules of Fair Practice, receipt of which must be
acknowledged by such firm on the signature page hereof.
1.15 The Subscriber hereby represents that, except
as set forth in the Offering Documents, no representations or warranties have
been made to the Subscriber by the Company or any agent, employee or affiliate
of the Company and in entering into this transaction, the Subscriber is not
relying on any information, other than that contained in the Offering
Documents and the results of independent investigation by the Subscriber.
1.16 The Subscriber acknowledges that at such time,
if ever, as his Warrants or Reserved Shares are registered, sales of such
securities will be subject to state securities laws, including those of New
Jersey which require any securities sold in New Jersey to be sold through a
registered broker-dealer or in reliance upon an exemption from registration.
1.17 The Subscriber acknowledges that the maximum
number of Units to be sold pursuant to the Memorandum may be increased, at the
discretion of the Company and the Placement Agent, by up to seven additional
Units.
II. REPRESENTATIONS BY THE COMPANY
The Company represents and warrants to the
Subscriber that prior to the consummation of this offering and at the Closing
Date:
(a) The Company is a corporation duly organized,
existing and in good standing under the laws of the State of Nevada and has
the corporate power to conduct the business which it conducts and proposes to
conduct and is qualified to do business in California.
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Page 40 of 65 Pages
(b) The execution, delivery and performance of this
Subscription Agreement by the Company will have been duly approved by the
Board of Directors of the Company and all other actions required to authorize
and effect the offer and sale of the Units and the securities contained
therein will have been duly taken and approved.
(c) The Shares and Warrants comprising the Units
have been duly and validly authorized and when issued and paid for in
accordance with the terms hereof, will be duly and validly issued and fully
paid and non assessable.
(d) The Company will at all times have authorized
and reserved a sufficient number of Reserved Shares to provide for conversion
of the Shares and exercise of the Warrants.
(e) The Company has obtained, or is in the process
of obtaining, all licenses, permits and other governmental authorizations
necessary to the conduct of its business; such licenses, permits and other
governmental authorizations obtained are in full force and effect; and the
Company is in all material respects complying therewith.
(f) The Company knows of no pending or threatened
legal or governmental proceedings to which the Company is a party which could
materially adversely affect the business, property, financial condition or
operations of the Company.
(g) The Company is not in violation of or default
under, nor will the execution and delivery of this Subscription Agreement, the
issuance of the Shares or the Warrants, and the incurrence of the obligations
herein and therein set forth and the consummation of the transactions herein
or therein contemplated, result in a violation of, or constitute a default
under, the Company's articles of incorporation or by-laws, any material
obligations, agreement, covenant or condition contained in any bond,
debenture, note or other evidence of indebtedness or in any material contract,
indenture, mortgage, loan agreement, lease, joint venture or other agreement
or instrument to which the Company is a party or by which it or any of its
properties may be bound or any material order, rule, regulation, writ,
injunction, or decree of any government, governmental instrumentality or
court, domestic or foreign.
(h) The financial information contained in the
Memorandum presents fairly the financial condition of the Company as of the
dates and for the periods indicated.
III. TERMS OF SUBSCRIPTION
3.1 The subscription period will begin as of
September 25, 1997 and will terminate at 11:59 PM Eastern time on November 25,
1997, unless extended by the Company and the Placement Agent for up to an
additional 60 days (the "Termination Date"). Of the Units, 27 will be offered
on a "best efforts-all or none" basis and the remaining 27 Units will be
offered on a "best
<PAGE>
Page 41 of 65 Pages
efforts" basis as more particularly set forth in the Memorandum. The minimum
subscription per subscriber shall be one Unit ($150,000), provided, however,
that smaller investments may be accepted at the discretion of the Placement
Agent and the Company.
3.2 Placement of the Units will be made by
Commonwealth Associates (the "Placement Agent"), which will receive (i) a
placement fee in the amount of 7% of the purchase price of the Units placed;
(ii) a non-accountable expense allowance of 2% of the purchase price of the
Units; (iii) a structuring fee in the amount of 3% of the purchase price of
the Units placed; (iv) warrants to purchase up to 7,256,250 shares of Common
Stock of the Company exercisable at $.375 per share for assisting the Company
in the placement and (iv) other compensation as summarized in the Memorandum.
3.3 Pending the sale of the Units, all funds paid
hereunder shall be deposited by the Company in escrow with United States Trust
Company of New York. If the Company shall not have obtained subscriptions
(including this subscription) for purchases of 27 Units for an aggregate
purchase price of $4,050,000 on or before the Termination Date, then this
subscription shall be void and all funds paid hereunder by the Subscriber,
without interest, shall be promptly returned to the Subscriber, subject to
paragraph 3.5 hereof. If 27 Units are sold at or prior to the Termination
Date, then all subscription proceeds shall be paid over to the Company within
ten days thereafter. In such event, placements of additional Units may
continue until the Termination Date, with subsequent releases of funds to be
at the mutual consent of the Company and the Placement Agent.
3.4 The Subscriber hereby authorizes and directs
the Company to deliver certificates representing the securities to be issued
to such Subscriber pursuant to this Subscription Agreement either (a) to the
residential or business address indicated in the Confidential Purchaser
Questionnaire or (b) directly to the Subscriber's account maintained with the
Placement Agent, if any. (If the Subscriber does not desire the securities to
be delivered to such account, the Subscriber should delete Subsection (b) of
this Section 3.4.)
3.5 The Subscriber hereby authorizes and directs
the Company to return any funds for unaccepted subscriptions to the same
account from which the funds were drawn, including any customer account
maintained with the Placement Agent.
3.6 The Subscriber acknowledges that at such time,
if ever, as any of the Securities are registered, sales of such Securities
will be subject to state securities laws, including those of states which may
require any securities sold therein to be sold through a registered
broker-dealer or in reliance upon an exemption from registration.
3.7 If the Subscriber is not a United States
person, such Subscriber hereby represents that it has satisfied itself as to
the full observance of the laws of its jurisdiction in connection with any
invitation to subscribe for the Securities or any use of this Agreement,
including
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Page 42 of 65 Pages
(i) the legal requirements within its jurisdiction for the purchase of the
Securities, (ii) any foreign exchange restrictions applicable to such
purchase, (iii) any governmental or other consents that may need to be
obtained, and (iv) the income tax and other tax consequences, if any, that may
be relevant to the purchase, holding, redemption, sale or transfer of the
Securities. Such Subscriber's subscription and payment for, and his or her
continued beneficial ownership of the Securities, will not violate any
applicable securities or other laws of the Subscriber's jurisdiction.
IV. REGISTRATION RIGHTS
4.1 The Company hereby agrees with the holders of
the Reserved Shares or their transferees (collectively, the "Holders") to use
its best efforts to ensure that the Warrants and the Reserved Shares
(collectively, the "Registrable Securities") shall be registered for resale
under the Act, subject to the lock-up provisions of Section 1.10 hereof, nine
months after the final Closing.
The obligation of the Company under this Section
4.1 shall be limited to one registration statement and shall not apply to any
Registrable Securities which at the time are eligible for resale pursuant to
Rule 144(k). The Company shall pay the expenses described in Section 4.3 for
the registration statement filed pursuant to this Section 4.1, except for
underwriting discounts and commissions and legal fees of the Holders, which
shall be borne by the Holders.
The foregoing notwithstanding, the Company may
defer any such registration pursuant to this Section 4.1 for a period of not
more than ninety (90) days if the Company's Board of Directors determines in
good faith that it would be in the best interest of shareholders to do so.
4.2 Registration Procedures. If and whenever the
Company is required by the provisions of Section 4.1 to effect the
registration of Registrable Securities under the Act, the Company will, until
such time as the Registrable Securities may be sold under Rule 144 without
volume limitation:
(a) prepare and file with the SEC a
registration statement with respect to such securities, and use its best
efforts to cause such registration statement to become and remain effective;
(b) prepare and file with the SEC such
amendments to such registration statement and supplements to the prospectus
contained therein as may be necessary to keep such registration statement
effective;
(c) furnish to the security holders
participating in such registration and to the underwriters of the securities
being registered such reasonable number of copies of the registration
statement, preliminary prospectus, final prospectus and such other documents
as such underwriters may reasonably request in order to facilitate the public
offering of such securities;
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Page 43 of 65 Pages
(d) use its best efforts to register or
qualify the securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as such participating
holders may reasonably request in writing within twenty (20) days following
the original filing of such registration statement, except that the Company
shall not for any purpose be required to execute a general consent to service
of process or to qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified;
(e) notify the security holders
participating in such registration, promptly after it shall receive notice
thereof, of the time when such registration statement has become effective or
a supplement to any prospectus forming a part of such registration statement
has been filed;
(f) notify such holders promptly of any
request by the SEC for the amending or supplementing of such registration
statement or prospectus or for additional information;
(g) prepare and file with the SEC,
promptly upon the request of any such holders, any amendments or supplements
to such registration statement or prospectus which, in the opinion of counsel
for such holders (and concurred in by counsel for the Company), is required
under the Act or the rules and regulations thereunder in connection with the
distribution of Common Stock by such holder;
(h) prepare and promptly file with the SEC
and promptly notify such holders of the filing of such amendment or supplement
to such registration statement or prospectus as may be necessary to correct
any statements or omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Act, any event shall have
occurred as the result of which any such prospectus or any other prospectus as
then in effect would include an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances in which they were made, not misleading; and
(i) advise such holders, promptly after it
shall receive notice or obtain knowledge thereof, of the issuance of any stop
order by the SEC suspending the effectiveness of such registration statement
or the initiation or threatening of any proceeding for that purpose and
promptly use its best efforts to prevent the issuance of any stop order or to
obtain its withdrawal if such stop order should be issued.
4.3 Expenses.
(a) With respect to the registration
required pursuant to Section 4.1 hereof, all fees, costs and expenses of and
incidental to such registration, inclusion and public offering (as specified
in paragraph (b) below) in connection therewith shall be borne by the
<PAGE>
Page 44 of 65 Pages
Company, provided, however, that any securityholders participating in such
registration shall bear their pro rata share of the underwriting discount and
commissions and transfer taxes.
(b) The fees, costs and expenses of
registration to be borne by the Company as provided in paragraph (a) above
shall include, without limitation, all registration, filing, and NASD fees,
printing expenses, fees and disbursements of counsel and accountants for the
Company, and all legal fees and disbursements and other expenses of complying
with state securities or blue sky laws of any jurisdictions in which the
securities to be offered are to be registered and qualified (except as
provided in 4.3(a) above). Fees and disbursements of counsel and accountants
for the selling securityholders and any other expenses incurred by the selling
securityholders not expressly included above shall be borne by the selling
securityholders.
4.4 Indemnification.
(a) The Company will indemnify and hold
harmless each holder of Registrable Securities which are included in a
registration statement pursuant to the provisions of Section 4.1 hereof, its
directors and officers, and any underwriter (as defined in the Act) for such
holder and each person, if any, who controls such holder or such underwriter
within the meaning of the Act, from and against, and will reimburse such
holder and each such underwriter and controlling person with respect to, any
and all loss, damage, liability, cost and expense to which such holder or any
such underwriter or controlling person may become subject under the Act or
otherwise, insofar as such losses, damages, liabilities, costs or expenses are
caused by any untrue statement or alleged untrue statement of any material
fact contained in such registration statement, any prospectus contained
therein or any amendment or supplement thereto, 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 to make the statements therein, in
light of the circumstances in which they were made, not misleading; provided,
however, that the Company will not be liable in any such case to the extent
that any such loss, damage, liability, cost or expenses arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with information furnished by such
holder, such underwriter or such controlling person in writing specifically
for use in the preparation thereof.
(b) Each holder of Registrable Securities
included in a registration pursuant to the provisions of Section 4.1 hereof
will indemnify and hold harmless the Company, its directors and officers, any
controlling person and any underwriter from and against, and will reimburse
the Company, its directors and officers, any controlling person and any
underwriter with respect to, any and all loss, damage, liability, cost or
expense to which the Company or any controlling person and/or any underwriter
may become subject under the Act or otherwise, insofar as such losses,
damages, liabilities, costs or expenses are caused by any untrue statement or
alleged untrue statement of any material fact contained in such registration
statement, any prospectus contained therein or any amendment or supplement
thereto, 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
<PAGE>
Page 45 of 65 Pages
to make the statements therein, in light of the circumstances in 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 so made in reliance upon and in strict conformity with written
information furnished by or on behalf of such holder specifically for use in
the preparation thereof.
(c) Promptly after receipt by an
indemnified party pursuant to the provisions of paragraph (a) or (b) of this
Section 4.4 of notice of the commencement of any action involving the subject
matter of the foregoing indemnity provisions such indemnified party will, if a
claim thereof is to be made against the indemnifying party pursuant to the
provisions of said paragraph (a) or (b), promptly notify the indemnifying
party of the commencement thereof; but the omission to so notify the
indemnifying party will not relieve it from any liability which it may have to
any indemnified party otherwise than hereunder. In case such action is brought
against any indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party shall have the right to
participate in, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party, provided, however, if counsel
for the indemnifying party concludes that a single counsel cannot under
applicable legal and ethical considerations, represent both the indemnifying
party and the indemnified party, the indemnified party or parties have the
right to select separate counsel to participate in the defense of such action
on behalf of such indemnified party or parties. After notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party pursuant to the provisions of said paragraph (a) or (b) for any legal or
other expense subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation, unless
(i) the indemnified party shall have employed counsel in accordance with the
provisions of the preceding sentence, (ii) the indemnifying party shall not
have employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after the notice of the
commencement of the action or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party.
V. MISCELLANEOUS
5.1 Any notice or other communication given
hereunder shall be deemed sufficient if in writing and sent by registered or
certified mail, return receipt requested, addressed to the Company, at its
registered office, 2105 Hamilton Avenue, Suite 240, San Jose, California
95125, Attention: President and to the Subscriber at his address indicated on
the last page of this Subscription Agreement. Notices shall be deemed to have
been given on the date of mailing, except notices of change of address, which
shall be deemed to have been given when received.
5.2 This Subscription Agreement shall not be
changed, modified or amended except by a writing signed by the parties to be
charged, and this Subscription Agreement
<PAGE>
Page 46 of 65 Pages
may not be discharged except by performance in accordance with its terms or by
a writing signed by the party to be charged.
5.3 This Subscription Agreement shall be binding
upon and inure to the benefit of the parties hereto and to their respective
heirs, legal representatives, successors and assigns. This Subscription
Agreement sets forth the entire agreement and understanding between the
parties as to the subject matter thereof and merges and supersedes all prior
discussions, agreements and understandings of any and every nature among them.
5.4 Notwithstanding the place where this
Subscription Agreement may be executed by any of the parties hereto, the
parties expressly agree that all the terms and provisions hereof shall be
construed in accordance with and governed by the laws of the State of New
York. The parties hereby agree that any dispute which may arise between them
arising out of or in connection with this Subscription Agreement shall be
adjudicated before a court located in New York City and they hereby submit to
the exclusive jurisdiction of the courts of the State of New York located in
New York, New York and of the federal courts in the Southern District of New
York with respect to any action or legal proceeding commenced by any party,
and irrevocably waive any objection they now or hereafter may have respecting
the venue of any such action or proceeding brought in such a court or
respecting the fact that such court is an inconvenient forum, relating to or
arising out of this Subscription Agreement or any acts or omissions relating
to the sale of the securities hereunder, and consent to the service of process
in any such action or legal proceeding by means of registered or certified
mail, return receipt requested, in care of the address set forth below or such
other address as the undersigned shall furnish in writing to the other.
5.5 This Subscription Agreement may be executed in
counterparts. Upon the execution and delivery of this Subscription Agreement
by the Subscriber, this Subscription Agreement shall become a binding
obligation of the Subscriber with respect to the purchase of Units as herein
provided; subject, however, to the right hereby reserved to the Company to
enter into the same agreements with other subscribers and to add and/or to
delete other persons as subscribers.
5.6 The holding of any provision of this
Subscription Agreement to be invalid or unenforceable by a court of competent
jurisdiction shall not affect any other provision of this Subscription
Agreement, which shall remain in full force and effect.
5.7 It is agreed that a waiver by either party of
a breach of any provision of this Subscription Agreement shall not operate, or
be construed, as a waiver of any subsequent breach by that same party.
5.8 The parties agree to execute and deliver all
such further documents, agreements and instruments and take such other and
further action as may be necessary or appropriate to carry out the purposes
and intent of this Subscription Agreement.
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Page 47 of 65 Pages
5.9 The Company agrees not to disclose the names,
addresses or any other information about the Subscribers, except as required
by law, provided, that the Company may use information relating to the
Subscriber in any registration statement under the Act with respect to the
Warrants or the Reserved Shares.
VI. BLUE SKY LEGENDS
California
The sale of securities which are the subject of
this agreement has not been qualified with the Commissioner of Corporations of
the State of California and the issuance of such securities or the payment or
receipt of any part of the consideration for such securities prior to such
qualification is unlawful, unless the sale of securities is exempt from
qualification by Section 25100, 25102 or 25105 of the California Corporations
Code. The rights of all parties to this agreement are expressly conditioned
upon such qualification being obtained, unless the sale is so exempt.
Connecticut
The undersigned acknowledges that the Securities
have not been registered under the Connecticut Uniform Securities Act, as
amended (the "Act") and are subject to restrictions on transferability and
sale of securities as set forth herein. The undersigned hereby agrees that
such Securities will not be transferred or sold without registration under the
Act or exemption therefrom.
Maine
These securities are being sold pursuant to an
exemption from registration with the bank superintendent of the State of Maine
under Section 10502(2)(r) of Title 32 of the Maine revised statutes. These
securities may be deemed restricted securities and as such the holder may not
be able to resell the securities unless pursuant to registration under state
or federal securities laws or unless an exemption under such laws exists.
Missouri
The undersigned acknowledges that the Securities
have not been registered under the Missouri Uniform Securities Act, as amended
(the "Act") and are subject to restrictions on transferability and sale of
securities as set forth herein. The undersigned hereby acknowledges that such
Securities may be disposed of only through a licensed broker-dealer. It is a
felony to sell securities in violation of the Missouri Securities Act.
<PAGE>
Page 48 of 65 Pages
Pennsylvania
The undersigned hereby acknowledges that the
Issuer is relying upon the exemption from registration of securities set forth
in Section 203(d) of the Pennsylvania Securities Act of 1972, as amended (the
"Pennsylvania Act") in connection with the sale of the Securities to the
undersigned.
In accordance with the requirements of Section
203(d) of the Pennsylvania Act, the undersigned hereby agrees not to sell his
Securities within twelve (12) months from the date of purchase except pursuant
to Section 204.01 of the Blue Sky Regulations of the Pennsylvania Securities
Act of 1972. Additionally, the undersigned is aware of the right of withdrawal
under Section 207(m) of the Act described in the cover pages of the
Memorandum.
Texas
The undersigned hereby acknowledges that the
Securities cannot be sold unless they are subsequently registered under the
Securities Act of 1933, as amended, and the Texas Securities Act, or an
exemption from registration is available. The undersigned further acknowledges
that because the Securities are not readily transferable, he must bear the
economic risk of his investment for an indefinite period of time.
<PAGE>
Page 49 of 65 Pages
IN WITNESS WHEREOF, the parties have executed this
Subscription Agreement as of the day and year first written above.
- ------------------------------ ------------------------------------
Signature of Subscriber Signature of Co-Subscriber
- ------------------------------ ------------------------------------
Name of Subscriber Name of Co-Subscriber
[please print]
- ------------------------------ ------------------------------------
Address of Subscriber Address of Co-Subscriber
- ------------------------------ ------------------------------------
Social Security or Taxpayer Social Security or Taxpayer
Identification Number of Subscriber Identification Number
of Co-Subscriber
- ------------------------------
Subscriber's Account Number
at Commonwealth Associates
- ------------------------------
Number of Units Subscribed For
*If Subscriber is a Registered Representative with an NASD member firm, have
the following acknowledgement signed by the appropriate party:
The undersigned NASD member firm
acknowledges receipt of the notice
required by Rule 3050 of the NASD Subscription Accepted:
Conduct Rules.
DATALINK SYSTEMS CORPORATION
- ------------------------------
Name of NASD Member Firm By:
---------------------------
By Date:
------------------------------- ---------------------------
Authorized Officer
<PAGE>
Page 50 of 65 Pages
Exhibit 5
THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS EXERCISE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE
TRANSFERRED UNTIL (1) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933 (THE "ACT") SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO, OR (2)
RECEIPT BY THE ISSUER OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
ISSUER TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED IN
CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS SUCH TRANSFER IN VIOLATION OF
ANY APPLICABLE STATE SECURITIES LAWS.
WARRANT TO PURCHASE COMMON STOCK
OF
DATALINK SYSTEMS CORPORATION
This is to Certify That, FOR VALUE RECEIVED, Commonwealth
Associates, or assigns ("Holder"), is entitled to purchase, subject to the
provisions of this Warrant, from Datalink Systems Corporation, a Nevada
corporation ("Company"), Eight Million Two Hundred Forty Three Thousand Eight
Hundred Twenty Six (8,243,826) fully paid, validly issued and nonassessable
shares of Common Stock of the Company ("Common Stock") at a price of $.375 per
share at any time or from time to time during the period from November 5, 1997
until November 5, 2002. The number of shares of Common Stock to be received
upon the exercise of this Warrant and the price to be paid for each share of
Common Stock may be adjusted from time to time as hereinafter set forth. The
shares of Common Stock deliverable upon such exercise, and as adjusted from
time to time, are hereinafter sometimes referred to as "Warrant Shares" and
the exercise price of a share of Common Stock in effect at any time and as
adjusted from time to time is hereinafter sometimes referred to as the
"Exercise Price". This Warrant, together with warrants of like tenor,
constituting in the aggregate warrants (the "Warrants") to purchase 8,243,826
shares of Common Stock, was originally issued pursuant to an agency agreement
between the Company and Commonwealth Associates ("Commonwealth"), in
connection with a private offering of the Company's securities through
Commonwealth (the "Private Placement"), in consideration of $37.50 received
for the Warrants.
(a) EXERCISE OF WARRANT; CANCELLATION OF WARRANT.
<PAGE>
Page 51 of 65 Pages
(1) This Warrant may be exercised in whole or in
part at any time or from time to time on or after November 5, 1997 and until
November 5, 2002 (the "Exercise Period"), subject to the provisions of Section
(j)(2) hereof; provided, however, that (i) if either such day is a day on
which banking institutions in the State of New York are authorized by law to
close, then on the next succeeding day which shall not be such a day, and (ii)
in the event of any merger, consolidation or sale of substantially all the
assets of the Company as an entirety, resulting in any distribution to the
Company's stockholders, prior to November 5, 2002, the Holder shall have the
right to exercise this Warrant commencing at such time through November 5,
2002 into the kind and amount of shares of stock and other securities and
property (including cash) receivable by a holder of the number of shares of
Common Stock into which this Warrant might have been exercisable immediately
prior thereto. This Warrant may be exercised by presentation and surrender
hereof to the Company at its principal office, or at the office of its stock
transfer agent, if any, with the Purchase Form annexed hereto duly executed
and accompanied by payment of the Exercise Price for the number of Warrant
Shares specified in such form. As soon as practicable after each such exercise
of the warrants, but not later than seven (7) days from the date of such
exercise, the Company shall issue and deliver to the Holder a certificate or
certificate for the Warrant Shares issuable upon such exercise, registered in
the name of the Holder or its designee. If this Warrant should be exercised in
part only, the Company shall, upon surrender of this Warrant for cancellation,
execute and deliver a new Warrant evidencing the rights of the Holder thereof
to purchase the balance of the Warrant Shares purchasable thereunder. Upon
receipt by the Company of this Warrant at its office, or by the stock transfer
agent of the Company at its office, in proper form for exercise, the Holder
shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
the Company shall then be closed or that certificates representing such shares
of Common Stock shall not then be physically delivered to the Holder.
(2) At any time during the Exercise Period, the
Holder may, at its option, exchange this Warrant, in whole or in part (a
"Warrant Exchange"), into the number of Warrant Shares determined in
accordance with this Section (a)(2), by surrendering this Warrant at the
principal office of the Company or at the office of its stock transfer agent,
accompanied by a notice stating such Holder's intent to effect such exchange,
the number of Warrant Shares to be exchanged and the date on which the Holder
requests that such Warrant Exchange occur (the "Notice of Exchange"). The
Warrant Exchange shall take place on the date specified in the Notice of
Exchange or, if later, the date the Notice of Exchange is received by the
Company (the "Exchange Date"). Certificates for the shares issuable upon such
Warrant Exchange and, if applicable, a new warrant of like tenor evidencing
the balance of the shares remaining subject to this Warrant, shall be issued
as of the Exchange Date and delivered to the Holder within seven (7) days
following the Exchange Date. In connection with any Warrant Exchange, this
Warrant shall represent the right to subscribe for and acquire the number of
Warrant Shares (rounded to the next highest integer) equal to (i) the number
of Warrant Shares specified by the Holder in its Notice of Exchange (the
"Total Number") less (ii) the number of Warrant Shares equal to the quotient
obtained by dividing (A) the product of the Total Number and the existing
Exercise Price by (B) the current market value of a share of
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Page 52 of 65 Pages
Common Stock. Current market value shall have the meaning set forth Section
(c) below, except that for purposes hereof, the date of exercise, as used in
such Section (c), shall mean the Exchange Date.
(b) RESERVATION OF SHARES. The Company shall at all times
reserve for issuance and/or delivery upon exercise of this Warrant such number
of shares of its Common Stock as shall be required for issuance and delivery
upon exercise of the Warrants.
(c) FRACTIONAL SHARES. No fractional shares or script
representing fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for upon any exercise
hereof, the Company shall pay to the Holder an amount in cash equal to such
fraction multiplied by the current market value of a share, determined as
follows:
(1) If the Common Stock is listed on a national
securities exchange or admitted to unlisted trading
privileges on such exchange or listed for trading on the
Nasdaq National Market, the current market value shall be
the last reported sale price of the Common Stock on such
exchange or market on the last business day prior to the
date of exercise of this Warrant or if no such sale is made
on such day, the average closing bid and asked prices for
such day on such exchange or market; or
(2) If the Common Stock is not so listed or
admitted to unlisted trading privileges, but is traded on
the Nasdaq SmallCap Market, the current market value shall
be the average of the closing bid and asked prices for such
day on such market and if the Common Stock is not so traded,
the current market value shall be the mean of the last
reported bid and asked prices reported by the National
Quotation Bureau, Inc. on the last business day prior to the
date of the exercise of this Warrant; or
(3) If the Common Stock is not so listed or
admitted to unlisted trading privileges and bid and asked
prices are not so reported, the current market value shall
be an amount, not less than book value thereof as at the end
of the most recent fiscal year of the Company ending prior
to the date of the exercise of the Warrant, determined in
such reasonable manner as may be prescribed by the Board of
Directors of the Company.
(d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This
Warrant is exchangeable, without expense, at the option of the Holder, upon
presentation and surrender hereof to the Company or at the office of its stock
transfer agent, if any, for other warrants of different denominations
entitling the holder thereof to purchase in the aggregate the same number of
shares of Common Stock purchasable hereunder. Upon surrender of this Warrant
to the Company at its principal office or at the office of its stock transfer
agent, if any, with the Assignment Form annexed hereto duly executed and funds
sufficient to pay any transfer tax, the Company shall, without charge, execute
and deliver a new Warrant in the name of the assignee
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Page 53 of 65 Pages
named in such instrument of assignment and this Warrant shall promptly be
cancelled. This Warrant may be divided or combined with other warrants which
carry the same rights upon presentation hereof at the principal office of the
Company or at the office of its stock transfer agent, if any, together with a
written notice specifying the names and denominations in which new Warrants
are to be issued and signed by the Holder hereof. The term "Warrant" as used
herein includes any Warrants into which this Warrant may be divided or
exchanged. Upon receipt by the Company of evidence satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Warrant, if mutilated, the Company
will execute and deliver a new Warrant of like tenor and date. Any such new
Warrant executed and delivered shall constitute an additional contractual
obligation on the part of the Company, whether or not this Warrant so lost,
stolen, destroyed, or mutilated shall be at any time enforceable by anyone.
(e) RIGHTS OF THE HOLDER. The Holder shall not, by virtue
hereof, be entitled to any rights of a shareholder in the Company, either at
law or equity, and the rights of the Holder are limited to those expressed in
the Warrant and are not enforceable against the Company except to the extent
set forth herein.
(f) ANTI-DILUTION PROVISIONS. Subject to the provisions of
Section l hereof, the Exercise Price in effect at any time and the number and
kind of securities purchasable upon the exercise of the Warrants shall be
subject to adjustment from time to time upon the happening of certain events
as follows:
(1) In case the Company shall (i) declare a
dividend or make a distribution on its outstanding shares of
Common Stock in shares of Common Stock, (ii) subdivide or
reclassify its outstanding shares of Common Stock into a
greater number of shares, or (iii) combine or reclassify its
outstanding shares of Common Stock into a smaller number of
shares, the Exercise Price in effect at the time of the
record date for such dividend or distribution or of the
effective date of such subdivision, combination or
reclassification shall be adjusted so that it shall equal
the price determined by multiplying the Exercise Price by a
fraction, the denominator of which shall be the number of
shares of Common Stock outstanding after giving effect to
such action, and the numerator of which shall be the number
of shares of Common Stock outstanding immediately prior to
such action. Such adjustment shall be made successively
whenever any event listed above shall occur.
(2) In case the Company shall fix a record
date for the issuance of rights or warrants to all holders
of its Common Stock entitling them to subscribe for or
purchase shares of Common Stock (or securities convertible
into Common Stock) at a price (the "Subscription Price") (or
having a conversion price per share) less than the current
market price of the Common Stock (as defined in Subsection
(8) below) on the record date mentioned below, or less than
the Exercise Price on such
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Page 54 of 65 Pages
record date the Exercise Price shall be adjusted so that the
same shall equal the lower of (i) the price determined by
multiplying the Exercise Price in effect immediately prior
to the date of such issuance by a fraction, the numerator of
which shall be the sum of the number of shares of Common
Stock outstanding on the record date mentioned below and the
number of additional shares of Common Stock which the
aggregate offering price of the total number of shares of
Common Stock so offered (or the aggregate conversion price
of the convertible securities so offered) would purchase at
such current market price per share of the Common Stock, and
the denominator of which shall be the sum of the number of
shares of Common Stock outstanding on such record date and
the number of additional shares of Common Stock offered for
subscription or purchase (or into which the convertible
securities so offered are convertible) or (ii) in the event
the Subscription Price is equal to or higher than the
current market price but is less than the Exercise Price,
the price determined by multiplying the Exercise Price in
effect immediately prior to the date of issuance by a
fraction, the numerator of which shall be the sum of the
number of shares outstanding on the record date mentioned
below and the number of additional shares of Common Stock
which the aggregate offering price of the total number of
shares of Common Stock so offered (or the aggregate
conversion price of the convertible securities so offered)
would purchase at the Exercise Price in effect immediately
prior to the date of such issuance, and the denominator of
which shall be the sum of the number of shares of Common
Stock outstanding on the record date mentioned below and the
number of additional shares of Common Stock offered for
subscription or purchase (or into which the convertible
securities so offered are convertible). Such adjustment
shall be made successively whenever such rights or warrants
are issued and shall become effective immediately after the
record date for the determination of shareholders entitled
to receive such rights or warrants; and to the extent that
shares of Common Stock are not delivered (or securities
convertible into Common Stock are not delivered) after the
expiration of such rights or warrants the Exercise Price
shall be readjusted to the Exercise Price which would then
be in effect had the adjustments made upon the issuance of
such rights or warrants been made upon the basis of delivery
of only the number of shares of Common Stock (or securities
convertible into Common Stock) actually delivered.
(3) In case the Company shall hereafter distribute
to the holders of its Common Stock evidences of its
indebtedness or assets (excluding cash dividends or
distributions and dividends or distributions referred to in
Subsection (1) above) or subscription rights or warrants
(excluding those referred to in Subsection (2) above), then
in each such case the Exercise Price in effect thereafter
shall be determined by multiplying the Exercise Price in
effect immediately prior thereto by a fraction, the
numerator of which shall be the total number of shares of
Common Stock outstanding multiplied by the current market
price per share of Common Stock (as defined in Subsection
(8) below), less the fair market value (as determined by the
<PAGE>
Page 55 of 65 Pages
Company's Board of Directors) of said assets or evidences of
indebtedness so distributed or of such rights or warrants,
and the denominator of which shall be the total number of
shares of Common Stock outstanding multiplied by such
current market price per share of Common Stock. Such
adjustment shall be made successively whenever such a record
date is fixed. Such adjustment shall be made whenever any
such distribution is made and shall become effective
immediately after the record date for the determination of
shareholders entitled to receive such distribution.
(4) In case the Company shall issue shares of its
Common Stock (excluding shares issued (i) in any of the
transactions described in Subsection (1) above, (ii) upon
exercise of options granted to the Company's employees under
a plan or plans adopted by the Company's Board of Directors
and approved by its shareholders, if such shares would
otherwise be included in this Subsection (4), (but only to
the extent that the aggregate number of shares excluded
hereby and issued after the date hereof, shall not exceed 5%
of the Company's Common Stock outstanding at the time of any
issuance), (iii) upon exercise of options and warrants
outstanding at November 5, 1997, and this Warrant (iv) to
shareholders of any corporation which merges into the
Company in proportion to their stock holdings of such
corporation immediately prior to such merger, upon such
merger, or (v) issued in a bona fide public offering
pursuant to a firm commitment underwriting, but only if no
adjustment is required pursuant to any other specific
subsection of this Section (f) (without regard to Subsection
(9) below) with respect to the transaction giving rise to
such rights) for a consideration per share (the "Offering
Price") less than the current market price per share (as
defined in Subsection (8) below) on the date the Company
fixes the offering price of such additional shares or less
than the Exercise Price, the Exercise Price shall be
adjusted immediately thereafter so that it shall equal the
lower of (i) the price determined by multiplying the
Exercise Price in effect immediately prior thereto by a
fraction, the numerator of which shall be the sum of the
number of shares of Common Stock outstanding immediately
prior to the issuance of such additional shares and the
number of shares of Common Stock which the aggregate
consideration received (determined as provided in Subsection
(7) below) for the issuance of such additional shares would
purchase at such current market price per share of Common
Stock, and the denominator of which shall be the number of
shares of Common Stock outstanding immediately after the
issuance of such additional shares or (ii) in the event the
Offering Price is equal to or higher than the current market
price per share but less than the Exercise Price, the price
determined by multiplying the Exercise Price in effect
immediately prior to the date of issuance by a fraction, the
numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to the issuance of such
additional shares and the number of shares of Common Stock
which the aggregate consideration received (determined as
provided in subsection (7) below) for the
<PAGE>
Page 56 of 65 Pages
issuance of such additional shares would purchase at the
Exercise Price in effect immediately prior to the date of
such issuance, and the denominator of which shall be the
number of shares of Common Stock outstanding immediately
after the issuance of such additional shares. Such
adjustment shall be made successively whenever such an
issuance is made.
(5) In case the Company shall issue any securities
convertible into or exchangeable for its Common Stock
(excluding securities issued in transactions described in
Subsections (2) and (3) above) for a consideration per share
of Common Stock (the "Conversion Price") initially
deliverable upon conversion or exchange of such securities
(determined as provided in Subsection (7) below) less than
the current market price per share (as defined in Subsection
(8) below) in effect immediately prior to the issuance of
such securities, or less than the Exercise Price, the
Exercise Price shall be adjusted immediately thereafter so
that it shall equal the lower of (i) the price determined by
multiplying the Exercise Price in effect immediately prior
thereto by a fraction, the numerator of which shall be the
sum of the number of shares of Common Stock outstanding
immediately prior to the issuance of such securities and the
number of shares of Common Stock which the aggregate
consideration received (determined as provided in Subsection
(7) below) for such securities would purchase at such
current market price per share of Common Stock, and the
denominator of which shall be the sum of the number of
shares of Common Stock outstanding immediately prior to such
issuance and the maximum number of shares of Common Stock of
the Company deliverable upon conversion of or in exchange
for such securities at the initial conversion or exchange
price or rate or (ii) in the event the Conversion Price is
equal to or higher than the current market price per share
but less than the Exercise Price, the price determined by
multiplying the Exercise Price in effect immediately prior
to the date of issuance by a fraction, the numerator of
which shall be the sum of the number of shares outstanding
immediately prior to the issuance of such securities and the
number of shares of Common Stock which the aggregate
consideration received (determined as provided in subsection
(7) below) for such securities would purchase at the
Exercise Price in effect immediately prior to the date of
such issuance, and the denominator of which shall be the sum
of the number of shares of Common Stock outstanding
immediately prior to the issuance of such securities and the
maximum number of shares of Common Stock of the Company
deliverable upon conversion of or in exchange for such
securities at the initial conversion or exchange price or
rate. Such adjustment shall be made successively whenever
such an issuance is made.
(6) Whenever the Exercise Price payable upon
exercise of each Warrant is adjusted pursuant to Subsections
(1), (2), (3), (4) and (5) above, the number of Shares
purchasable upon exercise of this Warrant shall
simultaneously be adjusted by multiplying the number of
Shares initially issuable upon exercise of this Warrant
<PAGE>
Page 57 of 65 Pages
by the Exercise Price in effect on the date hereof and
dividing the product so obtained by the Exercise Price, as
adjusted.
(7) For purposes of any computation respecting
consideration received pursuant to Subsections (4) and (5)
above, the following shall apply:
(A) in the case of the issuance of shares
of Common Stock for cash, the consideration shall
be the amount of such cash, provided that in no
case shall any deduction be made for any
commissions, discounts or other expenses incurred
by the Company for any underwriting of the issue or
otherwise in connection therewith;
(B) in the case of the issuance of shares
of Common Stock for a consideration in whole or in
part other than cash, the consideration other than
cash shall be deemed to be the fair market value
thereof as determined in good faith by the Board of
Directors of the Company (irrespective of the
accounting treatment thereof), whose determination
shall be conclusive; and
(C) in the case of the issuance of
securities convertible into or exchangeable for
shares of Common Stock, the aggregate consideration
received therefor shall be deemed to be the
consideration received by the Company for the
issuance of such securities plus the additional
minimum consideration, if any, to be received by
the Company upon the conversion or exchange thereof
(the consideration in each case to be determined in
the same manner as provided in clauses (A) and (B)
of this Subsection (7)).
(8) For the purpose of any computation under
Subsections (2), (3), (4) and (5) above, the current market
price per share of Common Stock at any date shall be
determined in the manner set forth in Section (c) hereof
except that the current market price per share shall be
deemed to be the higher of (i) the average of the prices for
30 consecutive business days before such date or (ii) the
price on the business day immediately preceding such date.
(9) No adjustment in the Exercise Price shall be
required unless such adjustment would require an increase or
decrease of at least five cents ($0.05) in such price;
provided, however, that any adjustments which by reason of
this Subsection (9) are not required to be made shall be
carried forward and taken into account in any subsequent
adjustment required to be made hereunder. All calculations
under this Section (f) shall be made to the nearest cent or
to the nearest one-hundredth of a share, as the case may be.
Anything in this Section (f) to the contrary
notwithstanding, the Company shall be entitled, but shall
not be required, to make such changes in the Exercise Price,
in addition to those required by this
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Page 58 of 65 Pages
Section (f), as it shall determine, in its sole discretion,
to be advisable in order that any dividend or distribution
in shares of Common Stock, or any subdivision,
reclassification or combination of Common Stock, hereafter
made by the Company shall not result in any Federal Income
tax liability to the holders of Common Stock or securities
convertible into Common Stock (including Warrants).
(10) Whenever the Exercise Price is adjusted, as
herein provided, the Company shall promptly but no later
than 10 days after any request for such an adjustment by the
Holder, cause a notice setting forth the adjusted Exercise
Price and adjusted number of Shares issuable upon exercise
of each Warrant, and, if requested, information describing
the transactions giving rise to such adjustments, to be
mailed to the Holders at their last addresses appearing in
the Warrant Register, and shall cause a certified copy
thereof to be mailed to its transfer agent, if any. In the
event the Company does not provide the Holder with such
notice and information within 10 days of a request by the
Holder, then notwithstanding the provisions of this Section
(f), the Exercise Price shall be immediately adjusted to
equal the lowest Offering Price, Subscription Price or
Conversion Price, as applicable, since the date of this
Warrant, and the number of shares issuable upon exercise of
this Warrant shall be adjusted accordingly. The Company may
retain a firm of independent certified public accountants
selected by the Board of Directors (who may be the regular
accountants employed by the Company) to make any computation
required by this Section (f), and a certificate signed by
such firm shall be conclusive evidence of the correctness of
such adjustment.
(11) In the event that at any time, as a result of
an adjustment made pursuant to Subsection (1) above, the
Holder of this Warrant thereafter shall become entitled to
receive any shares of the Company, other than Common Stock,
thereafter the number of such other shares so receivable
upon exercise of this 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
the Common Stock contained in Subsections (1) to (9),
inclusive above.
(12) Irrespective of any adjustments in the
Exercise Price or the number or kind of shares purchasable
upon exercise of this Warrant, Warrants theretofore or
thereafter issued may continue to express the same price and
number and kind of shares as are stated in the similar
Warrants initially issuable pursuant to this Agreement.
(g) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall
be adjusted as required by the provisions of the foregoing Section, the
Company shall forthwith file in the custody of its Secretary or an Assistant
Secretary at its principal office and with its stock transfer agent, if any,
an officer's certificate showing the adjusted Exercise Price determined as
herein
<PAGE>
Page 59 of 65 Pages
provided, setting forth in reasonable detail the facts requiring such
adjustment, including a statement of the number of additional shares of Common
Stock, if any, and such other facts as shall be necessary to show the reason
for and the manner of computing such adjustment. Each such officer's
certificate shall be made available at all reasonable times for inspection by
the holder or any holder of a Warrant executed and delivered pursuant to
Section (a) and the Company shall, forthwith after each such adjustment, mail
a copy by certified mail of such certificate to the Holder or any such holder.
(h) NOTICES TO WARRANT HOLDERS. So long as this Warrant
shall be outstanding, (i) if the Company shall pay any dividend or make any
distribution upon the Common Stock or (ii) if the Company shall offer to the
holders of Common Stock for subscription or purchase by them any share of any
class or any other rights or (iii) if any capital reorganization of the
Company, reclassification of the capital stock of the Company, consolidation
or merger of the Company with or into another corporation, sale, lease or
transfer of all or substantially all of the property and assets of the Company
to another corporation, or voluntary or involuntary dissolution, liquidation
or winding up of the Company shall be effected, then in any such case, the
Company shall cause to be mailed by certified mail to the Holder, at least
fifteen days prior the date specified in (x) or (y) below, as the case may be,
a notice containing a brief description of the proposed action and stating the
date on which (x) a record is to be taken for the purpose of such dividend,
distribution or rights, or (y) such reclassification, reorganization,
consolidation, merger, conveyance, lease, dissolution, liquidation or winding
up is to take place and the date, if any is to be fixed, as of which the
holders of Common Stock or other securities shall receive cash or other
property deliverable upon such reclassification, reorganization,
consolidation, merger, conveyance, dissolution, liquidation or winding up.
(i) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of
any reclassification, capital reorganization or other change of outstanding
shares of Common Stock of the Company, or in case of any consolidation or
merger of the Company with or into another corporation (other than a merger
with a subsidiary in which merger the Company is the continuing corporation
and which does not result in any reclassification, capital reorganization or
other change of outstanding shares of Common Stock of the class issuable upon
exercise of this Warrant) or in case of any sale, lease or conveyance to
another corporation of the property of the Company as an entirety, the Company
shall, as a condition precedent to such transaction, cause effective
provisions to be made so that the Holder shall have the right thereafter by
exercising this Warrant at any time prior to the expiration of the Warrant, to
purchase the kind and amount of shares of stock and other securities and
property receivable upon such reclassification, capital reorganization and
other change, consolidation, merger, sale or conveyance by a holder of the
number of shares of Common Stock which might have been purchased upon exercise
of this Warrant immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance. Any such provision shall include
provision for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Warrant. The foregoing
provisions of this Section (i) shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common
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Page 60 of 65 Pages
Stock and to successive consolidations, mergers, sales or conveyances. In the
event that in connection with any such capital reorganization or
reclassification, consolidation, merger, sale or conveyance, additional shares
of Common Stock shall be issued in exchange, conversion, substitution or
payment, in whole or in part, for a security of the Company other than Common
Stock, any such issue shall be treated as an issue of Common Stock covered by
the provisions of Subsection (1) of Section (f) hereof.
(j) REGISTRATION UNDER THE SECURITIES ACT OF 1933.
(1) Commencing the later of (i) February 28, 1998,
and (ii) one year after the effective date of a registration
statement relating to an initial public offering of the
Company's securities (other than one through Commonwealth
which results in cancellation of the Warrant) until February
28, 2004 (the "Registration Rights Period") the Company
shall advise the Holder of this Warrant or of the Warrant
Shares or any then holder of Warrants or Warrant Shares
(such persons being collectively referred to herein as
"holders") by written notice at least four weeks prior to
the filing of any registration statement under the
Securities Act of 1933, as amended (the "Act") covering
securities of the Company and upon the request of any such
holder, include in any such registration statement such
information as may be required to permit a public offering
of the Warrants or the Warrant Shares. The Company shall
supply prospectuses and other documents as the Holder may
request in order to facilitate the public sale or other
disposition of the Warrants or Warrant Shares, qualify the
Warrants and the Warrant Shares for sale in such states as
any such holder designates and do any and all other acts and
things which may be necessary or desirable to enable such
Holders to consummate the public sale or other disposition
of the Warrants or Warrant Shares, and furnish
indemnification in the manner as set forth in Subsection
(3)(C) of this Section (j). Such holders shall furnish
information and indemnification as set forth in Subsection
(3)(C) of this Section (j), except that the maximum amount
which may be recovered from the Holder shall be limited to
the amount of proceeds received by the Holder from the sale
of the Warrants or Warrant Shares.
(2) If Commonwealth or any "majority owner" (the
"Requesting Holder") shall give notice to the Company at any
time during the Registration Rights Period to the effect
that such holder contemplates (i) the transfer of all or any
part of his or its Warrants and/or Warrant Shares, or (ii)
the exercise and/or conversion of all or any part of his or
its Warrants and the transfer of all or any part of the
Warrants and/or Warrant Shares under such circumstances that
a public offering (within the meaning of the Act) of
Warrants and/or Warrant Shares will be involved, and desires
to register under the Act, the Warrants and/or the Warrant
Shares, then the Company shall, within four weeks after
receipt of such notice, file a registration statement on
Form S-1 or such other form as the holder requests, pursuant
to the Act, to the end
<PAGE>
Page 61 of 65 Pages
that the Warrants and/or Warrant Shares may be sold under
the Act as promptly as practicable thereafter and the
Company will use its best efforts to cause such registration
to become effective and continue to be effective (current)
(including the taking of such steps as are necessary to
obtain the removal of any stop order) until the holder has
advised that all of the Warrants and/or Warrant Shares have
been sold; provided that such holder shall furnish the
Company with appropriate information (relating to the
intentions of such holders) in connection therewith as the
Company shall reasonably request in writing. In the event
the registration statement is not declared effective under
the Act prior to November 5, 2004, the Company shall extend
the expiration date of the Warrants to a date not less than
90 days after the effective date of such registration
statement. The Requesting Holder may, at its option, request
the registration of the Warrants and/or Warrant Shares in a
registration statement made by the Company as contemplated
by Subsection (1) of this Section (j) or in connection with
a request made pursuant to Subsection (2) of this Section
(j) prior to the acquisition of the Warrant Shares upon
exercise of the Warrants and even though the Requesting
Holder has not given notice of exercise of the Warrants. If
the Company determines to include securities to be sold by
it in any registration statement originally requested
pursuant to this Subsection (2) of this Section (j), such
registration shall instead be deemed to have been a
registration under Subsection (1) of this Section (j) and
not under Subsection (2) of this Subsection (j). The
Requesting Holder may thereafter at its option, exercise the
Warrants at any time or from time to time subsequent to the
effectiveness under the Act of the registration statement in
which the Warrant Shares were included.
(3) The following provision of this Section (j)
shall also be applicable:
(A) Within ten days after receiving any
such notice pursuant to Subsection (2) of this
Section (j), the Company shall give notice to the
other holders of Warrants and Warrant Shares,
advising that the Company is proceeding with such
registration statement and offering to include
therein Warrants and/or Warrant Shares of such
other holders, provided that they shall furnish the
Company with such appropriate information (relating
to the intentions of such holders) in connection
therewith as the Company shall reasonably request
in writing. Following the effective date of such
registration, the Company shall upon the request of
any owner of Warrants and/or Warrant Shares
forthwith supply such a number of prospectuses
meeting the requirements of the Act, as shall be
requested by such owner to permit such holder to
make a public offering of all Warrants and/or
Warrant Shares from time to time offered or sold to
such holder, provided that such holder shall from
time to time furnish the Company with such
appropriate information (relating to the intentions
of such holder) in connection therewith as the
Company shall request in writing. The Company shall
also use its best
<PAGE>
Page 62 of 65 Pages
efforts to qualify the Warrant Shares for sale in
such states as the Requesting Holder shall
designate.
(B) The Company shall bear the entire cost
and expense of any registration of securities
initiated by it under Subsection (1) of this
Section (j) notwithstanding that Warrants and/or
Warrant Shares subject to this Warrant may be
included in any such registration. The Company
shall also comply with one request for registration
made by the majority holder pursuant to Subsection
(2) of this Section (j) at its own expense and
without charge to any holder of any Warrants and/or
Warrant Shares; and the Company shall comply with
one additional request made by the majority holder
pursuant to Subsection (2) of this Section (j) (and
not deemed to be pursuant to Subsection (1) of this
Section (j)) at the sole expense of such majority
holder. Any holder whose Warrants and/ or Warrant
Shares are included in any such registration
statement pursuant to this Section (j) shall,
however, bear the fees of his own counsel and any
registration fees, transfer taxes or underwriting
discounts or commissions applicable to the Warrant
Shares sold by him pursuant thereto.
(C) The Company shall indemnify and hold
harmless each such holder and each underwriter,
within the meaning of the Act, who may purchase
from or sell for any such holder any Warrants
and/or Warrant Shares from and against any and all
losses, claims, damages and liabilities caused by
any untrue statement or alleged untrue statement of
a material fact contained in any registration
statement under the Act or any prospectus included
therein required to be filed or furnished by reason
of this Section (j) or caused by any omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statements therein not misleading, except
insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement
or alleged untrue statement or omission or alleged
omission based upon information furnished or
required to be furnished in writing to the Company
by such holder or underwriter expressly for use
therein, which indemnification shall include each
person, if any, who controls any such underwriter
within the meaning of such Act provided, however,
that the Company will not be liable in any such
case to the extent that any such loss, claim,
damage or liability arises out of or is based upon
an untrue statement or alleged untrue statement or
omission or alleged omission made in said
registration statement, said preliminary
prospectus, said final prospectus or said amendment
or supplement in reliance upon and in conformity
with written information furnished by such Holder
or any other Holder, specifically for use in the
preparation thereof.
<PAGE>
Page 63 of 65 Pages
(D) Neither the giving of any notice by
any such majority holder nor the making of any
request for prospectuses shall impose upon such
majority holder or owner making such request any
obligation to sell any Warrants and/or Warrant
Shares, or exercise any Warrants.
The Company's agreements with respect to Warrants or Warrant Shares
in this Section (j) shall continue in effect regardless of the exercise and
surrender of this Warrant.
(l) CONVERSION OF WARRANTS. The holder may, at its option, elect to
convert the Warrants into warrants identical to those issued to the investors
in the Private Placement (the "Private Placement Warrants"). In such event,
the exercise price, anti-dilution provisions and other terms of the Warrant
Agreement governing the Private Placement Warrants shall govern the Warrants;
provided, however, that Section (j) hereof shall survive conversion and the
Warrants shall not be subject to redemption by the Company.
DATALINK SYSTEMS CORPORATION
By:_________________________________________
Anthony LaPine, Chief Executive Officer
Dated: November 5, 1997
Attest:
___________________________
Thomas C. Bland, Secretary
<PAGE>
Page 64 of 65 Pages
PURCHASE FORM
Dated
---------------------
The undersigned hereby irrevocably elects to exercise the
within Warrant to the extent of purchasing shares of Common Stock and hereby
makes payment of in payment of the actual exercise price thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name
-------------------------------------------
(Please typewrite or print in block letters)
Address
-------------------------------------------
Signature
-------------------------------------------
ASSIGNMENT FORM
FOR VALUE RECEIVED, ________________________________ hereby
sells, assigns and transfers unto
Name
-------------------------------------------
(Please typewrite or print in block letters)
Address
-------------------------------------------
the right to purchase Common Stock represented by this Warrant to the extent
of shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint Attorney, to transfer the same on the books of the
Company with full power of substitution in the premises.
Date
-------------------------------------------
Signature
-------------------------------------------
<PAGE>
Page 65 of 65 Pages
EXHIBIT 6
AGREEMENT
JOINT FILING OF SCHEDULE 13D
The undersigned hereby agree to jointly prepare and file with
regulatory authorities a Schedule 13D and any future amendments thereto
reporting each of the undersigned's ownership of securities of Datalink
Systems Corporation and hereby affirm that such Schedule 13D is being filed on
behalf of each of the undersigned.
Dated: December 9, 1997 Commonwealth Associates
New York, New York
By: /s/ Michael S. Falk
---------------------------------
Michael S. Falk
Chief Executive Officer
Dated: December 9, 1997 /s/ Michael S. Falk
New York, New York ---------------------------------
Michael S. Falk
Dated: December 9, 1997 /s/ Robert Priddy
Atlanta, Georgia ---------------------------------
Robert Priddy
