UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
February 9, 2000
Date of Report (Date of earliest event reported)
DATALINK.NET, INC.
(Exact name of registrant as specified in its charter)
Nevada 0-21069 95-4599440
(State or other jurisdiction of (Commission File (I.R.S. Employer
incorporation or organization) Number) Identification
No.)
1735 Technology Drive, Suite 790
San Jose, California 95125
(Address of Principal Executive Offices)
Registrant's telephone number including area code: (408) 367-1700
Not applicable
(Former name and former address,
if changed since last report)
<PAGE>
Item 5. OTHER EVENTS.
As of February 9, 2000, Datalink.net, Inc. (the "Company") consummated a
private placement of (i) 769,231 shares of Series B Convertible Preferred
Stock (each share of Series B Preferred Stock is convertible one for one into
common stock) and (ii) five-year warrants to purchase up to an aggregate of
576,923 shares of common stock at an exercise price of $17.50 per share (the
"Private Placement"). Also, the Company issued to H.C. Wainwright & Co., Inc.
a warrant to purchase up to 76,923 shares of common stock, at an exercise
price of $13.00 per share, for its services as placement agent with respect to
the Private Placement.
Item 7. FINANCIAL STATEMENT AND EXHIBITS.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits.
3.1 Amended and Restated Bylaws of the Company.
4.1 Certificate of Designation of the Series B Convertible
Preferred Stock.
4.2 Warrant to purchase up to 375,000 shares of common stock
issued to Brown Simpson Strategic Growth Fund, Ltd., dated
February 9, 2000.
4.3 Warrant to purchase up to 201,923 shares of common stock
issued to Brown Simpson Strategic Growth Fund, L.P., dated
February 9, 2000.
4.4 Warrant to purchase up to 76,923 shares of common stock
issued to H.C. Wainwright & Co., Inc., dated February 14,
2000.
99.1 Securities Purchase Agreement, dated as of February 9, 2000,
by and among the Company, Brown Simpson Strategic Growth
Fund, Ltd. and Brown Simpson Strategic Growth Fund, L.P.
(without the schedules and exhibits attached thereto).
99.2 Registration Rights Agreement, dated as of February 9, 2000,
by and among the Company, Brown Simpson Strategic Growth
Fund, Ltd. and Brown Simpson Strategic Growth Fund, L.P.
99.3 Press Release, dated February 14, 2000, announcing the
private placement offering of 769,231 shares of Series B
Convertible Preferred Stock and warrants to purchase up to
576,923 shares of the Company's common stock.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: February 15, 2000 DATALINK.NET, INC.
By:/s/ Anthony LaPine
Anthony LaPine
President and Chief Executive Officer
AMENDED AND RESTATED BYLAWS
OF
DATALINK.NET, INC.
(A Nevada corporation)
ARTICLE I
STOCKHOLDERS
1. Certificates Representing Stock. Every holder of stock in the
corporation shall be entitled to have a certificate signed by, or in the name
of, the corporation by the Chairman or Vice-Chairman of the Board of
Directors, if any, or by the President or a Vice-President and by the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary
of the corporation or by agents designated by the Board of Directors,
certifying the number of shares owned by him in the corporation and setting
forth any additional statements that may be required by the General
Corporation Law of Nevada. If any such certificate is countersigned or
otherwise authenticated by a transfer agent or transfer clerk or by a
registrar other than the corporation, a facsimile of the signature of any such
officers or agents designated by the Board may be printed or lithographed upon
such certificate in lieu of the actual signatures. In case any officer or
officers who shall have signed, or whose facsimile signature or signatures
shall have been used on, any such certificate or certificates shall cease to
be such officer or officers of the corporation before such certificate or
certificates shall have been delivered by the corporation, such certificate or
certificates may nevertheless be adopted by the corporation and be issued and
delivered as though the person or persons who signed such certificate or
certificates, or whose facsimile signature or signatures shall have been used
thereon, had not ceased to be such officer or officers of the corporation.
Whenever the corporation shall be authorized to issue more than one
class of stock or more than one series of any class of stock, and whenever the
corporation shall issue any shares of special stock, the certificates
representing shares of any such class or series or of any such special stock
shall set forth thereon the statements prescribed by the General Corporation
Law. Any restrictions on the transfer or registration of transfer of any
shares of stock of any class or series shall be noted conspicuously on the
certificate representing such shares.
The corporation may issue a new certificate of stock in place of any
certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed and the Board of Directors may require the owner of any lost, stolen
or destroyed certificate, or his legal representative, to give the corporation
a bond sufficient to indemnify the corporation against any claim that may be
made against it on account of the alleged loss, theft, or destruction of any
such certificate or the issuance of any new certificate.
2. Fractional Share Interests. The corporation shall not be obliged
to but may execute and deliver a certificate for or including a fraction of a
share. In lieu of executing and delivering a certificate for a fraction of a
share, the corporation may pay to any person otherwise entitled to become a
holder of a fraction of a share an amount in cash specified for such purpose
as the value thereof in the resolution of the Board of Directors, or other
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instrument pursuant to which such fractional share would otherwise be issued,
or, if not specified therein, then as may be determined for such purpose by
the Board of Directors of the issuing corporation; or may execute and deliver
registered or bear scrip over the manual or facsimile signature of an officer
of the corporation or of its agent for that purpose, exchangeable as therein
provided for full share certificates, but such scrip shall not entitle the
holder to any rights as a stockholder except as therein provided. Such scrip
may provide that it shall become void unless the rights of the holders are
exercised within a specified period and may contain any other provisions or
conditions that the corporation shall deem advisable. Whenever any such scrip
shall cease to be exchangeable for full share certificates, the shares that
would otherwise have been issuable as therein provided shall be deemed to be
treasury shares unless the scrip shall contain other provisions for their
disposition.
3. Stock Transfers. Upon compliance with provisions restricting the
transfer or registration of transfer of shares of stock, if any, transfers or
registration of transfers of shares of stock of the corporation shall be made
only on the stock ledger of the corporation by the registered holder thereof,
or by his attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the corporation or with a transfer agent or a
registrar, if any, and on surrender of the certificate or certificates for
such shares of stock properly endorsed and the payment of all taxes, if any,
due thereon.
4. Record Date for Stockholders. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or to express consent to corporate action in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution or the allotment of any rights, or entitled to exercise any
fights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the directors may fix, in advance, a
record date, which shall not be more than sixty days nor less than ten days
before the date of such meeting, nor more than sixty days prior to any other
action. If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders
shall be at the close of business on the day next preceding the date on which
notice is given, or, if notice is waived, at the close of business on the day
next preceding the date on which the meeting is held; the record date for
determining stockholders entitled to express consent to corporate action in
writing without a meeting, when no prior action by the Board of directors is
necessary, shall be the day on which the first written consent is expressed;
and the record date for determining stockholders for any other purpose shall
be at the close of business on the day on which the Board of Directors adopts
the resolution relating thereto. A determination of stockholders of record
entitled to notice of or to vote at any meeting of stockholders shall apply to
any adjournment of the meeting; provided, however, that the Board of Directors
may fix a new record date for the adjourned meeting.
5. Meaning Of Certain Terms. As used in these Bylaws in respect of
the right to notice of a meeting of stockholders or a waiver thereof or to
participate or vote thereat or to consent to dissent in writing in lieu of a
meeting, as the case may be, the term "share" or "shares" or "share of stock"
or "shares of stock" or "stockholder" or "stockholders" refers to an
outstanding share or shares of stock and to a holder or holders of record of
outstanding shares of stock when the corporation is authorized to issue only
one class of shares of stock, and said reference is also intended to include
any outstanding share or shares of stock and any holder or holders of record
of outstanding shares of stock of any class upon which or upon whom the
Articles of Incorporation confers such rights where there are two or more
classes or series of shares of stock or upon which or upon whom the General
<PAGE>
Corporation Law confers such rights notwithstanding that the Articles of
Incorporation may provide for more than one class or series of shares of
stock, one or more of which are limited or denied such rights thereunder;
provided, however, that no such right shall vest in the event of an increase
or a decrease in the authorized number of shares of stock of any class or
series which is otherwise denied voting rights under the provisions of the
Articles of Corporation.
6. Stockholder Meetings.
Time. The annual meeting shall be held on the date and at the time
fixed, from time to time, by the directors, provided, that the first annual
meeting shall be held on a date within thirteen months after the organization
of the corporation, and each successive annual meeting shall be held on a date
within thirteen months after the date of the preceding annual meeting. A
special meeting shall be held on the date and at the time fixed by the
directors.
Place. Annual meetings and special meetings shall be held at such
place, within or without the State of Nevada, as the directors may, from time
to time, fix. Whenever the directors shall fail to fix such place, the
meeting shall be held at the principal office of the corporation in the State
of Nevada.
Call. Annual meetings and special meetings may be called by the
directors or by any officer instructed by the directors to call the meeting.
Notice or Waiver of Notice. Notice of all meetings shall be in
writing and signed by the President or a Vice-President, or the Secretary, or
an Assistant Secretary, or by such other person or persons as the directors
shall designate. Such notice shall state the purpose or purposes for which
the meeting is called and the time when, and the place, where it is to be
held. A copy of such notice shall be either delivered personally to, or shall
be mailed postage prepaid, to each stockholder not less than ten nor more than
sixty days before such meeting. If mailed, it shall be directed to a
stockholder at his address as it appears upon the records of the corporation.
Any stockholder may waive notice of any meeting by a writing signed by him, or
his duly authorized attorney, either before or after the meeting; and whenever
notice of any kind is required to be given under the provisions of the General
Corporation Law, a waiver thereof in writing and duly signed whether before or
after the time stated therein, shall be deemed equivalent thereto.
Conduct of Meeting. Meetings of the stockholders shall be presided
over by one of the following officers in the order of seniority and if present
and acting - the Chairman of the Board, if any, the Vice-Chairman of the
Board, if any, the President, a Vice-President, or, if none of the foregoing
is in office and present and acting, by a chairman to be chosen by the
stockholders. The Secretary of the corporation, or in his absence, an
Assistant Secretary, shall act as secretary of every meeting, but if neither
the Secretary nor an Assistant Secretary is present the Chairman of the
meeting shall appoint a secretary of the meeting.
Proxy Representation. Every stockholder may authorize another
person or persons to act for him by proxy appointed by an instrument in
writing in all matters in which a stockholder is entitled to participate,
whether by voting or participating at a meeting, or expressing consent or
dissent without a meeting. Every proxy must be executed by the stockholder or
by his attorney-in-fact. No proxy shall be valid after the expiration of six
months from the date of its creation, unless coupled with an interest or
unless the stockholder specifies in it therein the length of time for which it
<PAGE>
is to continue in force, which in no case shall exceed seven years from the
date of its creation.
Inspectors. The directors, in advance of any meeting, may, but need
not, appoint one or more inspectors of election to act at the meeting or any
adjournment thereof. If an inspector or inspectors are not appointed, the
person presiding at the meeting may, but need not, appoint one or more
inspectors. In case any person who may be appointed as an inspector fails to
appear or act, the vacancy may be filled by appointment made by the directors
in advance of the meeting or at the meeting by the person presiding thereat.
Each inspector, if any, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his
ability. The inspectors, if any, shall determine the number of shares of
stock outstanding and the voting power of each, the shares of stock
represented at the meeting, the existence of a quorum, the validity and effect
of proxies, and shall receive votes, ballots or consents, hear and determine
all challenges and questions arising in connection with the right to vote,
count and tabulate all votes, ballots or consents, determine the result, and
do such acts as are proper to conduct the election or vote with fairness to
all stockholders. On request of the person presiding at the meeting, the
inspector or inspectors, if any, shall make a report in writing of any
challenge, question or matter determined by him or them and execute a
certificate of any fact found by him or them.
Quorum. The holders of a majority of the outstanding shares of
stock or of the voting power, as the case may be, shall constitute a quorum at
a meeting of stockholders for the transaction of any business unless the
action to be taken at the meeting shall require a different proportion. The
stockholders present may adjourn the meeting despite the absence of a quorum.
Voting. Each share of stock shall entitle the holder thereof to one
vote. In the election of directors, a plurality of the votes cast shall
elect. Any other action shall be authorized by a majority of the votes cast
except where the General Corporation Law, the Articles of Incorporation, or
these Bylaws prescribe a different percentage of votes and/or a different
exercise of voting power. In the election of directors, voting need not be by
ballot; and, except as otherwise may be provided by the General Corporation
Law, voting by ballot shall not be required for any other action.
7. Stockholder Action Without Meetings. Except as may otherwise be
provided by the General Corporation Law, any action required or permitted to
be taken by the vote of stockholders at a meeting, may be taken without a
meeting if authorized by the written consent of stockholders holding at least
a majority of the voting power, provided that if a different proportion of
voting power is required for such action at a meeting, then that proportion of
written consents shall be required. In no instance where action is authorized
by written consent need a meeting of stockholders be called or notice given.
The written consent must be filed with the minutes of the proceedings of the
stockholders. Any written consent shall be subject to the requirements of
Section 78-320 of the General Corporation Law and of any other applicable
provision of law.
8. Stockholder Action by Special Meeting. Except as may otherwise
be provided by the General Corporation Law, the stockholders of the
corporation may call a special meeting to conduct business concerning a single
transaction. Any action taken at the special meeting concerning this single
transaction may be permitted to be taken only upon the consent of stockholders
holding at least a majority of the voting power of the corporation and shall
be subject to the requirements of Section 78.320 of the General Corporation
Law and of any other applicable provision of law.
<PAGE>
ARTICLE II
DIRECTORS
1. Functions and Definition. The business and affairs of the
corporation shall be managed by the Board of Directors of the corporation.
The Board of Directors shall have authority to fix the compensation of the
members thereof for services in any capacity. The use of the phrase "whole
Board" herein refers to the total number of directors which the corporation
would have if there were no vacancies.
2. Qualifications and Number. Each director must be at least 18
years of age. A director need not be a stockholder or a resident of the State
of Nevada. The number of directors constituting the Board of Directors shall
be determined and may be increased or decreased, to not less than one
director, by resolution of the Board of Directors.
3. Election and Term. Directors may be elected in the manner
prescribed by the provisions of Sections 78.320 through 78.335 of the General
Corporation Law of Nevada. The first Board of Directors shall hold office
until the first election of directors by stockholders and until their
successors are elected and qualified or until their earlier resignation or
removal. Any director may resign at any time upon written notice to the
corporation. Thereafter, directors who are elected at an election of
directors by stockholders, and directors who are elected in the interim to
fill vacancies and newly created directorships, shall hold office until the
next election of directors by stockholders and until their successors are
elected and qualified or until their earlier resignation or removal. In the
interim between elections of directors by stockholders, newly created
directorships and any vacancies in the Board of Directors, including any
vacancies resulting from the removal of directors for cause or without cause
by the stockholders and not filled by said stockholders, may be filled by the
vote of a majority of the remaining directors then in office, although less
than a quorum, or by the sole remaining director.
4. Meetings.
Time. Meetings shall be held at such time as the Board shall fix,
except that the first meeting of a newly elected Board shall be held as soon
after its election as the director may conveniently assemble.
Place. Meetings shall be held at such place within or without the
State of Nevada as shall be fixed by the Board.
Call. No call shall be required for regular meetings for which the
time and place have been fixed. Special meetings may be called by or at the
direction of the Chairman of the Board, if any, the Vice-Chairman of the
board, if any, or the President, or of a majority of the directors in office.
Notice or Actual or Constructive Waiver. No notice shall be
required for regular meetings for which the time and place have been fixed.
Written, oral or any other mode of notice of the time and place shall be given
for special meetings in sufficient time for the convenient assembly of the
directors thereat. Notice if any need not be given to a director or to any
member of a committee of directors who submits a written waiver of notice
signed by him before or after the time stated therein.
Quorum and Action. A majority of the whole Board shall constitute a
quorum except when a vacancy or vacancies prevents such majority, whereupon a
majority of the directors in office shall constitute a quorum, provided, that
such majority shall constitute at least one-third of the whole Board. A
majority of the directors present, whether or not a quorum is present, may
<PAGE>
adjourn a meeting to another time and place. Except as the Articles of
Incorporation or these Bylaws may otherwise provide, and except as otherwise
provided by the General Corporation Law, the act of a majority of the
directors present at a meeting at which a quorum is present shall be the act
of the Board. The quorum and voting provisions herein stated shall not be
construed as conflicting with any provisions of the General Corporation Law
and these Bylaws which govern a meeting of directors held to fill vacancies
and newly created directorships in the Board or action of disinterested
directors.
Members of the Board or of any committee which may be designated by
the Board may participate in a meeting of the Board or of any such committee,
as the case may be, by means of a conference telephone network or a similar
communications method by which all persons participating in the meeting hear
each other. Participation in a meeting by said means shall constitute
presence in person at any such meeting. Each person participating in a
meeting by such means shall sign the minutes thereof
Chairman of the Meeting. The Chairman of the Board, if any, and if
present and acting, shall preside at all meetings. Otherwise, the
Vice-Chairman of the Board, if any and if present and acting, or the
President, if present and acting, or any other director chosen by the Board,
shall preside.
5. Removal of Directors. Any or all of the directors may be removed
for cause or without cause by the holders of at least two thirds of the voting
power of the outstanding stock of the corporation. One or more of the
directors may be removed for cause by the Board of Directors.
6. Committees. Whenever its number consists of two or more, the
Board of Directors may, by resolution passed by a majority of the whole Board,
designate one or more committees, each committee to consist of one or more of
the directors of the corporation and each committee to have such powers and
duties as the Board shall determine. Any such committee, to the extent
provided in the resolution or resolutions of the Board, shall have and may
exercise the powers and authority of the Board of Directors in the management
of the business and affairs of the corporation and may authorize the seal or
stamp of the corporation to be affixed to all papers on which the corporation
desires to place a seal or stamp.
7. Written Action. Any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting if, before or after the action, a written consent thereto is
signed by all the members of the Board or committee, as the case may be. The
written consent must be filed with the minutes of proceedings of the Board or
committee.
ARTICLE III
OFFICERS
1. Officers. The corporation shall have a President, a Secretary, a
Treasurer, a Resident Agent, and, if deemed necessary, expedient or desirable
by the Board of Directors, a Chairman of the Board, a Vice-Chairman of the
Board, a Chief Executive Officer, an Executive Vice-President, one or more
other Vice-Presidents, one or more Assistant Secretaries, one or more
Assistant Treasurers, and such other officers, agents and factors with such
titles as the resolution choosing them shall designate. Each of any such
officers, agents and factors shall be chosen by the Board of Directors or
chosen in the manner determined by the Board of Directors.
<PAGE>
2. Qualifications. Except as may otherwise be provided in the
resolution choosing him, no officer other than the Chairman of the Board, if
any, and the Vice-Chairman of the Board, if any, need be a director.
Any two or more offices may be held by the same person, as the
directors may determine.
3. Term of Office. Unless otherwise provided in the resolution
choosing him, each officer, except the Resident Agent, shall be chosen for a
term which shall continue until the meeting of the Board of Directors
following the next annual meeting of stockholders and until his successor
shall have been chosen and qualified. The Resident Agent shall serve until
his or its successor shall have been chosen and qualified.
Any officer may be removed, with or without cause, by the Board of
Directors or in the manner determined by the Board.
Any vacancy in any office may be filled by the Board of Directors or
in the manner determined by the Board.
4. Duties and Authority. All officers of the corporation shall have
such authority and perform such duties in the management and operation of the
corporation as shall be prescribed in the resolution designating and choosing
such officers and prescribing their authority and duties, and shall have such
additional authority and duties as are incident to their office except to the
extent that such resolutions or instruments may be inconsistent therewith.
ARTICLE IV
CORPORATE OPPORTUNITY
The officers, directors and other members of management of this
Corporation shall be subject to the doctrine of "corporate opportunities" only
insofar as it applies to business opportunities in which this Corporation has
expressed an interest as determined from time to time by this Corporation's
board of directors as evidenced by resolutions appearing in the Corporation's
minutes. Once such areas of interest are delineated, all such business
opportunities within such areas of interest which come to the attention of the
officers, directors, and other members of management of this Corporation shall
be disclosed promptly to this Corporation and made available to it. The Board
of Directors may reject any business opportunity presented to it and
thereafter any officer, director or other member of management may avail
himself of such opportunity. Until such time as this Corporation, through its
board of directors, has designated an area of interest, the officers,
directors and other members of management of this Corporation shall be free to
engage in such areas of interest on their own and this doctrine shall not
limit the rights of any officer, director or other member of management of
this Corporation to continue a business existing prior to the time that such
area of interest is designated by the Corporation. This provision shall not
be construed to release any employee of this Corporation (other than an
officer, director or member of management) from any duties which he may have
to this Corporation.
ARTICLE V
PRINCIPAL AND REGISTERED OFFICES
Initially, the principal office and place of business of the corporation
will be located in the State of Colorado at 13215 Braun Road, Golden,
Colorado. The Company's registered office in the State of Nevada is located
at ne Corporation Trust Company of Nevada, 1 East First Street, Reno, Nevada
89501. Other offices and places of business may be established from time to
<PAGE>
time by resolution of the Board of Directors or as the business of the
corporation may require.
The corporation shall maintain at said registered office a copy of its
Articles of Incorporation, and a amendments thereto, and a copy of these
Bylaws, and all amendments thereto, as certified by the Secretary of the
corporation. The corporation shall also keep at said registered office a
stock ledger or a duplicate stock ledger, revised annually, containing the
names, alphabetically arranged, of all persons who are stockholders of the
corporation, showing their places of residence, if known, and the number of
shares held by them respectively or a statement setting out the name of the
custodian of the stock ledger or duplicate stock ledge, and the present and
complete post office address, including street and number, if any, where such
stock ledger or duplicate stock ledger is maintained.
ARTICLE VI
WAIVER OF APPLICABILITY OF CONTROL SHARE
ACQUISITION PROVISIONS
The provisions in each section of the General Corporation Law (currently
Sections 78.378 to 78.3793) which, upon the acquisition of a controlling
interest of an issuing corporation, (i) impose disclosure requirements on an
acquiring person and (ii) provide rights and privileges to certain
stockholders, shall not apply to this corporation.
ARTICLE VII
CORPORATE SEAL OR STAMP
The Corporate seal or stamp shall be in such form as the Board of
Directors may prescribe.
ARTICLE VIII
FISCAL YEAR
The fiscal year of the corporation shall be April 1 through March 31 of
each year.
ARTICLE IX
CONTROL OVER BYLAWS
The power to amend, alter and repeal these Bylaws and to make new Bylaws
shall be vested in the Board of Directors subject to the Bylaws, if any,
adopted by the stockholders.
I HEREBY CERTIFY that the foregoing is a full, true and correct copy of
the Amended and Restated Bylaws of Datalink.net, Inc., a Nevada corporation,
as in effect on the date hereof
WITNESS my hand and the seal or stamp of the corporation.
Dated this 24th day of January, 2000.
/s/ Tali Durant
Secretary
(SEAL)
CERTIFICATE OF DESIGNATION
OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
Datalink.net, Inc.
Datalink.net, Inc., a Nevada corporation (the "Company") certifies that
pursuant to the authority contained in ARTICLE IV of its Articles of
Incorporation, as amended (the "Articles of Incorporation"), the Board of
Directors of the Company (the "Board of Directors"), by unanimous written
consent in lieu of a meeting effective February 9, 2000, duly approved and
adopted the following resolution, which resolution remains in full force and
effect on the date hereof:
RESOLVED, that pursuant to the authority vested in the Board of Directors
by the Articles of Incorporation, the Board of Directors does hereby
designate, create, authorize and provide for the issue of a series of
preferred stock, par value $.001 per share, which shall be designated as
Series B Convertible Preferred Stock, and which shall have the voting powers,
designations, preferences, limitations, restrictions, and relative rights as
follows:
CERTIFICATE OF DESIGNATION OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF DATALINK.NET, INC.
1. Designation, Amount, Par Value, Liquidation Value and Rank.
a. The Preferred Stock authorized under this Certificate of
Designation shall be designated as the Series B Convertible Preferred Stock
(the "Series B Preferred"), and the number of shares so designated shall be
769,231, subject to adjustment for any stock splits, stock dividends or
similar transactions affecting the Series B Preferred, and which shall not be
subject to increase without the consent of each holder of the Series B
Preferred (each, a "Holder", and collectively, the "Holders"). Each share of
Series B Preferred, par value .001 per share, shall have a liquidation value
of $13.00 per share (the "Liquidation Value").
b. The Series B Preferred shall, with respect to dividends and
distributions upon liquidation, dissolution or winding up of the Company, rank
senior to all classes of Common Stock and pari passu with the Series A
Preferred Stock and any other series of Preferred Stock that is not, expressly
by its terms, made junior to the Series B Preferred. No class of equity
securities of the Company shall be senior to the Series B Preferred as to
dividends, distributions and upon liquidation, dissolution or winding up.
2. Dividends. The Holders of the Series B Preferred shall be entitled
to receive dividends, whether in cash, property or otherwise (other than
dividends payable solely in shares of common stock), out of any assets legally
available therefor, ratably with any declaration or payment of any dividend to
holders of the Common Stock or any other junior securities of the company,
when, as and if declared by the Board of Directors, in an amount per share
equal to that which the Holders would have been entitled had they converted
<PAGE>
such shares of Series B Preferred into Common Stock immediately prior to the
payment of such dividends.
3. Voting Rights. Except as provided herein and as otherwise required
by law, the Series B Preferred shall have no voting rights.
4. Liquidation.
a. Upon any liquidation, dissolution or winding-up of the Company,
whether voluntary or involuntary (a "Liquidation"), the holders of record of
the Series B Preferred shall be entitled to receive, out of the assets of the
Company and before any distribution or payment is made upon any shares of
Common Stock or any series of Preferred Stock junior in rank to the Series B
Preferred, for each share of Series B Preferred, an amount per share equal to
the greater of (i) the Liquidation Value or (ii) the assets of the Company
available for distribution to its stockholders, distributed ratably among the
Holders of the outstanding Preferred Stock (determined on an "as converted"
basis) and the holders of all of the outstanding capital stock of the Company.
If the assets of the Company shall be insufficient to pay in full all amounts
due to the Holders of the Series B Preferred then the entire assets of the
Company shall be distributed to such Holders and the holders of the Company's
Series A Preferred Stock ratably in accordance with the respective amounts
that would be payable on such shares if all amounts payable thereon were paid
in full.
b. A sale, conveyance, lease, transfer or disposition of all or
substantially all of the assets of the Company, or the consummation by the
Company of a transaction or series of related transactions in which more than
50% of the voting power of the Company is disposed of, or a consolidation or
merger of the Company with or into any other company or companies, shall not
be treated as a Liquidation but instead shall be subject to the provisions of
Sections 7(g); provided, however, that the immediately preceding clause may be
waived by any Holder of Series B Preferred, and any such sale, conveyance,
lease, transfer, disposition, transaction or series of related transactions,
consolidation or merger, as the case may be, may be deemed to be a Liquidation
of the Company entitling such Holder to receive the Liquidation Value with
respect to such Holder's shares of Series B Preferred.
c. After setting apart or paying in full the amounts described in
Section (4)(a) hereof, the holders of record of Common Stock and any Preferred
Stock junior in rank to the Series B Preferred shall be entitled to
participate in any distribution of any remaining assets of the Company, and
the Holders of the Series B Preferred shall not be entitled to participate in
such distribution.
d. The Company shall mail written notice of any such Liquidation,
not less than 45 days prior to the payment date stated therein, to each
Holder.
5. Mechanics of Conversion.
a. Holder's Delivery Requirements. Each share of Series B
Preferred shall be convertible, at the option of the Holder thereof, at any
time after the Original Issue Date, into that number of fully paid and
non-assessable shares of Common Stock as is determined by the quotient of (i)
$13.00 over (ii) the Conversion Price in effect at the time of conversion,
determined as hereinafter provided. The initial Conversion Price shall be
$13.00, subject to adjustment from time to time as provided herein (the
"Conversion Price"). A Holder shall effect conversions by surrendering to the
Company, or to the Company's transfer agent, the certificate or certificates
representing the shares of Series B Preferred to be converted, together with a
<PAGE>
copy of the form of conversion notice attached hereto as Exhibit A (the
"Conversion Notice"). Each Conversion Notice shall specify the Holder, the
number of shares of Series B Preferred to be converted and the date on which
such conversion is to be effected, which date may not be prior to the date the
Holder delivers such Conversion Notice by facsimile (the "Conversion Date").
If no Conversion Date is specified in a Conversion Notice the Conversion Date
shall be the date that the Conversion Notice is deemed delivered pursuant to
Section 11. Subject to Section 5(b) hereof, each Conversion Notice, once
given, shall be irrevocable.
b. Company's Response. Not later than three (3) Trading Days after
any Conversion Date, the Company will use its best efforts to cause to be
delivered to the Holder, or to such Holder's designee, (i) a certificate or
certificates which shall be free of restrictive legends and trading
restrictions (other than those required by Section 3.l(b) of the Purchase
Agreement) representing the number of shares of Common Stock being acquired
upon the conversion of shares of Series B Preferred and (ii) if the Holder is
converting less than all shares of Series B Preferred represented by the
certificate or certificates tendered by the Holder with the Conversion Notice,
one or more certificates representing the number of shares of Series B
Preferred not converted. Upon request of the Holder, and in compliance with
the provisions hereof, in lieu of physical delivery of the shares of Series B
Preferred, provided the Company's transfer agent is participating in the
Depositary Trust Company ("DTC") Fast Automated Securities Transfer (FAST)
program, the Company shall use its best efforts to cause its transfer agent to
electronically transmit any certificate or certificates required to be
delivered to the Holder (or the Holder's designee) under this Section 5 by
crediting the account of the Holder's (or the Holder's designee's) Prime
Broker with DTC through its Deposit Withdrawal Agent Commission system. The
time period for delivery described herein shall apply to any such electronic
transmittals. If in the case of any Conversion Notice such certificate or
certificates are not delivered to or as directed by the applicable Holder by
the third Trading Day after the Conversion Date, the Holder shall be entitled
at any time on or before its receipt of such certificate or certificates
thereafter to rescind such conversion by written notice to the Company, in
which event the Company shall immediately return the certificates representing
the shares of Series B Preferred for which Common Stock was not delivered
pursuant to such conversion.
c. Failure to Convert.
(i) If the Company fails to deliver to the Holder (or the
Holder's designee) such certificate or certificates pursuant to this Section 5
on or prior to the fifth Trading Day after the Conversion Date (the "Delivery
Date"), in addition to all other remedies that such Holder may pursue
hereunder or under the Purchase Agreement, the Company shall pay to such
Holder upon demand an amount in cash equal to the product of (a) the number of
shares of Common Stock required to be issued upon conversion of such shares of
Series B Preferred, (b) the Per Share Market Value on the Conversion Date, (c)
the number of days after the three (3) Trading Day period referred to in
Section 5(b) that the Company fails to deliver such certificates and (d) .005;
provided, however, that the foregoing shall not be applicable in the first
three (3) instances that the Company violates the delivery requirements of
this Section 5. If the Holder has requested that the Company redeem shares of
Series B Preferred pursuant to this Section and the Company fails for any
reason to pay the amount referenced above within seven (7) days after such
notice is deemed delivered pursuant to this Section 5(c), the Company will pay
interest on such amount at a rate of 15% per annum in cash to such Holder,
accruing from such seventh day until the redemption price and any accrued
interest thereon is paid in full.
<PAGE>
(ii) Nothing herein shall limit a Holder's right to pursue
actual damages for the Company's failure to deliver certificates representing
shares of Common Stock upon conversion within the period specified herein
(including, without limitation, damages relating to any purchase of shares of
Common Stock by such Holder to make delivery on a sale effected in
anticipation of receiving certificates representing shares of Common Stock
upon conversion, such damages to be in an amount equal to (A) the aggregate
amount paid by such Holder for the shares of Common Stock so purchased minus
(B) the aggregate amount of net proceeds, if any, received by such Holder from
the sale of the shares of Common Stock issued by the Company pursuant to such
conversion), and such Holder shall have the right to pursue all remedies
available to it at law or in equity (including, without limitation, a decree
of specific performance and/or injunctive relief).
6. Reservation of Shares.
The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued Common Stock, solely for the
purpose of issuance upon conversion of the Series B Preferred and free from
preemptive rights or any other actual contingent purchase rights of Persons
other than the Holders of Series B Preferred, not less than 100% of such
number of shares of Common Stock as shall (subject to any additional
requirements of the Company as to reservation of such shares set forth in the
Purchase Agreement) be issuable (taking into account the adjustments of
Section 7) upon the conversion of all outstanding shares of Series B Preferred
(without regard to any limitations on conversion). The Company shall, from
time to time in accordance with Nevada law, take all steps necessary to
increase the authorized amount of its Common Stock if at any time the
authorized number of shares of Common Stock remaining unissued shall not be
sufficient to permit the conversion of all of the shares of the Series B
Preferred. The Company covenants that all shares of Common Stock that shall
be so issuable shall, upon issue, be duly authorized, validly issued and fully
paid, nonassessable and, subsequent to the effectiveness of the Initial
Registration Statement (as defined in the Registration Rights Agreement),
freely tradable.
7. Adjustment of Conversion Price.
a. Common Stock Dividends; Common Stock Splits; Reclassification.
If the Company, at any time after the Original Issue Date (a) shall pay or
make a stock dividend on its Common Stock in shares of Common Stock, (b)
subdivide outstanding shares of Common Stock into a larger number of shares or
(c) issue by reclassification of shares of Common Stock any shares of capital
stock of the Company, then the Conversion Price shall be multiplied by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding before such event and the denominator of which shall be the number
of shares of Common Stock outstanding after such event. Any adjustment made
pursuant to this Section 7(a) shall become effective immediately after the
record date for the determination of shareholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision or re-classification.
b. Rights; Warrants. If the Company, at any time after the
Original Issue Date, shall fix a record date for the issuance of rights,
options, warrants or other securities to the holders of its Common Stock
entitling them to subscribe for or purchase, exchange for, convert into or
otherwise acquire shares of Common Stock for no consideration or for a price
per share less than the Conversion Price, then the Conversion Price shall be
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding immediately prior to such issuance or sale plus
the number of shares of Common Stock which the aggregate consideration
<PAGE>
received by the Company would purchase at the Conversion Price, and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issuance or sale plus the number of additional
shares of Common Stock offered for subscription, purchase, conversion,
exchange or acquisition, as the case may be. Such adjustment shall be made
whenever such rights, options, warrants or other securities are issued, and
shall become effective immediately after the record date for the determination
of shareholders entitled to receive such rights, options, warrants or other
securities.
c. Subscription Rights. If the Company, at any time after the
Original Issue Date, shall fix a record date for the distribution to holders
of Common Stock evidence of its indebtedness or assets or rights, options,
warrants or other security entitling them to subscribe for or purchase,
convert into, exchange for or otherwise acquire any security (excluding those
referred to in paragraphs 7(a) and (b) above), then in each such case the
Conversion Price at which the Series B Preferred shall thereafter be
convertible shall be determined by multiplying the Conversion Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the Conversion Price on such record date less the then fair market
value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of Common
Stock as determined by the Board of Directors in good faith, and the
denominator of which shall be the Conversion Price as of such record date;
provided, however, that in the event of a distribution exceeding ten percent
(10%) of the net assets of the Company, such fair market value shall be
determined by an Appraiser selected in good faith by the Holders of the Series
B Preferred; and provided, further, that the Company, after receipt of the
determination by such Appraiser, shall have the right to select in good faith
an additional Appraiser meeting the same qualifications, in which case the
fair market value shall be equal to the average of the determinations by each
such Appraiser. Such adjustment shall be made whenever any such distribution
is made and shall become effective immediately after the record date mentioned
above.
d. Rounding. All calculations under this Section 7 shall be made
to the nearest cent or the nearest l/l00th of a share, as the case may be.
e. Notice of Adjustment. Whenever the Conversion Price is
adjusted pursuant to this Section 7 the Company shall promptly mail to the
Holders a notice setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment. Such
notice shall be signed by the chairman, president or chief financial officer
of the Company.
f. Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Company, and the disposition of any shares so owned or held
shall be considered an issue or sale of Common Stock by the Company.
g. Change of Control; Compulsory Share Exchange. In case of (A)
any Change of Control Transaction or (B) any compulsory share exchange
pursuant to which the Common Stock is converted into other securities, cash or
property (each, an "Event"), lawful provision shall be made so that the
Holders shall have the right thereafter to convert the shares of Series B
Preferred for shares of stock and other securities, cash and property
receivable upon or deemed to be held by holders of Common Stock following such
Event, and the Holders shall be entitled upon such Event to receive such
amount of shares of stock and other securities, cash or property as the shares
of the Common Stock of the Company into which the shares of Series B Preferred
could have been converted immediately prior to such Event (without taking into
<PAGE>
account any limitations or restrictions on the convertibility of the
Securities) would have been entitled. The provisions of this Section 7(g)
shall similarly apply to successive Events.
h. Issuances Below Conversion Price. If the Company, at any time
when any shares of Series B Preferred are outstanding, takes any of the
actions described in this Section 7(h), the majority of the Holders shall have
the right to amend this Certificate of Designation as set forth below:
(i) issues or sells, or is deemed to have issued or sold, any
Common Stock;
(ii) in any manner grants, issues or sells any rights,
options, warrants, options to subscribe for or to purchase Common Stock or any
stock or other securities convertible into or exchangeable for Common Stock
(other than any Excluded Securities) (such rights, options or warrants being
herein called "Options" and such convertible or exchangeable stock or
securities being herein called "Convertible Securities"); or
(iii) in any manner issues or sells any Convertible
Securities;
for (a) with respect to paragraph (h)(i), above, a price per share, or (b)
with respect to paragraphs h(ii) or h(iii), above, a price per share for which
Common Stock issuable upon the exercise of such Options or upon conversion or
exchange of such Convertible Securities is, less than the Conversion Price in
effect immediately prior to such issuance or sale, then, immediately after
such issuance, sale or grant, the majority of the Holders shall have the right
to amend the issuance terms of the Common Stock issuable upon conversion of
the shares of Series B Preferred (including adjustment of the Conversion
Price) so that the issuance terms hereof are equivalent to the issuance terms
of such offering. No modification of the issuance terms shall be made upon
the actual issuance of such Common Stock upon conversion or exchange of such
Options or Convertible Securities. If there is a change at any time in (i)
the exercise price provided for in any Options, (ii) the additional
consideration, if any, payable upon the issuance, conversion or exchange of
any Convertible Securities or (iii) the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock, then
immediately after such change the Holders shall have the right to amend the
issuance terms of such Common Stock accordingly, including, without
limitation, by reducing the Conversion Price in effect to the Conversion Price
which would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed exercise price,
additional consideration or changed conversion rate, as the case may be, at
the time initially granted, issued or sold; provided that no adjustment shall
be made if such adjustment would result in an increase of the Conversion Price
then in effect.
i. Effect on Conversion Price of Certain Events. For purposes of
determining the adjusted Conversion Price under Section 7(h), the following
shall be applicable:
(i) Calculation of Consideration Received. If any Common
Stock, Options or Convertible Securities are issued or sold or deemed to have
been issued or sold for cash, the consideration received therefor will be
deemed to be the net amount received by the Company therefor, without
deducting any expenses paid or incurred by the Company or any commissions or
compensations paid or concessions or discounts allowed to underwriters,
dealers or others performing similar services in connection with such issue or
sale. In case any Common Stock, Options or Convertible Securities are issued
or sold for a consideration other than cash, the amount of the consideration
<PAGE>
other than cash received by the Company will be the fair value of such
consideration, except where such consideration consists of securities listed
or quoted on a national securities exchange or national quotation system, in
which case the amount of consideration received by the Company will be the
arithmetic average of the closing sale price of such security for the five (5)
consecutive Trading Days immediately preceding the date of receipt thereof.
In case any Common Stock, Options or Convertible Securities are issued to the
owners of the non-surviving entity in connection with any merger in which the
Company is the surviving entity, the amount of consideration therefor will be
deemed to be the fair value of such portion of the net assets and business of
the non-surviving entity as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities will be determined jointly by the
Company and the Holders of a majority of the shares of Series B Preferred then
outstanding. If such parties are unable to reach agreement within ten (10)
days after the occurrence of an event requiring valuation (the "Valuation
Event"), the fair value of such consideration will be determined within
forty-eight (48) hours of the tenth (10th) day following the Valuation Event
by an Appraiser selected in good faith by the Company, and agreed upon in good
faith by the Holders of a majority of the shares of Series B Preferred then
outstanding. The determination of such Appraiser shall be binding upon all
parties absent manifest error.
(ii) Integrated Transactions. In case any Option is issued in
connection with the issue or sale of other securities of the Company, together
comprising one integrated transaction in which no specific consideration is
allocated to such Options by the parties thereto, the Options will be deemed
to have been issued for an aggregate consideration of $.001.
(iii) Record Date. If the Company takes a record of the
holders of Common Stock for the purpose of entitling them (a) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (b) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date will be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to have
been issued or sold upon the declaration of such dividend or the making of
such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(iv) Other Events. If any event that would adversely affect
the rights of any holder of the Series B Preferred occurs but is not expressly
provided for by Section 7 hereof (including, without limitation, the granting
of stock appreciation rights, phantom stock rights or other rights with equity
features), then the Company's Board of Directors will make an appropriate
adjustment in the Conversion Price so as to protect the rights of the Holders
or assigns; provided, however, that no such adjustment will increase the
Conversion Price.
j. Notice of Certain Events. If:
(i) the Company shall declare a dividend (or any other
distribution) on its Common Stock;
(ii) the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock;
(iii) the Company shall authorize the granting to the holders
of its Common Stock rights, options or warrants to subscribe for or purchase
any shares of capital stock of any class or of any rights;
<PAGE>
(iv) the approval of any shareholders of the Company shall be
required in connection with any reclassification of the Common Stock, any
consolidation or merger to which the Company is a party, any sale or transfer
of all or substantially all of the assets of the Company, or any compulsory
share exchange whereby the Common Stock is converted into other securities,
cash or property; or
(v) the Company shall authorize the Liquidation of the affairs
of the Company;
then the Company shall cause to be filed at each office or agency maintained
for the purpose of the conversion of the Series B Preferred, and shall cause
to be delivered to the Holders at the address specified herein, at least 30
(thirty) calendar days prior to the applicable record or effective date
hereinafter specified, a notice (provided such notice shall not include any
material non-public information) stating (a) the date on which a record is to
be taken for the purpose of such dividend, distribution, redemption, or
granting of options, rights or warrants, or if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distributions, redemption, rights, options or warrants are to
be determined or (b) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of record of
Common Stock shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided, however,
that the failure to mail such notice or any defect therein or in the mailing
thereof shall not affect the validity of the corporate action required to be
specified in such notice. Nothing herein shall prohibit the Holders from
converting shares of Series B Preferred held by such Holder during the 30-day
period commencing on the date of such notice to the effective date of the
event triggering such notice.
k. Adjustment in the Number of Shares. For the avoidance of doubt,
upon each adjustment in the Conversion Price pursuant to any provision of this
Section 7 the number of shares of Common Stock purchasable hereunder shall be
adjusted, to the nearest 1/100th of a whole share, to the product obtained by
multiplying such number of shares purchasable immediately prior to such
adjustment in the Conversion Price by a fraction, the numerator of which shall
be the Conversion Price immediately prior to such adjustment and the
denominator of which shall be the Conversion Price immediately thereafter.
l. Increase in Conversion Price. In no event shall any provision
in this Section 7 cause the Conversion Price to be greater than the Conversion
Price on the Original Issue Date.
8. Restriction on Conversion by Either the Holder or the Company.
Prior to the one year anniversary of the date that the Securities and Exchange
Commission declares effective the Initial Registration Statement (as defined
in the Registration Rights Agreement), and notwithstanding anything herein to
the contrary, in no event shall any Holder or the Company have the right or be
required to convert shares of Series B Preferred if as a result of such
conversion the aggregate number of shares of Common Stock beneficially owned
by such Holder and its Affiliates would exceed 4.99% of the outstanding shares
of the Common Stock following such exercise. For purposes of this Section
5(d), beneficial ownership shall be calculated in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended. The provisions of
this Section 5(d) may be waived by a Holder as to itself (and solely as to
itself) upon not less than sixty-five (65) days prior written notice to the
Company, and the provisions of this Section 5(d) shall continue to apply until
such 65th day (or later, if stated in the notice of waiver).
<PAGE>
9. Optional Redemption.
a. Redemption by the Company. The Series B Preferred shares shall
not be redeemable at the option of the Company prior to the one year
anniversary of the date that Securities and Exchange Commission declares
effective the Initial Registration Statement (as defined in the Registration
Rights Agreement). Following such one-year anniversary the Company may, at
its option and subject to the conditions set forth herein, redeem the shares
of Series B Preferred if the Per Share Market Value exceeds $35.00 for thirty
(30) consecutive Trading Days. The Company may redeem the Series B Preferred,
in whole and not in part, at a price per share equal to the Liquidation Value,
together with any other amounts due in respect thereof through the Redemption
Date (as defined in Section 9(c) (the "Redemption Price").
b. Limitations on Redemption. The Company may only exercise its
right to redeem the Series B Preferred pursuant to Section 9(a) on one (1)
occasion only, and shall only be permitted to do so if (i) any Registration
Statement required to be filed and be effective pursuant to the Registration
Rights Agreement is then in effect and has been in effect and sales of all of
the Registrable Securities can be made thereunder for at least twenty (20)
days prior to the Redemption Notice Date (as defined below), (ii) the Company
has a sufficient number of authorized shares of Common Stock reserved for
issuance upon full conversion of the Series B Preferred at the then applicable
Conversion Price and (iii) the Company is not then in breach of any of the
provisions of this Certificate of Designation.
c. Mechanics of Redemption. The Company shall exercise its right
to redeem the Series B Preferred by delivering to the registered Holders of
the Series B Preferred a redemption notice (a "Redemption Notice"), upon at
least ten (10) Business Days prior written notice (such date that the notice
is given, the "Redemption Notice Date") by facsimile and overnight courier.
Such Redemption Notice shall indicate the Redemption Price and a confirmation
of the date ("Redemption Date") that the Company shall effect the redemption,
which date shall be not less than ten (10) business days and not more than
sixty (60) calendar days after the Redemption Notice Date. Notwithstanding
anything in this Section 9, the Company shall convert any and all shares of
Series B Preferred delivered pursuant to Section 5 hereof if the Conversion
Notice for such shares of Series B Preferred is delivered prior to the
Redemption Date.
d. Payment of Redemption Price. The Company shall pay the
applicable Redemption Price to the Holder of the shares of Series B Preferred
being redeemed in cash on the Redemption Date. If the Company shall fail to
pay the applicable Redemption Price to such Holder on the Redemption Date, in
addition to any remedy such Holder may have under this Certificate of
Designation and the Purchase Agreement, such unpaid amount shall bear interest
at the rate of 2.0% per month until paid in full. Until the Company pays such
unpaid applicable Redemption Price in full to each Holder, each Holder of
shares of Series B Preferred submitted for redemption pursuant to this Section
9 and for which the applicable Redemption Price has not been paid shall have
the option, in lieu of redemption, (a) to require the Company to promptly
return to such Holder all of the shares of Series B Preferred that were
submitted for redemption by such Holder under this Section 9 and for which
the applicable Redemption Price has not been paid or (b) to convert those
shares of Series B Preferred for which the applicable Redemption Price has not
been paid at the Conversion Price (the "Void Redemption Notice"). Upon the
Company's receipt of such Void Redemption Notice(s) requesting the return of
the shares of Series B Preferred and prior to payment of the full applicable
Redemption Price to each Holder, (a) the redemption shall be null and void
with respect to those shares of Series B Preferred submitted for redemption
and for which the applicable Redemption Price has not been paid and (b) the
<PAGE>
Company shall immediately return any Series B Preferred certificates submitted
to the Company by each Holder for redemption under this Section 9 and for
which the applicable Redemption Price has not been paid. If the Company
fails to timely effect a redemption in accordance with this Section 9, the
Company shall not be allowed to submit another Redemption Notice without the
prior written consent of Holders of at least two-thirds (2/3) of the number of
shares of Series B Preferred then outstanding.
10. Definitions. For the purposes hereof, the following terms shall
have the following meanings:
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Amex" means the American Stock Exchange.
"Appraiser" means a nationally recognized or major regional investment
banking firm or firm of independent certified public accountants of recognized
standing.
"Approved Stock Plan" means any contract, plan or agreement which has
been approved by the Board of Directors of the Company or committee thereof,
pursuant to which the Company's securities may be issued to any employee,
officer or director of the Company; provided, that such issuance or issuances
shall not exceed 20% of the Company's outstanding Common Stock and Preferred
Stock on the Original Issue Date.
"Change of Control Transaction" means the occurrence of any of (i) any
acquisition or series of related acquisitions by any Person or "group" (as
described in Section 13(d)(3) of the Exchange Act) of in excess of 50% of the
voting power of the Company, (ii) a replacement of more than one-half of the
members of the Company's Board of Directors which is not approved by a
majority of those individuals who are members of the Board of Directors on the
Original Issue Date, or their duly elected successors who are directors
immediately prior to such transaction(s), in one or a series of related
transactions, (iii) the merger or consolidation of the Company with or into
another entity, unless the holders of the Company's securities immediately
prior to such transaction or series of related transactions continue to hold
at least 50% of such securities following such transaction or series of
related transactions, (iv) a sale, conveyance, lease, transfer or disposition
of all or substantially all of the assets of the Company in one or a series of
related transactions or (v) the execution by the Company of an agreement to
which the Company is a party or by which it is bound, providing for any of the
events set forth above in (i), (ii), (iii) or (iv).
"Common Stock" means the Company's common stock, $.01 par value per
share, and stock of any other class into which such shares may hereafter have
been reclassified or changed.
"Conversion Price" has the meaning set forth in Section 5(a).
"Excluded Securities" means (i) shares of Common Stock issued or
issuable pursuant to the terms of this Certificate of Designation, the
Securities Purchase Agreement and the Stock Purchase Warrant, (ii) shares of
Common Stock deemed to have been issued by the Company in connection with an
<PAGE>
Approved Stock Plan, (iii) shares of Common Stock (including options, rights
and warrants) issuable upon the exercise of any options, rights or warrants
outstanding on the Original Issue Date and set forth on Schedule 2.1(c) of the
Securities Purchase Agreement or (iv) shares of Common Stock issued or deemed
to be issued by the Company in connection with a strategic acquisition by the
Company of the assets or business, or division thereof, of another Person.
"Liquidation Value" has the meaning set forth in Section 1 hereof.
"Original Issue Date" shall mean the date of the first issuance of any
shares of the Series B Preferred, regardless of the number of transfers of any
particular shares of Series B Preferred and regardless of the number of
certificates which may be issued to evidence such Series B Preferred, which
date shall coincide with the Closing Date, as defined in the Securities
Purchase Agreement.
"Per Share Market Value" means on any particular date (a) the closing bid
price per share of the Common Stock on such date on the Amex or other
Subsequent Market, or if there is no such price on such date, then the closing
bid price on such exchange or quotation system on the date nearest preceding
such date, or (b) if the Common Stock is not listed then on the Amex or any
other Subsequent Market, the closing bid price for a share of Common Stock in
the over-the-counter market, as reported by the NASDAQ or in the National
Quotation Bureau Incorporated or similar organization or agency succeeding to
its functions of reporting prices) at the close of business on such date, or
(c) if the Common Stock is not then publicly traded the fair market value of a
share of Common Stock as determined by an Appraiser selected in good faith by
the Holders of a majority in interest of the shares of the Series B Preferred;
provided, however, that the Company, after receipt of the determination by
such Appraiser, shall have the right to select, in good faith, an additional
Appraiser, in which case the fair market value shall be equal to the average
of the determinations by each such Appraiser; and provided, further that all
determinations of the Per Share Market Value shall be appropriately adjusted
for any stock dividends, stock splits or other similar transactions during
such period.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Preferred Stock" means the preferred stock of the Company, par value
$.001 per share.
"Purchase Agreement" means the Convertible Preferred Stock Purchase
Agreement, dated as of the Original Issue Date, among the Company and the
original Holders of the Series B Preferred.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the Original Issue Date, by and among the Company and the original
Holders.
"Subsequent Market" means the New York Stock Exchange, the NASDAQ
National Market or the NASDAQ SmallCap Market.
"Trading Day" means any day on which the Amex or Subsequent Market (if
applicable) is open for trading.
"Underlying Shares" means the number of shares of Common Stock into which
the Series B Preferred are convertible in accordance with the terms hereof.
<PAGE>
11. Notices. Except as otherwise provided in the event of conversion
of shares of Series B Preferred, all notices or other communications required
hereunder shall be in writing and shall be deemed to have been received (a)
upon hand delivery (receipt acknowledged) or delivery by telex (with correct
answer back received) telecopy or facsimile (with transmission confirmation
report) at the address or number designated below (if received by 6:00 p.m.
EST where such notice is to be received), or the first business day following
such delivery (if received after 6:00 p.m. EST where such notice is to be
received) or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur; and shall be
regarded as properly addressed if sent to (i) the Company, to Datalink.net,
Inc., 1735 Technology Drive, Suite 790, San Jose, California 95110, Attn:
Anthony LaPine, facsimile (408) 367-1701, and (ii) if the Holders, at their
respective addresses set forth in the books and records of the Company, or
such other address as any of the above may have furnished to the other parties
in writing by registered mail, return receipt requested.
12. Lost or Stolen Certificates. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of any stock certificates representing the shares of
Series B Preferred, and, in the case of loss, theft or destruction, of any
indemnification undertaken by the Holder to the Company in customary form and,
in the case of mutilation, upon surrender and cancellation of such Series B
Preferred stock certificate(s), the Company shall execute and deliver new
preferred stock certificate(s) of like tenor and date; provided, however, the
Company shall not be obligated to re-issue preferred stock certificates if the
Holder contemporaneously requests the Company to convert such Series B
Preferred into Common Stock.
13. Remedies Characterized; Other Obligations, Breaches and Injunctive
Relief. The remedies provided in this Certificate of Designation shall be
cumulative and in addition to all other remedies available under this
Certificate of Designation, at law or in equity (including a decree of
specific performance and/or other injunctive relief), no remedy contained
herein shall be deemed a waiver of compliance with the provisions giving rise
to such remedy and nothing herein shall limit a Holder's right to pursue
actual damages for any failure by the Company to comply with the terms of this
Certificate of Designation. The Company covenants to each Holder of Series B
Preferred that there shall be no characterization concerning this instrument
other than as expressly provided herein. Amounts set forth or provided for
herein with respect to payments, conversion and the like (and the computation
thereof) shall be the amounts to be received by the Holder thereof and shall
not, except as expressly provided herein, be subject to any other obligation
of the Company (or the performance thereof). The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to the
Holders of the Series B Preferred and that the remedy at law in the event of
any such breach may be inadequate. The Company therefore agrees that, in the
event of any such breach or threatened breach, the Holders of the Series B
Preferred shall be entitled, in addition to all other available remedies, to
an injunction restraining any breach, without the necessity of showing
economic loss and without any bond or other security being required.
14. Specific Shall Not Limit General; Construction. No specific
provision contained in this Certificate of Designation shall limit or modify
any more general provision contained herein. This Certificate of Designation
shall be deemed to be jointly drafted by the Company and all Purchasers (as
defined in this Purchase Agreement) and shall not be construed against any
Person as the drafter hereof.
<PAGE>
15. Failure or Indulgence Not Waiver. No failure or delay on the part
of a Holder of Series B Preferred in the exercise of any power, right or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other right, power or privilege.
16. Fractional Shares. Upon a conversion hereunder, the Company shall
not be required to issue stock certificates representing fractions of shares
of Common Stock, but may if otherwise permitted, make a cash payment in
respect of any final fraction of a share based on the Per Share Market Value
at such time. If the Company elects not, or is unable, to make such a cash
payment, the Holder of a share of Series B Preferred shall be entitled to
receive, in lieu of the final fraction of a share, one whole share of Common
Stock.
17. Payment of Tax Upon Issue of Transfer. The issuance of
certificates for shares of the Common Stock upon conversion of the Series B
Preferred Shares shall be made without charge to the Holders thereof for any
documentary stamp or similar taxes that may be payable in respect of the issue
or delivery of such certificate, provided that the Company shall not be
required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate upon conversion
in a name other than that of the Holders so converted, and the Company shall
not be required to issue or deliver such certificates unless or until the
Person or Persons requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid.
18. Shares Owned by Company Deemed Not Outstanding. In determining
whether the Holders of the outstanding shares of Series B Preferred have
concurred in any direction, consent or waiver under this Certificate of
Designation, shares of Series B Preferred which are owned by the Company or
any other obligor thereof shall be disregarded and deemed not to be
outstanding for the purpose of any such determination; provided, that any
Series B Preferred owned by the Holders shall be deemed outstanding for
purposes of making such a determination. Shares of the Series B Preferred so
owned which have been pledged in good faith may be regarded as outstanding if
(i) the pledgee establishes to the satisfaction of the Holders and the Company
the pledgee's right so to act with respect to such shares and (ii) the pledgee
is not the Company or any other obligor of the Company.
19. Communications. The holders of the Series B Preferred shall be
entitled to receive, and the Company shall deliver pursuant to Section 11
hereof, all communications sent by the Company to the holders of the Common
Stock.
20. Reacquired Shares. Any shares of Series B Preferred redeemed,
purchased, converted or otherwise acquired by the Company in any manner
whatsoever shall not be reissued as part of the Company's Series B Preferred
and shall be retired promptly after the acquisition thereof. All such shares
shall become, upon their retirement (and the filing of any certificate
required in connection therewith pursuant to the General Corporation Law of
the state of Nevada), authorized but unissued shares of Preferred Stock.
21. Certain Limitations. As long as any shares of Series B Preferred
are outstanding, the Company shall not, and shall cause its subsidiaries not
to, without the affirmative vote of the Holders of 75% of the shares of the
Series B Preferred then outstanding, (a) alter or change adversely the
absolute or relative powers, preferences or rights given to the Series B
Preferred, (b) alter or amend this Certificate of Designation, (c) amend its
Articles of Incorporation, bylaws or other charter documents so as to affect
<PAGE>
adversely any rights of any Holders, (d) increase the authorized number of
shares of Series B Preferred, (e) sell all or substantially all of its assets
or (f) enter into any agreement with respect to the foregoing. In addition
the Company shall not, by amendment of its Articles of Incorporation or
through any reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issuance or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed hereunder by the Company, but
will at all times in good faith assist in the carrying out of all of the
provisions hereof and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Series B Preferred against
impairment.
22. Effect of Headings. The section headings herein are for
convenience only and shall not affect the construction hereof.
IN WITNESS WHEREOF, Datalink.net, Inc. has caused this Certificate of
Designation to be signed by its CEO on this 9th day of February, 2000.
By: /s/ Anthony LaPine
Name: Anthony LaPine
Title: CEO
Attest:
By: /s/ Tali Durant
Name: Tali Durant
Title: Secretary
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder in order to Convert shares of Series
B Preferred Stock)
The undersigned hereby elects to convert the number of shares of Series B
Convertible Preferred Stock indicated below, into shares of common stock, par
value $.01 per share (the "Common Stock"), of Datalink.net, Inc. (the
"Company") according to the conditions hereof, as of the date written below.
If shares are to be issued in the name of a person other than undersigned, the
undersigned will pay all transfer taxes payable with respect thereto and is
delivering herewith such certificates and opinions as reasonably requested by
the Company in accordance therewith. No fee will be charged to the Holder for
any conversion, except for such transfer taxes, if any.
Conversion calculations:
____________________________________________
Date to Effect Conversion
____________________________________________
Number of shares of Series B Preferred Stock
to be Converted
____________________________________________
Number of shares of Common Stock to be Issued
____________________________________________
Applicable Conversion Price
____________________________________________
Name of Person to whom Shares of Common Stock
are to be Issued
____________________________________________
Signature
____________________________________________
Name
____________________________________________
Address
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER AS SET FORTH IN THE SECURITIES PURCHASE AGREEMENT, DATED AS OF
FEBRUARY 9, 2000, A COPY OF WHICH IS AVAILABLE FROM THE COMPANY AND ANY
SUCCESSOR THERETO.
February 9, 2000
375,000 shares Warrant No. 1
DATALINK.NET, INC.
STOCK PURCHASE WARRANT
Registered Owner: Brown Simpson Strategic Growth Fund, Ltd.
This certifies that, for value received, Datalink.Net, Inc., a Nevada
corporation, the ("Company") grants the following rights to the Registered
Owner, or assigns, of this Warrant:
1. Definitions. Capitalized terms used herein and not otherwise
defined herein shall have the meanings given to such terms in the Purchase
Agreement. As used in this Warrant, the following terms have the following
meanings:
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under direct or
indirect common control with such Person. For the purposes of this
definition, "control," when used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise; and the terms of
"affiliated," "controlling" and "controlled" have meanings correlative to the
foregoing.
"Amex" means the American Stock Exchange.
"Appraiser" means a nationally recognized or major regional investment
banking firm or firm of independent certified public accountants of recognized
standing.
"Approved Stock Plan" means any contract, plan or agreement which has
been approved by the Board of Directors of the Company or any committee
thereof, pursuant to which the Company's securities may be issued to any
employee, officer or director; provided, that such issuance or issuances shall
not exceed 10% of the Company's outstanding Common Stock and preferred stock
on the Closing Date.
"Average Price" on any date means (x) the sum of the Per Share Market
Value for the ten (10) Trading Days immediately preceding such date minus (y)
<PAGE>
the highest and lowest Per Share Market Value during such 10 Trading Day
period, divided by (z) eight (8).
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the state
of New York generally are authorized or required by law or other government
actions to close.
"Change of Control Transaction" means the occurrence of any of (i) any
acquisition or series of related acquisitions by an individual or legal entity
or "group" (as described in Section 13(d)(3) of the Exchange Act) of in excess
of 50% of the voting power of the Company, (ii) a replacement of more than
one-half of the members of the Company's board of directors which is not
approved by a majority of those individuals who are members of the board of
directors on the date hereof, or their duly elected successors who are
directors immediately prior to such transaction(s), in one or a series of
related transactions, (iii) the merger or consolidation of the Company with or
into another entity, unless the holders of the Company's securities
immediately prior to such transaction or series of transactions continue to
hold at least 50% of such securities following such transaction or series of
transactions, (iv) a sale, conveyance, lease, transfer or disposition of all
or substantially all of the assets of the Company in one or a series of
related transactions or (v) the execution by the Company of an agreement to
which the Company is a party or by which it is bound, providing for any of the
events set forth above in (i), (ii), (iii) or (iv).
"Closing" and "Closing Date" have the meanings set forth in Section 1.2
of the Purchase Agreement.
"Common Stock" means the shares of the Company's Common Stock, par value
$.01 per share.
"Company" means Datalink.Net, Inc., a Nevada corporation.
"Excluded Securities" means (i) shares of Common Stock issued or issuable
pursuant to the Purchase Agreement, the Series B Certificate of Designation
and this Warrant, (ii) shares of Common Stock deemed to have been issued by
the Company in connection with an Approved Stock Plan, (iii) shares of Common
Stock (including options and warrants) issuable upon the exercise of any
options or warrants outstanding on the date hereof and listed in Schedule
2.1(c) of the Purchase Agreement or (iv) shares of Common Stock issued or
deemed to be issued by the Company in connection with a strategic acquisition
by the Company of the assets or business, or division thereof, of another
Person.
"Exercise Period" has the meaning assigned to it in Section 5 hereof.
"Exercise Price" has the meaning assigned to it in Section 4 hereof.
"Per Share Market Value" means on any particular date (i) the closing bid
price per share of the Common Stock on such date on the Amex or other
Subsequent Market on which the Common Stock is then listed or if there is no
such price on such date, then the closing bid price on such exchange or
quotation system on the date nearest preceding such date, or (ii) if the
Common Stock is not listed then on the Amex or other Subsequent Market, the
closing bid price for a share of Common Stock in the over-the-counter market,
as reported by the National Quotation Bureau Incorporated (or similar
organization or agency succeeding to its functions of reporting prices) at the
close of business on such date, or (iii) if the Common Stock is not then
publicly traded the fair market value of a share of Common Stock as determined
by an Appraiser selected in good faith by the Company; provided, however, that
<PAGE>
the registered owners of a majority of the Underlying Shares and Warrants then
outstanding, after receipt of the determination by such Appraiser, shall have
the right to select, in good faith, an additional Appraiser, in which case the
fair market value shall be equal to the average of the determinations by each
such Appraiser; and provided, further that all determinations of the Per Share
Market Value shall be appropriately adjusted for any stock dividends, stock
splits or other similar transactions during such period.
"Person" means a corporation, association, partnership, organization,
business, individual, government or political subdivision thereof or
governmental agency.
"Purchase Agreement" means that certain Securities Purchase Agreement,
dated as of February 9, 2000, among the Company and the Purchasers.
"Purchases" has the meaning set forth in the Purchase Agreement.
"Registered Owner" means the person identified on the face of this
Warrant as the registered owner hereof or their assigns.
"Subsequent Market" means the New York Stock Exchange, the Nasdaq
National Market or the Nasdaq SmallCap Market.
"Registration Rights Agreement" means that certain Registration Rights
Agreement, dated as of February 9, 2000, among the Company and the Purchasers.
"Trading Day(s)" means any day on which the primary market on which
shares of Common Stock are listed is open for trading.
"Underlying Shares" has the meaning assigned to it in Section 2.1(d) of
the Purchase Agreement.
"Warrant(s)" means the warrants issuable at the Closing.
"Warrant Shares" has the meaning assigned to it in Section 3 hereof.
2. Issue. Upon tender to the Company pursuant to Section 6 hereof, the
Company, within three (3) Business Days of the date thereof, shall issue to
the Registered Owner, or assigns, up to the number of shares specified in
Section 3 hereof of fully paid and nonassessable shares of Common Stock that
the Registered Owner, or assigns, is otherwise entitled to purchase.
3. Number of Shares. The total number of shares of Common Stock that
the Registered Owner, or assigns, of this Warrant is entitled to receive upon
exercise of this Warrant is 375,000 shares (the "Warrant Shares"), subject to
adjustment from time to time as provided herein. The Company shall at all
times reserve and hold available out of its authorized and unissued shares of
Common Stock or other securities, as the case may be, sufficient shares of
Common Stock to satisfy all conversion, exercise and purchase rights
represented by outstanding convertible securities, options and warrants,
including this Warrant. The Company covenants and agrees that all shares of
Common Stock that may be issued upon the exercise of this Warrant shall, upon
issuance, be duly and validly issued, fully paid and nonassessable, free from
all taxes, liens and charges with respect to the purchase and the issuance of
the shares, shall not have any legend or restrictions on resale, expect as
required by Section 3.2(b) of the Purchase Agreement and, subsequent to the
effectiveness of the Registration Statement (as defined in the Registration
Rights Agreement), shall be freely tradable.
4. Exercise Price. The initial per share exercise price of this
Warrant, representing the price per share at which each share of Common Stock
<PAGE>
issuable upon exercise of this Warrant may be purchased, is $17.50, subject to
adjustment from time to time pursuant to the provisions of Section 7 hereof
(the "Exercise Price").
5. Exercise Period. This Warrant may be exercised, in whole or in
part, from the Closing Date up to and including February 8, 2005 (5 years less
1 day) (the "Exercise Period"). If not exercised during this period, this
Warrant and all rights granted under this Warrant shall expire and lapse.
6. Tender; Issuance of Certificates.
a. This Warrant may be exercised, in whole or in part, by (a)
delivery of the applicable Exercise Price for the number of Warrant Shares in
respect of which this Warrant is exercisable, (b) delivery of a duly executed
Warrant Exercise Form, a copy of which is attached to this Warrant as Exhibit
A, properly executed by the Registered Owner, or assigns, of this Warrant and
(c) surrender of this Warrant. The number of Warrant Shares so purchased
shall be designated on the Warrant Exercise Form and shall be deemed to be
issued to the Registered Owner as of the close of business on the date on
which this Warrant shall have been surrendered, the completed Warrant Exercise
Form shall have been delivered and payment shall have been made for such
shares as set forth above. The payment and Warrant Exercise Form must be
delivered to the registered office of the Company or of the Company's transfer
agent, either in person or as set for in Section 13 hereof.
b. Commencing on the first day that the Securities and Exchange
Commission declares effective the Initial Registration Statement (as defined
in the Registration Rights Agreement), if, and only if, at the time of
exercise of this Warrant, the Warrant Shares are not saleable pursuant to an
effective registration statement, then in addition to the exercise of all or a
part of this Warrant by payment of the Exercise Price in cash as provided
above, and in lieu of such payment, the Registered Owner shall have the right
to effect a cashless exercise (a "Cashless Exercise"). In the event of a
Cashless Exercise the Registered Owner may exercise this Warrant in whole or
in part by surrendering this Warrant in exchange for the number of shares of
Common Stock equal to the product of (i) the number of shares as to which this
Warrant is being exercised multiplied by (ii) a fraction, the numerator of
which is the Per Share Market Value on such date less the Exercise Price then
in effect and the denominator of which is the Per Share Market Value on such
date (in each case adjusted for fractional shares as herein provided). The
Registered Owner shall be responsible for any and all taxes payable in respect
of such Cashless Exercise.
c. In lieu of physical delivery of this Warrant, provided the
Company's transfer agent is participating in the Depositary Trust Company
("DTC") Fast Automated Securities Transfer (FAST) program, upon request of the
Registered Owner and in compliance with the provisions hereof, the Company
shall use its best efforts to cause its transfer agent to electronically
transmit the Warrant Shares to the Registered Owner by crediting the account
of the Registered Owner's Prime Broker with DTC through its Deposit Withdrawal
Agent Commission system. The time period for delivery described herein shall
apply to any such electronic transmittals.
d. Certificates for the Warrant Shares so purchased, representing
the aggregate number of shares specified in the Warrant Exercise Form, and any
cash payments due under Section 15 hereof shall be delivered to the Registered
Owner within three (3) Business Days after this Warrant shall have been so
exercised. The certificates so delivered shall be in such denominations as
may be requested by the Registered Owner and shall be registered in the name
of the Registered Owner or such other name as shall be designated by such
Registered Owner. If this Warrant shall have been exercised only in part
<PAGE>
then, unless this Warrant has expired, the Company shall, at its expense and
at the time of delivery of such certificates, deliver to the Registered Owner
a new Warrant representing the number of shares with respect to which this
Warrant shall not then have been exercised.
7. Adjustment of Exercise Price.
a. Common Stock Dividends; Common Stock Splits; Reclassification.
If the Company, at any time while this Warrant is outstanding, (a) shall pay a
stock dividend on its Common Stock, (b) subdivide outstanding shares of Common
Stock into a larger number of shares or (c) issue by reclassification of
shares of Common Stock any shares of capital stock of the Company, then (i)
the Exercise Price shall be multiplied by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding before such event
and the denominator of which shall be the number of shares of Common Stock
outstanding after such event and (ii) the number of Warrant Shares shall be
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding immediately after such event and the denominator
of which shall be the number of shares of Common Stock outstanding immediately
prior to such event. Any adjustment made pursuant to this paragraph 7(a)
shall become effective immediately after the record date for the determination
of shareholders entitled to receive such dividend or distribution or, in the
case of a subdivision or re-classification, shall become effective immediately
after the effective date thereof.
b. Rights; Options; Warrants or Other Securities. If the Company,
at any time while this Warrant is outstanding, shall fix a record date for the
issuance of rights, options, warrants or other securities to the holders of
its Common Stock entitling them to subscribe for or purchase, convert to,
exchange for or otherwise acquire shares of Common Stock for no consideration
or at a price per share less than the Exercise Price, the Exercise Price shall
be multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issuance or sale
plus the number of shares of Common Stock which the aggregate consideration
received by the Company would purchase at the Exercise Price, and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issuance date plus the number of additional shares
of Common Stock offered for subscription, purchase, conversion, exchange or
acquisition, as the case may be. Such adjustment shall be made whenever such
rights, options, warrants or other securities are issued, and shall become
effective immediately after the record date for the determination of
shareholders entitled to receive such rights, options, warrants or other
securities.
c. Subscription Rights. If the Company, at any time while this
Warrant is outstanding, shall fix a record date for the distribution to
holders of its Common Stock evidence of its indebtedness or assets or rights,
options, warrants or other security entitling them to subscribe for or
purchase, convert to, exchange for or otherwise acquire any security
(excluding those referred to in paragraphs 7(a) and (b) above), then in each
such case the Exercise Price at which this Warrant shall thereafter be
exercisable shall be determined by multiplying the Exercise Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the Per Share Market Value on such record date less the then fair
market value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of Common
Stock as determined by the Board of Directors in good faith, and the
denominator of which shall be the Exercise Price as of such record date;
provided, however, that in the event of a distribution exceeding ten percent
(10%) of the net assets of the Company, such fair market value shall be
determined by an Appraiser selected in good faith by the registered owners of
<PAGE>
a majority of the Warrants and Underlying Shares then outstanding; and
provided, further, that the Company, after receipt of the determination by
such Appraiser shall have the right to select in good faith an additional
Appraiser meeting the same qualifications, in which case the fair market value
shall be equal to the average of the determinations by each such Appraiser.
Such adjustment shall be made whenever any such distribution is made and shall
become effective immediately after the record date mentioned above.
d. Rounding. All calculations under this Section 7 shall be made
to the nearest cent or the nearest l/l00th of a share, as the case may be.
e. Notice of Adjustment. Whenever the Exercise Price is adjusted
pursuant to this Section 7 the Company shall promptly deliver to the
Registered Owner a notice setting forth the Exercise Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment. Such notice shall be signed by the chairman, president or chief
financial officer of the Company.
f. Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Company, and the disposition of any shares so owned or held
shall be considered an issue or sale of Common Stock by the Company.
g. Change of Control; Compulsory Share Exchange. In case of (A)
any Change of Control Transaction or (B) any compulsory share exchange
pursuant to which the Common Stock is converted into other securities, cash or
property (each, an "Event"), lawful provision shall be made so that the
Registered Owner shall have the right thereafter to exercise this Warrant for
shares of stock and other securities, cash and property receivable upon or
deemed to be held by holders of Common Stock following such Event, and the
Registered Owner shall be entitled upon such Event to receive such amount of
shares of stock and other securities, cash or property as the shares of the
Common Stock of the Company into which this Warrant could have been exercised
immediately prior to such Event (without taking into account any limitations
or restrictions on the exercisability of this Warrant) would have been
entitled. The provisions of this Section 7(g) shall similarly apply to
successive Events.
h. Issuance's Below Exercise Price. If the Company, at any time
while this Warrant is outstanding, takes any of the actions described in this
Section 7(h), the Registered Owner shall have the right to amend this Warrant
as set forth below:
(i) issues or sells, or is deemed to have issued or sold, any
Common Stock;
(ii) in any manner grants, issues or sells any rights,
options, warrants, options to subscribe for or to purchase Common Stock or any
stock or other securities convertible into or exchangeable for Common Stock
(other than any Excluded Securities) (such rights, options or warrants being
herein called "Options" and such convertible or exchangeable stock or
securities being herein called "Convertible Securities"); or
(iii) in any manner issues or sells any Convertible
Securities;
for (a) with respect to paragraph (h)(i), above, a price per share, or (b)
with respect to paragraphs h(ii) or h(iii), above, a price per share for which
Common Stock issuable upon the exercise of such Options or upon conversion or
exchange of such Convertible Securities is, less than the Exercise Price in
effect immediately prior to such issuance or sale, then, immediately after
<PAGE>
such issuance, sale or grant, the Registered Owner shall have the right to
amend the issuance terms of the Common Stock issuable upon exercise of this
Warrant (including adjustment of the Exercise Price) so that the issuance
terms hereof are equivalent to the issuance terms of such offering. No
modification of the issuance terms shall be made upon the actual issuance of
such Common Stock upon conversion or exchange of such Options or Convertible
Securities. If there is a change at any time in (i) the exercise price
provided for in any Options, (ii) the additional consideration, if any,
payable upon the issuance, conversion or exchange of any Convertible
Securities or (iii) the rate at which any Convertible Securities are
convertible into or exchangeable for Common Stock, then immediately after such
change the Registered Owner shall have the right to amend the issuance terms
of the Common Stock issuable upon exercise of this Warrant accordingly,
including, without limitation, by reducing the Exercise Price in effect to the
Exercise Price which would have been in effect at such time had such Options
or Convertible Securities still outstanding provided for such changed exercise
price, additional consideration or changed conversion rate, as the case may
be, at the time initially granted, issued or sold; provided that no adjustment
shall be made if such adjustment would result in an increase of the Exercise
Price then in effect.
i. Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Exercise Price under Section 7(h), the following
shall be applicable:
(i) Calculation of Consideration Received. If any Common
Stock, Options or Convertible Securities are issued or sold or deemed to have
been issued or sold for cash, the consideration received therefor will be
deemed to be the net amount received by the Company therefor, without
deducting any expenses paid or incurred by the Company or any commissions or
compensations paid or concessions or discounts allowed to underwriters,
dealers or others performing similar services in connection with such issue or
sale. In case any Common Stock, Options or Convertible Securities are issued
or sold for a consideration other than cash, the amount of the consideration
other than cash received by the Company will be the fair value of such
consideration, except where such consideration consists of securities listed
or quoted on a national securities exchange or national quotation system, in
which case the amount of consideration received by the Company will be the
arithmetic average of the closing sale price of such security for the five (5)
consecutive Trading Days immediately preceding the date of receipt thereof.
In case any Common Stock, Options or Convertible Securities are issued to the
owners of the non-surviving entity in connection with any merger in which the
Company is the surviving entity, the amount of consideration therefor will be
deemed to be the fair value of such portion of the net assets and business of
the non-surviving entity as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities will be determined jointly by the
Company and the registered owners of a majority of the Underlying Shares and
Warrants then outstanding. If such parties are unable to reach agreement
within ten (10) days after the occurrence of an event requiring valuation (the
"Valuation Event"), the fair value of such consideration will be determined
within forty-eight (48) hours of the tenth (10th) day following the Valuation
Event by an Appraiser selected in good faith by the Company and agreed upon in
good faith by the registered owners of a majority of the Underlying Shares and
Warrants then outstanding. The determination of such Appraiser shall be
binding upon all parties absent manifest error.
(ii) Integrated Transactions. In case any Option is issued in
connection with the issue or sale of other securities of the Company, together
comprising one integrated transaction in which no specific consideration is
<PAGE>
allocated to such Options by the parties thereto, the Options will be deemed
to have been issued for an aggregate consideration of $.01.
(iii) Record Date. If the Company takes a record of the
holders of Common Stock for the purpose of entitling them (a) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (b) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date will be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to have
been issued or sold upon the declaration of such dividend or the making of
such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(iv) Other Events. If any event occurs that would adversely
affect the rights of the Registered Owner of this Warrant but is not expressly
provided for by Section 7 hereof (including, without limitation, the granting
of stock appreciation rights, phantom stock rights or other rights with equity
features), then the Company's Board of Directors will make an appropriate
adjustment in the Exercise Price so as to protect the rights of the Registered
Owner; provided, however, that no such adjustment will increase the Exercise
Price.
j. Notice of Certain Events. If:
(i) the Company shall declare a dividend (or any other
distribution) on its Common Stock;
(ii) the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock;
(iii) the Company shall authorize the granting to the holders
of its Common Stock rights or warrants to subscribe for or purchase any shares
of capital stock of any class or of any rights;
(iv) the approval of any shareholders of the Company shall be
required in connection with any reclassification of the Common Stock, any
consolidation or merger to which the Company is a party, any sale or transfer
of all or substantially all of the assets of the Company, or any compulsory
share exchange whereby the Common Stock is converted into other securities,
cash or property; or
(v) the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained
for the purpose of exercise of this Warrant, and shall cause to be delivered
to the Registered Owner, at least 30 calendar days prior to the applicable
record or effective date hereinafter specified, a notice (provided such notice
shall not include any material non-public information) stating (a) the date on
which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be determined
or (b) the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and the
date as of which it is expected that holders of Common Stock of record shall
be entitled to exchange their shares of Common Stock for securities, cash or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided, however, that the failure to mail
such notice or any defect therein or in the mailing thereof shall not affect
the validity of the corporate action required to be specified in such notice.
<PAGE>
Nothing herein shall prohibit the Registered Owner from exercising this
Warrant during the 30-day period commencing on the date of such notice.
k. Increase in Exercise Price. In no event shall any provision in
this Section 7 cause the Exercise Price to be greater than the Exercise Price
on the date of issuance of this Warrant.
8. Call Option. If, at any time during the Exercise Period and
following the one-year anniversary of the date that the Securities and
Exchange Commission declares effective the Initial Registration Statement (as
defined in the Registration Rights Agreement), the Per Share Market Value
equals or exceeds $35.00 for any period of thirty (30) consecutive Trading
Days ending not more than ten (10) Trading Days after the Call Notice Date (as
defined below), then so long as (i) any Registration Statement required to be
filed and be effective pursuant to the Registration Rights Agreement is then
in effect and has been in effect and sales of all of the Registrable
Securities can be made thereunder for at least twenty (20) days prior to the
Call Option Date (as defined below), (ii) the Company has a sufficient number
of authorized shares of Common Stock reserved for issuance upon full exercise
of the Warrants and (iii) the Company is not then in breach of any of the
provisions of this Warrant, the Company shall have the right (the "Call
Option"), to be exercised on one (1) occasion only during the two (2) month
period commencing on the Call Notice Date (as defined below), to cause the
Registered Owner to exercise this Warrant in full in accordance with the
provisions of Section 6 hereof (such date that the Call Option is exercised,
the "Call Option Date"). The Company shall exercise its Call Option by
delivering to the Registered Owner a call notice (the "Call Notice" and, such
date that the Call Notice is given, the "Call Notice Date"), by facsimile and
overnight courier, at least ten (10) Business Days prior to the Call Option
Date. The Call Notice shall indicate the Call Option Date and shall include a
brief statement of the facts evidencing the Company's right to exercise the
Call Option. Nothing herein shall prohibit the Registered Owner from
exercising this Warrant in accordance with the provisions of Section 6 hereof
at any time after receipt of the Call Notice and prior to the Call Option
Date, and the Company shall deliver certificates for Warrant Shares in
accordance with Section 6 hereof with respect to any Warrants so exercised.
9. Restriction on Exercise by Either the Registered Owner or the
Company. Prior to the one-year anniversary of the date that the Securities
and Exchange Commission declares effective the Initial Registration Statement
(as defined in the Registration Rights Agreement), and notwithstanding
anything herein to the contrary, in no event shall the Registered Owner or the
Company have the right or be required to exercise this Warrant if as a result
of such exercise the aggregate number of shares of Common Stock beneficially
owned by such Registered Owner and its Affiliates would exceed 4.99% of the
outstanding shares of the Common Stock following such exercise. For purposes
of this Section 9, beneficial ownership shall be calculated in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended. The
provisions of this Section 9 may be waived by a Registered Owner as to itself
(and solely as to itself) upon not less than 65 days prior written notice to
the Company, and the provisions of this Section 9 shall continue to apply
until such 65th day (or later, if stated in the notice of waiver).
10. Registration on Company Books. This Warrant shall be numbered and
shall be registered as they are issued in a warrant register maintained the
Company. The Company may deem and treat the Registered Owner of this Warrant
as the absolute owner thereof, unless the Registered Owner shall have
presented this Warrant to the Company for transfer and the transferee shall
have been entered in the register as a subsequent holder. The ownership of
this Warrant shall be proven by such register, absent manifest error.
<PAGE>
11. Registration Rights. The Company will undertake the registration
of the Common Stock into which this Warrant is exercisable at such times and
upon such terms pursuant to the provisions of the Registration Rights
Agreement.
12. Reservation of Underlying Shares; Listing. The Company covenants
that it will at all times reserve and keep available out of its authorized
shares of Common Stock, free from preemptive rights, solely for the purpose of
issue upon exercise of this Warrants as herein provided, such number of shares
of the Common Stock as shall then be issuable upon the exercise of all
outstanding Warrants into Common Stock. The Company shall promptly secure the
listing of the shares of Common Stock issuable upon exercise of this Warrant
upon each national securities exchange or automated quotation system upon
which shares of Common Stock are then listed (subject to official notice of
issuance upon exercise of this Warrant) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all shares of
Common Stock form time to time issuable upon the exercise of this Warrant.
13. Notices. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be deemed to have been
received (a) upon hand delivery (receipt acknowledged) or delivery by telex
(with correct answer back received), telecopy or facsimile (with transmission
confirmation report) at the address or number designated below (if received by
5:00 p.m. eastern time where such notice is to be received), or the first
Business Day following such delivery (if received after 5:00 p.m. eastern
time where such notice is to be received) or (b) on the second Business Day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications are (i) if to the
Company or the Company's transfer agent to the address set forth in the
Purchase Agreement, and (ii) if to the Registered Owner to the addresses set
forth on the Purchase Agreement with copies to Akin, Gump, Strauss, Hauer &
Feld, L.L.P., 590 Madison Avenue, New York, New York 10022, Attn: James Kaye,
fax no. (212) 872-1002 or such other address as may be designated in writing
hereafter, in the same manner, by such person.
14. Compliance With Governmental Requirements. The Company covenants
that if any shares of Common Stock required to be reserved for purposes of
exercise this Warrant requires registration with or approval of any
governmental authority under any Federal or state law, or any national
securities exchange, before such shares may be issued upon exercise, the
Company will use its best efforts to cause such shares to be duly registered
or approved, as the case may be.
15. Fractional Shares. Upon any exercise hereunder, the Company shall
not be required to issue stock certificates representing fractions of shares
of the Common Stock, but may if otherwise permitted make a cash payment in
respect of any final fraction of a share based on the Per Share Market Value
at such time. If the Company elects not, or is unable, to make such a cash
payment, the Registered Owner shall be entitled to receive, in lieu of the
final fraction of a share, one whole share of Common Stock.
16. Payment of Tax Upon Issue of Transfer. The issuance of
certificates for shares of the Common Stock upon exercise of this Warrant
shall be made without charge to the Registered Owner hereof for any
documentary stamp or similar taxes that may be payable in respect of the issue
or delivery of such certificate, provided that the Company shall not be
required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate upon exercise in
a name other than that of the Registered Owner of this Warrant and the Company
shall not be required to issue or deliver such certificates unless or until
<PAGE>
the person or persons requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid.
17. Warrants Owned by Company Deemed Not Outstanding. In determining
whether the holders of the outstanding Warrants have concurred in any
direction, consent or waiver under this Warrant, warrants which are owned by
the Company or any other obligor on the warrants shall be disregarded and
deemed not to be outstanding for the purpose of any such determination;
provided, that any Warrants owned by the Registered Owner shall be deemed
outstanding for purposes of making such a determination.
18. Effect of Headings. The section headings herein are for
convenience only and shall not affect the construction hereof.
19. No Rights as Stockholder. This Warrant shall not entitle the
Registered Owner to any rights as a stockholder of the Company, including
without limitation, the right to vote, to receive dividends and other
distributions, or to receive notice of, or to attend, meetings of stockholders
or any other proceedings of the Company, unless and to the extent exercised
into shares of Common Stock in accordance with the terms hereof.
20. Certain Actions Prohibited. The Company will not, by amendment of
its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the
terms to be observed or performed by it hereunder, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant
and in the taking of all such action as may reasonably be requested by the
Registered Owner in order to protect the exercise privilege of the Registered
Owner against dilution or other impairment, consistent with the tenor and
purpose of this Warrant. Without limiting the generality of the foregoing,
the Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant and (ii) will take all such
actions as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant.
21. Shareholder Rights Plan. In the event that the Company shall
distribute "poison pill" rights pursuant to a "poison pill" shareholder rights
plan (the "Rights"), the Company shall, in lieu of making any adjustment
pursuant to Section 7 hereof, make proper provision so that each Registered
Owner who exercises this Warrant after the record date for such distribution
and prior to the expiration or redemption of the Rights shall be entitled to
receive upon such exercise, in addition to the shares of Common Stock issuable
upon such exercise, a number of Rights to be determined as follows: (i) if
such exercise occurs on or prior to the date for the distribution to the
holders of Rights of separate certificates evidencing such Rights (the
"Distribution Date"), the same number of Rights to which a holder of a number
of shares of Common Stock equal to the number of shares of Common Stock
issuable upon such exercise at the time of such exercise would be entitled in
accordance with the terms and provisions of and applicable to the Rights; and
(ii) if such exercise occurs after the Distribution Date, the same number of
Rights to which a holder of the number of shares into which this Warrant was
exercisable immediately prior to the Distribution Date would have been
entitled on the Distribution Date, in accordance with the terms and provisions
of such Rights, and in each case subject to the terms and conditions of the
Rights.
22. Successors and Assigns. This Warrant shall be binding upon and
inure to the benefit of the Registered Owners and its assigns, and shall be
<PAGE>
binding upon any entity succeeding to the Company by merger or acquisition of
all or substantially all the assets of the Company. The Company may not
assign this Warrant or any rights or obligations hereunder without the prior
written consent of the Registered Owner. The Registered Owner may assign this
Warrant without the prior written consent of the Company.
23. Governing Law. The corporate laws of the State of Nevada shall
govern all issues concerning the relative rights of the Company and the
Registered Owners as securities holders. All other issues shall be governed
by and construed and enforced in accordance with the internal laws of the
State of New York without regard to the principles of conflicts of law
thereof. Each party hereby irrevocably submits to the nonexclusive
jurisdiction of the state and federal courts sitting in the City of New York,
Borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is
improper. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH
OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
24. Remedies. In the event of a breach by the Company of any of their
obligations under this Warrant, the Registered Owner, in addition to being
entitled to exercise all rights granted by law and under the Purchase
Agreement, including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees that
monetary damages would not provide adequate compensation for any losses
incurred by reason of a breach by it of any of the provisions of this Warrant
and hereby further agree that, in the event of any action for specific
performance in respect of such breach, it shall waive the defense that a
remedy at law would be adequate.
25. Mutilated or Missing Warrants. In case this Warrant shall be
mutilated, lost, stolen or destroyed, the Company, upon request of the
Registered Owner, shall issue and deliver in exchange and substitution for and
upon cancellation of such mutilated Warrant, or in the event that this Warrant
is lost, stolen or destroyed, a new Warrant of like tenor and representing an
equivalent right or interest.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officer as of the date first set forth above.
DATALINK.NET, INC.
By: /s/ Anthony LaPine
Name: Anthony LaPine
Title: CEO
<PAGE>
EXHIBIT A
Warrant Exercise Form
TO: DATALINK.NET, INC.
The undersigned hereby: (1) irrevocably subscribes for and offers to purchase
_______ shares of Common Stock of Datalink.net, Inc., pursuant to Warrant No.
___ heretofore issued to ___________________ on ____________, ____ ; (2)
encloses either (a) a cash payment of $__________ or (b) a Warrant
representing _____ shares of Common Stock valued at the Per Share Market Price
of $ _____ on ________, ____, for these shares at a price of $____ per share
(as adjusted pursuant to the provisions of the Warrant); and (3) requests that
a certificate for the shares be issued in the name of the undersigned, or the
undersigned's designee, and delivered to the undersigned, or the undersigned's
designee, at the address specified below.
Date: _________________________________
Investor Name: _________________________________
Taxpayer Identification Number: _________________________________
By: _________________________________
Printed Name: _________________________________
Title: _________________________________
Address: _________________________________
_________________________________
Cashless Exercise (Y or N): ______________
Note: The above signature should correspond exactly with the name on the face
of this Warrant Certificate or with the name of assignee appearing in
assignment form below.
AND, if said number of shares shall not be all the shares purchasable under
the within Warrant, a new Warrant Certificate is to be issued in the name of
said undersigned for the balance remaining of the shares purchasable
thereunder less any fraction of a share paid in cash and delivered to the
address stated above.
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER AS SET FORTH IN THE SECURITIES PURCHASE AGREEMENT, DATED AS OF
FEBRUARY 9, 2000, A COPY OF WHICH IS AVAILABLE FROM THE COMPANY AND ANY
SUCCESSOR THERETO.
February 9, 2000
201,923 shares Warrant No. 2
DATALINK.NET, INC.
STOCK PURCHASE WARRANT
Registered Owner: Brown Simpson Strategic Growth Fund, L.P.
This certifies that, for value received, Datalink.Net, Inc., a Nevada
corporation, the ("Company") grants the following rights to the Registered
Owner, or assigns, of this Warrant:
1. Definitions. Capitalized terms used herein and not otherwise defined
herein shall have the meanings given to such terms in the Purchase Agreement.
As used in this Warrant, the following terms have the following meanings:
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under direct or
indirect common control with such Person. For the purposes of this
definition, "control," when used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise; and the terms of
"affiliated," "controlling" and "controlled" have meanings correlative to the
foregoing.
"Amex" means the American Stock Exchange.
"Appraiser" means a nationally recognized or major regional investment
banking firm or firm of independent certified public accountants of recognized
standing.
"Approved Stock Plan" means any contract, plan or agreement which has
been approved by the Board of Directors of the Company or any committee
thereof, pursuant to which the Company's securities may be issued to any
employee, officer or director; provided, that such issuance or issuances shall
not exceed 10% of the Company's outstanding Common Stock and preferred stock
on the Closing Date.
"Average Price" on any date means (x) the sum of the Per Share Market
Value for the ten (10) Trading Days immediately preceding such date minus (y)
the highest and lowest Per Share Market Value during such 10 Trading Day
period, divided by (z) eight (8).
<PAGE>
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the state
of New York generally are authorized or required by law or other government
actions to close.
"Change of Control Transaction" means the occurrence of any of (i) any
acquisition or series of related acquisitions by an individual or legal entity
or "group" (as described in Section 13(d)(3) of the Exchange Act) of in excess
of 50% of the voting power of the Company, (ii) a replacement of more than
one-half of the members of the Company's board of directors which is not
approved by a majority of those individuals who are members of the board of
directors on the date hereof, or their duly elected successors who are
directors immediately prior to such transaction(s), in one or a series of
related transactions, (iii) the merger or consolidation of the Company with or
into another entity, unless the holders of the Company's securities
immediately prior to such transaction or series of transactions continue to
hold at least 50% of such securities following such transaction or series of
transactions, (iv) a sale, conveyance, lease, transfer or disposition of all
or substantially all of the assets of the Company in one or a series of
related transactions or (v) the execution by the Company of an agreement to
which the Company is a party or by which it is bound, providing for any of the
events set forth above in (i), (ii), (iii) or (iv).
"Closing" and "Closing Date" have the meanings set forth in Section 1.2
of the Purchase Agreement.
"Common Stock" means the shares of the Company's Common Stock, par value
$.01 per share.
"Company" means Datalink.Net, Inc., a Nevada corporation.
"Excluded Securities" means (i) shares of Common Stock issued or issuable
pursuant to the Purchase Agreement, the Series B Certificate of Designation
and this Warrant, (ii) shares of Common Stock deemed to have been issued by
the Company in connection with an Approved Stock Plan, (iii) shares of Common
Stock (including options and warrants) issuable upon the exercise of any
options or warrants outstanding on the date hereof and listed in Schedule
2.1(c) of the Purchase Agreement or (iv) shares of Common Stock issued or
deemed to be issued by the Company in connection with a strategic acquisition
by the Company of the assets or business, or division thereof, of another
Person.
"Exercise Period" has the meaning assigned to it in Section 5 hereof.
"Exercise Price" has the meaning assigned to it in Section 4 hereof.
"Per Share Market Value" means on any particular date (i) the closing bid
price per share of the Common Stock on such date on the Amex or other
Subsequent Market on which the Common Stock is then listed or if there is no
such price on such date, then the closing bid price on such exchange or
quotation system on the date nearest preceding such date, or (ii) if the
Common Stock is not listed then on the Amex or other Subsequent Market, the
closing bid price for a share of Common Stock in the over-the-counter market,
as reported by the National Quotation Bureau Incorporated (or similar
organization or agency succeeding to its functions of reporting prices) at the
close of business on such date, or (iii) if the Common Stock is not then
publicly traded the fair market value of a share of Common Stock as determined
by an Appraiser selected in good faith by the Company; provided, however, that
the registered owners of a majority of the Underlying Shares and Warrants then
outstanding, after receipt of the determination by such Appraiser, shall have
the right to select, in good faith, an additional Appraiser, in which case the
<PAGE>
fair market value shall be equal to the average of the determinations by each
such Appraiser; and provided, further that all determinations of the Per Share
Market Value shall be appropriately adjusted for any stock dividends, stock
splits or other similar transactions during such period.
"Person" means a corporation, association, partnership, organization,
business, individual, government or political subdivision thereof or
governmental agency.
"Purchase Agreement" means that certain Securities Purchase Agreement,
dated as of February 9, 2000, among the Company and the Purchasers.
"Purchases" has the meaning set forth in the Purchase Agreement.
"Registered Owner" means the person identified on the face of this
Warrant as the registered owner hereof or their assigns.
"Subsequent Market" means the New York Stock Exchange, the Nasdaq
National Market or the Nasdaq SmallCap Market.
"Registration Rights Agreement" means that certain Registration Rights
Agreement, dated as of February 9, 2000, among the Company and the Purchasers.
"Trading Day(s)" means any day on which the primary market on which
shares of Common Stock are listed is open for trading.
"Underlying Shares" has the meaning assigned to it in Section 2.1(d) of
the Purchase Agreement.
"Warrant(s)" means the warrants issuable at the Closing.
"Warrant Shares" has the meaning assigned to it in Section 3 hereof.
2. Issue. Upon tender to the Company pursuant to Section 6 hereof, the
Company, within three (3) Business Days of the date thereof, shall issue to
the Registered Owner, or assigns, up to the number of shares specified in
Section 3 hereof of fully paid and nonassessable shares of Common Stock that
the Registered Owner, or assigns, is otherwise entitled to purchase.
3. Number of Shares. The total number of shares of Common Stock that
the Registered Owner, or assigns, of this Warrant is entitled to receive upon
exercise of this Warrant is 201,923 shares (the "Warrant Shares"), subject to
adjustment from time to time as provided herein. The Company shall at all
times reserve and hold available out of its authorized and unissued shares of
Common Stock or other securities, as the case may be, sufficient shares of
Common Stock to satisfy all conversion, exercise and purchase rights
represented by outstanding convertible securities, options and warrants,
including this Warrant. The Company covenants and agrees that all shares of
Common Stock that may be issued upon the exercise of this Warrant shall, upon
issuance, be duly and validly issued, fully paid and nonassessable, free from
all taxes, liens and charges with respect to the purchase and the issuance of
the shares, shall not have any legend or restrictions on resale, expect as
required by Section 3.2(b) of the Purchase Agreement and, subsequent to the
effectiveness of the Registration Statement (as defined in the Registration
Rights Agreement), shall be freely tradable.
4. Exercise Price. The initial per share exercise price of this
Warrant, representing the price per share at which each share of Common Stock
issuable upon exercise of this Warrant may be purchased, is $17.50, subject to
adjustment from time to time pursuant to the provisions of Section 7 hereof
(the "Exercise Price").
<PAGE>
5. Exercise Period. This Warrant may be exercised, in whole or in
part, from the Closing Date up to and including February 8, 2005 (5 years less
1 day) (the "Exercise Period"). If not exercised during this period, this
Warrant and all rights granted under this Warrant shall expire and lapse.
6. Tender; Issuance of Certificates.
a. This Warrant may be exercised, in whole or in part, by (a)
delivery of the applicable Exercise Price for the number of Warrant Shares in
respect of which this Warrant is exercisable, (b) delivery of a duly executed
Warrant Exercise Form, a copy of which is attached to this Warrant as Exhibit
A, properly executed by the Registered Owner, or assigns, of this Warrant and
(c) surrender of this Warrant. The number of Warrant Shares so purchased
shall be designated on the Warrant Exercise Form and shall be deemed to be
issued to the Registered Owner as of the close of business on the date on
which this Warrant shall have been surrendered, the completed Warrant Exercise
Form shall have been delivered and payment shall have been made for such
shares as set forth above. The payment and Warrant Exercise Form must be
delivered to the registered office of the Company or of the Company's transfer
agent, either in person or as set for in Section 13 hereof.
b. Commencing on the first day that the Securities and Exchange
Commission declares effective the Initial Registration Statement (as defined
in the Registration Rights Agreement), if, and only if, at the time of
exercise of this Warrant, the Warrant Shares are not saleable pursuant to an
effective registration statement, then in addition to the exercise of all or a
part of this Warrant by payment of the Exercise Price in cash as provided
above, and in lieu of such payment, the Registered Owner shall have the right
to effect a cashless exercise (a "Cashless Exercise"). In the event of a
Cashless Exercise the Registered Owner may exercise this Warrant in whole or
in part by surrendering this Warrant in exchange for the number of shares of
Common Stock equal to the product of (i) the number of shares as to which this
Warrant is being exercised multiplied by (ii) a fraction, the numerator of
which is the Per Share Market Value on such date less the Exercise Price then
in effect and the denominator of which is the Per Share Market Value on such
date (in each case adjusted for fractional shares as herein provided). The
Registered Owner shall be responsible for any and all taxes payable in respect
of such Cashless Exercise.
c. In lieu of physical delivery of this Warrant, provided the
Company's transfer agent is participating in the Depositary Trust Company
("DTC") Fast Automated Securities Transfer (FAST) program, upon request of the
Registered Owner and in compliance with the provisions hereof, the Company
shall use its best efforts to cause its transfer agent to electronically
transmit the Warrant Shares to the Registered Owner by crediting the account
of the Registered Owner's Prime Broker with DTC through its Deposit Withdrawal
Agent Commission system. The time period for delivery described herein shall
apply to any such electronic transmittals.
d. Certificates for the Warrant Shares so purchased, representing
the aggregate number of shares specified in the Warrant Exercise Form, and any
cash payments due under Section 15 hereof shall be delivered to the Registered
Owner within three (3) Business Days after this Warrant shall have been so
exercised. The certificates so delivered shall be in such denominations as
may be requested by the Registered Owner and shall be registered in the name
of the Registered Owner or such other name as shall be designated by such
Registered Owner. If this Warrant shall have been exercised only in part
then, unless this Warrant has expired, the Company shall, at its expense and
at the time of delivery of such certificates, deliver to the Registered Owner
a new Warrant representing the number of shares with respect to which this
Warrant shall not then have been exercised.
<PAGE>
7. Adjustment of Exercise Price.
a. Common Stock Dividends; Common Stock Splits; Reclassification.
If the Company, at any time while this Warrant is outstanding, (a) shall pay a
stock dividend on its Common Stock, (b) subdivide outstanding shares of Common
Stock into a larger number of shares or (c) issue by reclassification of
shares of Common Stock any shares of capital stock of the Company, then (i)
the Exercise Price shall be multiplied by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding before such event
and the denominator of which shall be the number of shares of Common Stock
outstanding after such event and (ii) the number of Warrant Shares shall be
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding immediately after such event and the denominator
of which shall be the number of shares of Common Stock outstanding immediately
prior to such event. Any adjustment made pursuant to this paragraph 7(a)
shall become effective immediately after the record date for the determination
of shareholders entitled to receive such dividend or distribution or, in the
case of a subdivision or re-classification, shall become effective immediately
after the effective date thereof.
b. Rights; Options; Warrants or Other Securities. If the Company,
at any time while this Warrant is outstanding, shall fix a record date for the
issuance of rights, options, warrants or other securities to the holders of
its Common Stock entitling them to subscribe for or purchase, convert to,
exchange for or otherwise acquire shares of Common Stock for no consideration
or at a price per share less than the Exercise Price, the Exercise Price shall
be multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issuance or sale
plus the number of shares of Common Stock which the aggregate consideration
received by the Company would purchase at the Exercise Price, and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issuance date plus the number of additional shares
of Common Stock offered for subscription, purchase, conversion, exchange or
acquisition, as the case may be. Such adjustment shall be made whenever such
rights, options, warrants or other securities are issued, and shall become
effective immediately after the record date for the determination of
shareholders entitled to receive such rights, options, warrants or other
securities.
c. Subscription Rights. If the Company, at any time while this
Warrant is outstanding, shall fix a record date for the distribution to
holders of its Common Stock evidence of its indebtedness or assets or rights,
options, warrants or other security entitling them to subscribe for or
purchase, convert to, exchange for or otherwise acquire any security
(excluding those referred to in paragraphs 7(a) and (b) above), then in each
such case the Exercise Price at which this Warrant shall thereafter be
exercisable shall be determined by multiplying the Exercise Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the Per Share Market Value on such record date less the then fair
market value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of Common
Stock as determined by the Board of Directors in good faith, and the
denominator of which shall be the Exercise Price as of such record date;
provided, however, that in the event of a distribution exceeding ten percent
(10%) of the net assets of the Company, such fair market value shall be
determined by an Appraiser selected in good faith by the registered owners of
a majority of the Warrants and Underlying Shares then outstanding; and
provided, further, that the Company, after receipt of the determination by
such Appraiser shall have the right to select in good faith an additional
Appraiser meeting the same qualifications, in which case the fair market value
shall be equal to the average of the determinations by each such Appraiser.
<PAGE>
Such adjustment shall be made whenever any such distribution is made and shall
become effective immediately after the record date mentioned above.
d. Rounding. All calculations under this Section 7 shall be made
to the nearest cent or the nearest l/l00th of a share, as the case may be.
e. Notice of Adjustment. Whenever the Exercise Price is adjusted
pursuant to this Section 7 the Company shall promptly deliver to the
Registered Owner a notice setting forth the Exercise Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment. Such notice shall be signed by the chairman, president or chief
financial officer of the Company.
f. Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Company, and the disposition of any shares so owned or held
shall be considered an issue or sale of Common Stock by the Company.
g. Change of Control; Compulsory Share Exchange. In case of (A)
any Change of Control Transaction or (B) any compulsory share exchange
pursuant to which the Common Stock is converted into other securities, cash or
property (each, an "Event"), lawful provision shall be made so that the
Registered Owner shall have the right thereafter to exercise this Warrant for
shares of stock and other securities, cash and property receivable upon or
deemed to be held by holders of Common Stock following such Event, and the
Registered Owner shall be entitled upon such Event to receive such amount of
shares of stock and other securities, cash or property as the shares of the
Common Stock of the Company into which this Warrant could have been exercised
immediately prior to such Event (without taking into account any limitations
or restrictions on the exercisability of this Warrant) would have been
entitled. The provisions of this Section 7(g) shall similarly apply to
successive Events.
h. Issuance's Below Exercise Price. If the Company, at any time
while this Warrant is outstanding, takes any of the actions described in this
Section 7(h), the Registered Owner shall have the right to amend this Warrant
as set forth below:
(i) issues or sells, or is deemed to have issued or sold, any
Common Stock;
(ii) in any manner grants, issues or sells any rights,
options, warrants, options to subscribe for or to purchase Common Stock or any
stock or other securities convertible into or exchangeable for Common Stock
(other than any Excluded Securities) (such rights, options or warrants being
herein called "Options" and such convertible or exchangeable stock or
securities being herein called "Convertible Securities"); or
(iii) in any manner issues or sells any Convertible
Securities;
for (a) with respect to paragraph (h)(i), above, a price per share, or (b)
with respect to paragraphs h(ii) or h(iii), above, a price per share for which
Common Stock issuable upon the exercise of such Options or upon conversion or
exchange of such Convertible Securities is, less than the Exercise Price in
effect immediately prior to such issuance or sale, then, immediately after
such issuance, sale or grant, the Registered Owner shall have the right to
amend the issuance terms of the Common Stock issuable upon exercise of this
Warrant (including adjustment of the Exercise Price) so that the issuance
terms hereof are equivalent to the issuance terms of such offering. No
modification of the issuance terms shall be made upon the actual issuance of
<PAGE>
such Common Stock upon conversion or exchange of such Options or Convertible
Securities. If there is a change at any time in (i) the exercise price
provided for in any Options, (ii) the additional consideration, if any,
payable upon the issuance, conversion or exchange of any Convertible
Securities or (iii) the rate at which any Convertible Securities are
convertible into or exchangeable for Common Stock, then immediately after such
change the Registered Owner shall have the right to amend the issuance terms
of the Common Stock issuable upon exercise of this Warrant accordingly,
including, without limitation, by reducing the Exercise Price in effect to the
Exercise Price which would have been in effect at such time had such Options
or Convertible Securities still outstanding provided for such changed exercise
price, additional consideration or changed conversion rate, as the case may
be, at the time initially granted, issued or sold; provided that no adjustment
shall be made if such adjustment would result in an increase of the Exercise
Price then in effect.
i. Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Exercise Price under Section 7(h), the following
shall be applicable:
(i) Calculation of Consideration Received. If any Common
Stock, Options or Convertible Securities are issued or sold or deemed to have
been issued or sold for cash, the consideration received therefor will be
deemed to be the net amount received by the Company therefor, without
deducting any expenses paid or incurred by the Company or any commissions or
compensations paid or concessions or discounts allowed to underwriters,
dealers or others performing similar services in connection with such issue or
sale. In case any Common Stock, Options or Convertible Securities are issued
or sold for a consideration other than cash, the amount of the consideration
other than cash received by the Company will be the fair value of such
consideration, except where such consideration consists of securities listed
or quoted on a national securities exchange or national quotation system, in
which case the amount of consideration received by the Company will be the
arithmetic average of the closing sale price of such security for the five (5)
consecutive Trading Days immediately preceding the date of receipt thereof.
In case any Common Stock, Options or Convertible Securities are issued to the
owners of the non-surviving entity in connection with any merger in which the
Company is the surviving entity, the amount of consideration therefor will be
deemed to be the fair value of such portion of the net assets and business of
the non-surviving entity as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities will be determined jointly by the
Company and the registered owners of a majority of the Underlying Shares and
Warrants then outstanding. If such parties are unable to reach agreement
within ten (10) days after the occurrence of an event requiring valuation (the
"Valuation Event"), the fair value of such consideration will be determined
within forty-eight (48) hours of the tenth (10th) day following the Valuation
Event by an Appraiser selected in good faith by the Company and agreed upon in
good faith by the registered owners of a majority of the Underlying Shares and
Warrants then outstanding. The determination of such Appraiser shall be
binding upon all parties absent manifest error.
(ii) Integrated Transactions. In case any Option is issued in
connection with the issue or sale of other securities of the Company, together
comprising one integrated transaction in which no specific consideration is
allocated to such Options by the parties thereto, the Options will be deemed
to have been issued for an aggregate consideration of $.01.
(iii) Record Date. If the Company takes a record of the
holders of Common Stock for the purpose of entitling them (a) to receive a
dividend or other distribution payable in Common Stock, Options or in
<PAGE>
Convertible Securities or (b) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date will be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to have
been issued or sold upon the declaration of such dividend or the making of
such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(iv) Other Events. If any event occurs that would adversely
affect the rights of the Registered Owner of this Warrant but is not expressly
provided for by Section 7 hereof (including, without limitation, the granting
of stock appreciation rights, phantom stock rights or other rights with equity
features), then the Company's Board of Directors will make an appropriate
adjustment in the Exercise Price so as to protect the rights of the Registered
Owner; provided, however, that no such adjustment will increase the Exercise
Price.
j. Notice of Certain Events. If:
(i) the Company shall declare a dividend (or any other
distribution) on its Common Stock;
(ii) the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock;
(iii) the Company shall authorize the granting to the holders
of its Common Stock rights or warrants to subscribe for or purchase any shares
of capital stock of any class or of any rights;
(iv) the approval of any shareholders of the Company shall be
required in connection with any reclassification of the Common Stock, any
consolidation or merger to which the Company is a party, any sale or transfer
of all or substantially all of the assets of the Company, or any compulsory
share exchange whereby the Common Stock is converted into other securities,
cash or property; or
(v) the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained
for the purpose of exercise of this Warrant, and shall cause to be delivered
to the Registered Owner, at least 30 calendar days prior to the applicable
record or effective date hereinafter specified, a notice (provided such notice
shall not include any material non-public information) stating (a) the date on
which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be determined
or (b) the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and the
date as of which it is expected that holders of Common Stock of record shall
be entitled to exchange their shares of Common Stock for securities, cash or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided, however, that the failure to mail
such notice or any defect therein or in the mailing thereof shall not affect
the validity of the corporate action required to be specified in such notice.
Nothing herein shall prohibit the Registered Owner from exercising this
Warrant during the 30-day period commencing on the date of such notice.
k. Increase in Exercise Price. In no event shall any provision in
this Section 7 cause the Exercise Price to be greater than the Exercise Price
on the date of issuance of this Warrant.
<PAGE>
8. Call Option. If, at any time during the Exercise Period and
following the one-year anniversary of the date that the Securities and
Exchange Commission declares effective the Initial Registration Statement (as
defined in the Registration Rights Agreement), the Per Share Market Value
equals or exceeds $35.00 for any period of thirty (30) consecutive Trading
Days ending not more than ten (10) Trading Days after the Call Notice Date (as
defined below), then so long as (i) any Registration Statement required to be
filed and be effective pursuant to the Registration Rights Agreement is then
in effect and has been in effect and sales of all of the Registrable
Securities can be made thereunder for at least twenty (20) days prior to the
Call Option Date (as defined below), (ii) the Company has a sufficient number
of authorized shares of Common Stock reserved for issuance upon full exercise
of the Warrants and (iii) the Company is not then in breach of any of the
provisions of this Warrant, the Company shall have the right (the "Call
Option"), to be exercised on one (1) occasion only during the two (2) month
period commencing on the Call Notice Date (as defined below), to cause the
Registered Owner to exercise this Warrant in full in accordance with the
provisions of Section 6 hereof (such date that the Call Option is exercised,
the "Call Option Date"). The Company shall exercise its Call Option by
delivering to the Registered Owner a call notice (the "Call Notice" and, such
date that the Call Notice is given, the "Call Notice Date"), by facsimile and
overnight courier, at least ten (10) Business Days prior to the Call Option
Date. The Call Notice shall indicate the Call Option Date and shall include a
brief statement of the facts evidencing the Company's right to exercise the
Call Option. Nothing herein shall prohibit the Registered Owner from
exercising this Warrant in accordance with the provisions of Section 6 hereof
at any time after receipt of the Call Notice and prior to the Call Option
Date, and the Company shall deliver certificates for Warrant Shares in
accordance with Section 6 hereof with respect to any Warrants so exercised.
9. Restriction on Exercise by Either the Registered Owner or the
Company. Prior to the one-year anniversary of the date that the Securities
and Exchange Commission declares effective the Initial Registration Statement
(as defined in the Registration Rights Agreement), and notwithstanding
anything herein to the contrary, in no event shall the Registered Owner or the
Company have the right or be required to exercise this Warrant if as a result
of such exercise the aggregate number of shares of Common Stock beneficially
owned by such Registered Owner and its Affiliates would exceed 4.99% of the
outstanding shares of the Common Stock following such exercise. For purposes
of this Section 9, beneficial ownership shall be calculated in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended. The
provisions of this Section 9 may be waived by a Registered Owner as to itself
(and solely as to itself) upon not less than 65 days prior written notice to
the Company, and the provisions of this Section 9 shall continue to apply
until such 65th day (or later, if stated in the notice of waiver).
10. Registration on Company Books. This Warrant shall be numbered and
shall be registered as they are issued in a warrant register maintained the
Company. The Company may deem and treat the Registered Owner of this Warrant
as the absolute owner thereof, unless the Registered Owner shall have
presented this Warrant to the Company for transfer and the transferee shall
have been entered in the register as a subsequent holder. The ownership of
this Warrant shall be proven by such register, absent manifest error.
11. Registration Rights. The Company will undertake the registration
of the Common Stock into which this Warrant is exercisable at such times and
upon such terms pursuant to the provisions of the Registration Rights
Agreement.
12. Reservation of Underlying Shares; Listing. The Company covenants
that it will at all times reserve and keep available out of its authorized
<PAGE>
shares of Common Stock, free from preemptive rights, solely for the purpose of
issue upon exercise of this Warrants as herein provided, such number of shares
of the Common Stock as shall then be issuable upon the exercise of all
outstanding Warrants into Common Stock. The Company shall promptly secure the
listing of the shares of Common Stock issuable upon exercise of this Warrant
upon each national securities exchange or automated quotation system upon
which shares of Common Stock are then listed (subject to official notice of
issuance upon exercise of this Warrant) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all shares of
Common Stock form time to time issuable upon the exercise of this Warrant.
13. Notices. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be deemed to have been
received (a) upon hand delivery (receipt acknowledged) or delivery by telex
(with correct answer back received), telecopy or facsimile (with transmission
confirmation report) at the address or number designated below (if received by
5:00 p.m. eastern time where such notice is to be received), or the first
Business Day following such delivery (if received after 5:00 p.m. eastern
time where such notice is to be received) or (b) on the second Business Day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications are (i) if to the
Company or the Company's transfer agent to the address set forth in the
Purchase Agreement, and (ii) if to the Registered Owner to the addresses set
forth on the Purchase Agreement with copies to Akin, Gump, Strauss, Hauer &
Feld, L.L.P., 590 Madison Avenue, New York, New York 10022, Attn: James Kaye,
fax no. (212) 872-1002 or such other address as may be designated in writing
hereafter, in the same manner, by such person.
14. Compliance With Governmental Requirements. The Company covenants
that if any shares of Common Stock required to be reserved for purposes of
exercise this Warrant requires registration with or approval of any
governmental authority under any Federal or state law, or any national
securities exchange, before such shares may be issued upon exercise, the
Company will use its best efforts to cause such shares to be duly registered
or approved, as the case may be.
15. Fractional Shares. Upon any exercise hereunder, the Company shall
not be required to issue stock certificates representing fractions of shares
of the Common Stock, but may if otherwise permitted make a cash payment in
respect of any final fraction of a share based on the Per Share Market Value
at such time. If the Company elects not, or is unable, to make such a cash
payment, the Registered Owner shall be entitled to receive, in lieu of the
final fraction of a share, one whole share of Common Stock.
16. Payment of Tax Upon Issue of Transfer. The issuance of
certificates for shares of the Common Stock upon exercise of this Warrant
shall be made without charge to the Registered Owner hereof for any
documentary stamp or similar taxes that may be payable in respect of the issue
or delivery of such certificate, provided that the Company shall not be
required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate upon exercise in
a name other than that of the Registered Owner of this Warrant and the Company
shall not be required to issue or deliver such certificates unless or until
the person or persons requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid.
17. Warrants Owned by Company Deemed Not Outstanding. In determining
whether the holders of the outstanding Warrants have concurred in any
<PAGE>
direction, consent or waiver under this Warrant, warrants which are owned by
the Company or any other obligor on the warrants shall be disregarded and
deemed not to be outstanding for the purpose of any such determination;
provided, that any Warrants owned by the Registered Owner shall be deemed
outstanding for purposes of making such a determination.
18. Effect of Headings. The section headings herein are for
convenience only and shall not affect the construction hereof.
19. No Rights as Stockholder. This Warrant shall not entitle the
Registered Owner to any rights as a stockholder of the Company, including
without limitation, the right to vote, to receive dividends and other
distributions, or to receive notice of, or to attend, meetings of stockholders
or any other proceedings of the Company, unless and to the extent exercised
into shares of Common Stock in accordance with the terms hereof.
20. Certain Actions Prohibited. The Company will not, by amendment of
its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the
terms to be observed or performed by it hereunder, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant
and in the taking of all such action as may reasonably be requested by the
Registered Owner in order to protect the exercise privilege of the Registered
Owner against dilution or other impairment, consistent with the tenor and
purpose of this Warrant. Without limiting the generality of the foregoing,
the Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant and (ii) will take all such
actions as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant.
21. Shareholder Rights Plan. In the event that the Company shall
distribute "poison pill" rights pursuant to a "poison pill" shareholder rights
plan (the "Rights"), the Company shall, in lieu of making any adjustment
pursuant to Section 7 hereof, make proper provision so that each Registered
Owner who exercises this Warrant after the record date for such distribution
and prior to the expiration or redemption of the Rights shall be entitled to
receive upon such exercise, in addition to the shares of Common Stock issuable
upon such exercise, a number of Rights to be determined as follows: (i) if
such exercise occurs on or prior to the date for the distribution to the
holders of Rights of separate certificates evidencing such Rights (the
"Distribution Date"), the same number of Rights to which a holder of a number
of shares of Common Stock equal to the number of shares of Common Stock
issuable upon such exercise at the time of such exercise would be entitled in
accordance with the terms and provisions of and applicable to the Rights; and
(ii) if such exercise occurs after the Distribution Date, the same number of
Rights to which a holder of the number of shares into which this Warrant was
exercisable immediately prior to the Distribution Date would have been
entitled on the Distribution Date, in accordance with the terms and provisions
of such Rights, and in each case subject to the terms and conditions of the
Rights.
22. Successors and Assigns. This Warrant shall be binding upon and
inure to the benefit of the Registered Owners and its assigns, and shall be
binding upon any entity succeeding to the Company by merger or acquisition of
all or substantially all the assets of the Company. The Company may not
assign this Warrant or any rights or obligations hereunder without the prior
written consent of the Registered Owner. The Registered Owner may assign this
Warrant without the prior written consent of the Company.
<PAGE>
23. Governing Law. The corporate laws of the State of Nevada shall
govern all issues concerning the relative rights of the Company and the
Registered Owners as securities holders. All other issues shall be governed
by and construed and enforced in accordance with the internal laws of the
State of New York without regard to the principles of conflicts of law
thereof. Each party hereby irrevocably submits to the nonexclusive
jurisdiction of the state and federal courts sitting in the City of New York,
Borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is
improper. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH
OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
24. Remedies. In the event of a breach by the Company of any of their
obligations under this Warrant, the Registered Owner, in addition to being
entitled to exercise all rights granted by law and under the Purchase
Agreement, including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees that
monetary damages would not provide adequate compensation for any losses
incurred by reason of a breach by it of any of the provisions of this Warrant
and hereby further agree that, in the event of any action for specific
performance in respect of such breach, it shall waive the defense that a
remedy at law would be adequate.
25. Mutilated or Missing Warrants. In case this Warrant shall be
mutilated, lost, stolen or destroyed, the Company, upon request of the
Registered Owner, shall issue and deliver in exchange and substitution for and
upon cancellation of such mutilated Warrant, or in the event that this Warrant
is lost, stolen or destroyed, a new Warrant of like tenor and representing an
equivalent right or interest.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officer as of the date first set forth above.
DATALINK.NET, INC.
By: /s/ Anthony LaPine
Name: Anthony LaPine
Title: CEO
<PAGE>
EXHIBIT A
Warrant Exercise Form
TO: DATALINK.NET, INC.
The undersigned hereby: (1) irrevocably subscribes for and offers to purchase
_______ shares of Common Stock of Datalink.net, Inc., pursuant to Warrant No.
___ heretofore issued to ___________________ on ____________, ____ ; (2)
encloses either (a) a cash payment of $__________ or (b) a Warrant
representing _____ shares of Common Stock valued at the Per Share Market Price
of $ _____ on ________, ____, for these shares at a price of $____ per share
(as adjusted pursuant to the provisions of the Warrant); and (3) requests that
a certificate for the shares be issued in the name of the undersigned, or the
undersigned's designee, and delivered to the undersigned, or the undersigned's
designee, at the address specified below.
Date: ______________________________
Investor Name: ______________________________
Taxpayer Identification Number: ______________________________
By: ______________________________
Printed Name: ______________________________
Title: ______________________________
Address: ______________________________
______________________________
Cashless Exercise (Y or N): _________________
Note: The above signature should correspond exactly with the name on the face
of this Warrant Certificate or with the name of assignee appearing in
assignment form below.
AND, if said number of shares shall not be all the shares purchasable under
the within Warrant, a new Warrant Certificate is to be issued in the name of
said undersigned for the balance remaining of the shares purchasable
thereunder less any fraction of a share paid in cash and delivered to the
address stated above.
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES
ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR DATALINK.NET, INC. SHALL
HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT
REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
DataLink.net, Inc.
Subject to Section 1 hereof, expires on February 14, 2005
No.: W-HCW-1
Number of Shares: 76,923 Date of Issuance: February 14, 2000
FOR VALUE RECEIVED, subject to the provisions hereinafter set forth, the
undersigned, DataLink.net, Inc., a Nevada corporation (together with its
successors and assigns, the "Issuer"), hereby certifies that H.C. Wainwright &
Co., Inc., located at 245 Park Avenue, 44th Floor, New York, New York 10167,
or its registered permitted assigns is entitled to subscribe for and purchase,
during the period specified in this Warrant, up to 76,923 shares (subject to
adjustment as hereinafter provided) of the duly authorized, validly issued,
fully paid and non-assessable Common Stock of the Issuer, at an exercise price
per share of Thirteen Dollars ($13), subject, however, to the provisions and
upon the terms and conditions hereinafter set forth. Capitalized terms used
in this Warrant and not otherwise defined herein shall have the respective
meanings specified in Section 8 hereof.
1. Term. The right to subscribe for and purchase shares of Warrant
Stock represented hereby shall commence on the date of issuance of this
Warrant and shall expire at 5:00 p.m., California Time, on February 14, 2005
(the "Initial Term"), provided, that, if at the date of the expiration of the
Initial Term, (A) the Warrant Stock shall not be listed on the OTC Bulletin
Board, the Nasdaq SmallCap Market, the Nasdaq National Market, The New York
Stock Exchange, Inc. or The American Stock Exchange, Inc. or (B) the Issuer
shall not have sufficient shares of Warrant Stock issuable upon a full
exercise of this Warrant, then the Initial Term shall be extended until such
date on which none of the foregoing events shall exist (the Initial Term, as
such may be extended, being hereinafter called the "Term").
2. Method of Exercise Payment: Issuance of New Warrant: Transfer
and Exchange.
(a) Time of Exercise. The purchase rights represented by this
Warrant may be exercised in whole or in part at any time and from time to time
during the Term.
(b) Method of Exercise. The Holder hereof may exercise this Warrant,
in whole or in part, by the surrender of this Warrant (with the exercise form
attached hereto duly executed) at the principal office of the Issuer, and by
<PAGE>
the payment to the Issuer of an amount of consideration therefor equal to the
Warrant Price in effect on the date of such exercise multiplied by the number
of shares of Warrant Stock with respect to which this Warrant is then being
exercised, payable at the Holder's election (i) in cash by certified or
official bank check, (ii) at any time on or after the Original Issue Date by
surrender to the Issuer for cancellation of a portion of this Warrant
representing that number of unissued shares of Warrant Stock which is equal to
the quotient obtained by dividing (A) the product obtained by multiplying the
Warrant Price by the number of shares of Warrant Stock being purchased upon
such exercise by (B) the difference obtained by subtracting the Warrant Price
from the Per Share Market Value as of the date of such exercise ("Cashless
Exercise by surrender of Warrant) or (iii) by a combination of the foregoing
methods of payment selected by the Holder of this Warrant. In any case where
the consideration payable upon such exercise is being paid in whole or in part
pursuant to the provisions of clause (ii) of this subsection (b), such
exercise shall be accompanied by written notice from the Holder of this
Warrant specifying the manner of payment thereof and containing a calculation
showing the number of shares of Warrant Stock with respect to which rights are
being surrendered thereunder and the net number of shares to be issued after
giving effect to such surrender. For purposes of the cashless exercise
provision, per share market value shall be calculated either (i) on the date
the Warrant exercise is delivered to the Company ("Notice Date") or (ii) as
the average closing Market Price for each of the five trading days preceding
the Notice Date, whichever of (i) or (ii) is greater. Notwithstanding anything
in this Warrant to the contrary, any remaining unexercised portion of this
Warrant shall be deemed to have been exercised immediately prior to the
Expiration Date, pursuant to a cashless exercise and the Company shall issue
that number of shares of common stock as provided for based on the method
described under the Cashless Exercise provision above.
(c) Issuance of Stock Certificates. In the event of any exercise of
the rights represented by this Warrant in accordance with and subject to the
terms and conditions hereof, (i) certificates for the shares of Warrant Stock
so purchased shall be dated the date of such exercise and delivered to the
Holder hereof within a reasonable time, not exceeding three Trading Days after
such exercise, and the Holder hereof shall be deemed for all purposes to be
the Holder of the shares of Warrant Stock so purchased as of the date of such
exercise, and (ii) unless this Warrant has expired, a new Warrant representing
the number of shares of Warrant Stock, if any, with respect to which this
Warrant shall not then have been exercised (less any amount thereof which
shall have been canceled in payment or partial payment of the Warrant Price as
hereinabove provided) shall also be issued to the Holder hereof at the
Issuer's expense within such time.
(d) Transferability of Warrant. Subject to the provisions of
subsection (e) of this Section 2, this Warrant may be transferred by the
Holder without the consent of the Issuer. If transferred pursuant to this
paragraph, and subject to the provisions of subsection (e) of this Section 2,
this Warrant may be transferred on the books of the Issuer by the Holder
hereof in person or by duly authorized attorney, upon surrender of this
Warrant at the principal office of the Issuer, properly endorsed (by the
Holder executing an assignment in the form attached hereto) and upon payment
of any necessary transfer tax or other governmental charge imposed upon such
transfer. This Warrant is exchangeable at the principal office of the Issuer
for Warrants for the purchase of the same aggregate number of shares of
Warrant Stock, each new Warrant to represent the right to purchase such number
of shares of Warrant Stock as the Holder hereof shall designate at the time of
such exchange. All Warrants issued on transfers or exchanges shall be dated
the Original Issue Date and shall be identical with this Warrant except as to
the number of shares of Warrant Stock issuable pursuant hereto.
<PAGE>
(e) Compliance with Securities Laws.
(i) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the shares of Warrant Stock to be issued
upon exercise hereof are being acquired solely for the Holder's own account
and not as a nominee for any other party, and for investment, and that the
Holder will not offer, sell, transfer or otherwise dispose of this Warrant or
any shares of Warrant Stock to be issued upon exercise hereof except pursuant
to an effective registration statement, or an exemption from registration,
under the Securities Act and any applicable state securities laws.
(ii) Except as provided in paragraph (iii) below, this Warrant
and all certificates representing shares of Warrant Stock issued upon exercise
hereof shall be stamped or imprinted with a legend in substantially the
following form:
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES
ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR DATALINK.NET, INC. SHALL
HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT
REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
(iii) The restrictions imposed by this subsection (e) upon the
transfer of this Warrant and the shares of Warrant Stock to be purchased upon
exercise hereof shall terminate (A) when such securities shall have been
effectively registered under the Securities Act, (B) upon the Issuer's receipt
of an opinion of counsel, in form and substance reasonably satisfactory to the
Issuer, addressed to the Issuer to the effect that such restrictions are no
longer required to ensure compliance with the Securities Act or (C) upon the
Issuer's receipt of other evidence reasonably satisfactory to the Issuer that
such registration is not required. Whenever such restrictions shall cease and
terminate as to any such securities, the Holder thereof shall be entitled to
receive from the Issuer (or its transfer agent and registrar), without expense
(other than applicable transfer taxes, if any), new Warrants (or, in the case
of shares of Warrant Stock, new stock certificates) of like tenor not bearing
the applicable legends required by paragraph (ii) above relating to the
Securities Act and state securities laws.
3. Stock Fully Paid: Reservation and Listing of Shares: Covenants.
(a) Stock Fully Paid. The Issuer represents, warrants, covenants and
agrees that all shares of Warrant Stock which may be issued upon the exercise
of this Warrant or otherwise hereunder will, upon issuance, be duly
authorized, validly issued, fully paid and non-assessable and free from all
taxes, liens and charges created by or through Issuer. The Issuer further
covenants and agrees that during the period within which this Warrant may be
exercised, the Issuer will at all times have authorized and reserved for the
purpose of the issue upon exercise of this Warrant a number of shares of
Common Stock equal to at least 100% of the aggregate number of shares of
Warrant Stock issuable upon the exercise of the Warrant.
(b) Reservation. If any shares of Common Stock required to be
reserved for issuance upon exercise of this Warrant or as otherwise provided
hereunder require registration or qualification with any governmental
authority under any federal or state law before such shares may be so issued,
the Issuer will in good faith use its best efforts as expeditiously as
possible at its expense to cause such shares to be duly registered or
qualified. If the Issuer shall list any shares of Common Stock on any
<PAGE>
securities exchange or market it will, at its expense, list thereon, maintain
and increase when necessary such listing, of, all shares of Warrant Stock from
time to time issued upon exercise of this Warrant or as otherwise provided
hereunder, and, to the extent permissible under the applicable securities
exchange rules, all unissued shares of Warrant Stock which are at any time
issuable hereunder, so long as any shares of Common Stock shall be so listed.
The Issuer will also so list on each securities exchange or market, and will
maintain such listing of, any other securities which the Holder of this
Warrant shall be entitled to receive upon the exercise of this Warrant if at
the time any securities of the same class shall be listed on such securities
exchange or market by the Issuer.
(c) Covenants. The Issuer shall not by any action including, without
limitation, amending the Certificate of Incorporation or the by-laws of the
Issuer, or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other action, avoid or
seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of the Holder hereof against dilution (to
the extent specifically provided herein) or impairment. Without limiting the
generality of the foregoing, the Issuer will (i) not permit the par value, if
any, of its Common Stock to exceed the then effective Warrant Price, (ii) not
amend or modify any provision of the Certificate of Incorporation or by-laws
of the Issuer in any manner that would adversely affect in any way the powers,
preferences or relative participating, optional or other special rights of the
Common Stock or which would adversely affect the rights of the Holder of this
Warrant, (iii) take all such action as may be reasonably necessary in order
that the Issuer may validly and legally issue fully paid and nonassessable
shares of Common Stock, free and clear of any liens, claims, encumbrances and
restrictions (other than as provided herein) upon the exercise of this
Warrant, and (iv) use its best efforts to obtain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction
thereof as may be reasonably necessary to enable the Issuer to perform its
obligations under this Warrant.
(d) Loss, Theft, Destruction of Warrants. Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft,
destruction or mutilation of any Warrant and, in the case of any such loss,
theft or destruction, upon receipt of indemnity or security satisfactory to
the Issuer or, in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Issuer will make and deliver, in lieu of
such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor
and representing the right to purchase the same number of shares of Common
Stock.
4. Registration Rights Under The Securities Act
(a) Demand Registration.
(i) The Company upon, written demand of the Holders of at
least 51% of the then currently outstanding Warrant, agrees to register on one
occasion the shares of common stock issued or issuable upon exercise of this
Warrant (the "Registrable Securites). On such occasion, the Company will file
a registration statement covering the Registrable Securities within 45 days
after receipt of the written demand notice and will use its best efforts to
have such registration statement declared effective promptly thereafter,
provided however, the Company may delay such filing for one period of up to 30
consecutive days after the initial demand notice if the Company believes, in
good faith, that filing the registration statement would materially adversely
impact then ongoing discussions or negotiations regarding a merger,
<PAGE>
acquisition or other similar transaction. If the Company fails to comply with
the provisions of this Section, the Company shall, in addition to any other
equitable or other relief available to the Holders, be liable for any and all
incidental, special and consequential damages sustained by the Holders. The
demand for registration may be made at any time prior to the fifth anniversary
of the Effective Date.
(ii) The Holders shall pay any and all underwriting
commissions, if any, in connection with the sale of the Registrable
Securities, but the Company shall bear all fees and expenses attendant to
registering the Registrable Securities. The Company agrees to use its best
efforts to cause the filing required herein to become effective promptly and
to qualify or register the Registrable Securities in such States as are
reasonably requested by the Holders. The Company shall cause any registration
statement filed pursuant to the demand rights granted hereunder to remain
effective for a period of 12 months.
(b) Piggyback Registration
(i) In addition to the demand right of registration, the
Holders of the Warrant shall have the right for a period of five years
commencing on the Effective Date to include the Registrable Securities as part
of any other registration of securities filed by Company (other than in
connection with a transaction contemplated by Rule 145(a) promulgated under
the Act or pursuant to Form S-8 or any equivalent form.
(ii) The Holders shall pay any and all underwriting commissions,
if any, in connection with the sale of the Registrable Securities, but the
Company shall bear all fees and expenses attendant to registering the
Registrable Securities. In the event of such a proposed registration, the
Company shall furnish the then Holders of outstanding Registrable Securities
with not less than twenty days written notice prior to the proposed date of
filing of such registration statement. The holders of the Registrable
Securities shall exercise the piggback rights provided for herein by giving
written notice, within ten days of the receipt of the Company's notice of
intention to file a registration statement. The Company shall cause any
registration filed pursuant to the above piggyback registration rights to
remain effective in the the case of a registration statement on form S-3,
until all the Registrable Securities covered by such registration statement
have been solld and in the case of a registration statement on a form other
than S-3, for a period of one year.
5. Adjustment of Warrant Price and Warrant Share Number. The number
and kind of Securities purchasable upon the exercise of this Warrant and the
Warrant Price shall be subject to adjustment from time to time upon the
happening of certain events as follows:
(a) Recapitalization, Reorganization, Reclassification,
Consolidation, Merger or Sale.
(i) In case the Issuer after the Original Issue Date shall
do any of the following (each, a "Triggering Event"): (a) consolidate with or
merge into any other Person and the Issuer shall not be the continuing or
surviving corporation of such consolidation or merger; provided, however, that
a merger for the sole purpose of effecting a change in domicile of the Issuer
from one state to another shall not be deemed a Triggering Event, or (b)
permit any other Person to consolidate with or merge into the Issuer and the
Issuer shall be the continuing or surviving Person but, in connection with
such consolidation or merger, any Capital Stock of the Issuer shall be changed
into or exchanged for Securities of any other Person or cash or any other
property, or (c) transfer all or substantially all of its properties or assets
<PAGE>
to any other Person, or (d) effect a capital reorganization or
reclassification of its Capital Stock, then, and in the case of each such
Triggering Event, proper provision shall be made so that, upon the basis and
the terms and in the manner provided in this Warrant, the Holder of this
Warrant shall be entitled (x) upon the exercise hereof at any time after the
consummation of such Triggering Event, to the extent this Warrant is not
exercised prior to such Triggering Event, or is redeemed in connection with
such Triggering Event, to receive at the Warrant Price in effect at the time
immediately prior to the consummation of such Triggering Event in lieu of the
Common Stock issuable upon such exercise of this Warrant prior to such
Triggering Event, the Securities, cash and property to which the Holder would
have been entitled upon the consummation of such Triggering Event if the
Holder had exercised the rights represented by this Warrant immediately prior
thereto, subject to adjustments and increases (subsequent to such corporate
action) as nearly equivalent as possible to the adjustments provided for in
Section 4 hereof or (y) to sell this Warrant (or, at the Holder's election, a
portion hereof) to the Person continuing after or surviving such Triggering
Event, or to the Issuer (if Issuer is the continuing or surviving Person) at a
sales price equal to the amount of cash, property and/or Securities to which a
holder of the number of shares of Common Stock which would otherwise have been
delivered upon the exercise of this Warrant would have been entitled upon the
effective date or closing of any such Triggering Event (the "Event
Consideration"), less the amount or portion of such Event Consideration having
a fair value equal to the aggregate Warrant Price applicable to this Warrant
or the portion hereof so sold.
(ii) If with respect to any Triggering Event, the Holder of
this Warrant has exercised its right as provided in clause (y) of subparagraph
(i) of this subsection (a) to sell this Warrant or a portion thereof, the
Issuer agrees that as a condition to the consummation of any such Triggering
Event the Issuer shall secure such right of Holder to sell this Warrant to the
Person continuing after or surviving such Triggering Event and the Issuer
shall not effect any such Triggering Event unless upon or prior to the
consummation thereof the amounts of cash, property and/or Securities required
under such clause (y) are delivered to the Holder of this Warrant. The
obligation of the Issuer to secure such right of the Holder to sell this
Warrant shall be subject to the Holder's cooperation with the Issuer,
including, without limitation, the giving of customary representations and
warranties to the purchaser in connection with any such sale. Prior notice of
any Triggering Event shall be given to the Holder of this Warrant in
accordance with Section 11 hereof.
(b) Subdivision or Combination of Shares. If the Issuer, at any time
while this Warrant is outstanding, shall subdivide or combine any shares of
Common Stock, (i) in case of subdivision of shares, the Warrant Price shall be
proportionately reduced (as at the effective date of such subdivision or, if
the Issuer shall take a record of holders of its Common Stock for the purpose
of so subdividing, as at the applicable record date, whichever is earlier) to
reflect the increase in the total number of shares of Common Stock outstanding
as a result of such subdivision, or (ii) in the case of a combination of
shares, the Warrant Price shall be proportionately increased (as at the
effective date of such combination or, if the Issuer shall take a record of
holders of its Common Stock for the purpose of so combining, as at the
applicable record date, whichever is earlier) to reflect the reduction in the
total number of shares of Common Stock outstanding as a result of such
combination.
(c) Certain Dividends and Distributions. If the Issuer, at any time
while this Warrant is outstanding, shall:
<PAGE>
(i) Common Stock Dividends. Pay a dividend in, or make any
other distribution to its stockholders (without consideration therefor) of,
shares of Common Stock, the Warrant Price shall be adjusted, as at the date
the Issuer shall take a record of the holders the Issuer's Capital Stock for
the purpose of receiving such dividend or other distribution (or if no such
record is taken, as at the date of such payment or other distribution), to
that price determined by multiplying the Warrant Price in effect immediately
prior to such record date (or if no such record is taken, then immediately
prior to such payment or other distribution), by a fraction (1) the numerator
of which shall be the total number of shares of Common Stock outstanding
immediately prior to such dividend or distribution, and (2) the denominator of
which shall be the total number of shares of Common Stock outstanding
immediately after such dividend or distribution (plus in the event that the
Issuer paid cash for fractional shares, the number of additional shares which
would have been outstanding had the Issuer issued fractional shares in
connection with said dividends); or
(ii) Other Dividends. Pay a dividend on, or make any
distribution of its assets upon or with respect to (including, but not limited
to, a distribution of its property as a dividend in liquidation or partial
liquidation or by way of return of capital), the Common Stock (other than as
described in clause (i) of this subsection (c)), or in the event that the
Issuer shall offer options or rights to subscribe for shares of Common Stock,
or issue any Common Stock Equivalents, to all of its holders of Common Stock,
then on the record date for such payment, distribution or offer or, in the
absence of a record date, on the date of such payment, distribution or offer,
the Holder shall receive what the Holder would have received had it exercised
this Warrant in full immediately prior to the record date of such payment,
distribution or offer or, in the absence of a record date, immediately prior
to the date of such payment, distribution or offer.
(d) Other Provisions Applicable to Adjustments Under this Section 5.
The following provisions shall be applicable to the making of adjustments in
the Warrant Price hereinbefore provided in Section 4. The number of shares of
Common Stock at any time outstanding shall (A) not include any shares thereof
then directly or indirectly owned or held by or for the account of the Issuer
or any of its Subsidiaries, and (B) be deemed to include all shares of Common
Stock then issuable upon conversion, exercise or exchange of any then
outstanding Common Stock Equivalents or any other evidences of indebtedness,
shares of Capital Stock (including, without limitation, the Preferred Stock)
or other Securities which are or may be at any time convertible into or
exchangeable for shares of Common Stock or Other Common Stock.
(e) Other Action Affecting Common Stock. In case after the Original
Issue Date the Issuer shall take any action affecting its Common Stock, other
than an action described in any of the foregoing subsections (a) through (d)
of this Section 5, inclusive, and the failure to make any adjustment would not
fairly protect the purchase rights represented by this Warrant in accordance
with the essential intent and principle of this Section 5, then the Warrant
Price shall be adjusted in such manner and at such time as the Board may in
good faith determine to be equitable in the circumstances.
(f) Adjustment of Warrant Share Number. Upon each adjustment in the
Warrant Price pursuant to the provisions (b) and (c)(i) of this Section 5, the
Warrant Share Number shall be adjusted, to the nearest one hundredth of a
whole share, to the product obtained by multiplying the Warrant Share Number
immediately prior to such adjustment in the Warrant Price by a fraction, the
numerator of which shall be the Warrant Price immediately before giving effect
to such adjustment and the denominator of which shall be the Warrant Price
immediately after giving effect to such adjustment. If the Issuer shall be in
default under any provision contained in Section 3 of this Warrant so that
<PAGE>
shares issued at the Warrant Price adjusted in accordance with this Section 4
would not be validly issued, the adjustment of the Warrant Share Number
provided for in the foregoing sentence shall nonetheless be made and the
Holder of this Warrant shall be entitled to purchase such greater number of
shares at the lowest price at which such shares may then be validly issued
under applicable law. Such exercise shall not constitute a waiver of any
claim arising against the Issuer by reason of its default under Section 3 of
this Warrant.
(g) Form of Warrant after Adjustments. The form of this Warrant need
not be changed because of any adjustments in the Warrant Price or the number
and kind of Securities purchasable upon the exercise of this Warrant.
(h) Continuation of Terms. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this section 5, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other securities
and property receivable on the exercise of this Warrant after the consummation
of such reorganization, consolidation, or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in
the case of any such transfer, the person acquiring all or substantially all
of the properties or assets of the Company, whether or not such person shall
have expressly assumed the terms of this Warrant.
6. Notice of Adjustments. Whenever the Warrant Price or Warrant
Share Number shall be adjusted pursuant to Section 5 hereof (for purposes of
this Section 6, each an "adjustment"), the Issuer shall cause its Chief
Financial Officer to prepare and execute a certificate setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated (including a
description of the basis on which the Board made any determination hereunder),
and the Warrant Price and Warrant Share Number after giving effect to such
adjustment, and shall cause copies of such certificate to be delivered to the
Holder of this Warrant promptly after each adjustment. Any dispute between
the Issuer and the Holder of this Warrant with respect to the matters set
forth in such certificate may at the option of the Holder of this Warrant be
submitted to one of the national accounting firms currently known as the "big
five" mutually agreed upon by the Issuer and the Holder or, in the event the
Issuer and the Holder are unable to agree, a "big five" national accounting
firm (other than the Issuer's independent auditors) selected by the Issuer's
independent auditors. The firm selected in the manner as provided in the
preceding sentence shall be instructed to deliver a written opinion as to such
matters to the Issuer and the Holder within thirty days after submission to it
of such dispute. Such opinion shall be final and binding on the parties
hereto. The fees and expenses of such accounting firm shall be paid by the
Issuer.
7. Fractional Shares. No fractional shares of Warrant Stock will be
issued in connection with and exercise hereof, but in lieu of such fractional
shares, the Issuer shall make a cash payment therefor equal in amount to the
product of the applicable fraction multiplied by the Per Share Market Value
then in effect.
8. Definitions. For the purposes of this Warrant, the following
terms have the following meanings:
"Board" shall mean the Board of Directors of the Issuer.
"Business Day" shall mean day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
<PAGE>
State of New York are authorized or required by law or other government action
to close.
"Capital Stock" means and includes (i) any and all shares,
interests, participations or other equivalents of or interests in (however
designated) corporate stock, including, without limitation, shares of
preferred or preference stock, (ii) all partnership interests (whether general
or limited) in any Person which is a partnership, (iii) all membership
interests or limited liability company interests in any limited liability
company, and (iv) all equity or ownership interests in any Person of any other
type.
"Certificate of Incorporation" means the Certificate of
Incorporation of the Issuer as in effect on the Original Issue Date.
"Common Stock" means the Common Stock, $0.001 par value, of the
Issuer and any other Capital Stock into which such stock may hereafter be
changed.
"Common Stock Equivalent" means any Convertible Security or
warrant, option or other right to subscribe for or purchase any shares of
Common Stock or any Convertible Security.
"Convertible Securities" means evidences of indebtedness, shares
of Capital Stock or other Securities which are or may be at any time
convertible into or exchangeable for shares of Common Stock. The term
"Convertible Security" means one of the Convertible Securities.
"Five Day Average Share Price" means the average of the closing
bid prices of shares of the Common Stock (as reported by Bloomberg Financial
Markets) in the over-the-market on the electronic bulletin board for such
security (the "OTC Bulletin Board") (or such other United States stock
exchange or public market (an "Alternative Exchange") on which the Common
Stock trades if, at the time of exercise, the Common Stock is not trading on
the OTC Bulletin Board), for the five (5) consecutive trading days immediately
preceding the date of determination.
"Governmental Authority" means any governmental, regulatory or
self-regulatory entity, department, body, official, authority, commission,
board, agency or instrumentality, whether federal, state or local, and whether
domestic or foreign.
"Holder" means the registered Person or Persons who shall from
time to time own this Warrant.
"Issuer" means DataLink.net, Inc., a Nevada corporation, and its
successors.
"Original Issue Date" means February 14, 2000.
"Other Common" means any other Capital Stock of the Issuer of any
class which shall be authorized at any time after the date of this Warrant
(other than Common Stock) and which shall have the right to participate in the
distribution of earnings and assets of the Issuer without limitation as to
amount.
"OTC Bulletin Board" means the over-the-counter electronic
bulletin board.
<PAGE>
"Person" means an individual, corporation, limited liability
company, partnership, joint stock company, trust, unincorporated organization,
joint venture, Governmental Authority or other entity of whatever nature.
"Per Share Market Value" means on any particular date (a) the Five
Day Average Share Price on such date, (b) if the Common Stock is not listed
then on the OTC Bulletin Board or any Alternative Exchange, then the average
of the "Pink Sheet" quotes for the five consecutive days immediately preceding
such date, as determined in good faith by the Holder, or (c) if the Common
Stock is not then publicly traded, the fair market value of a share of Common
Stock as determined by the Company in good faith. In determining the fair
market value of any shares of Common Stock, no consideration shall be given to
any restrictions on transfer of the Common Stock imposed by agreement or by
federal or state securities laws, or to the existence or absence of, or any
limitations on, voting rights.
"Securities" means any debt or equity securities of the Issuer,
whether now or hereafter authorized, any instrument convertible into or
exchangeable for Securities or a Security, and any option, warrant or other
right to purchase or acquire any Security. "Security" means one of the
Securities.
"Securities Act" means the Securities Act of 1933, as amended, or
any similar federal statute then in effect.
"Subsidiary" means any corporation at least 50% of whose
outstanding Voting Stock shall at the time be owned directly or indirectly by
the Issuer or by one or more of its Subsidiaries, or by the Issuer and one or
more of its Subsidiaries.
"Term" has the meaning specified in Section 1 hereof.
"Trading Day" means (a) a day on which the Common Stock is traded
on the over the counter market as reported by the OTC Bulletin Board, or (b)
if the Common Stock is not listed on the OTC Bulletin Board, a day on which
the Common Stock is traded on any other registered national stock exchange, or
(c) if the Common Stock is not quoted on the OTC Bulletin Board, a day on
which the Common Stock is quoted in the over-the-counter market as reported by
the National Quotation Bureau Incorporated (or any similar organization or
agency succeeding its functions of reporting prices); provided, however, that
in the event that the Common Stock is not listed or quoted as set forth in
(a), (b) and (c) hereof, then Trading Day shall mean any day except Saturday,
Sunday and any day which shall be a legal holiday or a day on which banking
institutions in the State of New York are authorized or required by law or
other government action to close.
"Voting Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however designated)
having ordinary voting power for the election of a majority of the members of
the Board of Directors (or other governing body) of such corporation, other
than Capital Stock having such power only by reason of the happening of a
contingency.
"Warrant Price" means $13.00, as such price may be adjusted from
time to time as shall result from the adjustments specified in Section 5
hereof.
"Warrant Share Number" means at any time the aggregate number of
shares of Warrant Stock which may at such time be purchased upon exercise of
this Warrant, after giving effect to all adjustments to such number made or
required to be made under the terms hereof.
<PAGE>
"Warrant Stock" means Common Stock issuable upon exercise of this
Warrant.
8. Other Notices. In case at any time:
(A) the Issuer shall make any distributions to the holders of Common
Stock; or
(B) the Issuer shall authorize the granting to all holders of its
Common Stock of rights to subscribe for or purchase any shares of Capital
Stock of any class or of any Common Stock Equivalents or Convertible
Securities or other rights; or
(C) there shall be any reclassification of the Capital Stock of the
Issuer; or
(D) there shall be any capital reorganization by the Issuer; or
(E) there shall be any (i) consolidation or merger involving the
Issuer or (ii) sale, transfer or other disposition of all or substantially all
of the Issuer's property, assets or business (except a merger or other
reorganization in which the Issuer shall be the surviving corporation and its
shares of Capital Stock shall continue to be outstanding and unchanged and
except a consolidation, merger, sale, transfer or other disposition involving
a wholly-owned Subsidiary); or
(F) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Issuer or any partial liquidation of the
Issuer or distribution to holders of Common Stock;
then, in each of such cases, the Issuer shall give written notice to the
Holder of the date on which (i) the books of the Issuer shall close or a
record shall be taken for such dividend, distribution or subscription rights
or (ii) such reorganization, reclassification, consolidation, merger,
disposition, dissolution, liquidation or winding-up, as the case may be, shall
take place. Such notice also shall specify the date as of which the holders
of Common Stock of record shall participate in such dividend, distribution or
subscription rights, or shall be entitled to exchange their certificates for
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be. Such notice shall
be given at least twenty days prior to the action in question and not less
than twenty days prior to the record date or the date on which the Issuer's
transfer books are closed in respect thereto. The Issuer shall give to the
Holder notice of all meetings and actions by written consent of its
stockholders, at the same time in the same manner as notice of any meetings of
stockholders is required to be given to stockholders who do not waive such
notice (or, if such requires no notice, then two Trading Days written notice
thereof describing the matters upon which action is to be taken). The Holder
shall have the right to send two representatives selected by him to each
meeting, who shall be permitted to attend, but not vote at, such meeting and
any adjournments thereof. This Warrant entitles the Holder to receive copies
of all financial and other information distributed or required to be
distributed to the holders of the Common Stock.
9. Amendment and Waiver. Any term, covenant, agreement or condition
in this Warrant may be amended, or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), by a written instrument executed by the Issuer and the Holder.
<PAGE>
10. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.
11. Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earlier of (i) the date of
transmission, if such notice or communication is delivered via facsimile at
the facsimile telephone number specified for notice prior to 5:00 p.m.,
California Time, on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at
the facsimile telephone number specified for notice later than 5:00 p.m.,
California Time, on any date and earlier than 11:59 p.m., California Time, on
such date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service or (iv) actual receipt by the
party to whom such notice is required to be given. The addresses for such
communications shall be with respect to the Holder of this Warrant or of
Warrant Stock issued pursuant hereto, addressed to the Holder at its last
known address or facsimile number appearing on the books of the Issuer
maintained for such purposes, or with respect to the Issuer, addressed to:
DataLink.net, Inc.
1735 Technology Drive, Ste. 790
San Jose, CA 95110
Attention: Anthony Lapine, Chairman and CEO
or to such other address or addresses or facsimile number or numbers as any
such party may most recently have designated in writing to the other parties
hereto by such notice. Copies of notices to the Holder shall be sent to the
address or addresses specified on the first page hereto.
12. Warrant Agent. The Issuer may, by written notice to each Holder
of this Warrant, appoint an agent having an office in California or New York
for the purpose of issuing shares of Warrant Stock on the exercise of this
Warrant pursuant to subsection (b) of Section 2 hereof, exchanging this
Warrant pursuant to subsection (d) of Section 2 hereof or replacing this
Warrant pursuant to subsection (d) of Section 3 hereof, or any of the
foregoing, and thereafter any such issuance, exchange or replacement, as the
case may be, shall be made at such office by such agent.
13. Remedies. The Issuer stipulates that the remedies at law of the
Holder of this Warrant in the event of any default or threatened default by
the Issuer in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
14. Successors and Assigns. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors and
assigns of the Issuer and the Holder and shall be enforceable by the Holder.
15. Modification and Severability. If, in any action before any
court or agency legally empowered to enforce any provision contained herein,
any provision hereof is found to be unenforceable, then such provision shall
be deemed modified to the extent necessary to make it enforceable by such
court or agency. If any such provision is not enforceable as set forth in the
preceding sentence, the unenforceability of such provision shall not affect
the other provisions of this Warrant, but this Warrant shall be construed as
if such unenforceable provision had never been contained herein.
<PAGE>
16. Headings. The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
[Remainder of this page intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, the Issuer has executed this Warrant as of the day
and year first above written.
DATALINK.NET, INC.
By: /s/ Anthony LaPine
Name: Anthony LaPine
Title: CEO
<PAGE>
EXERCISE FORM
DATALINK.NET, INC.
The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of
___________________ covered by the within Warrant.
Dated: _________________ Signature _______________________
Address _________________________
_________________________
ASSIGNMENT
FOR VALUE RECEIVED, __________________ hereby sells, assigns and transfers
unto __________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _________________, attorney, to transfer
the said Warrant on the books of the within named corporation.
Dated: _________________ Signature _______________________
Address _________________________
_________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, __________________ hereby sells, assigns and transfers
unto __________ the right to purchase ___________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint _________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.
Dated: _________________ Signature _______________________
Address _________________________
_________________________
<PAGE>
FOR USE BY THE ISSUER ONLY:
This Warrant No. W-HCW-2 _____ canceled (or transferred or exchanged)
this _____ day of ___________, _____, shares of Common Stock issued therefor
in the name of _______________, Warrant No. W-HCW _____ issued for ____ shares
of Common Stock in the name of _______________.
SECURITIES PURCHASE AGREEMENT
among
DATALINK.NET, INC.
and
THE PURCHASERS LISTED ON SCHEDULE I
Dated as of February 9, 2000
<PAGE>
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is dated as of
February 9, 2000, among Datalink.Net, Inc., a Nevada corporation (the
"Company"), and the various purchasers identified and listed on Schedule I
hereto (each referred to herein as a "Purchaser" and, collectively, the
"Purchasers").
WHEREAS, the Company and the Purchasers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 under Regulation D as promulgated by the United States Securities
and Exchange Commission (the "Commission") under Section 4(2) of the
Securities Act of 1933, as amended (the "Securities Act"); and
WHEREAS, subject to the terms and conditions set forth in this Agreement,
the Company desires to issue and sell to the Purchasers, and the Purchasers
desire to acquire from the Company, in the aggregate 769,231 shares of the
Company's Series B Convertible Preferred Stock, par value $ 0.01 per share
(the "Preferred Stock"), and warrants (the "Warrants") to purchase the
Company's common stock, par value $0.01 per share (the "Common Stock"), in the
form of Exhibit B annexed hereto; and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration
Rights Agreement in the form of Exhibit C annexed hereto (the "Registration
Rights Agreement") pursuant to which the Company has agreed to provide certain
registration rights under the Securities Act and the rules and regulations
promulgated thereunder, and applicable state securities laws.
NOW, THEREFORE, in consideration of the promises and mutual covenants and
agreements hereinafter contained, the Company and the Purchasers hereby agree
as follows:
ARTICLE I.
PURCHASE AND SALE OF THE PREFERRED STOCK
AND WARRANTS
1.1 Purchase and Sale. Subject to the terms and conditions set forth
herein, the Company shall issue and sell to each Purchaser, and each
Purchaser, severally and not jointly, shall purchase from the Company on the
Closing Date (as defined below), the number of shares of Preferred Stock and
a Warrant to purchase the number of shares of Common Stock as set forth for
such Purchaser on Schedule I hereto. The Preferred Stock shall have the
respective rights, preferences and privileges set forth in the Certificate of
Designation (the "Certificate of Designation"), in the form of Exhibit A
annexed hereto, which shall be approved by the Purchasers and the Company's
Board of Directors and shall be filed on or prior to the Closing Date (as
defined in Section 1.2 hereof) by the Company with the Secretary of State of
the State of Nevada.
1.2 Closing. The closing of the purchase and sale of the Preferred
Stock and the issuance of the Warrants (the "Closing") shall take place at the
offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P., 590 Madison Avenue, New
York, New York 10022, or by transmission by facsimile and overnight courier,
immediately following the execution hereof, or such later date or different
location as the parties shall agree, but not prior to the date that the
conditions set forth in Section 4.1 have been satisfied or waived by the
appropriate party (the "Closing Date"). At the Closing:
<PAGE>
(a) Each Purchaser shall deliver, as directed by the Company,
its portion of the purchase price as set forth next to its name on Schedule I
hereto in United States dollars in immediately available funds to an account
or accounts designated in writing by the Company;
(b) The Company shall deliver to each Purchaser a
certificate(s) representing the shares of Preferred Stock purchased by such
Purchaser as set forth on Schedule I hereto;
(c) The Company shall deliver to each Purchaser a Warrant, in
the form of Exhibit B hereto, representing the right to acquire the number of
shares of Common Stock purchased by such Purchaser as set forth on Schedule I
hereto; and
(d) The parties shall execute and deliver each of the
documents referred to in Section 4.1 hereof.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. The
Company hereby makes the following representations and warranties to each of
the Purchasers:
(a) Organization and Qualification. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Nevada, with the requisite corporate power and authority
to own and use its properties and assets and to carry on its business as
currently conducted. Except as set forth on Schedule 2.1(a), the Company has
no subsidiaries (collectively, the "Subsidiaries"). Each of the Subsidiaries
(which for purposes of this Agreement means any entity in which the Company,
directly or indirectly, owns the majority of such entity's capital stock or
holds an equivalent equity or similar interest) is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the
full corporate power and authority to own and use its properties and assets
and to carry on its business as currently conducted. Each of the Company and
its Subsidiaries is duly qualified as a foreign corporation to do business and
is in good standing as a foreign corporation in each jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in
good standing, as the case may be, would not, individually or in the
aggregate, (x) adversely affect the legality, validity or enforceability of
any of this Agreement or the Transaction Documents (as defined in Section
2.1(b)) or any of the transactions contemplated hereby or thereby, (y) have or
result in a material adverse effect on the business, operations, properties,
assets, liabilities, prospects, results of operations or condition (financial
or otherwise) of the Company and its Subsidiaries, taken as a whole or (z)
impair the Company's ability to perform fully on a timely basis its
obligations under any Transaction Document (any of (x), (y) or (z), being a
"Material Adverse Effect.
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by this Agreement and the Certificate of Designation, the
Warrants and the Registration Rights Agreement (collectively, the "Transaction
Documents"), and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery of this Agreement and each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
<PAGE>
necessary corporate action and no further action is required by the Company,
its Board of Directors or its stockholders in connection therewith. This
Agreement and each of the Transaction Documents have been duly executed by the
Company and, when delivered in accordance with the terms hereof or thereof,
will constitute the valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application, and except that rights to
indemnification and contribution may be limited by federal or state securities
laws or public policy relating thereto.
(c) Capitalization. As of the date hereof, the authorized
capital stock of the Company is as set forth in Schedule 2.1(c). All of such
outstanding shares of capital stock have been, or upon issuance will be, duly
authorized and validly issued, fully paid and nonassessable and were issued in
accordance with the registration or qualification provisions of the Securities
Act, or pursuant to valid exemptions therefrom. Except as disclosed in
Schedule 2.1(c), (i) no shares of the Company's capital stock are subject to
preemptive rights or any other similar rights or any liens, claims or
encumbrances suffered or permitted by the Company, nor is any holder of the
Common Stock entitled to preemptive or similar rights arising out of any
agreement or understanding with the Company by virtue of any Transaction
Document, (ii) there are no outstanding options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable or exercisable for, or
giving any Person (as defined below) any right to subscribe for or acquire,
any shares of capital stock of the Company or any of its Subsidiaries, or
contracts, commitments, understandings or arrangements by which the Company or
any of its Subsidiaries is or may become bound to issue additional shares of
capital stock of the Company or any of its Subsidiaries or options, warrants,
scrip rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable or
exercisable for, any shares of capital stock of the Company or any of its
Subsidiaries, (iii) there are no outstanding debt securities of the Company or
any of its Subsidiaries, (iv) there are no contracts, commitments,
understandings, agreements or arrangements under which the Company or any of
its Subsidiaries is obligated to register the sale of any of their securities
under the Securities Act (except the Registration Rights Agreement), (v) there
are no outstanding securities of the Company or any of its Subsidiaries which
contain any redemption or similar provisions, and there are no contracts,
commitments, understandings, agreements or arrangements by which the Company
or any of its Subsidiaries is or may become bound to redeem a security of the
Company or any of its Subsidiaries, (vi) there are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the shares of Preferred Stock or Warrants, or
upon the conversion of the Preferred Stock or exercise of the Warrants, (vii)
the Company does not have any stock appreciation rights or "phantom stock"
plans or agreements, or any similar plan or agreement and (viii) except as
specifically disclosed in the SEC Documents (as defined in Section 2.1(k)
hereof), no Person or group of related Persons beneficially owns (as
determined pursuant to Rule 13d-3 promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) or has the right to acquire by
agreement with or by obligation binding upon the Company beneficial ownership
of in excess of 5% of the Common Stock. As used herein, "Person" means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or political subdivision thereof) or other entity of
any kind.
<PAGE>
(d) Authorization, Validity and Issuance of Shares. Prior to
the Closing Date the Certificate of Designation has been filed with the
Secretary of State of the State of Nevada. The shares of Common Stock
issuable upon conversion of the Preferred Stock and exercise of the Warrants
(collectively, the "Underlying Shares") are and will at all times hereafter
continue to be duly authorized and reserved for issuance and the shares of
Common Stock issued upon conversion of the Preferred Stock (the "Conversion
Shares") and exercise of the Warrants (the "Warrant Shares") will be validly
issued, fully paid and non-assessable, free and clear of all liens, claims,
encumbrances, other than rights created by the Transaction Documents and
liens, claims and encumbrances created by the Purchasers (collectively,
"Liens") and will not be subject to any preemptive or similar rights.
(e) No Conflicts. The execution, delivery and performance of
this Agreement and each of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and
thereby (including the issuance of the Underlying Shares) do not and will not
(i) conflict with or violate any provision of the Company's Articles of
Incorporation as amended and in effect on the date hereof (the "Articles of
Incorporation"), the Company's Bylaws, as in effect on the date hereof (the
"Bylaws"), or other organizational documents of the Company or any of its
Subsidiaries, (ii) subject to obtaining the consents referred to in Section
2.1(f), conflict with, or constitute a breach or a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
other Persons any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture, patent, license or instrument
(evidencing a Company or Subsidiary debt or otherwise) to which the Company or
any of its Subsidiaries is a party or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected or (iii) result in a
violation of any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or governmental authority to which the Company
or any of its Subsidiaries is subject (including federal and state securities
laws and regulations and the rules and regulations of the principal market or
exchange on which the Common Stock is traded or listed) applicable to the
Company or any of its Subsidiaries, or by which any material property or asset
of the Company or any of its Subsidiaries is bound or affected.
(f) Consents and Approvals. Except as specifically set forth
on Schedule 2.1(f), neither the Company nor any of its Subsidiaries is
required to obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority, regulatory or self
regulatory agency, or other Person in connection with the execution, delivery
and performance by the Company of this Agreement or any of the Transaction
Documents, other than (i) the filing of a registration statement with the
Commission, which shall be filed in accordance with and in the time periods
set forth in the Registration Rights Agreement, (ii) the application(s) or any
letter(s) acceptable to the American Stock Exchange ("AMEX") for the listing
of the Underlying Shares with AMEX, (iii) any filings, notices or
registrations under applicable state securities laws and (iv) the approval of
the Company's Board of Directors and the filings of the Certificate of
Designation with the Secretary of State of the State of Nevada, which filing
and approval shall be effected on or prior to the Closing Date (together with
the consents, waivers, authorizations, orders, notices and filings referred to
on Schedule 2.1(f), the "Required Approvals").
(g) Litigation; Proceedings. Except as specifically set forth
on Schedule 2.1(g), there is no action, suit, notice of violation, proceeding
or investigation pending or, to the knowledge of the Company or any of its
Subsidiaries, threatened against or affecting the Company or any of its
Subsidiaries or any of their respective properties or assets before or by any
<PAGE>
court, governmental or administrative agency or regulatory authority (federal,
state, county, local or foreign) or any arbitrator, which (i) adversely
affects or challenges the legality, validity or enforceability of any of this
Agreement or any of the Transaction Documents, (ii) could reasonably be
expected to, individually or in the aggregate, have a Material Adverse Effect
or (iii) if adversely decided, could reasonably be expected to have a material
adverse effect on the issuance or conversion of the Preferred Stock or the
Conversion Shares, or the issuance or exercise of the Warrants or the Warrant
Shares, or the consummation of the transactions contemplated by this Agreement
and the Transaction Documents.
(h) No Default or Violation. Neither the Company nor any of
its Subsidiaries is (i) in default under or in violation of any indenture,
loan or other credit agreement or any other agreement or instrument to which
it is a party or by which it or any of its properties or assets is bound, (ii)
in violation of any law, rule, regulation, order, judgment, injunction, decree
or other restriction of any court, arbitrator or governmental authority
applicable to it or any law, statute, ordinance, rule or regulation of any
governmental authority to which it is subject or (iii) in violation of any of
the provisions of its Articles of Incorporation, Bylaws or other charter
documents such that any right of a holder of the Preferred Stock would be
affected. The business of the Company and its Subsidiaries is not being
conducted, and shall not be conducted, in violation of any law, statute,
ordinance, rule or regulation of any governmental authority, except where such
violations have not resulted or would not reasonably result, individually or
in the aggregate, in a Material Adverse Effect.
(i) Disclosure; Absence of Certain Changes. None of this
Agreement, the Schedules to this Agreement, the Transaction Documents, the SEC
Documents or any other written or formally presented information, report,
financial statement, exhibit, schedule or document furnished by or on behalf
of the Company in connection with the negotiation of the transactions
contemplated hereby contained, contains, or will contain at the time it was or
is so furnished any untrue statement of a material fact or omitted, omits or
will omit at such time to state any material fact necessary in order to make
the statements made herein and therein, in light of the circumstances under
which they were made, not misleading. Except as disclosed on Schedule 2.1(i)
or in SEC Documents filed on EDGAR at least five (5) business days prior to
the date hereof, since March 31, 1999, there has been no material adverse
change and no material adverse development in the business, properties,
operations, condition (financial or otherwise), assets, liabilities or results
of operations or, insofar as can reasonably be foreseen, prospects of the
Company or its Subsidiaries. The Company has not taken any steps, and does
not currently expect to take any steps, to seek protection pursuant to any
bankruptcy law nor does the Company or any of its Subsidiaries have any
knowledge or reason to believe that their respective creditors intend to
initiate involuntary bankruptcy proceedings. No event, liability, development
or circumstance has occurred or exists, or is contemplated to occur, with
respect to the Company or its Subsidiaries or their respective businesses,
properties, operations, condition (financial or otherwise), assets,
liabilities or results of operations or, insofar as can reasonably be
foreseen, prospects, that would be required to be disclosed by the Company
under applicable securities laws on a registration statement (including by way
of incorporation by reference) filed with the Commission, on the date this
representation is made or deemed to be made, relating to an issuance and sale
by the Company of its Common Stock and which has not been publicly disclosed.
(j) Private Offering; Solicitation. The Company and all
Persons acting on its behalf have not (i) made, directly or indirectly, and
will not make, offers or sales of any securities or solicited any offers to
buy any security under circumstances that would require registration of the
<PAGE>
Preferred Stock, the Warrants, the Conversion Shares or the Warrant Shares or
the issuance of such securities under the Securities Act, (ii) distributed any
offering materials in connection with the offering and sale of the Preferred
Stock or the Warrants, other than the SEC Documents, the Schedules to this
Agreement, any amendments and any supplements thereto, or (iii) solicited any
offer to buy or sell the Preferred Stock or the Warrants by means of any form
of general solicitation or advertising (as those terms are used in Rule 502(c)
of Regulation D under the Exchange Act) in a manner which would require
registration under the Securities Act. The offer, issuance and sale of the
Preferred Stock, the Warrants, the Conversion Shares and the Warrant Shares to
the Purchasers will not be integrated with any other offer, sale and issuance
of the Company's securities (past, current, or future) under the Securities
Act or any regulations of any exchange or automated quotation system on which
any of the securities of the Company are listed, quoted or designated or for
purposes of any stockholder approval provision applicable to the Company or
its securities. Subject to the accuracy and completeness of the
representations and warranties of the respective Purchasers contained in
Section 2.2 hereof, the offer, issuance and sale by the Company to the
Purchasers of the Preferred Stock, the Warrants and the Underlying Shares is
exempt from the registration requirements of the Securities Act.
(k) SEC Documents; Financial Statements. The Common Stock of
the Company is registered pursuant to Section 12(g) of the Exchange Act. The
Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the Commission pursuant to the
reporting requirements of the Exchange Act, including pursuant to Section 13,
14 or 15(d) thereof (the foregoing materials and all exhibits included therein
and financial statements and schedules thereto and documents (other than
exhibits to such documents) incorporated by reference therein being
collectively referred to herein as the "SEC Documents"), on a timely basis or
has received a valid extension of such time of filing and has filed any such
SEC Documents prior to the expiration of any such extension. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Documents, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading. All agreements to which the Company or
any of its Subsidiaries is a party or to which the property or assets of the
Company or any of its Subsidiaries are subject and which are required to be
filed as exhibits to the SEC Documents have been filed as exhibits to the SEC
Documents as required and neither the Company nor any of its Subsidiaries nor,
to the Company's knowledge, any other party is in breach of any such
agreement. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance with United
States generally accepted accounting principles applied on a consistent basis
during the periods involved, except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all material
respects the financial position of the Company as of and for the dates thereof
and the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal, immaterial year-end
audit adjustments. No other information provided by or on behalf of the
Company to the Purchasers which is not included in the SEC Documents,
including, without limitation, information referred to in Section 2.1(i) of
this Agreement, contains any untrue statement of a material fact or omits to
state any material fact necessary in order to make the statements therein, in
light of the circumstances under which they are or were made, not misleading.
<PAGE>
Neither the Company nor any of its Subsidiaries nor any of their officers,
directors, employees or agents have provided the Purchasers with any material
non-public information. The Company acknowledges that the Purchasers will be
trading in the securities of the Company in reliance on the foregoing
representation and warranty.
(l) Investment Company. The Company is not, and is not
controlled by or under common control with an Affiliate (as defined in Section
3.11) of an "investment company" within the meaning of the Investment Company
Act of 1940, as amended. As used herein, "Affiliate" means, with respect to
any Person, any other Person that directly or indirectly controls or is
controlled by or under common control with such Person.
(m) Broker's Fees. No fees or commissions or similar payments
with respect to the transactions contemplated by this Agreement or the
Transaction Documents have been paid or will be payable by the Company to any
broker, financial advisor, finder, investment banker or bank, other than as
set forth in Schedule 2.1(m). The Purchasers shall have no obligation with
respect to any fees or with respect to any claims made by or on behalf of
other Persons for fees of a type contemplated in this Section 2.1(m) that may
be due in connection with the transactions contemplated by this Agreement and
the Transaction Documents.
(n) Form S-3 Eligibility. The Company is, and at the Closing
Date will be, eligible to register securities (including the Underlying
Shares) for resale with the Commission under Form S-3 promulgated under the
Securities Act.
(o) Listing and Maintenance Requirements Compliance. The
principal market on which the Common Stock is currently traded is AMEX.
Except as disclosed on Schedule 2.1(o), the Company has not, since the initial
listing of its Common Stock on AMEX, received notice (written or oral) from
AMEX to the effect that the Company is not in compliance with the listing or
maintenance requirements of such exchange, market or trading facility. The
Company is not in default under or in violation of any of the listing or
quotation requirements of AMEX as in effect on the date hereof and the Company
is not aware of any facts which could reasonably lead to delisting or
suspension of the Common Stock by AMEX. After giving effect to the
transactions contemplated by this Agreement and the Transaction Documents, the
Company will be in compliance with all such listing and maintenance
requirements.
(p) Intellectual Property Rights. The Company and each of its
Subsidiaries own or possess adequate rights or licenses to use all trademarks,
trademark applications, trade names and service marks, whether or not
registered, and all patents, patent applications, copyrights, inventions,
licenses, approvals, governmental authorizations, trade secrets and
intellectual property rights (collectively, "Intellectual Property Rights")
which are necessary for use in connection with their respective businesses as
now conducted and as described in the SEC Documents. Except as set forth on
Schedule 2.1(p), none of the Intellectual Property Rights of the Company or
any of its Subsidiaries has expired or terminated, or is expected to expire or
terminate within two (2) years from the date of this Agreement. Neither the
Company nor any of its Subsidiaries has infringed or is infringing on any of
the Intellectual Property Rights of any other Person and, except as set forth
on Schedule 2.1(p), there is no claim, action or proceeding which has been
made or brought or alleged against, or to the knowledge of the Company and its
Subsidiaries, is being made, brought or threatened against, the Company or any
of its Subsidiaries regarding the infringement of any of the Intellectual
Property Rights of the Company or any of its Subsidiaries, and the Company and
its Subsidiaries are unaware of any facts or circumstances which might give
<PAGE>
rise to any of the foregoing, except where any of the foregoing would not have
a Material Adverse Effect. The Company and its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value
of all of their Intellectual Property Rights.
(q) Tax Status; Firpta. Except as set forth on Schedule
2.1(q), the Company and each of its Subsidiaries have made or filed all
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject (unless and only to the
extent that the Company and each of its Subsidiaries has set aside on its
books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
(which are set forth on Schedule 2.1(q) hereof), and have set aside on their
books provisions reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due
from the Company or any of its Subsidiaries by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any such
claim. The Company is not a "United States real property holding corporation"
within the meaning of Section 847(c)(2) of the Internal Revenue Code of 1986,
as amended.
(r) Registration Rights; Rights of Participation. Except as
described on Schedule 2.1(r) hereto, (i) the Company has not granted or agreed
to grant to any Person any rights (including "piggy-back" registration rights)
to have any securities of the Company registered with the Commission or any
other governmental authority which have not been satisfied and (ii) no Person,
including, but not limited to, current or former stockholders of the Company,
underwriters, brokers or agents, has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the
transactions contemplated by this Agreement or any Transaction Document.
(s) Title. Except as disclosed on Schedule 2.1(s), the
Company and each of its Subsidiaries have good and marketable title in fee
simple to all real property and personal property owned by them which is
material to the business of the Company and its Subsidiaries, in each case
free and clear of all Liens, except for Liens that do not materially affect
the value of such property and do not interfere with the use made and proposed
to be made of such property by the Company and its Subsidiaries. Any real
property and facilities held under lease by the Company and its Subsidiaries
are held by them under valid, subsisting and, to the best knowledge of the
Company and its Subsidiaries, enforceable leases with such exceptions as are
not material and do not interfere with the use made and proposed to be made of
such property and buildings by the Company and the Subsidiaries.
(t) Permits. The Company and each of its Subsidiaries possess
all certificates, authorizations, licenses, easements, consents, approvals,
orders and permits necessary to own, lease and operate their respective
properties and to conduct their respective businesses as currently conducted
except where the failure to possess such permits would not, individually or in
the aggregate, have a Material Adverse Effect ("Material Permits"), and there
is no claim, action or proceeding pending, or, to the knowledge of the Company
or its Subsidiaries, threatened, relating to the revocation, modification,
suspension or cancellation of any Material Permit. Neither the Company nor
any of the Subsidiaries is in conflict with, in default under or in violation
of any Material Permit.
(u) Insurance. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
<PAGE>
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has any
reason to believe that it will not be able to renew its existing insurance
coverages as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business, at a cost that
would not materially and adversely affect the business, operations,
properties, assets, liabilities, prospects, results of operations or condition
(financial or otherwise) of the Company and its Subsidiaries, taken as a
whole.
(v) Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with United States generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorizations and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(w) Transactions With Affiliates. Except as set forth on
Schedule 2.1(w), and other than the granting of stock options and documents
disclosed on Schedule 2.1(c), none of the officers, directors or employees of
the Company is presently a party to any transaction with the Company or any of
its Subsidiaries (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of real property
or personal property to or from, or otherwise requiring payments to or from
any officer, director or such employee or, to the knowledge of the Company,
any Person in which any officer, director or any such employee has a
substantial interest or is an officer, director, trustee or partner.
(x) Application to Takeover Protection. The Company and its
Board of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination or other
similar anti-takeover provision under the Articles of Incorporation, Bylaws or
the laws of the state of incorporation of the Company which is or could become
applicable to the Purchasers or the Transaction Documents as a result of the
transactions contemplated by this Agreement and the Transaction Documents.
None of the transactions contemplated by this Agreement and the Transaction
Documents, including the conversion of the Preferred Stock and the exercise of
the Warrants, will trigger any poison pill provisions of any of the Company's
stockholders' rights or similar agreements.
(y) Foreign Corrupt Practices. Neither the Company, nor any
of its Subsidiaries, nor any director, officer, agent, employee or other
Person acting on behalf of the Company or any of its Subsidiaries has, in the
course of its actions for, or on behalf of, the Company or any of its
Subsidiaries (i) used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political activity, (ii)
made any direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds, (iii) violated (or is in
violation of) any provision of the U.S. Foreign Corrupt Practices Act of 1977,
as amended, or (iv) made any unlawful bribe, rebate, payoff, influence
payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
<PAGE>
(z) Acknowledgment of Dilution. The Company understands and
acknowledges the potentially dilutive effect to the Common Stock upon the
issuance of the Conversion Shares and Warrant Shares upon conversion of the
Preferred Stock or exercise of the Warrants. The Company further acknowledges
that its obligation to issue Conversion Shares and Warrant Shares upon
conversion of the Preferred Stock or exercise of the Warrants in accordance
with this Agreement, the Certificate of Designation and the Warrants is
absolute and unconditional regardless of the dilutive effect that such
issuance may have on the ownership interests of other stockholders of the
Company.
(aa) Acknowledgment Regarding Purchasers' Purchase of
Preferred Stock and Warrants. The Company acknowledges and agrees that the
Purchasers are acting solely in the capacity of arm's length purchasers with
respect to this Agreement and the transactions contemplated hereby. The
Company further acknowledges that no Purchaser is acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with respect
to this Agreement and the transactions contemplated hereby and any statement
made by any Purchaser or any of their respective representatives or agents in
connection with this Agreement and the transactions contemplated hereby is not
advice or a recommendation and is merely incidental to the Purchasers'
purchase of the Preferred Stock and the Warrants. The Company further
represents to each Purchaser that the Company's decision to enter into this
Agreement has been based solely on the independent evaluation of the Company
and its representatives.
(bb) Solvency. The Company (both before and after giving
effect to the transactions contemplated by this Agreement) is solvent (i.e.,
its assets have a fair market value in excess of the amount required to pay
its probable liabilities on its existing debts as they become absolute and
matured) and currently the Company has no information that would lead it to
reasonably conclude that the Company would not have the ability to, nor does
it intend to take any action that would impair its ability to, pay its debts
from time to time incurred in connection therewith as such debts mature. The
Company did not receive a qualified opinion from its auditors with respect to
its most recent fiscal year end and does not anticipate or know of any basis
upon which its auditors might issue a qualified opinion in respect of its
current fiscal year.
(cc)
(dd) Other Agreements. The Company has not, directly or
indirectly, made any agreements with any Purchasers relating to the terms and
conditions of the transactions contemplated by this Agreement and the
Transaction Documents except as set forth in this Agreement and the
Transaction Documents.
2.2 Representations and Warranties of the Purchasers. Each of the
Purchasers, severally and not jointly, hereby represents and warrants to the
Company (as to itself) as follows:
(a) Organization; Authority. Such Purchaser is a corporation
or a limited duration company or a limited liability company or limited
partnership duly formed, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, organization or formation with the
requisite power and authority, corporate or otherwise, to enter into and to
consummate the transactions contemplated hereby and by the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder.
The purchase by such Purchaser of the Preferred Stock and the Warrants
hereunder has been duly authorized by all necessary action on the part of such
Purchaser. This Agreement and the Registration Rights Agreement have been
<PAGE>
duly executed and delivered by such Purchaser and constitute the valid and
legally binding obligations of such Purchaser, enforceable against such
Purchaser in accordance with their terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable
principles of general application, and except that rights to indemnification
and contribution may be limited by federal or state securities laws or public
policy relating thereto.
(b) Investment Intent. Such Purchaser is acquiring the
Preferred Stock and the Warrants for its own account and not with a present
view to (i) acquiring control of the Company or taking any actions or causing
any of the effects set forth in Items 4(b), (c), (h) or (i) of Schedule 13D or
(ii) for distributing or reselling the Preferred Stock, the Warrants, the
Conversion Shares or the Warrant Shares or any part thereof or interest
therein in violation of the Securities Act; provided, however, that by making
the representations herein, such Purchaser does not agree to hold any of the
Preferred Stock, the Warrants, the Conversion Shares or the Warrant Shares for
any minimum or other specific term and reserves the right to dispose of the
Preferred Stock, the Warrants, the Conversion Shares and the Warrant Shares at
any time in accordance with or pursuant to a registration statement or an
exemption under the Securities Act.
(c) Purchaser Status. At the time such Purchaser was offered
the Preferred Stock and the Warrants, and at the Closing Date, (i) it was and
will be an "accredited investor" as defined in Rule 501 under the Securities
Act and (ii) such Purchaser, either alone or together with its
representatives, had and will have such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Preferred Stock and
the Warrants.
(d) Reliance. Such Purchaser understands and acknowledges
that (i) the Preferred Stock and the Warrants are being offered and sold to
such Purchaser without registration under the Securities Act in a private
placement that is exempt from the registration provisions of the Securities
Act under Section 4(2) of the Securities Act or Regulation D promulgated
thereunder and (ii) the availability of such exemption depends in part on, and
the Company will rely upon the accuracy and truthfulness of, the
representations set forth in this Section 2.2 and such Purchaser hereby
consents to such reliance.
(e) Information. Such Purchaser and its advisors, if any,
have been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Preferred Stock and the Warrants which have been requested by such Purchaser
or its advisors. Such Purchaser and its advisors, if any, have been afforded
the opportunity to ask questions of the Company. Neither such inquiries nor
any other due diligence investigation conducted by such Purchaser or any of
its advisors or representatives shall modify, amend or affect Purchaser's
right to rely on the Company's representations and warranties contained in
Section 2.1 above or representations and warranties of the Company contained
in any other Transaction Document. Such Purchaser understands that its
investment in the Preferred Stock and the Warrants involves a significant
degree of risk.
(f) Governmental Review. Such Purchaser understands that no
United States federal or state agency or any other government or governmental
agency or authority has passed upon or made any recommendation or endorsement
of the Preferred Stock or the Warrants.
<PAGE>
(g) Residency. Such Purchaser is a resident of the
jurisdiction set forth immediately below such Purchaser's name on Schedule II
hereto.
The Company acknowledges and agrees that the Purchasers make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2. The
Company further acknowledges that the Purchasers, collectively, are not acting
as a group pursuant to Rule 13-d of the Exchange Act.
ARTICLE III.
OTHER AGREEMENTS
3.1 Transfer Restrictions; Legend.
(a) Transfer Restrictions. If any Purchaser should decide to
sell or dispose of any of the Preferred Stock and/or Warrants held by it, such
Purchaser shall give notice to the Company (in accordance with Section 6.2
hereof) of the name(s) of the proposed transferee(s), the proposed purchase
price and other terms of the proposed transfer. The Company shall have ten
(10) Business Days from the date of such notice to purchase the Preferred
Stock and/or Warrants proposed to be sold for the purchase price, and upon the
same terms and conditions, specified in such notice. Further, If any
Purchaser should decide to dispose of the Preferred Stock, the Warrants, the
Conversion Shares or the Warrant Shares held by it, such Purchaser understands
and agrees that it may do so only pursuant to an effective registration
statement under the Securities Act, pursuant to an available exemption from
the registration requirements of the Securities Act or Rule 144 promulgated
under the Securities Act ("Rule 144") or the Company. The Company shall
announce any material non-public information that it legally is required to
announce on or prior to the Effectiveness Date (as defined in the Registration
Rights Agreement) of the registration statement filed pursuant to the
Registration Rights Agreement and shall not enter into any subsequent
non-disclosure agreements that would prevent it from announcing any such
information that otherwise legally could have been announced on or prior to
the Effectiveness Date, unless confidential treatment for such information is
granted by the Commission. In connection with any transfer or disposition of
any Preferred Stock, Warrants, Conversion Shares or Warrant Shares other than
pursuant to an effective registration statement, Rule 144 or to the Company,
the Company may require the transferor thereof to provide to the Company a
written opinion of counsel experienced in the area of United States securities
laws selected by the transferor, the form and substance of which opinion shall
be customary for opinions of counsel in comparable transactions, to the effect
that such transfer or disposition does not require registration of such
transferred securities under the Securities Act; provided, however, that if
the Preferred Stock, Warrants, Conversion Shares or Warrant Shares may be sold
pursuant to Rule 144(k), no written opinion of counsel shall be required from
the Purchaser if such Purchaser provides reasonable assurances that such
security can be sold pursuant to Rule 144(k). Notwithstanding the foregoing,
the Company hereby consents to and agrees to register any transfer by any
Purchaser to an Affiliate of such Purchaser, provided that the transferee
certifies to the Company that it is an "accredited investor" as defined in
Rule 501(a) under the Securities Act. Any such transferee shall also agree in
writing to be bound by the terms of this Agreement and shall have the rights
of a Purchaser under this Agreement and the Transaction Documents. If a
Purchaser provides the Company with an opinion of counsel, the form and
substance of which opinion shall be customary for opinions of counsel in
comparable transactions, to the effect that a public sale, assignment or
transfer of the Preferred Stock, the Conversion Shares, the Warrants and/or
the Warrant Shares may be made without registration under the Securities Act,
<PAGE>
or the Purchaser provides the Company with reasonable assurances that the
Preferred Stock, the Warrants, the Conversion Shares and/or the Warrant Shares
can be sold pursuant to Rule 144 without any restriction as to the number of
securities acquired as of a particular date that can then be immediately sold,
the Company shall permit the transfer. Notwithstanding the foregoing or
anything else contained herein to the contrary, the Preferred Stock, the
Warrants, the Conversion Shares and the Warrant Shares may be pledged as
collateral in connection with a bona fide margin account or other lending
arrangement. Each Purchaser shall give the Company five (5) Business Days
advance notice of any intended sale or transfer (whether or not pursuant to a
registration statement) of a number of shares of Common Stock equal to or in
excess of five percent (5%) of the number of shares of Common Stock of the
Company then outstanding.
(b) Legend. Each Purchaser hereby agrees to the imprint of a
legend on the Preferred Stock and the Warrants referring to the rights of the
Company under Section 3.1(a). Further, each Purchaser agrees to the
imprinting, so long as is required by this Section 3.1(b), of the following
legend on the Preferred Stock, the Warrants, the Conversion Shares and the
Warrant Shares:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH
THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.
Neither the Conversion Shares nor the Warrant Shares shall contain
the legend set forth above (or any other legend) (i) at any time while a
registration statement is effective under the Securities Act covering such
security, (ii) if, in the written opinion of counsel to the Company
experienced in the area of United States securities laws, such legend is not
required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the staff of the
Commission) or (iii) if such Conversion Shares or Warrant Shares may be sold
pursuant to Rule 144. The Company agrees that it will provide each Purchaser,
upon request, with a certificate or certificates representing the Conversion
Shares or the Warrant Shares, free from such legend at such time as such
legend is no longer required hereunder. If such certificate or certificates
had previously been issued with such a legend or any other legend, the Company
shall, upon request and delivery of such certificate or certificates to the
Company by such Purchaser, reissue to such Purchaser such certificate or
certificates free of any legend.
3.2 Stop Transfer Instruction. The Company may not make any notation
on its records or give instructions to any transfer agent of the Company which
enlarge the restrictions on transfer set forth in Section 3.1.
3.3 Furnishing of Information. As long as any Purchaser owns any
Preferred Stock, Warrants, Conversion Shares or Warrant Shares, the Company
will cause the Common Stock to continue at all times to be registered under
Section 12 of the Exchange Act, will timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Sections
13, 14 or 15(d) of the Exchange Act and, unless filed by EDGAR, will promptly
furnish, but in no event later than two (2) business days after the filing
thereof with the Commission, the Purchasers with true and complete copies of
all such filings, and will not take any action or file any document (whether
or not permitted by the Exchange Act or the rules thereunder) to terminate or
<PAGE>
suspend such reporting and filing obligations, and will make and keep public
information available, as those terms are defined in Rule 144. As long as any
Purchaser owns any Preferred Stock, Warrants, Conversion Shares or Warrant
Shares, if the Company is not required to file reports pursuant to Section
13(a) or 15(d) of the Exchange Act, it will prepare and furnish to the
Purchasers and make publicly available in accordance with Rule 144(c)
promulgated under the Securities Act annual and quarterly financial
statements, together with a discussion and analysis of such financial
statements in form and substance substantially similar to those that would
otherwise be required to be included in reports required by Section 13(a) or
15(d) of the Exchange Act, as well as any other information required thereby,
in the time period that such filings would have been required to have been
made under the Exchange Act. The Company also agrees to send the following to
each Purchaser prior to and during the Effectiveness Period (as defined in the
Registration Rights Agreement): (i) on the same day as the release thereof,
facsimile copies of all press releases issued by the Company or any of its
Subsidiaries and (ii) copies of any notices and other information made
available or given to the stockholders of the Company generally,
contemporaneously with the making available or giving thereof to the
stockholders. The Company further covenants that it will take such further
action as any holder of the Preferred Stock, the Warrants, the Conversion
Shares or the Warrant Shares may reasonably request, all to the extent
required from time to time to enable such Person to sell the Preferred Stock,
the Warrants, the Conversion Shares or the Warrant Shares without registration
under the Securities Act within the limitation of the exemptions provided by
Rule 144 promulgated under the Securities Act, including the legal opinion
referenced above in Section 3.1(b). Upon the request of any such Person, the
Company shall deliver to such Person a written certification of a duly
authorized officer as to whether it has complied with such requirements.
3.4 Blue Sky Laws. In accordance with the Registration Rights
Agreement, the Company shall (a) qualify the Conversion Shares and the Warrant
Shares under the securities or "blue sky" laws of such jurisdictions as the
Purchasers may request (or to obtain an exemption from such qualification),
(b) provide evidence of any such action so taken to each Purchaser on or prior
to the Effectiveness Date (as defined in the Registration Rights Agreement)
and (c) continue such qualification at all times through the resale of all
Conversion Shares or Warrant Shares.
3.5 Integration. The Company shall not sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Preferred Stock, the Warrants, the Conversion Shares or
the Warrant Shares in a manner that would require the registration under the
Securities Act of the sale to any Purchaser of the Preferred Stock, the
Warrants, the Conversion Shares or the Warrant Shares or cause the offering of
such securities to be integrated with any other offering of securities by the
Company for the purpose of any stockholder approval provision applicable to
the Company or its securities.
3.6 Listing, Registration and Reservation of Conversion Shares and
Warrant Shares.
(a) Listing of Shares. Prior to the Closing Date the Company
shall (i) prepare and file with AMEX an additional shares listing application
covering and listing a number of shares of Common Stock which is at least
equal to 100% of the maximum number of Underlying Shares then issuable, (ii)
take all steps necessary to cause the Underlying Shares to be approved for
listing on AMEX and (iii) provide the Purchasers evidence, in the form
customarily given by AMEX and acceptable to Purchasers, of such listing. The
Company shall maintain, so long as any Purchaser owns any shares of Preferred
<PAGE>
Stock, Conversion Shares, Warrants or Warrant Shares, such listing of all such
Underlying Shares (and any shares of the Company's capital stock issued with
respect to the Underlying Shares as a result of any stock split, stock
dividend, recapitalization, exchange or similar event or otherwise) on AMEX
(as well as on any other national securities exchange or market quotation
system on which the Common Stock is then listed or quoted) and neither the
Company nor any of its Subsidiaries shall take any action which may result in
the delisting or suspension of the Common Stock on AMEX (or such other
national securities exchange or market quotation system on which the Common
Stock is then listed or quoted). The Company shall pay all fees and expenses
in connection with satisfying its obligations under this Section 3.6(a).
(b) Registration of Shares. The number of shares of Common
Stock initially included in the Initial Registration Statement (as defined in
the Registration Rights Agreement) shall be determined pursuant to Section
2(a) of the Registration Rights Agreement.
(c) Reservation of Shares. The Company at all times shall
reserve a sufficient number of shares of its authorized but unissued Common
Stock to provide for 100% of the full conversion of the outstanding Preferred
Stock and exercise of the outstanding Warrants. Shares of Common Stock
reserved for issuance upon conversion of the Preferred Stock and the exercise
of the Warrants shall be allocated pro rata to each of the Purchasers in
accordance with the amount of Preferred Stock and Warrants issued and
delivered to such Purchaser at the Closing. If at any time the number of
shares of Common Stock authorized and reserved for issuance is insufficient to
cover 100% of the number of Conversion Shares and Warrant Shares issued and
issuable upon conversion of the Preferred Stock and exercise of the Warrants
(based on the Conversion Price (as defined in the Certificate of Designation)
of the Preferred Stock in effect from time to time) without regard to any
limitation on conversions or exercises, the Company will promptly take all
corporate action necessary to authorize and reserve 100% of such shares
pursuant to Section 3(b) of the Registration Rights Agreement, including,
without limitation, calling a special meeting of stockholders to authorize
additional shares to meet the Company's obligations under this Section 3.6(c),
in the case of an insufficient number of authorized shares, and using its best
efforts to obtain stockholder approval of an increase in such authorized
number of shares.
3.7 Notice of Breaches and Violations; Purchaser Default.
(a) Notice of Breach. The Company and each Purchaser shall
give prompt written notice to each other of any breach by it of any
representation, warranty or other agreement contained in this Agreement or in
the Transaction Documents, as well as any events or occurrences arising after
the date hereof and prior to the Closing Date, which would reasonably be
likely to cause any representation or warranty or other agreement of such
party, as the case may be, contained herein to be incorrect or breached as of
the Closing Date; provided such notice will not constitute material non-public
information. However, no disclosure by any party pursuant to this Section 3.7
shall be deemed to cure any breach of any representation, warranty or other
agreement contained herein or in the Transaction Documents.
(b) Notice of Violation. Notwithstanding the generality of
Section 3.7(a), the Company shall promptly notify (provided such notification
will not constitute material non-public information) each Purchaser of any
notice or claim (written or oral) that it receives from any lender of the
Company or any of its Subsidiaries to the effect that the consummation of the
transactions contemplated hereby and by the Transaction Documents violates or
would violate any written agreement or understanding between such lender and
the Company or any of its Subsidiaries, and the Company shall promptly furnish
<PAGE>
by facsimile to the Purchasers a copy of any written statement in support of
or relating to such claim or notice.
(c) Purchaser Default. The default by any Purchaser of any of
its obligations, representations or warranties under this Agreement or the
Transaction Documents shall not be imputed to, and shall have no effect upon,
any other Purchaser or affect the Company's obligations under this Agreement
or any Transaction Document to any non-defaulting Purchaser.
3.8 Form D. The Company agrees to file a Form D with respect to the
Preferred Stock and the Warrants as required by Rule 506 under Regulation D
and to provide a copy thereof to each Purchaser promptly after such filing.
3.9 Use of Proceeds. The Company shall use the proceeds from the
sale of the Preferred Stock and the exercise of the Warrants for working
capital, expansion of its business and general corporate purposes.
3.10 Transactions with Affiliates. So long as any shares of
Preferred Stock or Warrants are outstanding, the Company shall not, and shall
cause each of its Subsidiaries not to, enter into, amend, modify or
supplement, or permit any of its Subsidiaries to enter into, amend, modify or
supplement, any agreement, transaction, commitment or arrangement with any of
its or any Subsidiary's officers, directors or persons who were officers or
directors at any time during the previous two (2) years, stockholders who
beneficially own 5% or more of the Common Stock, or Affiliates or any
individual related by blood, marriage or adoption to any such individual or
with any Person in which any such Person owns a 5% or more beneficial interest
(each, a "Related Party"), except for (a) customary employment arrangements
and benefit programs on reasonable terms, (b) any agreement, transaction,
commitment or arrangement on an arm's length basis on terms no less favorable
than terms which would have been obtainable from a Person other than such
Related Party or (c) any agreement, transaction, commitment or arrangement
which is approved by a majority of the disinterested directors of the Company.
For purposes hereof, any director who is also an officer of the Company or any
Subsidiary of the Company shall not be a disinterested director with respect
to any such agreement, transaction, commitment or arrangement. For purposes
hereof, "Affiliate" means, with respect to any Person, another Person that,
directly or indirectly, (i) has a 5% or more equity interest in that Person,
(ii) has 5% or more common ownership with that Person, (iii) controls that
Person or (iv) shares common control with that Person. "Control" or
"Controls" for purposes of this Section only means that a Person has the
power, direct or indirect, to conduct or govern the policies of another
Person, whether through the ownership of voting securities, by contract or
otherwise.
3.11 Transfer Agent Instructions. At the Closing, the Company shall
issue instructions to its transfer agent (and shall issue to any subsequent
transfer agent as required), to issue certificates, registered in the name of
each such Purchaser or its respective nominee(s), for the Conversion Shares
and/or the Warrant Shares in such amounts as specified from time to time by
each Purchaser to the Company in a form acceptable to such Purchasers (the
"Transfer Agent Instructions"). The Company warrants that no instruction
other than the Transfer Agent Instructions referred to in this Section 3.11,
and stop transfer instructions to give effect to Section 3.1 hereof (in the
case of the Conversion Shares and the Warrant Shares, prior to registration of
the Conversion Shares and the Warrant Shares under the Securities Act) will be
given by the Company to its transfer agent and that the Preferred Stock, the
Warrants, the Conversion Shares and the Warrant Shares shall otherwise be
freely transferable on the books and records of the Company as and to the
extent provided in this Agreement and the Transaction Documents. The Company
acknowledges that a breach by it of its obligations hereunder will cause
<PAGE>
irreparable harm to the Purchasers by violating the intent and purpose of the
transactions contemplated hereby. Accordingly, the Company acknowledges that
the remedy at law for a breach of its obligations under this Section 3.11 will
be inadequate and agrees, in the event of a beach or threatened breach by the
Company of the provisions of this Section 3.11, that the Purchasers shall be
entitled, in addition to all other available remedies, to an order and/or
injunction restraining any breach and requiring immediate issuance and
transfer without the necessity of showing economic loss and without any bond
or other security being required.
3.12 Ordinary Course Brokerage and Trading. Subject to compliance
with all applicable securities laws and AMEX regulations, no Purchaser shall
be prohibited from engaging in its ordinary course brokerage and trading
activities in respect of the Common Stock; provided, that the personnel
engaged in such activities have not been involved with the transactions
contemplated hereby and have not been provided with confidential information
with respect to the Company.
3.13 Best Efforts. Each of the parties hereto shall use its
reasonable best efforts to satisfy each of the conditions to be satisfied by
it as provided in Article IV of this Agreement.
3.14 Corporate Existence. Until such time as all of the Purchasers
provide the Company with written notice that the Purchasers do not
beneficially own any shares of Preferred Stock or Warrants, the Company shall
maintain its corporate existence and shall not sell all or substantially all
of the Company's assets, except in the event of a merger or consolidation or
sale of all or substantially all of the Company's assets, where the surviving
or successor Person in such transaction (i) assumes the Company's obligations
hereunder and under the agreements and instruments entered into in connection
herewith and (ii) is a publicly traded corporation whose common stock is
listed for trading or quoted on the National Market System of the Nasdaq Stock
Market, the New York Stock Exchange or AMEX.
3.15 Press Release; Filing of Form 8-K. Subject to the provisions of
Section 6.10 hereof, prior to the opening of AMEX on February 14, 2000, the
Company shall file a press release in form and substance acceptable to the
Purchasers. On or before the third (3rd) business day following the Closing
Date, the Company shall file a Form 8-K with the Commission describing the
terms of the transaction contemplated by this Agreement and the Transaction
Documents in the form required by the Exchange Act.
3.16 Seniority; Exclusivity. No class of equity securities of the
Company will be senior to the Preferred Stock in right of payment, whether
upon liquidation, dissolution or otherwise. The Series A Preferred Stock of
the Company shall rank pari passu with the Preferred Stock to be issued
hereunder. So long as any Preferred Stock issued hereunder remains
outstanding, the Company shall not exchange, redeem or convert any of the
Company's capital stock for indebtedness, including convertible debt, of the
Company. So long as any Preferred Stock issued hereunder remains outstanding,
the Company shall not issue and sell any shares (of any class) of its
preferred stock that ranks senior to the Preferred Stock issued hereunder,
without the prior written consent of the Purchasers then holding a majority of
the Preferred Stock issued hereunder.
ARTICLE IV.
CONDITIONS
4.1 Closing Conditions.
<PAGE>
(a) Conditions Precedent to the Obligation of the Company to
Sell. The obligation of the Company to sell the Preferred Stock and the
Warrants hereunder is subject to the satisfaction or waiver (with prior
written notice to each Purchaser) by the Company, at or before the Closing, of
each of the following conditions:
(i) Accuracy of the Purchasers' Representations and
Warranties. The representations and warranties of each Purchaser set forth in
this Agreement shall be true and correct in all material respects as of the
date when made (except for representations and warranties that speak as of a
specific date) and as of the Closing Date;
(ii) Performance by the Purchasers. Each Purchaser
shall have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement and the
Transaction Documents to be performed, satisfied or complied with by such
Purchaser at or prior to the Closing; and
(iii) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated, endorsed or threatened or shall be pending by or before
any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement or
the Transaction Documents.
(b) Conditions Precedent to the Obligation of the Purchasers
to Purchase. The obligation of each Purchaser hereunder to acquire and pay
for the Preferred Stock and the Warrants at the Closing is subject to the
satisfaction or waiver (with prior written notice to the Company and each
other Purchaser) by such Purchaser, at or before the Closing, of each of the
following conditions:
(i) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company set forth in
this Agreement and in each of the Transaction Documents shall be true and
correct in all respects as of the date when made (except for representations
and warranties that speak as of a specific date) and as of the Closing Date;
(ii) Performance by the Company. The Company shall
have performed, satisfied and complied in all respects with all covenants,
agreements and conditions required by this Agreement and the Transaction
Documents to be performed, satisfied or complied with by the Company at or
prior to the Closing;
(iii) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated, endorsed or threatened or shall be pending by or before
any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement and
the Transaction Documents;
(iv) No Suspensions of Trading in Common Stock. The
trading in the Common Stock shall not have been suspended by the Commission or
AMEX (except for any suspension of trading of limited duration solely to
permit dissemination of material information regarding the Company);
(iv) Listing of Common Stock. The Common Stock shall
be listed for trading on AMEX, and the Company shall have obtained the
approval from AMEX for the listing of the number of shares of Common Stock
underlying the Preferred Stock and the Warrants as of the Closing Date;
<PAGE>
(v) Required Approvals. All Required Approvals shall
have been obtained and copies thereof delivered to such Purchaser;
(vi) Shares of Common Stock. The Company shall have
duly reserved the number of Underlying Shares required by this Agreement and
the Transaction Documents to be reserved for issuance upon conversion of the
Preferred Stock and the exercise of the Warrants;
(vii) Transfer Agent Instructions. The Transfer Agent
Instructions, in a form acceptable to the Purchasers, shall have been
delivered to and acknowledged in writing by the Company's transfer agent with
a copy forwarded to each Purchaser; and
(viii) Resolutions. The Board of Directors of the
Company shall have adopted resolutions consistent with Section 2.1(b) and in a
form reasonably acceptable to each Purchaser (the "Resolutions").
(c) Documents and Certificates. At the Closing, the Company
shall have delivered to the Purchasers the following in form and substance
reasonably satisfactory to the Purchasers:
(i) Opinion. An opinion of the Company's legal
counsel, substantially in the form attached hereto as Exhibit D, dated as of
the Closing Date;
(ii) Security. A security(ies) representing the
number of shares of Preferred Stock purchased by such Purchaser as set forth
next to such Purchaser's name on Schedule I hereto, registered in the name of
such Purchaser, each in form satisfactory to the Purchaser;
(iii) Warrant. A Warrant(s), substantially in the
form of Exhibit B hereto, representing the Warrants purchased by such
Purchaser as set forth next to such Purchaser's name on Schedule I hereto,
registered in the name of such Purchaser;
(iv) Registration Rights. The Company shall have
executed and delivered the Registration Rights Agreement, substantially in the
form of Exhibit C hereto;
(v) Officer's Certificate. An Officer's Certificate
dated the Closing Date and signed by an executive officer of the Company
confirming the accuracy of the Company's representations, warranties and
covenants as of the Closing Date and confirming the compliance by the Company
with the conditions precedent set forth in this Section 4.1 as of the Closing
Date;
(vi) Secretary's Certificate. A Secretary's
Certificate dated the Closing Date and signed by the Secretary or Assistant
Secretary of the Company certifying that (A) attached thereto is a true and
complete copy of the Articles of Incorporation of the Company, as in effect on
the Closing Date, (B) attached thereto is a true and complete copy of the
By-laws of the Company, as in effect on the Closing Date and (C) attached
thereto is a true and complete copy of the Resolutions duly adopted by the
Board of Directors of the Company authorizing the execution, delivery and
performance of this Agreement and of the Transaction Documents, and that such
Resolutions have not been modified, rescinded or revoked;
(vii) Articles of Incorporation. The Company shall
have delivered to each of the Purchasers a copy of a certificate evidencing
the incorporation and good standing of the Company and each Subsidiary, in
such corporation's state of incorporation issued by the Secretary of State of
<PAGE>
such state of incorporation as of a date within ten (10) days of the Closing
Date. The Company shall have delivered to each of the Purchasers a copy of
its Articles of Incorporation as certified by the Secretary of State of the
State of Nevada within ten (10) days of the Closing Date;
(viii) Certificate of Designation. The Certificate of
Designation shall have been duly approved by the Company's Board of Directors
and filed with the Secretary of State of the State of Nevada, and the Company
shall have delivered a copy thereof to the Purchaser certified as filed by the
office of the Secretary of State of the State of Nevada;
(ix) Transfer Agent Letter. The Company shall have
delivered to each Purchaser a letter from the Company's transfer agent
certifying the number of shares of Common Stock outstanding as of a date
within five days of the Closing Date; and
(x) Other Documents. The Company shall have delivered
to each Purchaser such other documents relating to the transactions
contemplated by the Transaction Documents as the Purchasers or their counsel
may reasonably request.
ARTICLE V.
INDEMNIFICATION
5.1 Indemnification.
(a) Indemnification. In addition to all of the Company's
other obligations under this Agreement and the Transaction Documents, the
Company shall defend, protect, indemnify and hold harmless each Purchaser, its
past and present Affiliates and their successors and assigns (in accordance
with the provisions of Section 6.5 hereof), each other holder of the
Underlying Shares and all of their stockholders, officers, directors,
employees and direct or indirect investors and any of the foregoing Persons'
agents or other representatives (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against any and all actions, causes
of action, suits, claims, losses, proceedings, costs (as incurred), penalties,
fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for
which indemnification hereunder is sought), and including interest, penalties
and attorneys' fees and disbursements (the "Indemnified Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to
(i) any misrepresentation or breach of any representation or warranty made by
the Company in this Agreement or in any of the Transaction Documents, or any
other certificate, instrument or document contemplated hereby or thereby, (ii)
any breach of any covenant, agreement or obligation of the Company contained
in this Agreement or any of the Transaction Documents, or any other
certificate, instrument or document contemplated hereby or thereby or (iii)
any cause of action, suit or claim brought or made or threatened, other than
by the Company, against such Indemnitee and arising out of or resulting from
(A) the execution, delivery, registration, performance or enforcement of this
Agreement or any of the Transaction Documents, (B) any transaction financed or
to be financed in whole or in part, directly or indirectly, with the proceeds
of the issuance of the Preferred Stock or the Warrants or (C) solely the
status of such Purchasers or holder of the Preferred Stock, the Conversion
Shares, the Warrants or the Warrant Shares as an investor in the Company. The
indemnification obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any Affiliate of the Purchasers and
partners, directors, agents, employees and controlling Persons (if any), as
the case may be, of the Purchasers and any such Affiliate, and shall be
<PAGE>
binding upon and inure to the benefit of any successors, assigns, heirs and
personal representatives of the Company, the Purchasers and any such Affiliate
and any such Person. The Company also agrees that neither the Purchasers nor
any such Affiliates, partners, directors, agents, employees or controlling
Persons shall have any liability to the Company or any Person asserting claims
on behalf of or in right of the Company in connection with or as a result of
the consummation of this Agreement or any of the Transaction Documents except
to the extent that any losses, claims, damages, liabilities or expenses
incurred by the Company result from the gross negligence or willful misconduct
of such Purchaser or Person in connection with the transactions contemplated
by this Agreement and the Transaction Documents. To the extent that the
foregoing undertakings by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under applicable law.
(b) Indemnification Payments. All fees and expenses
(including reasonable fees and expenses to the extent incurred in connection
with investigating or preparing to defend such actions, causes of action,
suits, claims or other proceedings in a manner not inconsistent with this
Section) of the Indemnitees shall be paid to the Indemnitees as incurred,
within ten (10) Business Days of written notice thereof to the Company, which
notice shall be delivered no more frequently than on a monthly basis
(regardless of whether it is ultimately determined that an Indemnitee is not
entitled to indemnification hereunder; provided, that the Company may require
such Indemnitee to undertake to reimburse all such fees and expenses to the
extent it is finally judicially determined that such Indemnitee is not
entitled to indemnification hereunder).
ARTICLE VI.
MISCELLANEOUS
6.1 Entire Agreement. This Agreement, together with the Exhibits and
Schedules hereto and the Transaction Documents, contains the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with
respect to such matters.
6.2 Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally, (ii) upon receipt, when sent by facsimile, provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party (if received by or before 5:30 p.m. Eastern
Time where such notice is received) or the first (1st) business day following
such delivery (if received after 5:30 p.m. Eastern Time where such notice is
received) or (iii) one (1) business day after deposit with a nationally
recognized overnight courier, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
(i) If to the Company:
Datalink.Net, Inc.
1735 Technology Drive
Suite 790
San Jose, California 95110
Attention: Anthony LaPine
Chairman and Chief Executive Officer
Telephone: (408) 367-1700
Facsimile: (408) 367-1701
<PAGE>
with a copy to:
Greenberg, Glusker, Fields, Claman & Machtinger LLP
1900 Avenue of the Stars
Suite 2100
Los Angeles, California 90067
Attention: Paula J. Peters, Esq.
Telephone: (310) 201-7428
Facsimile: (310) 553-0667
(ii) If to Brown Simpson Strategic Growth Fund L.P. or Brown
Simpson Strategic Growth Fund, Ltd., to:
Brown Simpson Asset Management, LLC
152 West 57th Street, 40th Floor
New York, New York 10029
Attention: Peter D. Greene
Telephone: (212) 247-8200
Facsimile: (212) 247-1329
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Attention: James E. Kaye, Esq.
Telephone: (212) 872-1000
Facsimile: (212) 872-1002
Each party shall provide written notice to the other parties of any change in
address or facsimile number in accordance with the provisions hereof.
6.3 Amendments; Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by both the Company and each of the Purchasers or, in the case of a
waiver, by the party against whom a waiver of any such provision is sought.
No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in the
future or a waiver of any other provision, condition or requirement hereof,
nor shall any delay or omission of any party to exercise any right hereunder
in any manner impair the exercise of any such right accruing to it thereafter.
Notwithstanding the foregoing, no such amendment shall be effective to the
extent that it applies to less than all of the holders of the Preferred Stock
outstanding. The Company shall not offer or pay any consideration to a
Purchaser for consenting to such an amendment or waiver unless the same
consideration is offered to each Purchaser and the same consideration is paid
to each Purchaser which consents to such amendment or waiver.
6.4 Headings. The table of contents, titles and headings contained
herein are for convenience only, do not constitute a part of this Agreement
and shall not be deemed to limit or affect any of the provisions hereof.
6.5 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of each of the
Purchasers. The Purchasers may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Company. This
provision shall not limit a Purchaser's right to transfer securities in
accordance with all of the terms of this Agreement or the Transaction
Documents.
<PAGE>
6.6 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person.
6.7 Governing Law. The corporate laws of the State of Nevada shall
govern all issues concerning the relative rights of the Company and the
Purchasers as its stockholders. All other questions concerning this Agreement
shall be governed by and construed and enforced in accordance with the
internal laws of the State of New York without regard to the principles of
conflicts of law thereof. Each party hereby irrevocably submits to the
nonexclusive jurisdiction of the state and federal courts sitting in the City
of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, or that such suit, action or
proceeding is improper. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law. EACH PARTY
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A
JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.
6.8 Survival. The representations and warranties of the Company and
the Purchasers contained in Sections 2.1 and 2.2, the agreements and covenants
set forth in Article III, and the indemnification provisions set forth in
Article V, shall survive the Closing and any conversion of the Preferred Stock
or exercise of the Warrants regardless of any investigation made by or on
behalf of the Purchasers or by or on behalf of the Company, except that, in
the case of representations and warranties such survival shall be limited to
the period of six (6) years following the Closing Date on which they were made
or deemed to have been made (other than with respect to any claim by a third
party against the party to this Agreement who seeks to assert a claim based on
such representations and warranties). This Section shall have no effect on
the survival of the indemnification provisions of the Registration Rights
Agreement.
6.9 Counterparts. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed
by each party and delivered to the other parties, it being understood that
both parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission, such signature shall create
a valid and binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature page were an original thereof.
6.10 Publicity. The Company and the Purchasers shall consult with
each other in issuing any press releases or otherwise making public statements
with respect to the transactions contemplated hereby and no party shall issue
any such press release or otherwise make any such public statement without the
prior written consent of the other parties, which consent shall not be
unreasonably withheld or delayed, except that no prior consent shall be
required if such disclosure is required by law, in which such case the
disclosing party shall provide the other parties with prior notice of such
public statement. The Company shall not publicly or otherwise disclose the
names of any of the Purchasers without each such Purchaser's prior written
consent, which consent shall not be unreasonably withheld. The Purchasers and
their affiliated companies shall, without further cost, have the right to use
in its advertising, marketing or other similar materials, the Company's logo
<PAGE>
and trademarks and all or parts of the Company's press releases that focus on
the transactions contemplated hereby forming the subject matter of this
Agreement or which make reference to the transactions contemplated hereby.
The Purchasers understand that this grant by the Company only waives
objections that the Company might have to the use of such materials by the
Purchasers and in no way constitutes a representation by the Company that
references in such materials to the activities of third-parties have been
cleared or constitute a fair use.
6.11 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affected or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
6.12 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the
Purchasers will be entitled to specific performance of the obligations of the
Company under this Agreement or the Transaction Documents without the showing
of economic loss and without any bond or other security being required. The
Company and each of the Purchasers (severally and not jointly) agree that
monetary damages would not be adequate compensation for any loss incurred by
reason of any breach of its obligations described in the foregoing sentence
and hereby agree to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.
6.13 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser hereunder are several and not joint with the
obligations of the other Purchaser hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at the Closing, and no action taken by any Purchaser
pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of Person, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this
Agreement. Each Purchaser shall be entitled to protect and enforce its
rights, including without limitation the rights arising out of this Agreement
or out of the Transaction Documents, and it shall not be necessary for any
other Purchaser to be joined as an additional party in any proceeding for such
purpose.
6.14 Payment Set Aside. To the extent that the Company makes a
payment or payments to the Purchasers hereunder or pursuant to the Transaction
Documents or the Purchasers enforce or exercise their rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement
or exercise or any part thereof are subsequently invalidated, declared
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a
trustee, receiver or any other Person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and
continued in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.
6.15 Further Assurances. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and
<PAGE>
documents, as the other parties may reasonably request in order to carry out
the intent and accomplish the purposes of this Agreement and the consummation
of the transactions contemplated hereby.
[SIGNATURE PAGES FOLLOW]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized persons
as of the date first indicated above.
DATALINK.NET, INC.
By: /s/ Anthony LaPine
Name: Anthony LaPine
Title: CEO
<PAGE>
BROWN SIMPSON STRATEGIC
GROWTH FUND, LTD.
By: Brown Simpson Asset Management, LLC
By: /s/ Evan Levine
Name: Evan Levine
Title: Principal
BROWN SIMPSON STRATEGIC
GROWTH FUND, L.P.
By: Brown Simpson Capital, LLC
its general partner
By: /s/ Evan Levine
Name: Evan Levine
Title: Principal
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this Agreement ) is made and
entered into as of February 9, 2000, among Datalink.Net, Inc., a Nevada
corporation (the Company ), and the parties who have executed this Agreement
and whose names appear as the purchasers on Schedule I hereto (each such
purchaser listed on Schedule I hereto is sometimes individually referred to
herein as a Purchaser , and all such purchasers are sometimes collectively
referred to herein as the Purchasers ).
This Agreement is made pursuant to the Securities Purchase
Agreement, dated as of the date hereof among the Company and the Purchasers
(the Purchase Agreement ).
The Company and the Purchasers hereby agree as follows:
1. Definitions.
Capitalized terms used and not otherwise defined herein shall have
the meanings given such terms in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
Advice has the meaning set forth in Section 3(o) hereof.
Affiliate means, with respect to any Person, any other Person
that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, control ,
when used with respect to any Person, means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities,
by contract or otherwise; and the terms affiliated , controlling and
controlled have meanings correlative to the foregoing.
AMEX means the American Stock Exchange.
Business Day means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
State of New York generally are authorized or required by law or other
government action to close.
Certificate of Designation means the Certificate of Designation of
the Company with respect to the Securities.
Closing Date shall mean the Closing Date as defined in the
Purchase Agreement.
Commission means the Securities and Exchange Commission.
Common Stock means the Company s Common Stock, par value $0.01 per
share.
Effectiveness Date means the earlier of (i) the 5th Business Day
after the Company has received notice (written or oral) from the Commission
that the Commission staff will not be reviewing the Registration Statement or
<PAGE>
has no further comments on the Registration Statement or (ii) the date that
the Commission declares the Registration Statement Effective.
Effectiveness Period has the meaning set forth in Section 2(a)
hereof.
Event has the meaning set forth in Section 2(d) hereof.
Exchange Act means the Securities Exchange Act of 1934, as
amended.
Filing Date means as soon as practicable after the Closing Date
but in no event later than the 30th day following the Closing Date.
Holder or Holders means the holder or holders, as the case may be,
from time to time of Registrable Securities.
Indemnified Party has the meaning set forth in Section 5(c)
hereof.
Indemnifying Party has the meaning set forth in Section 5(c)
hereof.
Initial Registration Statement has the meaning set forth in
Section 2(a) hereof.
Losses has the meaning set forth in Section 5(a) hereof.
Majority Holders means the Holders of at least sixty (60%) percent
of the Registrable Securities.
Person means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
Proceeding means an action, claim, suit, arbitration,
investigation or proceeding (including, without limitation, an investigation
or partial proceeding, such as a deposition), whether commenced or threatened.
Prospectus means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.
Registrable Securities means the shares of Common Stock issued or
issuable (i) upon conversion of or with respect to the Securities, (ii) upon
exercise of the Warrants and (iii) otherwise received by the Purchasers in
connection with the transactions contemplated by the Purchase Agreement, and
shall include any shares of the Company s capital stock issued with respect to
(i), (ii) or (iii) as a result of any stock split, stock dividend,
recapitalization, exchange or similar event or otherwise.
Registration Delay Payment has the meaning set forth in Section
2(d) hereof.
<PAGE>
Registration Statement means the Initial Registration Statement
and any additional registration statements contemplated by Sections 2(a), 2(b)
and 6(d), including (in each case) the Prospectus, amendments and supplements
to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference in such registration statement.
Rule 144 means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
Rule 158 means Rule 158 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
Rule 415 means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
Securities means the Company s Series B Convertible Preferred
Stock issuable pursuant to the Purchase Agreement.
Securities Act means the Securities Act of 1933, as amended.
Special Counsel means one special counsel to the Holders.
Trading Day means a day on which AMEX (or in the event the Common
Stock is not traded on AMEX, such other securities market on which the Common
Stock is listed) is open for trading.
Underlying Shares means the shares of Common Stock issuable upon
conversion of the Securities and exercise of the Warrants.
Underwritten Registration or Underwritten Offering means a
registration in connection with which securities of the Company are sold to an
underwriter for reoffering to the public pursuant to an effective registration
statement, whether on a firm commitment or best efforts basis.
Warrants means the warrants issuable pursuant to the Purchase
Agreement.
2. Registration Requirements.
(a) Filing and Effectiveness Obligations. On or prior to the
Filing Date, the Company shall prepare and file with the Commission a
Registration Statement (the Initial Registration Statement ) which shall
cover all Registrable Securities for an offering to be made on a continuous
basis pursuant to a Shelf registration statement under Rule 415. The
Initial Registration Statement shall be on Form S-3 or any successor form
(except if the Company is not then eligible to register for resale the
Registrable Securities on Form S-3, in which case such registration shall be
on another appropriate form in accordance herewith, subject to the reasonable
consent of the Majority Holders). The Company shall (i) not permit any
securities other than the Registrable Securities to be included in the Initial
Registration Statement and (ii) use its best efforts to cause the Initial
Registration Statement to be declared effective under the Securities Act as
promptly as possible after the filing thereof, and to keep such Initial
Registration Statement continuously effective under the Securities Act
<PAGE>
(subject to Section 3(r)) from the Effectiveness Date until the date which is
five (5) years after the date that such Initial Registration Statement is
declared effective by the Commission or such earlier date when all Registrable
Securities covered by such Initial Registration Statement have been sold or
may be sold without volume restrictions pursuant to Rule 144 as determined by
counsel to the Company pursuant to a written opinion letter, addressed to the
Holders and the Company s transfer agent to such effect (the Effectiveness
Period ). The number of shares of Common Stock initially included in the
Initial Registration Statement shall be no less than 100% of the sum of the
number of shares of Common Stock that are then issuable upon conversion of the
Securities (based on the Conversion Price (as defined in the Certificate of
Designation) as would then be in effect at such time) and the exercise of the
Warrants, without regard to any limitation on the Holder s ability to convert
the Securities or exercise the Warrants.
(b) Underwritten Offering. In addition to the Initial
Registration Statement, at any time when a Registration Statement covering
the Registrable Securities is not effective (during any period in which a
Registration Statement is required to be effective pursuant to the terms
hereof) if the Holders of a majority of the Registrable Securities so elect on
or after August 9, 2000, an offering of Registrable Securities pursuant to
such Registration Statement may be effected on no more than one (1) occasion
in the form of an Underwritten Offering. In such event, and if the managing
underwriters advise the Company and such Holders in writing that in their
opinion the amount of Registrable Securities proposed to be sold in such
Underwritten Offering exceeds the amount of Registrable Securities which can
be sold in such Underwritten Offering, there shall be included in such
Underwritten Offering the amount of such Registrable Securities which in the
opinion of such managing underwriters can be sold, and such amount shall be
allocated pro rata among the Holders proposing to sell Registrable Securities
in such Underwritten Offering.
(c) Underwriter. If any of the Registrable Securities are to
be sold in an Underwritten Offering, the investment banker in interest that
will administer the offering will be selected by the Holders of a majority of
the Registrable Securities included in such offering. No Holder may
participate in any Underwritten Offering hereunder unless such Holder (i)
agrees to sell its Registrable Securities on the basis provided in any
underwriting agreements approved by the Persons entitled hereunder to approve
such arrangements and (ii) completes and executes all questionnaires, powers
of attorney, indemnities, underwriting agreements and other documents required
under the terms of such arrangements.
(d) Penalties. If (i) the Initial Registration Statement
covering all the applicable Registrable Securities and required to be filed by
the Company pursuant to this Agreement is not (A) filed with the Commission on
or before the Filing Date, (ii) if the Company fails to respond, in a
commercially reasonable manner, to any comments made by the Commission with
respect to the Initial Registration Statement within ten (10) Business Days
following the receipt thereof, (iii) if, on any day after the Registration
Statement has been declared effective by the Commission and no Permitted Delay
pursuant to Section 3(b) is in effect, sales of all the Registrable Securities
required to be included on a Registration Statement cannot be made pursuant to
the Registration Statement (including, without limitation, because of a
failure to keep the Registration Statement effective, to disclose such
information as is necessary for sales to be made pursuant to the Registration
Statement, or to register sufficient shares of Common Stock) or (iv) the
Company shall otherwise fail to file a Registration Statement required by
Section 2(a) hereof, (each such event specified in (i), (ii), (iii) and (iv)
above, an Event ), then, as partial relief for the damages to any Holder by
reason of any such delay in or reduction of its ability to sell the
<PAGE>
Registrable Securities (which remedy shall not be exclusive of any other
remedies available at law or in equity), the Company shall pay to each Holder,
upon the occurrence of each such violation, an amount (a Registration Delay
Payment) equal to the product of (a) the purchase price of such Holder s
Securities (as set forth in Schedule I to the Purchase Agreement), (b) two
one-hundredths (.020) and (c) the number of months (rounded up to the nearest
whole month in the event of partial months) that such Event has occurred and
is continuing. The Company shall pay such Registration Delay Payments to each
Holder in cash on the last Business Day of each month during which an Event
has occurred and is continuing. In the event the Company fails to make a
Registration Delay Payment within ten (10) Business Days of the date such
Registration Delay Payment is due, such Registration Delay Payment shall bear
interest at the rate of 2.0% per month (rounded up to the nearest whole month
in the event of partial months) until paid in full.
3. Registration Procedures.
In connection with the Company s registration obligations
hereunder, the Company shall:
(a) Preparation of Registration Statement. Prepare and file
with the Commission on or prior to the Filing Date a Registration Statement on
Form S-3 or its successor form (or if the Company is not then eligible to
register for resale the Registrable Securities on Form S-3 such registration
shall be on another appropriate form in accordance herewith (which shall
include a Plan of Distribution substantially in the form of Exhibit A annexed
hereto, unless in connection with an Underwritten Offering) or in connection
with an Underwritten Offering hereunder, such other form agreed to by the
Company and by a majority-in-interest of Holders of Registrable Securities to
be covered by such Registration Statement) (except if otherwise directed by
the Majority Holders), and cause the Registration Statement to become
effective and remain effective as provided herein; provided, however, that not
less than three (3) Business Days prior to the filing of the Registration
Statement or any related Prospectus or any amendment or supplement thereto
(including any document that would be incorporated therein by reference), the
Company shall, if reasonably practicable (i) furnish to the Holders, their
Special Counsel and any managing underwriters, copies of all such documents
proposed to be filed (including documents incorporated by reference), which
documents will be subject to the review of such Holders, their Special Counsel
and such managing underwriters, and (ii) cause its officers and directors,
counsel and independent certified public accountants to respond to such
inquiries as shall be necessary, in the reasonable opinion of respective
counsel to such Holders and such underwriters, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file the Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Majority Holders, their Special Counsel or
any managing underwriters shall reasonably object, and will not request
acceleration of such Registration Statement without prior notice to such
counsel. The sections of such Registration Statement covering information
with respect to the Holders, the Holders beneficial ownership of securities
of the Company or the Holders intended method of disposition of Registrable
Securities shall conform to the information provided to the Company by each of
the Holders.
(b) Amendments. (i) Prepare and file with the Commission, in
accordance with the requirements and in the time periods set forth in the
Securities Act, such amendments, including post-effective amendments, to the
Registration Statement as may be necessary to keep the Registration Statement
continuously effective for the Effectiveness Period and prepare and file with
the Commission such additional Registration Statements as are required to be
filed hereunder in order to register for resale under the Securities Act all
<PAGE>
of the Registrable Securities (a Permitted Dealy ), (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus
supplement, and as so supplemented or amended to be filed pursuant to Rule 424
(or any similar provisions then in force) promulgated under the Securities
Act, (iii) respond as promptly as possible to any comments received from the
Commission with respect to the Registration Statement or any amendment thereto
and as promptly as practicable, but in no event later than ten (10) Business
Days, and as promptly as possible provide the Holders true and complete copies
of all correspondence from and to the Commission relating to the Registration
Statement, and (iv) comply in all material respects with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by
the Holders thereof set forth in the Registration Statement as so amended or
in such Prospectus as so supplemented. In the event the number of shares
available under a Registration Statement filed pursuant to this Agreement is
insufficient to cover 100% of the Registrable Securities issued or issuable
upon conversion of the Securities and exercise of the Warrants, the Company
shall amend the Registration Statement, or file a new Registration Statement
(on the short form available therefor, if applicable), or both, so as to cover
100% of the Registrable Securities, in each case as soon as practicable, but
in any event within twenty (20) Business Days after the necessity therefor
arises (based on the Conversion Price of the Securities and other relevant
factors on which the Company reasonably elects to rely). The Company shall
use its best efforts to cause such amendment and/or new Registration Statement
to become effective as soon as practicable following the filing thereof, but
in no event later than ninety (90) days after the date on which the Company
reasonably first determines (or reasonably should have determined) the need
therefor.
(c) Notifications. Notify the Holders of Registrable
Securities to be sold, their Special Counsel, and any managing underwriters,
as promptly as possible (and, in the case of (i)(A) below, not less than five
(5) days prior to such filing and, in the case of (i)(C) below, not later than
the first Business Day after effectiveness) and (if requested by any such
Person) confirm such notice in writing no later than one (1) Business Day
following the day (i) (A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is proposed to be
filed, (B) when the Commission notifies the Company whether there will be a
review of such Registration Statement and whenever the Commission comments in
writing on such Registration Statement and (C) with respect to the
Registration Statement or any post-effective amendment, when the same has
become effective, (ii) of any request by the Commission or any other federal
or state governmental authority for amendments or supplements to the
Registration Statement or Prospectus or for additional information, (iii) of
the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement covering any or all of the Registrable
Securities or the initiation of any Proceedings for that purpose, (iv) any of
the representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated hereby ceases to be true
and correct in all material respects, (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose, (vi) of the occurrence of any event that makes any statement made in
the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect
or that requires any revisions to the Registration Statement, Prospectus or
other documents so that, in the case of the Registration Statement or the
Prospectus, as the case may be, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
<PAGE>
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading and (vii) the beginning and end of
a black-out period pursuant to Section 3(r).
(d) Suspensions. Use its best efforts to avoid the issuance
of, or, if issued, obtain the withdrawal of (i) any order suspending the
effectiveness of the Registration Statement or (ii) any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable moment.
(e) Supplements and Post-Effective Amendments. If requested
by any managing underwriter or the Holders of a majority in interest of the
Registrable Securities to be sold in connection with an Underwritten Offering,
(i) promptly incorporate in a Prospectus supplement or post-effective
amendment to the Registration Statement such information as the Company
reasonably agrees should be included therein and (ii) make all required
filings of such Prospectus supplement or such post-effective amendment as soon
as practicable after the Company has received notification of the matters to
be incorporated in such Prospectus supplement or post-effective amendment;
provided, however, that the Company shall not be required to take any action
pursuant to this Section 3(e) that would, in the written opinion of counsel
for the Company (addressed to counsel to the Holder), violate applicable law.
(f) Copies of Registration Statement. Furnish to each Holder,
their Special Counsel, and any managing underwriters, without charge, at least
one conformed copy of each Registration Statement and each amendment thereto,
including financial statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference, and all exhibits to the extent
requested by such Person (including those previously furnished or incorporated
by reference) promptly after the filing of such documents with the Commission.
(g) Copies of Prospectus. Promptly deliver to each Holder,
their Special Counsel, and any underwriters, without charge, as many copies of
the Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may reasonably request; and
the Company hereby consents to the use of such Prospectus and each amendment
or supplement thereto by each of the selling Holders and any underwriters in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus and any amendment or supplement thereto.
(h) Blue Sky. Prior to any public offering of Registrable
Securities, use its best efforts to register or qualify or cooperate with the
selling Holders, their Special Counsel and any underwriters in connection with
the registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any Holder or underwriter requests in writing, to keep each such registration
or qualification (or exemption therefrom) effective during the Effectiveness
Period and to do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Registrable Securities
covered by a Registration Statement; provided, however, that the Company shall
not be required to qualify generally to do business in any jurisdiction where
it is not then so qualified or to take any action that would subject it to
general service of process in any such jurisdiction where it is not then so
subject or subject the Company to any material tax in any such jurisdiction
where it is not then so subject.
(i) Certificates. Cooperate with the Holders and any managing
underwriters to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold pursuant to a Registration
Statement, which certificates shall be free, to the extent permitted by
<PAGE>
applicable law and the Purchase Agreement, of all restrictive legends, and to
enable such Registrable Securities to be in such denominations and registered
in such names as any such managing underwriters or Holders may request at
least two (2) Business Days prior to any sale of Registrable Securities.
(j) Supplements and Amendments. Upon the occurrence of any
event contemplated by Section 3(c)(vi), as promptly as possible, prepare a
supplement or amendment, including a post-effective amendment, to the
Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference, and
file any other required document so that, as thereafter delivered, neither the
Registration Statement nor such Prospectus will contain an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(k) Listing. Cause all Registrable Securities relating to
such Registration Statement to be listed on AMEX and any other securities
exchange, quotation system, market or over-the-counter bulletin board, if any,
on which similar securities issued by the Company are then listed or quoted as
and when required pursuant to the Purchase Agreement.
(l) Underwriting Agreement. Enter into such agreements
(including an underwriting agreement in form, scope and substance as is
customary in Underwritten Offerings) and take all such other actions in
connection therewith (including those reasonably requested by any managing
underwriters and the Holders of a majority of the Registrable Securities being
sold) in order to expedite or facilitate the disposition of such Registrable
Securities, and whether or not an underwriting agreement is entered into, (i)
make such representations and warranties to such Holders and such underwriters
as are customarily made by issuers to underwriters in underwritten public
offerings, and confirm the same if and when requested, (ii) in the case of an
Underwritten Offering obtain and deliver copies thereof to the managing
underwriters, if any, or in the case of non-Underwritten Offerings, if
reasonably requested by the selling Holders, obtain and deliver copies thereof
to such selling Holders, of opinions of counsel to the Company and updates
thereof addressed to each such underwriter, in form, scope and substance
reasonably satisfactory to any such managing underwriters and Special Counsel
to the selling Holders covering the matters customarily covered in opinions
requested in Underwritten Offerings and such other matters as may be
reasonably requested by such Special Counsel and underwriters, (iii)
immediately prior to the effectiveness of the Registration Statement, and, in
the case of an Underwritten Offering, at the time of delivery of any
Registrable Securities sold pursuant thereto, and, in the case of
non-Underwritten Offerings, at such time as the selling Holders may reasonably
request, obtain and deliver copies to the Holders and the managing
underwriters, if any, of cold comfort letters and updates thereof from the
independent certified public accountants of the Company (and, if required, any
other independent certified public accountants of any subsidiary of the
Company or of any business acquired by the Company for which financial
statements and financial data is, or is required to be, included in the
Registration Statement), addressed to each of the underwriters, if any, in
form and substance as are customary in connection with Underwritten Offerings,
(iv) if an underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable to the selling
Holders and the underwriters, if any, than those set forth in Section 5 (or
such other provisions and procedures acceptable to the managing underwriters,
if any, and Holders of a majority of Registrable Securities participating in
such Underwritten Offering, and (v) deliver such documents and certificates as
may be reasonably requested by the Holders of a majority of the Registrable
Securities being sold, their Special Counsel and any managing underwriters to
<PAGE>
evidence the continued validity of the representations and warranties made
pursuant to clause (i) of this Section 3(1) and to evidence compliance with
any customary conditions contained in the underwriting agreement or other
agreement entered into by the Company.
(m) Due Diligence. Make available for inspection by the
selling Holders, any representative of such Holders, any underwriter
participating in any disposition of Registrable Securities, and any attorney
or accountant retained by such selling Holders or underwriters, at the offices
where normally kept, during reasonable business hours, all financial and other
records, pertinent corporate documents and properties of the Company and its
subsidiaries, and cause the officers, directors, agents and employees of the
Company and its subsidiaries to supply all information in each case reasonably
requested by any such Holder, representative, underwriter, attorney or
accountant in connection with the Registration Statement; provided, however,
that if any information is determined in good faith by the Company (in
writing) to be of a confidential nature at the time of delivery of such
information, then prior to delivery of such information, the Company and the
Holders shall enter into a confidentiality agreement reasonably acceptable to
the Company and the Holders providing that such information shall be kept
confidential, unless (i) disclosure of such information is required by court
or administrative order or is necessary to respond to inquiries of regulatory
authorities (provided, however, that the Company shall be given notice of any
such pending disclosure so that the Company may seek a protective order), (ii)
disclosure of such information, in the opinion of counsel to such Person, is
required by law, (iii) such information becomes generally available to the
public other than as a result of a disclosure or failure to safeguard by such
Person, or (iv) such information becomes available to such Person from a
source other than the Company and such source is not known by such Person to
be bound by a confidentiality agreement with the Company.
(n) Earnings Statement. Comply in all material respects with
all applicable rules and regulations of the Commission and make generally
available to its securityholders earning statements satisfying the provisions
of Section 11(a) of the Securities Act and Rule 158 not later than 45 days
after the end of any 3-month period (or 90 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing at the end of any
fiscal quarter in which Registrable Securities are sold to underwriters in a
firm commitment or best efforts Underwritten Offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Company after the effective date of the Registration
Statement, which statement shall conform to the requirements of Rule 158.
(o) Information. The Company may require each selling Holder
to furnish to the Company information regarding such Holder and the
distribution of such Registrable Securities as is required by law to be
disclosed in the Registration Statement, and the Company may exclude from such
registration the Registrable Securities of any such Holder who unreasonably
fails to furnish such information within a reasonable time after receiving
such request.
The Company shall hold in confidence and not make any disclosure
of information concerning a Holder provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this Agreement or any other agreement. The Company
agrees that it shall, upon learning that disclosure of such information
<PAGE>
concerning a Holder is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to such
Holder prior to making such disclosure, and allow the Holder, at its expense,
to undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, such information.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder
shall have the right to require (if such reference to such Holder by name or
otherwise is not required by the Securities Act or any similar federal statute
then in force) the deletion of the reference to such Holder in any amendment
or supplement to the Registration Statement filed or prepared subsequent to
the time that such reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(g) and notice from the Company that such Registration Statement and
any post-effective amendments thereto have become effective as contemplated by
Section 3(c) and (ii) it and its officers, directors or Affiliates, if any,
will comply with the prospectus delivery requirements of the Securities Act as
applicable to them in connection with sales of Registrable Securities pursuant
to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence
of any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv),
3(c)(v), 3(c)(vi) or 3(c)(vii), such Holder will forthwith discontinue
disposition of such Registrable Securities under the Registration Statement
until such Holder s receipt of the copies of the supplemented Prospectus
and/or amended Registration Statement contemplated by Section 3(j), or until
it is advised in writing (the Advice ) by the Company that the use of the
applicable Prospectus may be resumed, and, in either case, has received copies
of any additional or supplemental filings that are incorporated or deemed to
be incorporated by reference in such Prospectus or Registration Statement.
Notwithstanding anything to the contrary contained herein, the Company shall
cause its transfer agent to deliver unlegended shares of Common Stock to a
transferee of a Holder in accordance with the terms of the Purchase Agreement
in connection with any sale of Registrable Securities with respect to which a
Holder has entered into a contract for sale prior to the Holder s receipt of a
notice from the Company of the happening of any event of the kind described in
Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v), 3(c)(vi) or 3(c)(vii) and for
which the Holder has not yet settled.
(p) Responses to the Commission. The Company agrees to
respond fully and completely to any and all comments on a Registration
Statement received from the Commission staff as promptly as possible but, for
non-Underwritten Offerings, in no event later than ten (10) Business Days of
the receipt of such comments, regardless of whether such comments are in oral
or written form.
(q) Confirmation of Effectiveness. Within two (2) Business
Days after a Registration Statement which covers applicable Registrable
Securities is ordered effective by the Commission, the Company shall deliver,
and shall cause legal counsel for the Company to deliver, to the transfer
agent for such Registrable Securities (with copies to the Holders whose
Registrable Securities are included in such Registration Statement)
confirmation that such Registration Statement has been declared effective by
the Commission in the form attached hereto as Exhibit B.
<PAGE>
(r) Black-out Periods. Subject to the last sentence of this
Section 3(r), the Company may by written notice require that the Holders
immediately cease sales of Registrable Securities (for a period not to exceed
twenty (20) consecutive days in any one instance and for a period not to
exceed forty (40) calendar days in any twelve-month period) pursuant to a
Registration Statement at any time that (i) the Company becomes engaged in a
business activity or negotiation which is not disclosed in a Registration
Statement (or the prospectus included therein) which the Company reasonably
believes must be disclosed therein under applicable law and which the Company
desires to keep confidential for business purposes, (ii) the Company
determines that a particular disclosure so determined to be required to be
disclosed therein would be premature or would adversely affect the Company or
its business or prospects or (iii) the Registration Statement can no longer be
used under the existing rules and regulations promulgated under the Securities
Act (each of (i), (ii) or (iii), a Material Condition ). The Company shall
not be required to disclose to the Holders which of the reasons specified in
(i), (ii) or (iii) above is the basis for requiring a suspension of sales due
to the occurrence of a Material Condition. The Company will use its
commercially reasonable best efforts to ensure that the use of the
Registration Statement (and the prospectus included therein) may be resumed as
soon as it is practicable. The Company may not suspend sales of Registrable
Securities under a Registration Statement pursuant to this Section 3(r) more
than two times during any twelve-month period. 4. Registration
Expenses.
All fees and expenses incident to the performance of or compliance
with this Agreement by the Company shall be borne by the Company, whether or
not pursuant to an Underwritten Offering and whether or not the Registration
Statement is filed or becomes effective and whether or not any Registrable
Securities are sold pursuant to the Registration Statement. The fees and
expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without
limitation, fees and expenses (A) with respect to filings required to be made
with AMEX and each other securities exchange or market on which Registrable
Securities are required hereunder to be listed or quoted and (B) in compliance
with state securities or Blue Sky laws (including, without limitation, fees
and disbursements of counsel for the Holders in connection with Blue Sky
qualifications of the Registrable Securities and determination of the
eligibility of the Registrable Securities for investment under the laws of
such jurisdictions as the managing underwriters, if any, or the Holders of a
majority of Registrable Securities may designate)), (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses if the printing of
prospectuses is requested by the managing underwriters, if any, or by the
Holders of a majority of the Registrable Securities included in the
Registration Statement), (iii) messenger, telephone and delivery expenses,
(iv) fees and disbursements of counsel for the Company, (v) Securities Act
liability insurance, if the Company so desires such insurance, and (vi) fees
and expenses of all other Persons retained by the Company in connection with
the consummation of the transactions contemplated by this Agreement. In
addition, the Company shall be responsible for all of its internal expenses
incurred in connection with the consummation of the transactions contemplated
by this Agreement (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the expense
of any annual audit, and the fees and expenses incurred in connection with the
listing of the Registrable Securities on any securities exchange, system or
market as required hereunder. The Holders shall pay the fees and expenses of
the Special Counsel retained by them, any underwriting discounts or
commissions and any transfer or similar taxes in connection with the sale of
Registrable Securities.
<PAGE>
5. Indemnification.
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents (including any underwriters
retained by such Holder in connection with the offer and sale of Registrable
Securities), brokers (including brokers who offer and sell Registrable
Securities as principal as a result of a pledge or any failure to perform
under a margin call of Common Stock), investment advisors and employees of
each such Holder, each Person who controls any such Holder (within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the
officers, directors, agents and employees of each such controlling Person, to
the fullest extent permitted by applicable law, from and against any and all
joint or several losses, claims, damages, liabilities, costs (including,
without limitation, costs of preparation and attorneys fees) and expenses
(collectively, together with Proceedings by any regulatory or self-regulatory
organization, whether commenced or threatened, Losses ), as incurred, arising
out of or relating to (i) any untrue or alleged untrue statement of a material
fact contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
Prospectus, or arising out of or relating to any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
amendment or supplement thereto, in light of the circumstances under which
they were made) not misleading, except to the extent, but only to the extent,
that such untrue statements or omissions are based solely upon and in
conformity with information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, which information was
reasonably relied on by the Company for use therein or to the extent that such
information relates to such Holder or such Holder s proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement,
such Prospectus or such form of prospectus or in any amendment or supplement
thereto (provided that the Company amended any disclosure with respect to the
method of distribution upon written notice from the Holders that such section
of the Prospectus should be revised in any way) or (ii) any violation or
alleged violation by the Company of the Securities Act, the Exchange Act, any
other law, including, without limitation, any state securities law, or any
rule or regulation thereunder relating to the offer or sale of Registrable
Securities. The Company shall not, however, be liable to any Holder for any
Losses with respect to any untrue or alleged untrue statement of material fact
or omission or alleged omission of material fact if such statement or omission
was made in a preliminary Prospectus and such Holder did not receive a copy of
the final Prospectus (or any amendment or supplement thereto) at or prior to
the confirmation of the sale of the Registrable Securities in any case where
such delivery is required by the Securities Act and the untrue or alleged
untrue statement of material fact or omission or alleged omission of material
fact contained in such preliminary Prospectus was corrected in the final
Prospectus (or any amendment or supplement thereto), unless the failure to
deliver such final Prospectus (as amended or supplemented) was a result of
noncompliance by the Company with Section 3(g) of this Agreement. The Company
shall notify the Holders promptly of the institution, threat or assertion of
any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally
and not jointly, indemnify and hold harmless the Company, its officers,
directors, agents and employees, each Person who controls the Company (within
the meaning of Section 15 of the Securities Act and Section 20 of the Exchange
Act), and the officers, directors, agents and employees of such controlling
Persons, to the fullest extent permitted by applicable law, from and against
<PAGE>
all Losses, as incurred, arising solely out of or based solely upon any untrue
statement of a material fact contained in the Registration Statement, any
Prospectus, or any form of prospectus, or arising solely out of or based
solely upon any omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading to the extent, but
only to the extent, that such untrue statement or omission is contained in any
information so furnished in writing by such Holder to the Company specifically
for inclusion in the Registration Statement or such Prospectus and that such
information was reasonably relied upon by the Company for use in the
Registration Statement, such Prospectus or such form of prospectus or to the
extent that such information relates to such Holder or such Holder s proposed
method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Holder expressly for use in the
Registration Statement, such Prospectus or such form of prospectus; provided,
however, that the indemnity agreement contained in this Section 5(b) shall not
apply to amounts paid in settlement of any Losses if such settlement is
effected without the prior written consent of such Holder. In no event shall
the liability of any selling Holder hereunder be greater in amount than the
dollar amount of the net proceeds received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity
hereunder (an Indemnified Party ), such Indemnified Party promptly shall
notify the Person from whom indemnity is sought (the Indemnifying Party ) in
writing, and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to the Indemnified
Party and the payment of all fees and expenses incurred in connection with
defense thereof; provided, however, that the failure of any Indemnified Party
to give such notice shall not relieve the Indemnifying Party of its
obligations or liabilities pursuant to this Agreement, except (and only) to
the extent that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or further review)
that such failure shall have proximately and materially adversely prejudiced
the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Indemnified Parties unless: (i) the Indemnifying Party
has agreed in writing to pay such fees and expenses; (ii) the Indemnifying
Party shall have failed promptly to assume the defense of such Proceeding and
to employ counsel reasonably satisfactory to such Indemnified Party in any
such Proceeding; or (iii) the named parties to any such Proceeding (including
any impleaded parties) include both such Indemnified Party and the
Indemnifying Party, and such Indemnified Party shall have been advised by
counsel that a conflict of interest is likely to exist if the same counsel
were to represent such Indemnified Party and the Indemnifying Party (in which
case, if such Indemnified Party notifies the Indemnifying Party in writing
that it elects to employ separate counsel at the expense of the Indemnifying
Party, the Indemnifying Party shall not have the right to assume the defense
thereof and such counsel shall be at the reasonable expense of the
Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such Proceeding.
<PAGE>
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten (10) Business Days of written notice thereof to the
Indemnifying Party, which notice shall be delivered no more frequently than on
a monthly basis (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).
(d) Contribution. If a claim for indemnification under
Section 5(a) or 5(b) is unavailable to an Indemnified Party because of a
failure or refusal of a court of competent jurisdiction to enforce such
indemnification in accordance with its terms (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission of a material fact, has been
taken or made by, or relates to information supplied by, such Indemnifying
Party or Indemnified Party, and the parties relative intent, knowledge,
access to information and opportunity to correct or prevent such action,
statement or omission. The amount paid or payable by a party as a result of
any Losses shall be deemed to include, subject to the limitations set forth in
Section 5(c), any reasonable attorneys or other reasonable fees or expenses
incurred by such party in connection with any Proceeding to the extent such
party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms. In no event shall any selling Holder be required
to contribute an amount under this Section 5(d) in excess of the net proceeds
received by such Holder upon sale of the Registrable Securities pursuant to
the Registration Statement giving rise to such contribution obligation.
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may
have to the Indemnified Parties.
6. Miscellaneous.
(a) Remedies. In the event of a breach by the Company or by
a Holder of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement.
<PAGE>
The Company and each Holder agree that monetary damages would not provide
adequate compensation for any losses incurred by reason of a breach by it of
any of the provisions of this Agreement and hereby further agrees that, in the
event of any action for specific performance in respect of such breach, it
shall waive the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any
of its subsidiaries has, as of the date hereof, nor shall the Company or any
of its subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. Except as disclosed in Schedule 2.1(r) of the Purchase
Agreement, neither the Company nor any of its subsidiaries has previously
entered into any agreement granting any registration rights with respect to
any of its securities to any Person. Without limiting the generality of the
foregoing, without the written consent of the Majority Holders, the Company
shall not grant to any Person the right to request the Company to register any
securities of the Company under the Securities Act unless the rights so
granted are subordinated in all respects to the rights in full of the Holders
set forth in Section 2 herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement. This Agreement, together
with the Purchase Agreement, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements
and understandings, oral or written, with respect to such matters.
(c) No Piggyback on Registrations. Except as disclosed on
Schedule 2.1(r) of the Purchase Agreement, neither the Company nor any of its
securityholders (other than the Holders in such capacity pursuant hereto) may
include securities of the Company in the Registration Statements and the
Company shall not after the date hereof enter into any agreement providing
such right to any of its securityholders, unless the right so granted is
subordinated in all respects to the rights in full of the Holders set forth
herein, and is not otherwise in conflict or inconsistent with the provisions
of this Agreement.
(d) Piggy-Back Registrations. Except as provided herein if,
at any time when there is not an effective Registration Statement covering the
Registrable Securities, the Company shall determine to prepare and file with
the Commission a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, the Company shall send to each Holder of Registrable Securities
written notice of such determination and, if within ten (10) days after
receipt of such notice, any such Holder shall so request in writing, (which
request shall specify the Registrable Securities intended to be disposed of by
the Holders), the Company will use reasonable efforts to effect the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by the Holder, to the extent
requisite to permit the disposition of the Registrable Securities so to be
registered; provided, that if at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of
such securities, the Company may, at its election, give written notice of such
determination to such Holder and, thereupon, (i) in the case of a
determination not to register, shall be relieved of its obligation to register
any Registrable Securities in connection with such registration (but not from
its obligation to pay expenses in accordance with Section 4 hereof), and (ii)
<PAGE>
in the case of a determination to delay registering, shall be permitted to
delay registering any Registrable Securities being registered pursuant to this
Section 6(d) for the same period as the delay in registering such other
securities. The Company shall include in such registration statement all or
any part of such Registrable Securities such Holder requests to be registered;
provided, however, that the Company shall not be required to register any
Registrable Securities pursuant to this Section 6(d) that are eligible for
sale pursuant to Rule 144(k) of the Securities Act. In the case of an
Underwritten Offering, if the managing underwriter(s) or underwriter(s) should
reasonably object to the inclusion of the Registrable Securities in such
registration statement, then if the Company after consultation with the
underwriter s representative should reasonably determine that the inclusion of
such Registrable Securities would materially adversely affect the offering
contemplated in such registration statement, and based on such determination
recommends inclusion in such registration statement of fewer Registrable
Securities than proposed to be sold by the Holders, then (x) the number of
Registrable Securities of the Holders included in such registration statement
shall be reduced pro rata among such Holders (based upon the number of
Registrable Securities requested to be included in the registration) or (y)
none of the Registrable Securities of the Holders shall be included in such
registration statement if the Company, after consultation with the
underwriter(s), recommends the inclusion of none of such Registrable
Securities; provided, however, that if securities are being offered for the
account of other Persons as well as the Company, such reduction shall not
represent a greater fraction of the number of Registrable Securities intended
to be offered by the Holders than the fraction of similar reductions imposed
on such other Persons (other than the Company).
(e) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the
Company and the Majority Holders; provided, however, that for the purposes of
this sentence, Registrable Securities that are owned, directly or indirectly,
by the Company, or an Affiliate of the Company are not deemed outstanding.
Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the
rights of a Holder and that does not directly or indirectly affect the rights
of any other Holders may be given by the Holders to which such waiver or
consent relates; provided, however, that the provisions of this sentence may
not be amended, modified, or supplemented except in accordance with the
provisions of the immediately preceding sentence. Any amendment or waiver
effected in accordance with this Section shall be binding upon each Holder,
each future Holder, and the Company. Upon effectiveness of each such
amendment or waiver, the Company shall promptly give written notice thereof to
the Holders who have not previously consented thereto in writing.
(f) Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i)
upon receipt, when delivered personally, (ii) upon receipt, when sent by
facsimile, provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party (if received by
or before 5:30 p.m. Eastern Time where such notice is received) or the first
(1st) Business Day following such delivery (if received after 5:30 p.m.
Eastern Time where such notice is received) or (iii) one (1) Business Day
after deposit with a nationally recognized overnight courier. The addresses
for such communications are (A) if to the Company, to the address set forth on
Schedule I hereto, with copies to Greenberg, Glusker, Fields, Claman &
Machtinger LLP, 1900 Avenue of the Stars, Suite 2100, Los Angeles, California
90067, Attention: Paula J. Peters, Esq, facsimile no. (310) 553-0667 and (B)
<PAGE>
if to any Purchaser, to its address set forth on Schedule I hereto, with
copies to those specified on the signature pages hereto and to Akin, Gump,
Strauss, Hauer & Feld, L.L.P., 590 Madison Avenue, New York, New York 10022,
Attention: James E. Kaye, Esq., facsimile no. (212) 872-1002, or to such other
address as may be designated in writing hereafter, in the same manner, by such
Person.
(g) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company may
not assign its rights or obligations hereunder without the prior written
consent of the Majority Holders. Each Holder may assign its rights hereunder
in the manner and to the Persons as permitted under the Purchase Agreement.
In addition, the rights of each Holder hereunder, including the right to have
the Company register for resale Registrable Securities in accordance with the
terms of this Agreement, shall be automatically assignable by each Holder if:
(i) the Holder agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment; (ii) the Company is, within a
reasonable time after such transfer or assignment, furnished with written
notice of (A) the name and address of such transferee or assignee and (B) the
securities with respect to which such registration rights are being
transferred or assigned; (iii) following such transfer or assignment the
further disposition of such securities by the transferee or assignees is
restricted under the Securities Act and applicable state securities laws; (iv)
at or before the time the Company receives the written notice contemplated by
clause (ii) of this Section, the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions of this Agreement; and (v)
such transfer shall have been made in accordance with the applicable
requirements of the Purchase Agreement.
(h) Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of
the party executing (or on whose behalf such signature is executed) the same
with the same force and effect as if such facsimile signature were the
original thereof.
(i) Governing Law. The corporate laws of the State of Nevada
shall govern all issues concerning the relative rights of the Company and the
Holders as its stockholders. All other questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed
by and construed in accordance with the laws of the State of New York, without
regard to principles of conflicts of law. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting
in the City of New York, Borough of Manhattan, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any Proceeding any claim that it is not personally
subject to the jurisdiction of any such court, that such Proceeding is
improper. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law.
(j) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(k) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
<PAGE>
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would
have executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid, illegal,
void or unenforceable.
(l) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(m) Shares Held by The Company and its Affiliates. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company
or its Affiliates (other than any Holder or transferees or successors or
assigns thereof if such Holder is deemed to be an Affiliate solely by reason
of its holdings of such Registrable Securities) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.
(n) Revision of SEC Position on Warrants. In the event the
rules and regulations of the Commission or the policies of the staff of the
Commission are modified and as a result thereof the Company and the Company s
counsel determines in good faith that it may be practicable and in the
interests of the Company and the Holders to register the exercise of the
Warrants so that the Warrant Shares may be freely resold without maintaining
an effective registration statement under the Securities Act for resales, the
Company and the Holders agree to cooperate in good faith to effect such
amendments to this Agreement as may be appropriate to provide that the Company
may fulfill its obligations hereunder with respect to the Warrants and the
Warrant Shares by maintaining an effective registration statement under the
Securities Act covering the exercise of the Warrants rather than the resale of
the Warrant Shares.
[SIGNATURE PAGES FOLLOW]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration
Rights Agreement as of the date first written above.
DATALINK.NET, INC.
By: /s/ Anthony LaPine
Name: Anthony LaPine
Title: CEO
<PAGE>
BROWN SIMPSON STRATEGIC GROWTH FUND, LTD.
By: Brown Simpson Asset Management, LLC
By: /s/ Evan Levine
Name: Evan Levine
Title: Principal
BROWN SIMPSON STRATEGIC GROWTH FUND, L.P.
By: Brown Simpson Capital, LLC
its general partner
By: /s/ Evan Levine
Name: Evan Levine
Title: Principal
<PAGE>
SCHEDULE I
Company
- -------
Datalink.Net, Inc.
1735 Technology Drive
Suite 790
San Jose, California 95110
Attention: Anthony LaPine
Chairman and Chief Executive Officer
Facsimile: (408) 367-1701
Purchasers:
- ----------
Brown Simpson Strategic Growth Fund, L.P.
152 West 57th Street, 40th Floor
New York, New York 10019
Attention: Peter D. Greene
Facsimile: (212) 247-1329
Brown Simpson Strategic Growth Fund, Ltd.
152 West 57th Street, 40th Floor
New York, New York 10019
Attention: Peter D. Greene
Facsimile: (212) 247-1329
<PAGE>
EXHIBIT A
PLAN OF DISTRIBUTION
Our company is registering the shares of common stock on behalf of
the selling stockholders. All costs, expenses and fees in connection with the
registration of the shares offered by this prospectus will be borne by our
company, other than brokerage commissions and similar selling expenses, if
any, attributable to the sale of shares which will be borne by the selling
stockholders. Sales of shares may be effected by selling stockholders from
time to time in one or more types of transactions (which may include block
transactions) on AMEX, in the over-the-counter market, in negotiated
transactions, through put or call options transactions relating to the shares,
through short sales of shares, or a combination of such methods of sale, at
market prices prevailing at the time of sale, or at negotiated prices. Such
transactions may or may not involve brokers or dealers. The selling
stockholders have advised our company that they have not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their securities, nor is there an
underwriter or coordinated broker acting in connection with the proposed sale
of shares by the selling stockholders.
The selling stockholders may enter into hedging transactions with
broker-dealers or other financial institutions. In connection with such
transactions, broker-dealers or other financial institutions may engage in
short sales of the shares or of securities convertible into or exchangeable
for the shares in the course of hedging positions they assume with selling
stockholders. The selling stockholders may also enter into options or other
transactions with broker-dealers or other financial institutions which require
the delivery to such broker-dealers or other financial institutions of shares
offered by this prospectus, which shares such broker-dealer or other financial
institution may resell pursuant to this prospectus (as amended or supplemented
to reflect such transaction).
The selling stockholders may make these transactions by selling
shares directly to purchasers or to or through broker-dealers, which may act
as agents or principals. Such broker-dealers may receive compensation in the
form of discounts, concessions or commissions from selling stockholders and/or
the purchasers of shares for whom such broker-dealers may act as agents or to
whom they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions).
The selling stockholders and any broker-dealers that act in
connection with the sale of shares are underwriters within the meaning of
Section 2(11) of the Securities Act, and any commissions received by such
broker-dealers or any profit on the resale of the shares sold by them while
acting as principals might be deemed to be underwriting discounts or
commissions under the Securities Act. The selling stockholders may agree to
indemnify any agent, dealer or broker-dealer that participates in transactions
involving sales of the shares against certain liabilities, including
liabilities arising under the Securities Act.
Because selling stockholders are underwriters within the meaning
of Section 2(11) of the Securities Act, the selling stockholders will be
subject to the prospectus delivery requirements of the Securities Act. Our
company has informed the selling stockholders that the anti-manipulative
provisions of Regulation M promulgated under the Exchange Act may apply to
their sales in the market.
<PAGE>
Selling stockholders also may resell all or a portion of the shares
in open market transactions in reliance upon Rule 144 under the Securities
Act, provided they meet the criteria and conform to the requirements of Rule
144.
Upon our company being notified by a selling stockholder that any
material arrangement has been entered into with a broker-dealer for the sale
of shares through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to
this prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing:
the name of each such selling stockholder and of the participating
broker-dealer(s);
- the number of shares involved;
- the initial price at which such shares were sold;
- the commissions paid or discounts or concessions allowed to
such broker-dealer(s), where applicable;
- that such broker-dealer(s) did not conduct any investigation
to verify the information set out or incorporated by reference
in this prospectus; and
- other facts material to the transactions.
In addition, upon our company being notified by a selling stockholder that a
donee or pledgee intends to sell more than 500 shares, a supplement to this
prospectus will be filed.
<PAGE>
EXHIBIT B
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[TRANSFER AGENT]
Attention:
Re: Datalink.Net, Inc.
Ladies and Gentlemen:
We are counsel to Datalink.Net, Inc., a Nevada corporation (the Company),
and have represented the Company in connection with that certain Securities
Purchase Agreement (the Purchase Agreement) entered into by and among the
Company and the purchasers named therein (collectively, the Holders) pursuant
to which the Company issued to the Holders its Series B Convertible Preferred
Stock (the Securities ) convertible into shares of the Company s common stock,
par value $0.01 per share (the Common Stock), and Warrants (the Warrants) to
acquire shares of Common Stock. Pursuant to the Purchase Agreement, the
Company also has entered into a Registration Rights Agreement with the Holders
(the Registration Rights Agreement ) pursuant to which the Company agreed,
among other things, to register the Registrable Securities (as defined in the
Registration Rights Agreement), including the shares of Common Stock issuable
upon conversion of the Securities and exercise of the Warrants, under the
Securities Act of 1933, as amended (the 1933 Act). In connection with the
Company s obligations under the Registration Rights Agreement, on
_______________, 2000, the Company filed a Registration Statement on Form S-3
(File No. 333-_____________) (the Registration Statement) with the Securities
and Exchange Commission (the SEC) relating to the Registrable Securities which
names each of the Holders as a selling stockholder thereunder.
In connection with the foregoing, we advise you that a member of the SEC
s staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER
TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no
knowledge, after telephonic inquiry of a member of the SEC s staff, that any
stop order suspending its effectiveness has been issued or that any
proceedings for that purpose are pending before, or threatened by, the SEC and
the Registrable Securities are available for resale under the 1933 Act
pursuant to the Registration Statement.
Very truly yours,
[ISSUER S COUNSEL]
cc: [LIST NAMES OF HOLDERS]
PRESS RELEASE
- -------------
DATALINK.NET RECEIVES $10 MILLION INVESTMENT
Additional $6 Million Anticipated From Warrant Exercises
SAN JOSE, Calif., February 14, 2000 - Datalink.net (AMEX:DLK) a Wireless
Application Service Provider (w-ASP) and the worldwide leader in
Web-to-Wireless (tm) convergence since 1994, today announced that Brown
Simpson Strategic Growth Funds has invested $10 million into the Company.
The Datalink.net Board of Directors approved the investment on January 24th at
a price determined by the closing price on that date. Datalink.net will issue
769,231 shares of Series B Convertible Preferred Stock which is convertible
one for one into common. Datalink.net also issued five-year warrants to
purchase 576,923 shares of common stock at an exercise price 35% higher than
the closing price on January 24th.
Jim Simpson, Principal of Brown Simpson Asset Management, said, "We are very
pleased with this investment. We believe that Datalink.net has an opportunity
to become the dominant player in providing comprehensive wireless solutions to
businesses. We are excited to be making a significant commitment to this
dynamic Company."
Datalink.net will use the capital to support its B2B initiatives, including
its new business unit, Net2Wireless.com. The funds will accelerate the
Company's business model by dramatically increasing the Company's aggressive
sales and marketing campaign, as well as fueling developments in the two-way
and WAP areas.
"Over the last two quarters, Datalink.net has shifted its strategy from B2C to
a focus on the B2B enterprise business model. With the B2B strategy now in
place, the Company will use the capital to build out its infrastructure and
accelerate its growth," said Anthony LaPine, Chairman and CEO of Datalink.net.
"This investment from a global institutional player in Datalink.net has
greatly enhanced our credibility both in the marketplace and the capital
sector. The Company's recent stock appreciation is in part attributable to
our initial announcement January 18th of a Letter of Intent on the $10 Million
investment."
The Company also expects receipts from the exercise of warrants, which
resulted from a prior financing in 1997, to total over $6 million.
Approximately 1.5 million warrants remain unexercised.
<PAGE>
<PAGE>
Datalink.net - Where the Web Meets Wireless(tm)
Datalink.net markets a suite of products and services for both the B2B
(business to business) and B2C (business to consumer) markets. The B2B Group
extends Internet franchises to the wireless world through the company's
patented Xpresslink(tm) Application Server, while the B2C Group provides
custom tailored information to the wireless user. Datalink.net is rated the
number one service of its kind by SmartMoney magazine. The company was
founded in 1993 and is headquartered in Silicon Valley. The corporate web
site can be located at http://www.datalink.net. For B2B capabilities, contact
Corporate Sales at 408-367-1706 or the B2B e-commerce Web site at
http://www.net2wireless.com.
This release contains forward-looking statements within the meaning of the
Securities Act of 1933 and the Securities Exchange Act of 1934. Although the
Company believes that the expectations reflected in the forward-looking
statements and assumptions upon which forward-looking statements are based are
reasonable it can give no assurance that such expectations and assumptions
will prove to have been correct.
