THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. EXCEPT AS
OTHERWISE SET FORTH HEREIN OR IN A SECURITIES PURCHASE AGREEMENT DATED AS
OF FEBRUARY 6, 2003, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SECURITIES UNDER SAID ACT OR, AN OPINION OF COUNSEL, IN
FORM, SUBSTANCE AND SCOPE, CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE
TRANSACTIONS, THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS
SOLD PURSUANT TO RULE 144 OR REGULATION S UNDER SUCH ACT.
Right to
Purchase
300,000
Shares of
Common
Stock,
$.005 par
value per
share
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, AJW Offshore, Ltd. or its
registered assigns, is entitled to purchase from iDial Networks, Inc., a Nevada
corporation (the "Company"), at any time or from time to time during the period
specified in Paragraph 2 hereof, Three Hundred Thousand (300,000) fully paid and
nonassessable shares of the Company's Common Stock, $.005 par value per share
(the "Common Stock"), at an exercise price per share equal to $0.05 (the
"Exercise Price"). The term "Warrant Shares," as used herein, refers to the
shares of Common Stock purchasable hereunder. The Warrant Shares and the
Exercise Price are subject to adjustment as provided in Paragraph 4 hereof. The
term "Warrants" means this Warrant and the other warrants issued pursuant to
that certain Securities Purchase Agreement, dated February 6, 2003, by and among
the Company and the Buyers listed on the execution page thereof (the "Securities
Purchase Agreement"), including any additional warrants issuable pursuant to
Section 4(l) thereof.
This Warrant is subject to the following terms, provisions, and conditions:
1. Manner of Exercise; Issuance of Certificates; Payment for Shares.
(a) Exercise of Warrant. Subject to the provisions hereof, this Warrant
may be exercised by the holder hereof, in whole or in part, by the
surrender of this Warrant, together with a completed exercise
agreement in the form attached hereto (the "Exercise Agreement"), to
the Company during normal business hours on any business day at the
Company's principal executive offices (or such other office or agency
of the Company as it may designate by notice to the holder hereof),
and upon (i) payment to the Company in cash, by certified or official
bank check or by wire transfer for the account of the Company of the
Exercise Price for the Warrant Shares specified in the Exercise
Agreement or (ii) if the resale of the Warrant Shares by the holder is
not then registered pursuant to an effective registration statement
under the Securities Act of 1933, as amended (the "Securities Act"),
delivery to the Company of a written notice of an election to effect a
"Cashless Exercise" (as defined in Section 11(c) below) for the
Warrant Shares specified in the Exercise Agreement. The Warrant Shares
so purchased shall be deemed to be issued to the holder hereof or such
holder's designee, as the record owner of such shares, as of the close
of business on the date on which this Warrant shall have been
surrendered, the completed Exercise Agreement shall have been
delivered, and payment shall have been made for such shares as set
forth above. Certificates for the Warrant Shares so purchased,
representing the aggregate number of shares specified in the Exercise
Agreement, shall be delivered to the holder hereof within a reasonable
time, not exceeding 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 holder hereof and shall be
registered in the name of such holder or such other name as shall be
designated by such holder. If this Warrant shall have been exercised
only in part, then, unless this Warrant has expired, the Company
shall, at its expense, at the time of delivery of such certificates,
deliver to the holder a new Warrant representing the number of shares
with respect to which this Warrant shall not then have been exercised.
In addition to all other available remedies at law or in equity, if
the Company fails to deliver certificates for the Warrant Shares
within three (3) business days after this Warrant is exercised, then
the Company shall pay to the holder in cash a penalty (the "Penalty")
equal to 2% of the number of Warrant Shares that the holder is
entitled to multiplied by the Market Price (as hereinafter defined)
for each day that the Company fails to deliver certificates for the
Warrant Shares. For example, if the holder is entitled to 100,000
Warrant Shares and the Market Price is $2.00, then the Company shall
pay to the holder $4,000 for each day that the Company fails to
deliver certificates for the Warrant Shares. The Penalty shall be paid
to the holder by the fifth day of the month following the month in
which it has accrued.
Notwithstanding anything in this Warrant to the contrary, in no event shall
the holder of this Warrant be entitled to exercise a number of Warrants (or
portions thereof) in excess of the number of Warrants (or portions thereof) upon
exercise of which the sum of (i) the number of shares of Common Stock
beneficially owned by the holder and its affiliates (other than shares of Common
Stock which may be deemed beneficially owned through the ownership of the
unexercised Warrants and the unexercised or unconverted portion of any other
securities of the Company (including the Debentures (as defined in the
Securities Purchase Agreement)) subject to a limitation on conversion or
exercise analogous to the limitation contained herein) and (ii) the number of
shares of Common Stock issuable upon exercise of the Warrants (or portions
thereof) with respect to which the determination described herein is being made,
would result in beneficial ownership by the holder and its affiliates of more
than 4.9% of the outstanding shares of Common Stock. For purposes of the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13D-G thereunder, except as otherwise provided in clause
(i) of the preceding sentence. The holder of this Warrant may waive the
limitations set forth herein by sixty-one (61) days written notice to the
Company. Notwithstanding anything to the contrary contained herein, the
limitation on exercise of this Warrant set forth herein may not be amended
without (i) the written consent of the holder hereof and the Company and (ii)
the approval of a majority of shareholders of the Company.
(b) Mandatory Exercise Right. The Company shall be entitled, on any day
(the "Calculation Date") on which the Closing Price (as defined below)
of the Common Stock for thirty (30) consecutive Trading Days (as
defined below) is equal to or greater than $3.00, to deliver a written
notice (the "Mandatory Exercise Notice") to the Holder requiring such
Holder to exercise this Warrant in accordance with Section 1 hereof at
any time during a thirty (30) Trading Day period following the date of
such Mandatory Exercise Notice (the "Exercise Date"); provided,
however, that the Company shall have such right if and only if (x) for
a period of thirty (30) consecutive Trading Days prior to the
Calculation Date and (y) at all times during such thirty (30)
consecutive Trading Day period and continuing through the Exercise
Date, the Warrant Shares issuable upon exercise of the Warrants are
(i) authorized and reserved for issuance, (ii) registered for resale
under the Securities Act of 1933, as amended, by the holder of this
Warrant (or may otherwise be resold publicly without restriction) and
sales of the Warrant Shares may be made continuously thereunder during
such time periods, and (iii) listed for trading on each principal
exchange or market on which the shares of Common Stock of the Company
were then traded; and provided, further, that the Holder shall be
required to exercise only that portion of this Warrant that is equal
to ten percent (10%) of the average trading volume of the Common Stock
over the thirty (30) consecutive Trading Days immediately preceding
the Calculation Date. The Company may not deliver more than one
Mandatory Exercise Notice during any thirty (30) Trading Day period.
Nothing in this Section 2(b) shall prohibit exercise of the Warrant
otherwise permitted pursuant to the terms of this Warrant during the
pendency of any Mandatory Exercise Notice. "Trading Day" shall mean
any day on which the Common Stock is traded for any period on the
Over-the-Counter Bulletin Board (the "OTCBB"), or on the principal
securities exchange or other securities market on which the Common
Stock is then being traded. "Closing Price," as of any date, (i) means
the last reported sale price for the shares of Common Stock on the
OTCBB as reported by Bloomberg Financial Markets or other similar
reliable reporting service as designated by the Holder ("Bloomberg"),
or (ii) if the OTCBB is not the principal trading market for the
shares of Common Stock, the last reported sale price on the principal
trading market for the Common Stock as reported by Bloomberg, or (iii)
if the last reported sale price cannot be determined as of such date
on any of the foregoing bases, the Closing Price shall be the fair
market value as reasonably determined in good faith by the Board of
Directors of the Company or, at the option of a majority-in-interest
of the holders of the outstanding Warrants, by an independent
investment bank of nationally recognized standing in the valuation of
businesses similar to the business of the corporation.
2. Period of Exercise. This Warrant is exercisable at any time or from time to
time on or after the date on which this Warrant is issued and delivered
pursuant to the terms of the Securities Purchase Agreement and before 6:00
p.m., New York, New York time on the fifth (5th) anniversary of the date of
issuance (the "Exercise Period").
3. Certain Agreements of the Company. The Company hereby covenants and agrees
as follows:
(a) Shares to be Fully Paid. All Warrant Shares will, upon issuance in
accordance with the terms of this Warrant, be validly issued, fully
paid, and nonassessable and free from all taxes, liens, and charges
with respect to the issue thereof.
(b) Reservation of Shares. During the Exercise Period, the Company shall
at all times have authorized, and reserved for the purpose of issuance
upon exercise of this Warrant, a sufficient number of shares of Common
Stock to provide for the exercise of this Warrant.
(c) Listing. The Company shall promptly secure the listing of the shares
of Common Stock issuable upon exercise of the Warrant upon each
national securities exchange or automated quotation system, if any,
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 from time to time issuable upon
the exercise of this Warrant; and the Company shall so list on each
national securities exchange or automated quotation system, as the
case may be, and shall maintain such listing of, any other shares of
capital stock of the Company issuable upon the exercise of this
Warrant if and so long as any shares of the same class shall be listed
on such national securities exchange or automated quotation system.
(d) 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 holder of this
Warrant in order to protect the exercise privilege of the holder of
this Warrant 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
above the Exercise Price then in effect, 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.
(e) Successors and Assigns. This Warrant will be binding upon any entity
succeeding to the Company by merger, consolidation, or acquisition of
all or substantially all the Company's assets.
4. Antidilution Provisions. During the Exercise Period, the Exercise Price and
the number of Warrant Shares shall be subject to adjustment from time to
time as provided in this Paragraph 4.
In the event that any adjustment of the Exercise Price as required herein
results in a fraction of a cent, such Exercise Price shall be rounded up to the
nearest cent.
(a) Adjustment of Exercise Price and Number of Shares upon Issuance of
Common Stock. Except as otherwise provided in Paragraphs 4(c) and 4(e)
hereof, if and whenever on or after the date of issuance of this
Warrant, the Company issues or sells, or in accordance with Paragraph
4(b) hereof is deemed to have issued or sold, any shares of Common
Stock for no consideration or for a consideration per share (before
deduction of reasonable expenses or commissions or underwriting
discounts or allowances in connection therewith) less than the Market
Price on the date of issuance (a "Dilutive Issuance"), then
immediately upon the Dilutive Issuance, the Exercise Price will be
reduced to a price determined by multiplying the Exercise Price in
effect immediately prior to the Dilutive Issuance by a fraction, (i)
the numerator of which is an amount equal to the sum of (x) the number
of shares of Common Stock actually outstanding immediately prior to
the Dilutive Issuance, plus (y) the quotient of the aggregate
consideration, calculated as set forth in Paragraph 4(b) hereof,
received by the Company upon such Dilutive Issuance divided by the
Market Price in effect immediately prior to the Dilutive Issuance, and
(ii) the denominator of which is the total number of shares of Common
Stock Deemed Outstanding (as defined below) immediately after the
Dilutive Issuance.
(b) Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Exercise Price under Paragraph 4(a) hereof,
the following will be applicable:
(i) Issuance of Rights or Options. If the Company in any manner
issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common
Stock or other securities convertible into or exchangeable for
Common Stock ("Convertible Securities") (such warrants, rights
and options to purchase Common Stock or Convertible Securities
are hereinafter referred to as "Options") and the price per share
for which Common Stock is issuable upon the exercise of such
Options is less than the Market Price on the date of issuance or
grant of such Options, then the maximum total number of shares of
Common Stock issuable upon the exercise of all such Options will,
as of the date of the issuance or grant of such Options, be
deemed to be outstanding and to have been issued and sold by the
Company for such price per share. For purposes of the preceding
sentence, the "price per share for which Common Stock is issuable
upon the exercise of such Options" is determined by dividing (i)
the total amount, if any, received or receivable by the Company
as consideration for the issuance or granting of all such
Options, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise
of all such Options, plus, in the case of Convertible Securities
issuable upon the exercise of such Options, the minimum aggregate
amount of additional consideration payable upon the conversion or
exchange thereof at the time such Convertible Securities first
become convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the exercise of
all such Options (assuming full conversion of Convertible
Securities, if applicable). No further adjustment to the Exercise
Price will be made upon the actual issuance of such Common Stock
upon the exercise of such Options or upon the conversion or
exchange of Convertible Securities issuable upon exercise of such
Options.
(ii) Issuance of Convertible Securities. If the Company in any manner
issues or sells any Convertible Securities, whether or not
immediately convertible (other than where the same are issuable
upon the exercise of Options) and the price per share for which
Common Stock is issuable upon such conversion or exchange is less
than the Market Price on the date of issuance, then the maximum
total number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities will,
as of the date of the issuance of such Convertible Securities, be
deemed to be outstanding and to have been issued and sold by the
Company for such price per share. For the purposes of the
preceding sentence, the "price per share for which Common Stock
is issuable upon such conversion or exchange" is determined by
dividing (i) the total amount, if any, received or receivable by
the Company as consideration for the issuance or sale of all such
Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the
conversion or exchange thereof at the time such Convertible
Securities first become convertible or exchangeable, by (ii) the
maximum total number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities. No
further adjustment to the Exercise Price will be made upon the
actual issuance of such Common Stock upon conversion or exchange
of such Convertible Securities.
(iii)Change in Option Price or Conversion Rate. If there is a change
at any time in (i) the amount of additional consideration payable
to the Company upon the exercise of any Options; (ii) the amount
of additional consideration, if any, payable to the Company upon
the conversion or exchange of any Convertible Securities; or
(iii) the rate at which any Convertible Securities are
convertible into or exchangeable for Common Stock (other than
under or by reason of provisions designed to protect against
dilution), the Exercise Price in effect at the time of such
change will be readjusted 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 additional
consideration or changed conversion rate, as the case may be, at
the time initially granted, issued or sold.
(iv) Treatment of Expired Options and Unexercised Convertible
Securities. If, in any case, the total number of shares of Common
Stock issuable upon exercise of any Option or upon conversion or
exchange of any Convertible Securities is not, in fact, issued
and the rights to exercise such Option or to convert or exchange
such Convertible Securities shall have expired or terminated, the
Exercise Price then in effect will be readjusted to the Exercise
Price which would have been in effect at the time of such
expiration or termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such
expiration or termination (other than in respect of the actual
number of shares of Common Stock issued upon exercise or
conversion thereof), never been issued.
(v) Calculation of Consideration Received. If any Common Stock,
Options or Convertible Securities are issued, granted or sold for
cash, the consideration received therefor for purposes of this
Warrant will be the amount received by the Company therefor,
before deduction of reasonable commissions, underwriting
discounts or allowances or other reasonable expenses paid or
incurred by the Company in connection with such issuance, grant
or sale. In case any Common Stock, Options or Convertible
Securities are issued or sold for a consideration part or all of
which shall be 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, in which case the amount of consideration received by
the Company will be the Market Price thereof as of the date of
receipt. In case any Common Stock, Options or Convertible
Securities are issued in connection with any acquisition, merger
or consolidation in which the Company is the surviving
corporation, 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 corporation 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 in good faith by the Board of
Directors of the Company.
(vi) Exceptions to Adjustment of Exercise Price. No adjustment to the
Exercise Price will be made (i) upon the exercise of any
warrants, options or convertible securities granted, issued and
outstanding on the date of issuance of this Warrant; (ii) upon
the grant or exercise of any stock or options which may hereafter
be granted or exercised under any employee benefit plan, stock
option plan or restricted stock plan of the Company now existing
or to be implemented in the future, so long as the issuance of
such stock or options is approved by a majority of the
independent members of the Board of Directors of the Company or a
majority of the members of a committee of independent directors
established for such purpose; (iii) upon the exercise of the
Warrants; or (iv) upon the issuance, grant or exercise of any
stock, options or convertible securities which may be issued,
granted or exercised pursuant to a consulting arrangement under
which such consultants perform bona fide consulting services to
the Company or its subsidiaries.
(c) Subdivision or Combination of Common Stock. If the Company at any time
subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common
Stock acquirable hereunder into a greater number of shares, then,
after the date of record for effecting such subdivision, the Exercise
Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company at any time combines (by
reverse stock split, recapitalization, reorganization,
reclassification or otherwise) the shares of Common Stock acquirable
hereunder into a smaller number of shares, then, after the date of
record for effecting such combination, the Exercise Price in effect
immediately prior to such combination will be proportionately
increased.
(d) Adjustment in Number of Shares. Upon each adjustment of the Exercise
Price pursuant to the provisions of this Paragraph 4, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be
adjusted by multiplying a number equal to the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common
Stock issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product so obtained by the adjusted
Exercise Price.
(e) Consolidation, Merger or Sale. In case of any consolidation of the
Company with, or merger of the Company into any other corporation, or
in case of any sale or conveyance of all or substantially all of the
assets of the Company other than in connection with a plan of complete
liquidation of the Company, then as a condition of such consolidation,
merger or sale or conveyance, adequate provision will be made whereby
the holder of this Warrant will have the right to acquire and receive
upon exercise of this Warrant in lieu of the shares of Common Stock
immediately theretofore acquirable upon the exercise of this Warrant,
such shares of stock, securities or assets as may be issued or payable
with respect to or in exchange for the number of shares of Common
Stock immediately theretofore acquirable and receivable upon exercise
of this Warrant had such consolidation, merger or sale or conveyance
not taken place. In any such case, the Company will make appropriate
provision to insure that the provisions of this Paragraph 4 hereof
will thereafter be applicable as nearly as may be in relation to any
shares of stock or securities thereafter deliverable upon the exercise
of this Warrant. The Company will not effect any consolidation, merger
or sale or conveyance unless prior to the consummation thereof, the
successor corporation (if other than the Company) assumes by written
instrument the obligations under this Paragraph 4 and the obligations
to deliver to the holder of this Warrant such shares of stock,
securities or assets as, in accordance with the foregoing provisions,
the holder may be entitled to acquire.
(f) Distribution of Assets. In case the Company shall declare or make any
distribution of its assets (including cash) to holders of Common Stock
as a partial liquidating dividend, by way of return of capital or
otherwise, then, after the date of record for determining shareholders
entitled to such distribution, but prior to the date of distribution,
the holder of this Warrant shall be entitled upon exercise of this
Warrant for the purchase of any or all of the shares of Common Stock
subject hereto, to receive the amount of such assets which would have
been payable to the holder had such holder been the holder of such
shares of Common Stock on the record date for the determination of
shareholders entitled to such distribution.
(g) Notice of Adjustment. Upon the occurrence of any event which requires
any adjustment of the Exercise Price, then, and in each such case, the
Company shall give notice thereof to the holder of this Warrant, which
notice shall state the Exercise Price resulting from such adjustment
and the increase or decrease in the number of Warrant Shares
purchasable at such price upon exercise, setting forth in reasonable
detail the method of calculation and the facts upon which such
calculation is based. Such calculation shall be certified by the Chief
Financial Officer of the Company.
(h) Minimum Adjustment of Exercise Price. No adjustment of the Exercise
Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be
made, but any such lesser adjustment shall be carried forward and
shall be made at the time and together with the next subsequent
adjustment which, together with any adjustments so carried forward,
shall amount to not less than 1% of such Exercise Price.
(i) No Fractional Shares. No fractional shares of Common Stock are to be
issued upon the exercise of this Warrant, but the Company shall pay a
cash adjustment in respect of any fractional share which would
otherwise be issuable in an amount equal to the same fraction of the
Market Price of a share of Common Stock on the date of such exercise.
(j) Other Notices. In case at any time:
(i) the Company shall declare any dividend upon the Common Stock
payable in shares of stock of any class or make any other
distribution (including dividends or distributions payable in
cash out of retained earnings) to the holders of the Common
Stock;
(ii) the Company shall offer for subscription pro rata to the holders
of the Common Stock any additional shares of stock of any class
or other rights;
(iii)there shall be any capital reorganization of the Company, or
reclassification of the Common Stock, or consolidation or merger
of the Company with or into, or sale of all or substantially all
its assets to, another corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also specify the date
on which the holders of Common Stock shall be entitled to receive such dividend,
distribution, or subscription rights or to exchange their Common Stock for stock
or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are closed in
respect thereto. Failure to give any such notice or any defect therein shall not
affect the validity of the proceedings referred to in clauses (i), (ii), (iii)
and (iv) above.
(k) Certain Events. If any event occurs of the type contemplated by the
adjustment provisions of this Paragraph 4 but not expressly provided
for by such provisions, the Company will give notice of such event as
provided in Paragraph 4(g) hereof, and the Company's Board of
Directors will make an appropriate adjustment in the Exercise Price
and the number of shares of Common Stock acquirable upon exercise of
this Warrant so that the rights of the holder shall be neither
enhanced nor diminished by such event.
(l) Certain Definitions.
(i) "Common Stock Deemed Outstanding" shall mean the number of shares
of Common Stock actually outstanding (not including shares of
Common Stock held in the treasury of the Company), plus (x)
pursuant to Paragraph 4(b)(i) hereof, the maximum total number of
shares of Common Stock issuable upon the exercise of Options, as
of the date of such issuance or grant of such Options, if any,
and (y) pursuant to Paragraph 4(b)(ii) hereof, the maximum total
number of shares of Common Stock issuable upon conversion or
exchange of Convertible Securities, as of the date of issuance of
such Convertible Securities, if any.
(ii) "Market Price," as of any date, (i) means the average of the last
reported sale prices for the shares of Common Stock on the OTCBB
for the five (5) Trading Days immediately preceding such date as
reported by Bloomberg, or (ii) if the OTCBB is not the principal
trading market for the shares of Common Stock, the average of the
last reported sale prices on the principal trading market for the
Common Stock during the same period as reported by Bloomberg, or
(iii) if market value cannot be calculated as of such date on any
of the foregoing bases, the Market Price shall be the fair market
value as reasonably determined in good faith by (a) the Board of
Directors of the Company or, at the option of a
majority-in-interest of the holders of the outstanding Warrants
by (b) an independent investment bank of nationally recognized
standing in the valuation of businesses similar to the business
of the corporation. The manner of determining the Market Price of
the Common Stock set forth in the foregoing definition shall
apply with respect to any other security in respect of which a
determination as to market value must be made hereunder.
(iii)"Common Stock," for purposes of this Paragraph 4, includes the
Common Stock, par value $.005 per share, and any additional class
of stock of the Company having no preference as to dividends or
distributions on liquidation, provided that the shares
purchasable pursuant to this Warrant shall include only shares of
Common Stock, par value $.005 per share, in respect of which this
Warrant is exercisable, or shares resulting from any subdivision
or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger, or sale
of the character referred to in Paragraph 4(e) hereof, the stock
or other securities or property provided for in such Paragraph.
5. Issue Tax. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect
thereof, provided that the Company shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance
and delivery of any certificate in a name other than the holder of this
Warrant.
6. No Rights or Liabilities as a Shareholder. This Warrant shall not entitle
the holder hereof to any voting rights or other rights as a shareholder of
the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere
enumeration herein of the rights or privileges of the holder hereof, shall
give rise to any liability of such holder for the Exercise Price or as a
shareholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
7. Transfer, Exchange, and Replacement of Warrant.
(a) Restriction on Transfer. This Warrant and the rights granted to the
holder hereof are transferable, in whole or in part, upon surrender of
this Warrant, together with a properly executed assignment in the form
attached hereto, at the office or agency of the Company referred to in
Paragraph 7(e) below, provided, however, that any transfer or
assignment shall be subject to the conditions set forth in Paragraph
7(f) hereof and to the applicable provisions of the Securities
Purchase Agreement. Until due presentment for registration of transfer
on the books of the Company, the Company may treat the registered
holder hereof as the owner and holder hereof for all purposes, and the
Company shall not be affected by any notice to the contrary.
Notwithstanding anything to the contrary contained herein, the
registration rights described in Paragraph 8 are assignable only in
accordance with the provisions of that certain Registration Rights
Agreement, dated February 6, 2003, by and among the Company and the
other signatories thereto (the "Registration Rights Agreement").
(b) Warrant Exchangeable for Different Denominations. This Warrant is
exchangeable, upon the surrender hereof by the holder hereof at the
office or agency of the Company referred to in Paragraph 7(e) below,
for new Warrants of like tenor representing in the aggregate the right
to purchase the number of shares of Common Stock which may be
purchased hereunder, each of such new Warrants to represent the right
to purchase such number of shares as shall be designated by the holder
hereof at the time of such surrender.
(c) Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant and, in the case of any such loss, theft,
or destruction, upon delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company, or, in the case of any
such mutilation, upon surrender and cancellation of this Warrant, the
Company, at its expense, will execute and deliver, in lieu thereof, a
new Warrant of like tenor.
(d) Cancellation; Payment of Expenses. Upon the surrender of this Warrant
in connection with any transfer, exchange, or replacement as provided
in this Paragraph 7, this Warrant shall be promptly canceled by the
Company. The Company shall pay all taxes (other than securities
transfer taxes) and all other expenses (other than legal expenses, if
any, incurred by the holder or transferees) and charges payable in
connection with the preparation, execution, and delivery of Warrants
pursuant to this Paragraph 7.
(e) Register. The Company shall maintain, at its principal executive
offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this
Warrant, in which the Company shall record the name and address of the
person in whose name this Warrant has been issued, as well as the name
and address of each transferee and each prior owner of this Warrant.
(f) Exercise or Transfer Without Registration. If, at the time of the
surrender of this Warrant in connection with any exercise, transfer,
or exchange of this Warrant, this Warrant (or, in the case of any
exercise, the Warrant Shares issuable hereunder), shall not be
registered under the Securities Act of 1933, as amended (the
"Securities Act") and under applicable state securities or blue sky
laws, the Company may require, as a condition of allowing such
exercise, transfer, or exchange, (i) that the holder or transferee of
this Warrant, as the case may be, furnish to the Company a written
opinion of counsel, which opinion and counsel are acceptable to the
Company, to the effect that such exercise, transfer, or exchange may
be made without registration under said Act and under applicable state
securities or blue sky laws, (ii) that the holder or transferee
execute and deliver to the Company an investment letter in form and
substance acceptable to the Company and (iii) that the transferee be
an "accredited investor" as defined in Rule 501(a) promulgated under
the Securities Act; provided that no such opinion, letter or status as
an "accredited investor" shall be required in connection with a
transfer pursuant to Rule 144 under the Securities Act. The first
holder of this Warrant, by taking and holding the same, represents to
the Company that such holder is acquiring this Warrant for investment
and not with a view to the distribution thereof.
8. Registration Rights. The initial holder of this Warrant (and certain
assignees thereof) is entitled to the benefit of such registration rights
in respect of the Warrant Shares as are set forth in Section 2 of the
Registration Rights Agreement.
9. Notices. All notices, requests, and other communications required or
permitted to be given or delivered hereunder to the holder of this Warrant
shall be in writing, and shall be personally delivered, or shall be sent by
certified or registered mail or by recognized overnight mail courier,
postage prepaid and addressed, to such holder at the address shown for such
holder on the books of the Company, or at such other address as shall have
been furnished to the Company by notice from such holder. All notices,
requests, and other communications required or permitted to be given or
delivered hereunder to the Company shall be in writing, and shall be
personally delivered, or shall be sent by certified or registered mail or
by recognized overnight mail courier, postage prepaid and addressed, to the
office of the Company at 00000 Xxxx Xxxxxxx Xxxxx, Xxxxx 000, Xxxxxx,
Xxxxxxxx 00000, Attention: Chief Executive Officer, or at such other
address as shall have been furnished to the holder of this Warrant by
notice from the Company. Any such notice, request, or other communication
may be sent by facsimile, but shall in such case be subsequently confirmed
by a writing personally delivered or sent by certified or registered mail
or by recognized overnight mail courier as provided above. All notices,
requests, and other communications shall be deemed to have been given
either at the time of the receipt thereof by the person entitled to receive
such notice at the address of such person for purposes of this Paragraph 9,
or, if mailed by registered or certified mail or with a recognized
overnight mail courier upon deposit with the United States Post Office or
such overnight mail courier, if postage is prepaid and the mailing is
properly addressed, as the case may be.
10. Governing Law. THIS WARRANT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW
YORK, NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS WARRANT, THE
AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE
OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING.
BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A PARTY MAILED BY
FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF
PROCESS UPON THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN SHALL
AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW. BOTH PARTIES AGREE THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH
SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER LAWFUL MANNER. THE
PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER THIS WARRANT
SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING ATTORNEYS' FEES,
INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH DISPUTE.
11. Miscellaneous.
(a) Amendments. This Warrant and any provision hereof may only be amended
by an instrument in writing signed by the Company and the holder
hereof.
(b) Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for purposes of reference
only, and shall not affect the meaning or construction of any of the
provisions hereof.
(c) Cashless Exercise. Notwithstanding anything to the contrary contained
in this Warrant, if the resale of the Warrant Shares by the holder is
not then registered pursuant to an effective registration statement
under the Securities Act, this Warrant may be exercised by
presentation and surrender of this Warrant to the Company at its
principal executive offices with a written notice of the holder's
intention to effect a cashless exercise, including a calculation of
the number of shares of Common Stock to be issued upon such exercise
in accordance with the terms hereof (a "Cashless Exercise"). In the
event of a Cashless Exercise, in lieu of paying the Exercise Price in
cash, the holder shall surrender this Warrant for that number of
shares of Common Stock determined by multiplying the number of Warrant
Shares to which it would otherwise be entitled by a fraction, the
numerator of which shall be the difference between the then current
Market Price per share of the Common Stock and the Exercise Price, and
the denominator of which shall be the then current Market Price per
share of Common Stock. For example, if the holder is exercising
100,000 Warrants with a per Warrant exercise price of $0.75 per share
through a cashless exercise when the Common Stock's current Market
Price per share is $2.00 per share, then upon such Cashless Exercise
the holder will receive 62,500 shares of Common Stock.
(d) Remedies. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the holder, by
vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law
for a breach of its obligations under this Warrant will be inadequate
and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Warrant, that the holder shall be
entitled, in addition to all other available remedies at law or in
equity, and in addition to the penalties assessable herein, to an
injunction or injunctions restraining, preventing or curing any breach
of this Warrant and to enforce specifically the terms and provisions
thereof, without the necessity of showing economic loss and without
any bond or other security being required.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
IDIAL NETWORKS, INC.
By: _______________________________
Xxxx X. Xxxx
Chief Executive Officer
Dated as of February 6, 2003
FORM OF EXERCISE AGREEMENT
Dated: ________ __,200_
To: iDial Networks, Inc.
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase ________ shares of Common Stock covered by
such Warrant, and makes payment herewith in full therefor at the price per share
provided by such Warrant in cash or by certified or official bank check in the
amount of, or, if the resale of such Common Stock by the undersigned is not
currently registered pursuant to an effective registration statement under the
Securities Act of 1933, as amended, by surrender of securities issued by the
Company (including a portion of the Warrant) having a market value (in the case
of a portion of this Warrant, determined in accordance with Section 11(c) of the
Warrant) equal to $_________. Please issue a certificate or certificates for
such shares of Common Stock in the name of and pay any cash for any fractional
share to:
Name:
------------------------------
Signature:
Address:____________________________
-----------------------------
Note: The above signature
should correspond
exactly with the name
on the face of the
within Warrant, if
applicable.
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned covering the balance of the shares purchasable thereunder
less any fraction of a share paid in cash.
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered thereby set forth
hereinbelow, to:
Name of Assignee Address No of Shares
---------------- ------- ------------
, and hereby irrevocably constitutes and appoints
___________________________________ as agent and attorney-in-fact to transfer
said Warrant on the books of the within-named corporation, with full power of
substitution in the premises.
Dated: ________ __, 200_
In the presence of:
------------------------------
Name:______________________________
Signature:_________________________
Title of Signing Officer or Agent (if
any):
------------------------------
Address: ______________________________
------------------------------
Note: The above signature should
correspond exactly with the
name on the face of the
within Warrant, if applicable.
