THIS WARRANT AGREEMENT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE COMMON STOCK
OF
DATA NET INTERNATIONAL, INC.
This agreement ("Warrant") certifies that for value received, COMPUTER
AIDED SOFTWARE INTEGRATION, INC., Inc. ("CASI") is entitled, subject to the
terms set forth below, to purchase from Data Net International, Inc. (the
"Company"), for consideration consisting of cancellation of all obligations
of the Company to CASI, including cancellation of the entire outstanding
principal amount (the "Due Amount"), due and payable to CASI pursuant to that
certain promissory note issued by the Company to CASI on the date hereof (the
"Note"), that number of fully paid and nonassessable shares of Common Stock
(the "Shares") of the Company, as is equal to the quotient of (x) the Due
Amount, divided by (y) $49.26 (the "Price Per Share"), up to a maximum of
32,918 Shares. The Company represents and warrants to CASI that as of the
date of this Warrant, there are 406,000 shares of Common Stock issued and
outstanding.
1. TERM OF WARRANT. Subject to the terms and conditions set forth
herein, this Warrant shall be exercisable in whole, but not in part at the
option of CASI within the period (the "Exercise Period") commencing upon the
occurrence of a default under Section 2(a) of the Note (a "Payment Default")
and ending at 6:00 p.m., Los Angeles time on the thirtieth day following the
date of the Payment Default (the "Exercise Period") by delivering to the
Company the Notice of Exercise attached as Exhibit "A" hereto, and execution
and delivery to the Company of the Note Cancellation attached as Exhibit "B"
hereto. The right of CASI to exercise this Warrant shall expire, if not
exercised during the Exercise Period.
2. EXERCISE PRICE. The aggregate exercise price of this Warrant shall
be cancellation of the Due Amount and the Note.
3. EXERCISE OF WARRANT. The purchase rights represented by this
Warrant are exercisable by the CASI in whole, but not in part, during the
Exercise Period, by the surrender of this Warrant and the Notice of Exercise
attached hereto duly completed and executed on behalf of CASI, at the office
of the Company (or such other office or agency of the Company as it may
designate by notice in writing to the CASI at the address of the CASI
appearing on the books of
the Company), and upon execution and delivery to the Company of the Note
Cancellation attached as Exhibit "B" hereto.
Except as specifically provided in Section 1, this Warrant shall be
deemed to have been exercised immediately prior to the close of business on
the date of its surrender for exercise as provided above, and the person
entitled to receive the Shares issuable upon such exercise shall be treated
for all purposes as the holder of record of such Shares as of the close of
business on such date. As promptly as practicable on or after such date, the
Company at its expense shall issue and deliver to the person or persons
entitled to receive the same a certificate or certificates for the number of
Shares issuable upon such exercise.
4 ADJUSTMENTS.
4.1. STOCK DIVIDENDS - SPLIT-UPS. If after the date hereof, and
subject to the provisions of Section 4.4 below, the number of outstanding
shares of Common Stock is increased by a stock dividend payable in shares of
Common Stock or by a split-up of shares of Common Stock or other similar
event, then, on the effective date thereof, the number of shares issuable on
exercise of this Warrant shall be increased in proportion to such increase in
outstanding shares and the then applicable Per Share Price shall be
correspondingly decreased.
4.2. AGGREGATION OF SHARES. If after the date hereof, and subject
to the provisions of Section 4.4, the number of outstanding shares of Common
Stock is decreased by a consolidation, combination or reclassification of
shares of Common Stock or other similar event, then, upon the effective date
of such consolidation, combination or reclassification, the number of shares
issuable on exercise of this Warrant shall be decreased in proportion to such
decrease in outstanding shares and the then applicable Per Share Price shall
be correspondingly increased.
4.3. REPLACEMENT OF SECURITIES UPON REORGANIZATION, ETC. If after the
date hereof any capital reorganization or reclassification of the Common Stock
of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation or other similar event shall be effected, then, as a condition of
such reorganization, reclassification, consolidation, merger, or sale, lawful
and fair provision shall be made whereby CASI shall thereafter have the right to
purchase and receive, upon the basis and upon the terms and conditions specified
in this Warrant and in lieu of the shares of Common Stock of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby, such shares of stock, securities, or assets as may be
issued or payable with respect to or in exchange for the number of outstanding
shares of such Common Stock equal to the number of shares of such stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented by this Warrant, had such reorganization, reclassification,
consolidation, merger, or sale not taken place and in such event appropriate
provision shall be made with respect to the rights and interests of CASI to the
end that the provisions hereof (including, without limitation, provisions for
adjustments of the Per Share Price and of the number of shares purchasable upon
the exercise of this Warrant) shall thereafter
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be applicable, as nearly as may be in relation to any share of stock,
securities, or assets thereafter deliverable upon the exercise hereof.
4.4. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional share to which the CASI would otherwise
be entitled, the Company shall make a cash payment equal to the product of
(x) the Price Per Share, multiplied by (y) such fraction.
5. RIGHTS OF SHAREHOLDERS. CASI shall not be entitled to vote or
receive dividends or be deemed the holder of the Shares for any purpose, nor
shall anything contained herein be construed to confer upon CASI, as a holder
of this Warrant, any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, change of par value, or change of stock to no par
value, consolidation, merger, conveyance, or otherwise) or to receive notice
of meetings, or to receive dividends or subscription rights or otherwise
until this Warrant shall have been exercised as provided herein.
6. TRANSFER OF WARRANT PROHIBITED; COMPLIANCE WITH SECURITIES LAWS.
6.1 TRANSFERABILITY OF WARRANT. This Warrant may not be
transferred or assigned in whole or in part.
6.2 COMPLIANCE WITH SECURITIES LAWS.
6.2.1 CASI of this Warrant, by acceptance hereof, acknowledges
that this Warrant and the Shares to be issued upon exercise hereof are being
acquired solely for CASI's own account and not as a nominee for any other
party, and for investment, and that the CASI will not offer, sell or
otherwise dispose of the Shares to be issued upon exercise hereof except
under circumstances that will not result in a violation of the Securities Act
of 1933, as amended (the "Act") or any state securities laws. Upon exercise
of this Warrant, CASI shall, if requested by the Company, confirm in writing,
in a form satisfactory to the Company, that the Shares so purchased are being
acquired solely for CASI's own account and not as a nominee for any other
party, for investment, and not with a view toward distribution or resale.
6.2.2 The Shares issued upon exercise hereof shall be
stamped or imprinted with a legend in substantially the following form (in
addition to any legend required by state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH
SECURITIES AND ANY SECURITIES OR SHARES ISSUED HEREUNDER OR THEREUNDER
MAY NOT BE SOLD OR
3
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT. COPIES OF THE AGREEMENT COVERING THE PURCHASE
OF THESE SECURITIES AND RESTRICTING THEIR TRANSFER OR SALE MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE CASI OF RECORD
HEREOF TO THE SECRETARY OF THE COMPANY AT THE PRINCIPAL EXECUTIVE
OFFICES OF THE COMPANY.
6.2.3 CASI represents and warrants to the Company that CASI is an
"accredited investor" within the meaning of Regulation D of the Securities and
Exchange Commission under the Act.
7. MARKET STAND-OFF; CALL RIGHT. CASI agrees that if CASI does not
enter into an agreement with the underwriters of an initial underwritten
public offering by the Company (i) in form and substance acceptable to such
underwriters, and (ii) which provides that CASI agrees to not sell, make any
short sale of, loan, hypothecate, pledge, grant any option for the repurchase
of, or otherwise dispose or transfer for value or otherwise engage in any of
the foregoing transactions with respect to any securities of the Company
without the prior written consent of the underwriters, for such period of
time from and after the effective date of such registration statement as may
be requested by such underwriters, then the Company or its assigns shall have
the right (the "Call Right") to purchase from CASI, and CASI shall sell to
the Company or its assigns, all of the Shares, for a purchase price equal to
the Due Amount canceled by CASI upon exercise of this Warrant, plus interest
thereon from the date of exercise of this Warrant at a rate of 12% per annum
(the "Call Price"). The Call Right may be exercised by delivery to CASI of
written notice (a "Call Notice") of exercise and the closing of the exercise
of the Call Right (the "Call Closing") shall occur upon such date and at such
time as is specified in the Call Notice. At the Call Closing, CASI shall
deliver to the Company or its assigns a certificate or certificates
evidencing all of the Shares, duly endorsed for transfer to the Company or
its assignee, as specified in the Call Notice, against delivery to CASI of a
cashiers check in the amount of the Call Price.
8. RESERVATION OF STOCK. The Company covenants that during the term
this Warrant is exercisable, the Company will reserve a sufficient number of
Shares to provide for the issuance upon the exercise of this Warrant and,
from time to time, will take all steps necessary to amend its Certificate of
Incorporation to provide sufficient reserves of Shares issuable upon exercise
of this Warrant. The Company further covenants that the Shares that may be
issued upon the exercise of this Warrant, upon exercise of this Warrant and
payment of the Exercise Price, all as set forth herein, will be free from all
taxes, liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously or otherwise specified
herein).
9. AMENDMENTS. Any term of this Warrant may be amended only with the
written consent of the Company and the CASI. No waivers of, or exceptions to,
any term, condition or
4
provision of this Warrant, in any one or more instances, shall be deemed to
be, or construed as, a further or continuing waiver of any such term,
condition or provision.
10. MISCELLANEOUS.
10.1 SEVERABILITY AND GOVERNING LAW. Should any Section or any part
of a Section within this Warrant be rendered void, invalid or unenforceable
by any court of law for any reason, such invalidity or unenforceability shall
not void or render invalid or unenforceable any other Section or part of a
Section in this Warrant. THIS WARRANT IS MADE AND ENTERED INTO IN THE STATE
OF CALIFORNIA AND THE LAWS OF SAID STATE SHALL GOVERN THE VALIDITY AND
INTERPRETATION HEREOF AND THE PERFORMANCE BY THE PARTIES HERETO OF THEIR
RESPECTIVE DUTIES AND OBLIGATIONS HEREUNDER.
10.2 COUNTERPARTS. This Warrant may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
10.3 CAPTIONS AND SECTION HEADINGS. Section titles or captions
contained in this Warrant are inserted as a matter of convenience and for
reference purposes only, and in no way define, limit, extend or describe the
scope of this Warrant or the intent of any provision hereof.
10.4 ATTORNEYS' FEES. In the event that any dispute among the
parties to this Warrant should result in litigation, the prevailing party in
such dispute shall be entitled to recover from the losing party its
reasonable fees and expenses of attorneys and accountants in connection
therewith.
10.5 ENTIRE AGREEMENT. This Warrant contains the entire
understanding of the parties and there are no further or other agreements or
understandings, written or oral, in effect between the parties relating to
the subject matter hereof unless expressly referred to herein.
5
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Warrant as of the date written below.
Dated: As of July 1, 1997
DATA NET INTERNATIONAL, INC.
By: /s/ XXXXX XXX
---------------------------
Its: President
---------------------------
AGREED AND ACCEPTED:
COMPUTER AIDED SOFTWARE INTEGRATION, INC.
By: /s/ XXXXX XXXX
---------------------------
Its: Chief Financial Officer
---------------------------
6
NOTICE OF EXERCISE
To: Data Net International, Inc.
(1) The undersigned hereby elects to purchase _______ Shares of
_______________ pursuant to the terms of the attached Warrant, and tenders
herewith payment of the purchase price for such Shares in full.
(2) In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the Shares are being acquired solely for the account of the
undersigned and not as a nominee for any other party, and for investment, and
that the undersigned will not offer, sell or otherwise dispose of any such
Shares except under circumstances that will not result in a violation of the
Securities Act of 1933, as amended, or any state securities laws.
(3) Please issue a certificate or certificates representing said Shares in the
name of the undersigned or in such other name as is specified below:
--------------------------
(Name)
--------------------------
(Name)
--------------- -------------------------
(Date) (Signature)
7
NOTE CANCELLATION FORM
FOR VALUE RECEIVED, the undersigned holder and owner of that certain
promissory note in the original principal amount of $950,000 issued by Data Net
International, Inc. (the "Company") to the undersigned on September __, 1997
(the "Note") hereby tenders such Note, marked "CANCELED" across its face, and
hereby cancels and waives any claims of the undersigned for payment of
principal, interest, expenses and fees due to or claimed by the undersigned
under or pursuant to the Note. The undersigned represents and warrants that the
undersigned has not assigned any of its rights or claims at any time existing or
arising under the Note to any person, and agrees to indemnify, defend and hold
the Company harmless against liability or assertions of liability on the part of
the Company to any person other than the undersigned under or pursuant to the
provisions of the Note.
Dated:
----------------------
COMPUTER AIDED SOFTWARE INTEGRATION, INC.
By:
-----------------------------
Its:
----------------------------
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