NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT ("AGREEMENT") is made as of the 9th day
of February, 2001 by and between LINK TWO COMMUNICATIONS, INC., a Texas
corporation (the "COMPANY"), and THE TAIL WIND FUND, LTD. (the "PURCHASER").
RECITALS
A. The Company and the Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration
afforded by the provisions of Regulation D ("REGULATION D"), as promulgated
by the U.S. Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended;
B. The Purchaser wishes to purchase, and the Company wishes to
sell and issue to the Purchaser, upon the terms and conditions stated in this
Agreement, an aggregate of (i) $7,000,000 principal amount of 2% Convertible
Notes due May 15, 2002 at an aggregate purchase price of $7,000,000, (the
"PURCHASE PRICE") which shall be convertible into shares ("COMMON SHARES") of
common stock ("COMMON STOCK") of the Company, par value $.01 in the form of
Exhibit 1.1A (the "NOTES"); and (ii) 1,367,188 warrants, exercisable from
June 1, 2002 (or as may otherwise be provided herein) through July 31, 2006,
to purchase shares ("WARRANT SHARES") of Common Stock, in the form of Exhibit
1.1B (the "WARRANTS").
C. Contemporaneous with the execution and delivery of this
Agreement, and as a condition to the Purchaser's obligation to purchase the
Notes and Warrants, (i) the Purchaser shall receive a Guaranty (the
"GUARANTY") from Eagle Wireless International Inc. (the "GUARANTOR") whereby
the Guarantor will guaranty the obligations of the Company under this
Agreement and the Notes; and (ii) the Purchaser and the Guarantor shall enter
into a Registration Rights and Conversion Agreement (the "CONVERSION
AGREEMENT") to provide for the exchange of the Notes and Warrants of
Guarantor's common stock, par value $.01 per share (the "GUARANTOR'S STOCK").
In consideration of the mutual promises made herein and for other
good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. In addition to those terms defined above and elsewhere
in this Agreement, for the purposes of this Agreement, the following terms
shall have the meanings here set forth:
1.1 "1933 ACT" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
1.2 "1934 ACT" means the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
1.3 "ACQUISITION AGREEMENT" shall have the meaning set forth
in Section 4.25 hereof.
1.4 "AFFILIATE" means, with respect to any Person, any other
Person which directly or indirectly controls, is controlled by, or is under
common control with, such Person.
1.5 "CLEARWORKS" shall have the meaning set forth in Section
4.25 hereof.
1.6 "CLOSING" means the consummation of the transactions
contemplated by this Agreement, and "Closing Date" means the date of such
Closing.
1.7 "COMMON SHARES" shall have the meaning set forth in the
Recitals.
1.8 "COMMON STOCK" shall have the meaning set forth in the
Recitals.
1.9 The "COMPANY" shall refer to the Company (as defined in
the first paragraph hereof) together with its subsidiaries wherever
applicable (including without limitation with respect to all representations
of the Company unless the context otherwise requires).
1.10 "COMPANY TRANSACTION DOCUMENTS" means this Agreement, the
Notes and the Warrants.
1.11 "CONVERSION PRICE" shall have the meaning set forth in
the Notes.
1.12 "CONTROL" means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting securities, by contract or
otherwise.
1.13 "NOTES" shall have the meaning set forth in the Recitals.
1.14 "CONVERSION AGREEMENT" shall have the meaning set forth
in the Recitals.
1.15 "FINANCIAL STATEMENTS" shall have the meaning set forth
in Section 4.6.
1.16 "GUARANTY" shall have the meaning set forth in the
Recitals.
1.17 "GUARANTOR" shall have the meaning set forth in the
Recitals.
1.18 "GUARANTOR'S STOCK" shall have the meaning set forth in
the Recitals.
1.19 "MATERIAL ADVERSE EFFECT" means a material adverse effect
on the (i) condition (financial or otherwise), business, assets, prospects or
results of operations
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of the Company; (ii) ability of the Company to perform any of its material
obligations under the terms of the Company Transaction Documents; or (iii)
rights and remedies of the Purchaser under the terms of the Company
Transaction Documents.
1.20 "MFN TRANSACTION" shall mean a transaction in which the
Company issues or sells any securities in a capital raising transaction or
series of related transactions (the "New Offering") which grants to the
Purchaser (the "New Purchaser") the right to receive additional securities
based upon future capital raising transactions of the Company on terms more
favorable than those granted to the New Purchaser in the New Offering.
1.21 "NEW OFFERING" shall have the meaning set forth in the
definition of MFN Transaction.
1.22 "NEW PURCHASER" shall have the meaning set forth in the
definition of MFN Transaction.
1.23 "PERSON" means an individual, corporation, partnership,
trust, business trust, association, joint stock company, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein.
1.24 "PURCHASER" shall have the meaning set forth in the
Preamble.
1.25 "PURCHASE PRICE" shall have the meaning set forth in the
Recitals.
1.26 "REGULATION D" shall have the meaning set forth in the
Recitals.
1.27 "SEC" shall have the meaning set forth in the Recitals.
1.28 "SECURITIES" means the Notes, the Warrants, the Common
Shares and the Warrant Shares.
1.29 "TRANSACTION DOCUMENTS" means the Company
Transaction Documents, the Guaranty and the Conversion Agreement.
1.30 "UNDERLYING SHARES" means the Common Shares and the
Warrant Shares.
1.31 "VARIABLE RATE TRANSACTION" shall mean a transaction in
which the Company issues or sells (a) any debt or equity securities that are
convertible into, exchangeable or exercisable for, or include the right to
receive additional shares of Common Stock either (x) at a conversion,
exercise or exchange rate or other price that is based upon and/or varies
with the trading prices of or quotations for the Common Stock at any time
after the initial issuance of such debt or equity securities, or (y) with a
fixed conversion, exercise or exchange price that is subject to being reset
at some future date after the initial issuance of such debt or equity
security or upon the occurrence of specified or contingent events directly or
indirectly related to the business of the
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Company or the market for the Common Stock (but excluding standard stock
split anti-dilution provisions), or (b) any securities of the Company
pursuant to an "equity line" structure which provides for the sale, from time
to time, of securities of the Company which are registered for resale
pursuant to the 0000 Xxx.
1.32 "WARRANTS" shall have the meaning set forth in the
recital.
1.33 "WARRANT SHARES" shall have the meaning set forth in the
Recitals.
2. PURCHASE AND SALE OF THE NOTES AND WARRANTS.
(a) Subject to the terms and conditions of this
Agreement, the Purchaser agrees to purchase, and the Company hereby agrees to
sell and issue to the Purchaser, the Notes and Warrants.
(b) By mutual agreement of the Company and the Purchaser,
the Company may sell on additional amount of Notes and Warrants to the
Purchaser on items identical to those set forth in this Agreement, provided
that in no event shall the aggregate principal amount of Notes exceed
$10,000,000.
3. CLOSING. The Company shall promptly deliver to Purchaser's counsel,
in trust, all of the Notes and Warrants, issued in such name or names as the
Purchaser may designate, with instructions that such Notes and Warrants are
to be held for release to the Purchaser only upon payment of the Purchase
Price to the Company. Upon receipt by counsel to the Purchaser of the Notes
and Warrants, the Purchaser shall promptly cause a wire transfer in same day
funds to be sent to the account of the Company as instructed in writing by
the Company, in an amount representing the Purchaser's Purchase Price;
provided that the Company shall direct the Purchaser to pay directly to
Ladenburg Xxxxxxxx & Co. from the payment of the Purchase Price due to the
Company hereunder, the amounts due to Ladenburg Xxxxxxxx & Co. (or its
affiliate) for fees payable in connection with the transactions contemplated
hereby. On the date the Company receives such funds, the Notes and the
Warrants shall be released to the Purchaser (and such date shall be deemed
the "CLOSING DATE").
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to the Purchaser that:
4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to carry on its business as now
conducted and own its properties. The Company is duly qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or leasing
of property makes such qualification or licensing necessary unless the
failure to so qualify would not have a Material Adverse Effect. All of the
Company's subsidiaries are listed by name and jurisdiction on SCHEDULE 4.1
attached hereto.
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4.2 AUTHORIZATION. The Company has full power and authority
and has taken all requisite action on the part of the Company, its officers,
directors and stockholders necessary for (i) the authorization, execution and
delivery of the Company Transaction Documents, (ii) the authorization of the
performance of all obligations of the Company hereunder or thereunder, and
(iii) the authorization, issuance (or reservation for issuance) and delivery
of the Securities. The Company Transaction Documents constitute the legal,
valid and binding obligations of the Company, enforceable against the Company
in accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability, relating to or affecting creditors' rights generally.
4.3 CAPITALIZATION. Set forth on Schedule 4.3 hereto is (a)
the authorized capital stock of the Company on the date hereof; (b) the
number of shares of capital stock issued and outstanding; (c) the number of
shares of capital stock issuable pursuant to the Company's stock plans; and
(d) the number of shares of capital stock issuable and reserved for issuance
pursuant to securities (other than the Notes and the Warrants) exercisable
for, or convertible into or exchangeable for any shares of capital stock. All
of the issued and outstanding shares of the Company's capital stock have been
duly authorized and validly issued and are fully paid, nonassessable and free
of preemptive rights. Except as set forth on Schedule 4.3 and as contemplated
by the Acquisition Agreement, no Person is entitled to preemptive or similar
statutory or contractual rights with respect to any securities of the
Company. Except as set forth on Schedule 4.3 and as contemplated by the
Acquisition Agreement, there are no outstanding warrants, options,
convertible securities or other rights, agreements or arrangements of any
character under which the Company is or may be obligated to issue any equity
securities of any kind and except as contemplated by this Agreement or set
forth on Schedule 4.3, the Company is not currently in negotiations for the
issuance of any equity securities of any kind. Except as set forth on
Schedule 4.3 and as contemplated by the Acquisition Agreement, the Company
has no knowledge of any voting agreements, buy-sell agreements, option or
right of first purchase agreements or other agreements of any kind among any
of the securityholders of the Company relating to the securities of the
Company held by them. Except as set forth on Schedule 4.3, the Company has
not granted any Person the right to require the Company to register any
securities of the Company under the 1933 Act, whether on a demand basis or in
connection with the registration of securities of the Company for its own
account or for the account of any other Person.
4.4 VALID ISSUANCE. The Company has reserved a sufficient
number of shares of Common Stock for the issuance upon conversion of, as
payment for interest on and otherwise pursuant to the Notes, and upon
exercise of the Warrants. The Company will take such steps as may be
necessary to reserve additional shares for issuance pursuant to the Notes and
Warrants as a result of an adjustment pursuant to the terms thereof when such
issuance is determinable. The Notes and Warrants are duly authorized, and
such Securities, along with the Underlying Shares, when issued in accordance
herewith and with the terms of the Notes and Warrants, will be duly
authorized, validly issued, fully paid, non-assessable and free and clear of
all
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encumbrances and restrictions, except for restrictions on transfer imposed by
applicable securities laws.
4.5 CONSENTS. The execution, delivery and performance by the
Company of the Company Transaction Documents and the offer, issuance and sale
of the Securities require no consent of, action by or in respect of, or
filing with, any Person, governmental body, agency, or official other than
filings that have been made pursuant to applicable state securities laws and
post-sale filings pursuant to applicable state and federal securities laws,
which the Company undertakes to file within any applicable time periods.
4.6 FINANCIAL STATEMENTS. The Company has delivered to the
Purchaser certain unaudited financial statements attached hereto as Schedule
4.6 (the "FINANCIAL STATEMENTS"). The Financial Statements present fairly and
accurately in all material respects the consolidated financial position of
the Company as of the dates shown and its consolidated results of operations
and cash flows for the periods shown, and such Financial Statements have been
prepared in conformity with generally accepted accounting principles applied
on a consistent basis and present fairly the business projections and the
financial condition and position of the Company as of the dates of such
Financial Statements. Except as set forth in the Financial Statements of the
Company, the Company has no liabilities, contingent or otherwise, except
those which individually or in the aggregate are not material to the
financial condition or operating results of the Company.
4.7 USE OF PROCEEDS. The proceeds of the sale of the Notes
and the Warrants hereunder shall be used by the Company for working capital
and general corporate purposes.
4.8 NO MATERIAL ADVERSE CHANGE. Except as set forth on
Schedule 4.3, since September 30, 2000, there has not been:
(i) any change in the consolidated assets, liabilities,
financial condition or operating results of the Company from that reflected
in the most recent Financial Statements, except changes in the ordinary
course of business which have not had, in the aggregate, a Material Adverse
Effect;
(ii) any declaration or payment of any dividend, or any
authorization or payment of any distribution, on any of the capital stock
of the Company, or any redemption or repurchase of any securities of the
Company;
(iii) any material damage, destruction or loss,
whether or not covered by insurance, to any assets or properties of the
Company;
(iv) any waiver by the Company of a valuable right or of
a material debt owed to it;
(v) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the
ordinary
6
course of business and which is not material to the assets, properties,
financial condition, operating results or business of the Company taken as a
whole (as such business is presently conducted and as it is proposed to be
conducted);
(vi) any material change or amendment to a material
contract or arrangement by which the Company or any of its assets or
properties is bound or subject;
(vii) any material labor difficulties or labor union
organizing activities with respect to employees of the Company;
(viii) any transaction entered into by the Company
other than the Acquisition Agreement and in the ordinary course of
business; or
(ix) any other event or condition of any character that
might have a Material Adverse Effect.
4.9 CONTRACTS REGARDING ISSUANCE OF SECURITIES. Except as set
forth on Schedule 4.3 hereto and other than the Acquisition Agreement, there
are no agreements or instruments currently in force and effect that
constitute a warrant, option, convertible security or other right, agreement
or arrangement of any character under which the Company is or may be
obligated to issue any material amounts of any equity security of any kind,
or to transfer any material amounts of any equity security of any kind.
4.10 NO CONFLICT, BREACH, VIOLATION OR DEFAULT.
(a) The execution, delivery and performance of the
Company Transaction Documents by the Company and the issuance and sale of the
Securities will not conflict with or result in a breach or violation of any
of the terms and provisions of, or constitute a default under (i) the
Company's Articles of Incorporation or the Company's By-laws, both as in
effect on the date hereof (copies of which have been provided to the
Purchaser before the date hereof), or (ii) except where it would not have a
Material Adverse Effect, (a) any statute, rule, regulation or order of any
governmental agency or body or any court, domestic or foreign, having
jurisdiction over the Company or any of its properties, or (b) any agreement
or instrument to which the Company is a party or by which the Company is
bound or to which any of the properties of the Company is subject, including
the Acquisition Agreement.
(b) Except where it would not have a Material Adverse
Effect, the Company (i) is not in violation of any statute, rule or
regulation applicable to the Company or its assets, (ii) is not in violation
of any judgment, order or decree applicable to the Company or its assets, and
(iii) is not in breach or violation of any agreement, note or instrument to
which it or its assets are a party or are bound or subject. The Company has
not received notice from any Person of any claim or investigation that, if
adversely determined, would render the preceding sentence untrue or
incomplete.
4.11 TAX MATTERS. The Company has timely prepared and filed
all tax returns required to have been filed by the Company with all
appropriate governmental agencies and timely paid all taxes owed by it. The
charges, accruals and reserves on the
7
books of the Company in respect of taxes for all fiscal periods are adequate
in all material respects, and there are no material unpaid assessments
against the Company nor, to the knowledge of the Company, any basis for the
assessment of any additional taxes, penalties or interest for any fiscal
period or audits by any federal, state or local taxing authority except such
as which are not material. All material taxes and other assessments and
levies that the Company is required to withhold or to collect for payment
have been duly withheld and collected and paid to the proper governmental
entity or third party when due. There are no tax liens or claims pending or
threatened against the Company or any of its respective assets or property.
There are no outstanding tax sharing agreements or other such arrangements
between the Company and any other corporation or entity.
4.12 TITLE TO PROPERTIES. The Company has good and marketable
title to all real properties and all other properties and assets owned by it,
in each case free from liens, encumbrances and defects that would materially
affect the value thereof or materially interfere with the use made or
currently planned to be made thereof by them; and the Company holds any
leased real or personal property under valid and enforceable leases with no
exceptions that would materially interfere with the use made or currently
planned to be made thereof by them.
4.13 CERTIFICATES, AUTHORITIES AND PERMITS. The Company
possesses adequate certificates, authorities or permits issued by appropriate
governmental agencies or bodies necessary to conduct the business now
operated by it and has not received any notice of proceedings relating to the
revocation or modification of any such certificate, authority or permit that,
if determined adversely to the Company, would individually or in the
aggregate have a Material Adverse Effect.
4.14 NO LABOR DISPUTES. No material labor dispute with
the employees of the Company exists or, to the knowledge of the Company,
is imminent.
4.15 INTELLECTUAL PROPERTY. The Company owns or possesses
adequate rights or licenses to the inventions, know-how, patents, copyrights,
trademarks, trade names, confidential information and other intellectual
property (collectively, "INTELLECTUAL PROPERTY RIGHTS"), free and clear of
all liens, security interests, charges, encumbrances, equities and other
adverse claims, necessary to conduct the business now operated by it, or
presently employed by it, and presently contemplated to be operated by it,
and the Company has not received any notice of infringement of or conflict
with asserted rights of others with respect to any Intellectual Property
Rights. To the knowledge of the Company, the Company's patents and other
Intellectual Property Rights and the present activities of the Company do not
infringe any patent, copyright, trademark, trade name or other proprietary
rights of any third party.
4.16 ENVIRONMENTAL MATTERS. The Company is not in violation of
any statute, rule, regulation, decision or order of any governmental agency
or body or any court, domestic or foreign, relating to the use, disposal or
release of hazardous or toxic substances or relating to the protection or
restoration of the environment or human exposure to hazardous or toxic
substances (collectively, "ENVIRONMENTAL LAWS"), does not own or operate any
real property contaminated with any substance that is subject to
8
any Environmental Laws, is not liable for any off-site disposal or
contamination pursuant to any Environmental Laws, and is not subject to any
claim relating to any Environmental Laws, which violation, contamination,
liability or claim would individually or in the aggregate have a Material
Adverse Effect; and the Company is not aware of any pending investigation
that might lead to such a claim.
4.17 LITIGATION. There are no pending actions, suits or
proceedings against or affecting the Company or any of its properties that,
if determined adversely to the Company, would individually or in the
aggregate have a Material Adverse Effect or would materially and adversely
affect the ability of the Company to perform its obligations under this
Agreement, or which are otherwise material in the context of the sale of the
Securities; and to the Company's knowledge, no such actions, suits or
proceedings are threatened or contemplated.
4.18 INSURANCE COVERAGE. The Company maintains in full force
and effect insurance coverage that is customary for comparably situated
companies for the business being conducted and properties owned or leased by
the Company, and the Company reasonably believes such insurance coverage to
be adequate against all liabilities, claims and risks against which it is
customary for comparably situated companies to insure.
4.19 ACKNOWLEDGEMENT OF DILUTION. The number of shares of
Common Stock issuable pursuant to the Company Transaction Documents may
increase substantially. The Company's executive officers and directors have
studied and fully understand the nature of the transactions being
contemplated hereunder and recognize that they have a potential dilutive
effect.
4.20 BROKERS AND FINDERS. The Purchaser shall have no
liability or responsibility for the payment of any commission or finder's fee
to any third party in connection with or resulting from this agreement or the
transactions contemplated by this Agreement by reason of any agreement of or
action taken by the Company.
4.21 NO DIRECTED SELLING EFFORTS OR GENERAL SOLICITATION.
Neither the Company nor any Person acting on its behalf has conducted any
general solicitation or general advertising (as those terms are used in
Regulation D) in connection with the offer or sale of any of the Securities.
4.22 NO INTEGRATED OFFERING. Neither the Company nor any of
its Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers
to buy any security, under circumstances that (i) would adversely affect
reliance by the Company on Section 4(2) for the exemption from registration
for the transactions contemplated hereby or would require registration of the
Securities under the 1933 Act; or (ii) would be integrated with the offering
of the Securities under the Act.
4.23 DISCLOSURES. No representation or warranty made under any
Section hereof and no information furnished by the Company pursuant hereto,
or in any
9
other document, certificate or statement furnished by the Company to the
Purchaser or any authorized representative of the Purchaser, pursuant to the
Company Transaction Documents or in connection therewith, contains any untrue
statement of a material fact or omits to state a material fact necessary to
make the respective statements contained herein or therein, in light of the
circumstances under which the statements were made, not misleading
4.24 EMPLOYEES. To the Company's knowledge, no employee of the
Company is in violation of any term of any employment contract, patent
disclosure agreement or any other contract or agreement relating to the
relationship of such employee with the Company or any other party because of
the nature of the business conducted or to be conducted by the Company. Each
employee of the Company with access to confidential or proprietary
information has executed a confidentiality agreement. The Company is not
aware that any of its employees is obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or
subject to any judgment, decree or order of any court or administrative
agency, that would interfere with the use of his best efforts to promote the
interests of the Company or that would conflict with the Company's business
as proposed to be conducted. Neither the execution nor delivery of this
Agreement, nor the carrying on of the Company's business by the employees of
the Company, nor the conduct of the Company's business as proposed, will, to
the Company's knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract.
4.25 XXXXXXXXXX.XXX, INC.
(a) The agreement and plan of acquisition by and among
Xxxxxxxxxx.Xxx, Inc. ("Clearworks") and Link Two Communications, Inc., among
others, dated September 15, 2000 (the "Acquisition Agreement"), pursuant to
which the Company's stock shall be acquired by Clearworks and the Company
shall continue as a wholly owned subsidiary of Clearworks, is in full force
and effect.
(b) Each of the representations and warranties of the
Company set forth in Article IV of the Acquisition Agreement shall be true
and correct as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties as of an earlier
date, which will be true and correct as of such date);
(c) The Company and, to the knowledge of the Company,
Clearworks have complied with each of their obligations under the Acquisition
Agreement as of the Closing hereof, and neither the Company nor, to the
knowledge of the Company, Clearworks is in breach of, or in default under,
the Acquisition Agreement.
(d) The Company's Board of Directors has performed an
adequate and independent review of the transactions contemplated by the
Acquisition Agreement and has determined such transactions to be fair to its
shareholders.
10
(e) All of the transactions occurring prior to the
consummation of the Acquisition Agreement between the Company and the
Guarantor were conducted on an arm's length basis, were properly authorized,
and were properly accounted for on the Company's books and records.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
hereby represents and warrants to the Company that:
5.1 ORGANIZATION AND EXISTENCE. The Purchaser is a validly
existing corporation, partnership or limited liability company and has all
requisite corporate, partnership or limited liability company power and
authority to invest in the Securities pursuant to this Agreement.
5.2 AUTHORIZATION. The execution, delivery and performance by
the Purchaser of this Agreement has been duly authorized and this Agreement
will constitute the valid and legally binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with their terms.
5.3 PURCHASE ENTIRELY FOR OWN ACCOUNT. The Securities to be
received by the Purchaser hereunder will be acquired for the Purchaser's own
account, not as nominee or agent, and not with a view to the resale or
distribution of any part thereof in violation of securities laws, and the
Purchaser has no present intention of selling, granting any participation in,
or otherwise distributing the same in violation of securities laws. The
Purchaser is not a registered broker dealer or an entity engaged in the
business of being a broker dealer.
5.4 INVESTMENT EXPERIENCE. The Purchaser acknowledges that it
can bear the economic risk and complete loss of its investment in the
Securities and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the
investment contemplated hereby.
5.5 DISCLOSURE OF INFORMATION. The Purchaser has had an
opportunity to receive documents related to the Company and to ask questions
of and receive answers from the Company regarding the Company, its business
and the terms and conditions of the offering of the Securities. Neither such
inquiries nor any other due diligence investigation conducted by the
Purchaser shall modify, amend or affect the Purchaser's right to rely on the
Company's representations and warranties contained in this Agreement or made
pursuant to this Agreement.
5.6 RESTRICTED SECURITIES. The Purchaser understands that the
Securities are characterized as "restricted securities" under the U.S.
federal securities laws inasmuch as they are being acquired from the Company
in a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration
under the 1933 Act only in certain limited circumstances.
11
5.7 LEGENDS. It is understood that, until registration for
resale has been effectuated or until sales under Rule 144 are permitted,
certificates evidencing the Securities may bear one or all of the following
legends or legends substantially similar thereto:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS, IN RELIANCE
UPON EXEMPTIONS FROM REGISTRATION FOR NON-PUBLIC OFFERINGS. THIS SECURITY MAY
NOT BE SOLD OR TRANSFERRED UNLESS IT IS REGISTERED UNDER THE ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR UNLESS LINK TWO COMMUNICATIONS, INC.
RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT AN
EXEMPTION FROM REGISTRATION IS AVAILABLE (UNLESS WAIVED)."
Upon registration for resale or upon Rule 144 becoming available,
the Company shall promptly cause certificates evidencing the Securities
previously issued hereunder to be replaced with certificates which do not
bear such restrictive legends, and all Securities subsequently issued shall
not bear such restrictive legends. If the Company does not promptly cause all
such unlegended certificates to be issued to the Purchaser hereunder (no
later than 10 business days in any event), the Company shall pay liquidated
damages to the Purchaser equal to 2% per month (or part thereof) based on the
original market value of such Securities.
5.8 ACCREDITED INVESTOR. The Purchaser is an accredited
investor as defined in paragraph (a)(3) of Rule 501(a) of Regulation D.
5.9 NO GENERAL SOLICITATION. The Purchaser did not learn of
the investment in the Securities as a result of any public advertising or
general solicitation.
5.10 BROKERS. The Purchaser has taken no action which would
give rise to any claim by any person for brokerage commissions, finder's fees
or similar payments by the Company or the Purchaser relating to this
Agreement or the transactions contemplated hereby except for the broker's fee
of Ladenburg Xxxxxxxx & Co. which shall be paid by the Company out of the
Closing proceeds.
5.11 NO PUBLIC MARKET. The Purchaser understands that there is
no public trading market for the Securities, that none is expected to
develop, and that the Securities must be held indefinitely unless and until
such Securities are registered under the 1933 Act or an exemption from
registration is available.
6. GUARANTY AND CONVERSION AGREEMENT. The parties acknowledge and
agree that part of the inducement for the Purchaser to enter into this
Agreement is the Guarantor's execution and delivery to the Purchaser of
the Guaranty and the Conversion Agreement.
7. COVENANTS AND AGREEMENTS OF THE COMPANY.
12
7.1 SECURITIES COMPLIANCE. To the extent required, the
Company shall notify the SEC in accordance with its requirements of the
transactions contemplated by the Company Transaction Documents, and shall
take all other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Notes and the Warrants hereunder and the Common Stock
issuable upon conversion of the Notes and/or exercise of the Warrants.
7.2 NOTICES. For so long as the Purchaser beneficially
owns any of the Securities, the Company agrees to provide the Purchaser
with:
(a) copies of all notices and information (including,
without limitation, notices, financial statements, reports and proxy
statements in connection with any meetings) that are provided to the
stockholders of the Company, contemporaneously with the delivery of such
notices or information to the stockholders of the Company; and
(b) such other information relating to the Company as
from time to time may reasonably be requested by the Purchaser provided the
Company produces such information in its ordinary course of business, and
further provided that the Company, solely in its own discretion, determines
that such information is not confidential in nature and disclosure to the
Purchaser would not be harmful to the Company.
7.3 RESERVATION OF COMMON STOCK. The Company hereby agrees at
all times to reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of providing for the
conversion of the Notes and exercise of the Warrants, such number of shares
of Common Stock as shall from time to time equal the number of shares
sufficient to permit the exercise of the Warrants in accordance with the
terms of such Securities.
7.4 BEST EFFORTS. The Company shall use its best efforts to
satisfy timely each of the covenants described in this Article 7 of this
Agreement and to fulfill the closing condition set forth in Article 8 of this
Agreement.
7.5 FORM D; BLUE SKY LAWS. The Company agrees to file a Form D
with respect to the Securities, as required under Regulation D under the Act,
and to provide a copy thereof to the Purchaser promptly after such filing.
The Company shall, on or before each Closing Date, take such action as the
Company shall have reasonably determined is necessary to qualify the
Securities and for sale to the Purchaser at the Closing pursuant to this
Agreement under applicable securities or "blue sky" laws of the states of the
United States (or to obtain an exemption from such qualification), and shall
provide evidence of any such action so taken to the Purchaser on or prior to
the Closing Date.
7.6 LIMITS ON OFFERINGS. Neither the Company, nor any of its
affiliates, nor any person acting on their behalf, directly or indirectly,
shall make any offer, sell any security, solicit any offer, or buy any
security, under circumstances that would adversely affect any private
placement exemption applicable to the Securities.
13
7.7 FINANCIAL INFORMATION. For so long as the Purchaser
beneficially owns any of the Securities, the Company will provide to the
Purchaser (and any holder of the Securities), each of which shall be provided
to the Purchaser by air mail or reputable courier:
(a) As soon as practicable after the end of each fiscal
year, and in any event within 120 days thereafter, consolidated balance
sheets of the Company and its subsidiaries, if any, as of the end of such
fiscal year, and consolidated statements of income or loss and consolidated
statements of cash flow of the Company and its subsidiaries, if any, for such
year, prepared in accordance with generally accepted accounting principles
consistently applied and setting forth in each case in comparative form the
figures for the previous fiscal year (or, at the election of the Company,
setting forth in comparative form the budgeted figures for the fiscal year
then reported), all in reasonable detail and audited by independent public
accountants of national standing selected by the Company.
(b) As soon as practicable after the end of each of the
first, second and third quarter periods in each fiscal year of the Company,
and in any event within 30 days thereafter, an unaudited quarterly report
including a balance sheet and profit and loss statement, prepared in
accordance with generally accepted accounting principles consistently applied
(other than for accompanying notes and subject to changes resulting from
year-end adjustments).
(c) To the extent applicable, copies of (i) all notices,
proxy statements, financial statements, reports and documents as the Company
shall send or make available generally to its stockholders or to financial
analysts, promptly after providing same to the stockholders and (ii) all
periodic and special reports, documents and registration statements (other
than on Form S-8) which the Company furnishes or files, or any officer or
director of the Company (in such person's capacity as such) furnishes or
files with the SEC.
(d) Such other information relating to the Company as
from time to time may reasonably be requested by any Purchaser provided the
Company produces such information in its ordinary course of business, and
further provided that the Company, solely in its own discretion, determines
that such information is not confidential in nature and disclosure to the
Purchaser would not be harmful to the Company.
(e) The Company agrees to make publicly available on a
timely basis the information necessary to enable Rule 144 to be available for
resale.
7.8 INSPECTION. As long as the Purchaser holds any
Securities, the Company shall permit that Purchaser, at the Purchaser's
expense, to visit and inspect the Company's offices and properties, to
examine its books of account and records and to discuss the Company's
affairs, finances and accounts with its officers, all at such reasonable
times as may be requested by the Purchaser; provided, however, that the
Company shall not be obligated pursuant to this Section 7.8 to provide access
to any
14
information which it reasonably considers to be a trade secret or similar
confidential information unless the Purchaser enters into an appropriate
confidentiality agreement.
7.9 LIMITATION ON TRANSACTIONS.
Until April 30, 2002, without the prior written consent of the
Purchaser (which consent may be withheld in the Purchasers' discretion), the
Company shall not (i) issue or sell or agree to issue or sell for cash any
securities in a MFN Transaction; or (ii) issue or sell, or agree to issue or
sell, for cash any securities in a Variable Rate Transaction. However,
notwithstanding the foregoing, the Company may issue, sell and agree to issue
and sell such securities at any time after the date which is six (6) months
following the date on which the Purchaser no longer holds any Securities.
7.10 PRESS RELEASES. Any press release or other publicity
concerning this Agreement or the transactions contemplated by this Agreement
shall be submitted to the Purchaser for comment at least two (2) business
days prior to issuance, unless the release is required to be issued within a
shorter period of time by law. The Company shall issue a press release
concerning the fact and material terms of this Agreement within one business
day of the Closing.
7.11 NO CONFLICTING AGREEMENTS. The Company will not take any
action, enter into any agreement or make any commitment that would conflict
or interfere in any material respect with the obligations to the Purchaser
under the Company Transaction Documents.
7.12 INSURANCE. For so long as the Purchaser beneficially owns
any of the Securities, the Company shall, and shall cause each subsidiary to,
have in full force and effect (a) insurance reasonably believed to be
adequate on all assets and activities of a type customarily insured, covering
property damage and loss of income by fire or other casualty, and (b)
insurance reasonably believed to be adequate protection against all
liabilities, claims and risks against which it is customary for companies
similarly situated as the Company and the subsidiaries to insure.
7.13 COMPLIANCE WITH LAWS. So long as the Purchaser
beneficially owns any Securities, the Company will use reasonable efforts to
comply with all applicable laws, rules, regulations, orders and decrees of
all governmental authorities, except to the extent non-compliance (in one
instance or in the aggregate) would not have a Material Adverse Effect.
7.14 LISTING OF UNDERLYING SHARES AND RELATED MATTERS. The
Company agrees that if the Company applies to have its Common Stock or other
securities traded on any principal stock exchange or market, it will include
in such application the Underlying Shares and will take such other action as
is necessary to cause such Common Stock to be so listed. For so long as the
Purchaser beneficially owns any of the Securities, in the event that the
shares are traded in a principal stock exchange or market, the Company will
take all action necessary to continue the listing and trading of its Common
Stock on such exchange or market and will comply in all respects with the
15
Company's reporting, filing and other obligations under the bylaws or rules
of such exchange, as applicable, to ensure the continued eligibility for
trading of the Underlying Shares thereon.
7.15 CORPORATE EXISTENCE. So long as the Purchaser
beneficially owns any of the Securities, the Company shall maintain its
corporate existence, except in the event of a merger, consolidation or sale
of all or substantially all of the Company's assets, as long as the surviving
or successor entity in such transaction (a) assumes the Company's obligations
in a written instrument to the satisfaction of the Purchaser hereunder and
under the agreements and instruments entered into in connection herewith,
regardless of whether or not the Company would have had a sufficient number
of shares of Common Stock authorized and available for issuance in order to
fulfill its obligations hereunder and effect the conversion in full of all
Notes and exercise in full of all Warrants outstanding as of the date of such
transaction; and (b) has no legal, contractual or other restrictions on its
ability to perform the obligations of the Company hereunder and under the
agreements and instruments entered into in connection herewith.
8. CONDITIONS TO CLOSINGS.
8.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO
SELL THE SECURITIES. The obligation hereunder of the Company to issue and/or
sell the Securities to the Purchaser at the Closing (unless otherwise
specified) is subject to the satisfaction, at or before the Closing, of each
of the applicable conditions set forth below. These conditions are for the
Company's sole benefit and may be waived by the Company at any time in its
sole discretion.
(a) ACCURACY OF THE PURCHASER'S REPRESENTATIONS AND
WARRANTIES. The representations and warranties of the Purchaser will be true
and correct as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties as of an earlier
date, which will be true and correct as of such date).
(b) PERFORMANCE BY THE PURCHASER. The Purchaser shall
have performed all agreements and satisfied all conditions required to be
performed or satisfied by the Purchaser under the terms of this Agreement at
or prior to the Closing.
(c) NO INJUNCTION. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by any court or governmental authority of
competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by the Company Transaction Documents.
8.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASER
TO PURCHASE THE SECURITIES. The obligation hereunder of the Purchaser to
acquire and pay for the Securities at the Closing (unless otherwise
specified) is subject to the satisfaction, at or before the Closing, of each
of the applicable conditions set forth below.
16
These conditions are for the Purchaser's benefit and may be waived by the
Purchaser at any time in its sole discretion.
(a) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND
WARRANTIES. The representations and warranties of the Company shall be true
and correct as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties as of an earlier
date, which shall be true and correct as of such date).
(b) PERFORMANCE BY THE COMPANY. The Company shall
have performed all agreements and satisfied all conditions required to
be performed or satisfied by the them at or prior to the Closing.
(c) NO INJUNCTION. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by any court or governmental authority of
competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by the Transaction Documents.
(d) OPINION OF COUNSEL. At the Closing the Purchaser
shall have received the following opinions:
(i) an opinion of counsel to the Company in the form
attached hereto as Exhibit 8.2(d)(i) addressing the Company Transaction
Documents, those matters set forth in Schedule 8.2(d) and such other
opinions, certificates and documents as the Purchaser or its counsel shall
reasonably require incident to the Closing.
(ii) an opinion of counsel to the Guarantor in the
form attached hereto as Exhibit 8.2(d)(ii) addressing the Conversion
Agreement and the Guaranty and such other opinions, certificates and
documents as the Purchaser or its counsel shall reasonably require incident
to the Closing.
(e) GUARANTY. The Guarantor shall have executed and
delivered the Guaranty to the Purchaser.
(f) CONVERSION AGREEMENT. The Guarantor and the
Purchaser shall have executed and delivered the Conversion Agreement.
(g) MATERIAL ADVERSE CHANGES. No event which had or is
likely to have, in the reasonable judgment of the Purchaser, a Material
Adverse Effect on the Company or any of its subsidiaries shall have occurred.
(h) OFFICER'S CERTIFICATE.
(i) The Company shall have delivered to the Purchaser
a certificate in form and substance satisfactory to the Purchaser and its
counsel, executed by an officer of the Company, certifying as to satisfaction
of closing conditions, incumbency of signing officers, and the true, correct
and complete nature of the Charter,
17
By-laws, good standing and authorizing resolutions of the Company. The
Company's Articles of Incorporation, By-laws, certificate of good standing
and authorizing resolutions shall be attached to such Officer's Certificate.
(ii) The Guarantor shall have delivered to the
Purchaser a certificate in form and substance satisfactory to the Purchaser
and its counsel, executed by an officer of the Guarantor, certifying as to
satisfaction of applicable closing conditions, incumbency of signing
officers, and the true, correct and complete nature of the charter, By-laws,
Good Standing and authorizing resolutions of the Guarantor.
(i) NOTES AND WARRANTS. The Purchaser shall have
received the duly executed Notes and Warrants.
(j) DUE DILIGENCE. The Purchaser shall have completed
its financial, accounting, operational and legal due diligence in a manner
satisfactory to the Purchaser in its sole discretion.
(k) SOLVENCY. The Company is "solvent," within the
meaning of the Uniform Fraudulent Transfers Act (or such other statute as
shall apply to the Company with respect to fraudulent transfers) and as such
has assets in excess of liabilities and the capacity to meet its obligations
as they become due. No bankruptcy, insolvency, or liquidation proceedings
have been initiated by or against the Company.
(l) FORM D; BLUE SKY LAWS. The Company shall have
delivered to the Purchaser all evidence required to be delivered to the
Purchaser pursuant to Section 7.5 hereof.
9. SURVIVAL. All representations, warranties, covenants and
agreements contained in this Agreement shall be deemed to be
representations, warranties, covenants and agreements as of the date hereof
and shall survive the execution and delivery of this Agreement.
10. MISCELLANEOUS.
10.1 SUCCESSORS AND ASSIGNS. This Agreement may not be
assigned by a party hereto without the prior written consent of the other
party hereto which consent may not be unreasonably withheld or delayed,
except that without the prior written consent of the Company, but after
notice duly given, an Purchaser may assign its rights and delegate its duties
hereunder in whole or in part to an Affiliate or to a third party acquiring
some portion or all of its Securities in a private transaction. The terms and
conditions of this Agreement shall inure to the benefit of and be binding
upon the respective permitted successors and assigns of the parties. Nothing
in this Agreement, express or implied, is intended to confer upon any party
other than the parties hereto or their respective successors and assigns any
rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
18
10.2 COUNTERPARTS. This Agreement may be executed in two 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 TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
10.4 NOTICES. Unless otherwise provided, any notice required
or permitted under this Agreement shall be given in writing and shall be
deemed effectively given only upon delivery to each party to be notified by
(i) personal delivery, (ii) telex or telecopier, upon receipt of confirmation
of complete transmittal, or (iii) an internationally recognized overnight air
courier, addressed to the party to be notified at the address as follows, or
at such other address as such party may designate by ten days' advance
written notice to the other party:
If to the Company:
Link Two Communications, Inc.
c/o X.X. Xxxxxxxx
000 Xxxxxxxxxx Xxxxx
Xxxxxx Xxxx, Xxxxx 00000
Attn: X.X. Xxxxxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxxxxx
Three Riverway, 00xx Xxxxx
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxx X. Xxxxxxxxx, Esq.
Telephone: (000) 000-0000
Fax: (000) 000-0000
If to the Purchaser, to the addresses set forth on
the signature pages hereto.
10.5 EXPENSES. The parties hereto shall pay their own costs
and expenses in connection herewith and with the other Transaction Documents,
except that the Company shall pay to Tail Wind, Inc. a sum equal to 0.6% of
the Purchase Price paid by the Purchaser as and for reimbursement for legal
and due diligence expenses incurred in connection herewith and with the other
Transaction Documents. Such amount shall be paid at Closing from gross
proceeds of the offering (other than the $15,000 already paid). The Company
shall pay all fees of Ladenburg Xxxxxxxx & Co. in connection with the
19
transactions contemplated by the Transaction Documents pursuant to a separate
agreement between such parties.
10.6 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the
Purchaser. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon each holder of any Securities purchased under this
Agreement at the time outstanding, each future holder of all such securities,
and the Company.
10.7 SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
10.8 ENTIRE AGREEMENT. This Agreement, including the Exhibits
and Schedules hereto, and constitute the entire agreement among the parties
hereof with respect to the subject matter hereof and thereof and supersede
all prior agreements and understandings, both oral and written, between the
parties with respect to the subject matter hereof and thereof.
10.9 FURTHER ASSURANCES. The parties shall execute and deliver
all such further instruments and documents and take all such other actions as
may reasonably be required to carry out the transactions contemplated hereby
and by the Transaction Documents to evidence the fulfillment of the
agreements herein contained.
10.10 APPLICABLE LAW. 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 laws.
10.11 REMEDIES.
(i) The Purchaser shall be entitled to specific
performance of the Company's obligations under the Company Transaction
Documents.
(ii) The Company on the one hand, and the Purchaser
shall indemnify the other and hold it harmless from any loss, cost, expense
or fees (including attorneys' fees and expenses) arising out of any breach of
any representation, warranty, covenant or agreement in any of the Company
Transaction Documents, or arising out of the enforcement of this Section
10.11.
10.12 JURISDICTION. The parties hereby agree that all actions
or proceedings arising directly or indirectly from or in connection with this
Agreement or the other Agreements shall be litigated only in the Supreme
Court of the State of New York or the United States District Court for the
Southern District of New York located in New York County, New York. The
parties consent to the jurisdiction and venue of the foregoing courts and
consent that any process or notice of motion or other application to
20
either of said courts or a judge thereof may be served inside or outside the
State of New York or the Southern District of New York by registered mail,
return receipt requested, directed to the party being served at its address
set forth in this Agreement (and service so made shall be deemed complete
three (3) days after the same has been posted as aforesaid) or by personal
service or in such other manner as may be permissible under the rules of said
courts. The Company hereby waives any right to a jury trial in connection
with any litigation pursuant to this Agreement or the other Company
Transaction Documents.
[SIGNATURE PAGE FOLLOWS]
21
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.
THE COMPANY: LINK TWO COMMUNICATIONS, INC.
By: /s/ X.X. Xxxxxxxx
---------------------------
Name: X.X. Xxxxxxxx
Title: President
22
THE PURCHASER
THE TAIL WIND FUND, LTD.
By:_________________________
Name:
Title:
Aggregate Purchase Price: $7,000,000
Number of Warrants: 1,367,188
Address for Notices:
The Tail Wind Fund Ltd.
MeesPierson (Bahamas) Ltd.
Attn: Xxxxxx Xxxxx
Windemere House, 000 Xxxx Xxx Xxxxxx
P.O. Box SS 5539, Nassau, Bahamas
Tel: 242/000-0000 Fax: 242/000-0000
with a copy to:
Xxxxx Xxxxx, Esq.
x/x XXXX
0xx Xxxxx, No. 0 Xxxxxx Xxxxxx
Xxxxxx, XX0X 0XX XX
Telephone: 00-000-000-0000
Facsimile: 00-000-000-0000
and with a copy to:
Kleinberg, Kaplan, Xxxxx & Xxxxx, P.C.
000 Xxxxx Xxxxxx, 00xx Xxx.
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxxx X. Xxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
23
EXHIBIT 1.1A
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE 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.
2% CONVERTIBLE NOTE
February 9, 2001 Original Principal Amount: $7,000,000
FOR VALUE RECEIVED, LINK TWO COMMUNICATIONS, INC., a Texas corporation
(the "COMPANY"), hereby promises to pay to the order of THE TAIL WIND FUND,
LTD. or its registered assigns ("HOLDER") the Principal Amount (as defined in
Section 2(a) below), together with all accrued but unpaid interest thereon,
if any, on May 15, 2002 (the "MATURITY DATE") to the extent such Principal
Amount and interest has not been converted into the Company's Common Stock,
$.0l par value per share (the "COMMON STOCK"), in accordance with the terms
hereof, and to pay interest on the unpaid principal balance hereof at the
rate of 2% per annum from the date hereof (the "ISSUANCE DATE") until the
same becomes due and payable on the Maturity Date, or such earlier date upon
acceleration or by conversion or redemption in accordance with the terms
hereof. Interest on this Note shall accrue daily commencing on the Issuance
Date and shall be computed on the basis of a 360-day year, 30-day months and
actual days elapsed and shall be payable in accordance with Section 2(a)
hereof. Notwithstanding anything contained herein, this Note shall bear
interest from and after the occurrence and during the continuance of a
default pursuant to Section 4(a), at the rate equal to the lower of fifteen
percent (15%) per annum or the highest rate permitted by law. Unless
otherwise agreed or required by applicable law, payments will be applied
first to any unpaid collection costs, then to unpaid interest and fees and
any remaining amount to principal.
All payments of principal, interest and, to the extent applicable, the
Late Payments (as defined in Section 2(b) below) on this Note (to the extent
such Principal Amount (as defined below) is not converted into Common Stock)
shall be made in lawful money of the United States of America by wire
transfer of immediately available funds to such account as the Holder may
from time to time designate by written notice in accordance with the
provisions of this Note or by Company check. Whenever any amount expressed to
be due by the terms of this Note is due on any day which is not a Business
Day, the same shall instead be due on the next succeeding day which is a
Business Day. Each capitalized term used herein, and not otherwise defined in
Section 6 or any other Section hereof, shall have the meaning ascribed
thereto in the Purchase Agreement dated on or about the Issuance Date
pursuant to which this Note was originally issued (the "PURCHASE AGREEMENT").
The following terms and conditions shall apply to this Note:
Section 1. INTEREST. The Company shall pay the interest hereunder
quarterly in arrears on each April 1, July 1, October l and January 1 (each,
an "Interest Payment Date") either in (a) cash or (b) by adding the amount
thereof to the Principal Amount due under this Note ("PIK INTEREST"), at the
Company's option. Accrued but unpaid interest on any portion of the Principal
Amount which is redeemed or repurchased hereunder shall be paid in cash
concurrently with such redemption or repurchase.
The Company shall exercise its option hereunder by delivering
an irrevocable statement in the form of EXHIBIT A hereto ("PAYMENT STATEMENT")
delivered at least ten (10) Business Days prior to the applicable Interest
Payment Date and applicable for such Interest Payment Date only. If the Payment
Statement is not timely delivered to the Holder as provided herein, the payment
with respect to such Interest Payment Date shall be in PIK Interest. If the
Company selects cash interest in the Payment Statement and fails to deliver such
cash on or before the Interest Payment Date, the Holder shall have the right to
require the Company to pay PIK Interest in lieu thereof. Any PIK Interest when
so added to the Principal Amount due under this Note shall, for all purposes of
this Note, be deemed to be part of the principal indebtedness evidenced by this
Note including, without limitation, for purposes of determining interest payable
hereunder after the applicable Interest Payment Date for which such PIK Interest
is paid and amounts convertible into shares of Common Stock hereunder after the
applicable Interest Payment Date for which such PIK Interest is paid.
Except as herein provided for interest, all amounts payable under
this Note shall be paid in cash.
Section 2. CONVERSION. The Holder shall have the right, at the
Holder's option, to convert this Note into shares of Common Stock on the
following terms and conditions:
(a) Any part of the Principal Amount (as defined below) of this Note
shall be convertible into shares of Common Stock (subject to reduction
pursuant to Section 2(i) below) at the Conversion Ratio at the option of the
Holder in whole or in part at any time following the Issuance Date up to and
including the day that all of the Principal Amount and interest accrued but
unpaid thereon, if any, are paid in full. The Holder shall effect conversions
by delivering to the Company a fully executed notice of conversion in the
form of conversion notice attached hereto as EXHIBIT B (the "CONVERSION
NOTICE"), which may be transmitted by facsimile. Each Conversion Notice shall
specify the outstanding Principal Amount of this Note to be converted and the
date on which such conversion is to be effected, which date may not be prior
to the date such Conversion Notice is received by the Company hereunder (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 2(h) hereof. The Holder shall surrender
this Note to the Company with or promptly following the delivery of a
Conversion Notice. If the Holder is converting less than all of the
outstanding Principal Amount hereunder, or if a conversion hereunder cannot
be effected in full for any reason, the Company shall promptly deliver to the
Holder (in the manner and within the time set forth in Section 2(b) hereof) a
Note for such Principal Amount as has not been converted. As used herein,
"PRINCIPAL AMOUNT" shall refer to the sum of (i) the original principal
amount of this Note, (ii) all accrued
2
but unpaid interest payments hereunder and (iii) at the election of the
Holder, to the extent not paid in cash when due, any Late Payments.
(b) Not later than ten (10) Business Days after the Conversion Date, the
Company will deliver to the Holder (i) a certificate or certificates which
shall be free of restrictive legends and trading restrictions representing
the number of shares of Common Stock being acquired upon the conversion of
this Note (unless such securities are neither registered for resale under the
Securities Act or tradeable pursuant to Rule 144 thereunder), and (ii) a Note
representing the remaining Principal Amount of this Note not converted, if
any. If in the case of any Conversion Notice, such certificate or
certificates are not delivered to or as directed by the Holder by the third
Business Day after the Conversion Date, the Holder shall be entitled by
written notice to the Company at any time on or before its receipt of such
certificate or certificates thereafter, to rescind such conversion, in which
event the Company shall immediately return this Note tendered for conversion.
If the Company fails to deliver to the Holder such certificate or
certificates pursuant to this Section 2(b), prior to the tenth Business Day
after the Conversion Date or the interest payment due date, as the case may
be, the Company shall pay to the Holder, an amount equal to 2% of the
Principal Amount so converted (collectively, the "LATE PAYMENTS") per month
payable ratably in cash; PROVIDED, HOWEVER, that such 2% amount shall not be
payable unless and until the Holder provides the Company or its transfer
agent with all accurate information completed on the Conversion Notice.
Notwithstanding anything to the contrary set forth herein,
upon conversion of any portion of this Note in accordance with the terms hereof,
the Holder thereof shall not be required to physically surrender this Note to
the Company unless the full Principal Amount is being converted. The Holder and
the Company shall maintain records showing the Principal Amount so converted and
the dates of such conversions or shall use such other method, reasonably
satisfactory to the Holder and the Company, so as not to require physical
surrender of this Note upon each such conversion. In the event of any dispute or
discrepancy, such records of the Company shall be controlling and determinative
in the absence of manifest error. Notwithstanding the foregoing, if this Note is
converted as aforesaid, the Holder may not transfer this Note unless the Holder
first physically surrenders this Note to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the Holder a new Note of like
tenor, registered as the Holder may request, representing in the aggregate the
remaining Principal Amount represented by this Note. The Holder and any
assignee, by acceptance of this Note or a new Notes, acknowledge and agree that,
by reason of the provisions of this paragraph, following conversion of any
portion of this Notes, the principal amount and accrued interest represented by
this Note may be less than the principal amount and the accrued interest set
forth on the face hereof.
(c) (i) The Conversion Price applicable to conversions of
the Principal Amount of this Note into Common Stock hereunder shall be
subject to adjustment as provided herein.
(ii) If the Company, at any time while any Principal Amount of
this Note is outstanding, (a) shall pay a stock dividend or otherwise make a
distribution or distributions on shares of its Junior Securities payable in
shares of Common Stock, (b) subdivide outstanding shares of Common Stock into
a larger number of shares, (c) combine outstanding shares of Common Stock
into a smaller number of shares, or (d) issue by reclassification of shares of
3
Common Stock any shares of capital stock of the Company, the Conversion Price
shall be multiplied by a fraction of which the numerator shall be the number
of shares of Common Stock (excluding treasury shares, if any) outstanding
before such event and of which the denominator shall be the number of shares
of Common Stock outstanding after such event. Any adjustment made pursuant to
this Section 2(c)(ii) shall become effective immediately after the record
date for the determination of stockholders entitled to receive such dividend
or distribution and shall become effective immediately after the effective
date in the case of a subdivision, combination or re-classification.
(iii) If the Company, at any time while any Principal Amount of
this Note is outstanding, shall distribute to all holders of Common Stock
evidences of its indebtedness or assets or rights or warrants to subscribe
for or purchase any security (excluding those referred to in Section 2(c)(ii)
above), then in each such case the Conversion Price shall be determined by
multiplying the Conversion Price in effect immediately prior to the record
date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the Market Price
of Common Stock determined as o f the record date mentioned above, and of
which the numerator shall be such Market Price of the Common Stock 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 Company's Board
of Directors in good faith; PROVIDED, HOWEVER, that if the Holder disputes
such amount, the Holder may select a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants
of recognized standing (an "Appraiser") paid for by the Holder and the
Company equally, in which case the fair market value shall be equal to the
average of the determinations by the Company's Board of Directors and such
Appraiser. In either case the adjustments shall be described in a statement
provided to the Holder of the Notes of the portion of assets or evidences of
indebtedness so distributed or such subscription rights applicable to one
share of Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date mentioned above.
(iv) All calculations under this Section 2 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may be.
(v) Whenever the Conversion Price is adjusted pursuant to
Section 2(c)(ii) or (iii) above, the Company shall promptly mail to each
Holder of the Notes, a notice setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment.
(vi) In case of (i) an acquisition after the date hereof by an
individual, legal entity or "group" within the meaning of Section 13(d) under
the Exchange Act of voting securities of the Company pursuant to which, after
giving effect to such acquisition, such individual, legal entity or group
will beneficially own in excess of 50% of the issued and outstanding voting
securities 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 those
individuals who are members of the Company's Board of Directors on the date
thereof in one or a series of related transactions, (iii) the merger of the
Company with or into another entity, and/or consolidation with, or sale,
transfer or disposition of all or substantially all of the assets of the
Company in one
4
or a series of transactions to, another entity or (iv) the execution by the
Company of an agreement to which the Company is a party or which it is bound
providing for an event set forth in (i), (ii) or (iii) above, pursuant to
which the outstanding Common Stock is converted into or exchanged for other
securities, cash or property (each, a "BUSINESS COMBINATION"), the Holder
shall have the right thereafter to, at its option, (A) convert this Note, in
whole or in part, only into the shares of stock and other securities, cash
and/or property receivable upon or deemed to be held by holders of Common
Stock following such Business Combination, and the Holder shall be entitled
upon such event to receive such amount of securities, cash or property as the
shares of the Common Stock of the Company into which this Note could have
been converted immediately prior to such Business Combination would have been
entitled, subject to such further applicable adjustments set forth in this
Section 2 or (B) except in the case of any such acquisition of the Company by
Xxxxxxxxxx.Xxx, Inc. pursuant to the Acquisition Agreement (as defined in the
Purchase Agreement) whereupon only the provisions of the Registration Rights
and Conversion Terms Agreement, dated the date by and between Holder and
Eagle Wireless International, Inc. shall apply, require the Company to redeem
this Note, in whole or in part, at a redemption price equal to the greater of
(i) the outstanding Principal Amount being redeemed plus any accrued and
unpaid cash interest thereon and (ii) the product of (x) the average of the
Market Price for the five (5) Trading Days immediately preceding the Holder's
election to have its Notes redeemed and (y) the Conversion Ratio; PROVIDED,
HOWEVER, that the redemption right contained in clause (B) above shall only
apply if any such Business Combination occurs without the consent of the then
incumbent Board of Directors of the Company or if any such Business
Combination occurs in connection with a transaction or series of transactions
in which the Company's Common Stock is issued, sold or transferred at
effectively a Per Share Selling Price (as defined below) less than the Market
Price at the time of such Business Combination. Any securities issuable upon
conversion hereof in accordance with this Section following the Business
Combination shall at all times, unless waived by the Holder in writing, be
(A) covered by an effective registration statement under the Securities Act
and a deliverable prospectus or freely tradeable under Rule 144 thereunder,
and (B) listed and traded on an acceptable exchange or market. The terms of
any such Business Combination shall include such terms so as to continue to
give to the Holder the right to receive the amount of securities, cash and/or
property upon any conversion or redemption following such Business
Combination to which a holder of the number of shares of Common Stock
deliverable upon such conversion would have been entitled in such Business
Combination, and interest payable hereunder shall be in cash or such new
securities and/or property, at the Holder's option. This provision shall
similarly apply to successive reclassifications, consolidations, mergers,
sales, transfers or share exchanges.
(vii) If:
A. the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
B. the Company shall declare a special nonrecurring
cash dividend on or a redemption of its Common
Stock; or
C. the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital
stock of any class or of any rights; or
5
D. the approval of any stockholders of the Company
shall be required in connection with any
reclassification of the Common Stock of the Company,
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, of
any compulsory share of exchange whereby the Common
Stock is converted into other securities, cash or
property; or
E. 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 conversion of this Note, and shall cause to be mailed to
the Holder at its last: address as it shall appear upon the books of the
Company, on or prior to the date notice to the Company's stockholders
generally is given, a notice stating (x) 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 (y) 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.
(d) 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 this Note, free from preemptive rights
or any other actual contingent purchase rights of persons other than the
Holder, not less than 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 and restrictions of this Section 2) upon the conversion of
this Note hereunder.
(e) 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 Market Price at such time. If the Company
elects not, or is unable, to make such a cash payment, the Holder shall be
entitled to receive, in lieu of the final fraction of a share, one whole
share of Common Stock.
(f) The issuance of certificates for shares of Common Stock on
conversion of this Note shall be made without charge to the Holder for any
documentary stamp or similar taxes that may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate in a
name other than that of the Holder and the Company shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof
6
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.
(g) After all of the Principal Amount has been paid in fill or converted
into Common Stock, this Note shall automatically be deemed be canceled.
(h) Any and all notices or other communications or deliveries to be
provided by the Holder hereunder, including, without limitation, any
Conversion Notice, shall be in writing and delivered personally, by
facsimile, or by a nationally recognized overnight courier service to the
Company at the facsimile telephone number or address of the principal place
of business of the Company as set forth in the Purchase Agreement. Any and
all notices or other communications or deliveries to be provided by the
Company hereunder shall be in writing and delivered personally, by facsimile,
or by a nationally recognized overnight courier service addressed to the
Holder at the facsimile telephone number or address of the Holder appearing
on the books of the Company, or if no such facsimile telephone number or
address appears, at the principal place of business of the Holder. Any notice
or other communication or deliveries hereunder shall be deemed delivered (i)
upon receipt, when delivered personally, (ii) when sent by facsimile, upon
receipt if received on a Business Day prior to 5:00 p.m. (Eastern Time), or
on the first Business Day following such receipt if received on a Business
Day after 5:00 p.m. (Eastern Time) or (iii) upon receipt, when deposited with
a nationally recognized overnight courier service.
(i) (i) Notwithstanding anything to the contrary contained herein, in
the event that the Underlying Shares are registered under the 1934 Act, the
number of shares of Common Stock that may be acquired by the Holder upon
conversion pursuant to the terms hereof at any time shall not exceed a number
that, when added to the total number of shares of Common Stock deemed
beneficially owned at such time by the Holder (other than by virtue of the
ownership of securities or rights to acquire securities (including the Notes
and Warrants) that have limitations on the Holder's right to convert,
exercise or purchase similar to the limitation set forth herein), together
with all shares of Common Stock deemed beneficially owned at such time (other
than by virtue of the ownership of securities or rights to acquire securities
that have limitations on the right to convert, exercise or purchase similar
to the limitation set forth herein) by the Holder's "affiliates" (as defined
in Rule 144 of the Act) ("AGGREGATION PARTIES") that would be aggregated for
purposes of determining whether a group under Section 13(d) of the Securities
Exchange Act of 1934 as amended, exists, would exceed 9.99% of the total
issued and outstanding shares of the Common Stock (the "RESTRICTED OWNERSHIP
PERCENTAGE"). The Holder shall have the right (w) at any time and from time
to time to reduce its Restricted Ownership Percentage immediately upon notice
to the Company and (x) (subject to waiver) at any time and from time to time,
to increase its Restricted Ownership Percentage immediately in the event of
the announcement as pending or planned, of a transaction or event described
in Section 2(c)(vi) above.
(ii) The Holder covenants at all times on each day (each such
day being referred to as a "COVENANT DAY") as follows: During the balance of
such Covenant Day and the succeeding sixty-one (61) days (the balance of such
Covenant Day and the succeeding 61 days being referred to as the "COVENANT
PERIOD") the Holder will not acquire shares of Common Stock pursuant to any
right (including conversion of Notes and exercise of Warrants) existing at
the commencement of the Covenant Period to the extent the number of shares so
acquired by the Holder and its Aggregation Parties (ignoring all
dispositions) would exceed:
7
(x) the Restricted Ownership Percentage of the total
number of shares of Common Stock outstanding at the commencement
of the Covenant Period,
MINUS
(y) the number of shares of Common Stock actually owned
by the Holder and its Aggregation Parties at the commencement of the
Covenant Period.
A new and independent covenant will be deemed to be given by
the Holder as of each moment of each Covenant Day. No covenant will terminate,
diminish or modify any other covenant. The Holder agrees to comply with each
such covenant. This Section (i)(ii) controls in the case of any conflict with
any other provision of the Transaction Documents.
(iii) The Company's obligation to issue shares of Common Stock
which would exceed such limits referred to in this paragraph shall be
suspended to the extent necessary until such time, if any, as shares of
Common Stock may be issued in compliance with such restrictions.
(j) Notwithstanding and in addition to anything contained herein,
if the Company sells any shares of its Common Stock, or securities
which are convertible into or exchangeable for its Common Stock, or any
warrants or other rights to subscribe for or to purchase or any options
for the purchase of its Common Stock or if the Company sells any shares
of Common Stock or other Convertible Securities pursuant to a Variable
Rate Transaction (as defined in the Purchase Agreement) or MFN
Transaction (as defined in the Purchase Agreement) at a Per Share
Selling Price which is less than the Conversion Price then in effect,
then the Conversion Price per share in effect immediately prior to such
issue or sale shall be reduced effective concurrently with such issue
or sale to equal such lower Per Share Selling Price effective
concurrently with such issue or sale.
The Company shall give to the Holder written notice of any such sale
within 72 hours of the closing of any such sale. If an adjustment
("ADJUSTMENT") of the Conversion Price is required as provided herein, the
Company shall deliver to the Holder within eight calendar days of the closing
of the transaction giving rise to the Adjustment ("DELIVERY DATE") a notice
("ADJUSTMENT NOTICE") stating that such Conversion Price has been
automatically adjusted as of the Delivery Date, and such notice shall
constitute an amendment to this Note. In the event the Company fails to
deliver the Adjustment Notice by the applicable Delivery Date, such failure
to notify shall not affect automatic adjustment of the Conversion Price. This
Section 2(j) shall not apply to (i) sales of shares of Common Stock by the
Company upon conversion or exercise of any convertible securities, options or
warrants outstanding prior to the date hereof; or (ii) sales of shares of
Common Stock by the Company pursuant to the provisions of any
shareholder-approved option or similar plan heretofore or subsequently
adopted by the Company. This provision shall similarly apply to successive
sales of shares of Common Stock by the Company and shall not affect the other
Conversion Price adjustments contained herein.
8
Section 3. REPLACEMENT NOTES. This Note may be exchanged by Holder
at any time and from time to time for a Note or Notes with different
denominations representing an equal aggregate Principal Amount, as reasonably
requested by Holder, upon surrendering the same. No service charge will be
made for such registration or exchange. In the event that Holder notifies the
Company that this Note has peen lost, stolen or destroyed, a replacement Note
identical in all respects to the original Note (except for registration
number and Principal Amount, if different than that shown on the original
Note), shall be issued to the Holder, provided that the Holder executes and
delivers to the Company an agreement reasonably satisfactory to the Company
to indemnify the Company from any loss incurred by it in connection with the
Note.
Section 4. DEFAULTS AND REMEDIES.
(a) EVENTS OF DEFAULT. An "EVENT OF DEFAULT" is: (i) default in payment
of the Principal Amount of any of the Notes on or after the date such payment
is due (to the extent such principal and/or accrued but unpaid interest
thereon has not been converted into Common Stock in accordance with the terms
hereof) which default continues for five (5) days after notice of such
non-payment; (ii) any principal payment under the Notes shall have been
accelerated, (iii) failure by the Company for ten days after written notice
to it to comply with any material provision of any of the Company Transaction
Documents (including without limitation the failure to issue the requisite
number of shares of Common Stock upon conversion hereof and the failure to
redeem Notes upon the Holder's request following a Business Combination
pursuant to Section 2(c)(vi)); (iv) a material breach by the Company of its
representations or warranties in the Purchase Agreement for ten days
following written notice of such breach; (v) any default after any cure
period under, or acceleration prior to maturity of, any mortgage, indenture
or instrument under which there may be issued or by which there may be
secured or evidenced any indebtedness for money borrowed by the Company or
for money borrowed the repayment of which is guaranteed by the Company,
whether such indebtedness or guarantee now exists or shall be created
hereafter; (vi) any breach or default under the Guaranty (as defined in the
Purchase Agreement 1 or the Exchange Agreement (as defined in the Purchase
Agreement) by the Guarantor that continues uncured for at least ten (10) days
after written notice thereof to the Guarantor with a cope to the Company;
(vii) if the Company pursuant to or within the meaning of any Bankruptcy Law
(A) commences a voluntary case, (B) consents to the entry of an order for
relief against it in an involuntary case, (C) consents to the appointment of
a Custodian of it or for all or substantially all of its property; (D) makes
a general assignment for the benefit of its creditors; or (E) admits in
writing that it is generally unable to pay its debts as the same become due;
or (viii) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that (1) is for relief against the Company in an
involuntary case, (2) appoints a Custodian of the Company or for all or
substantially all of its property, or (3) orders the liquidation of the
Company or any subsidiary. The Term "BANKRUPTCY LAW" means Title 11, U.S.
Code, or any similar federal or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
(b) REMEDIES. If an Event of Default occurs and is continuing with
respect to any of the Notes, the Holder may declare all of the then
outstanding Principal Amount of this Note and all other Notes held by the
Holder, including any interest due thereon, to be due and payable
immediately, except that in the case of an Event of Default arising from
events described in
9
clauses (vii) and (viii) of Section 4(a), this Note shall become due and
payable without further action or notice. In the event of such acceleration,
the amount due and owing to the Holder shall be the greater of (1) the
outstanding Principal Amount of the Notes held by the Holder (plus all
accrued and unpaid interest, if any) and (2) the product of (A) the average
of Market Price for the five (5) Trading Days immediately preceding the
Holder's acceleration and (B) the Conversion Ratio. In either case the
Company shall pay interest on such amount in cash at a rate of 15% per annum
to the Holder if such amount is not paid within 7 days of Holder's request.
The remedies under this Note shall be cumulative.
Section 5. DEFINITIONS. For the purposes hereof, the following
terms shall have the following meanings:
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a day
on which commercial banks in the City of New York are authorized or required
by law or executive order to remain closed.
"CONVERSION PRICE" shall mean $1.28, as may be adjusted from
time to time in accordance herewith.
"CONVERSION RATIO" means, at any time, a fraction, of which the
numerator is the Principal Amount of this Note (and any accrued but unpaid
interest thereon, if any, which aggregate amount may be less than the face
amount pursuant to Section 2(b) above) to be converted in such conversion,
and of which the denominator is the Conversion Price at such time.
"JUNIOR SECURITIES" means the Company's capital stock and all other
equity securities and all debt securities of the Company which are junior in
rights and liquidation preference to the Notes.
"MARKET PRICE" shall mean the price of one share of Common Stock
determined as follows:
(i) if the Common Stock is listed on the New York Stock
Exchange or the American Stock Exchange, the closing bid price on such
exchange on the date of valuation;
(ii) if (i) does not apply and the Common Stock is listed on
the NASDAQ National Market System, the NASDAQ Small-Cap Market or the; NASDAQ
OTC Bulletin Board, the mean between the last reported bid price thereof on
the date of valuation;
(iii) if neither (i) nor (ii) apply but the Common Stock is
quoted in the over-the-counter market, another recognized exchange or on the
pink sheets, the mean between the last reported "bid" and "asked" prices
thereof on the date of valuation; and
(iv) if neither clause (i), (ii) or (iii) above applies, the
fair market value thereof as determined in accordance with Section 2(c)(iii)
hereof.
10
"PERSON" means a corporation, an association, a partnership, .a limited
liability company, an organization, a business, an individual, a government
or political subdivision thereof or a governmental agency.
"PER SHARE SELLING PRICE" shall mean the selling price per share of
Common Stock and shall include the amount actually paid by a third party for
each share of Common Stock. In the event a fee is paid by the Company in
connection with such transaction, any such fee shall be deducted from the
selling price pro rata to all shares sold in the transaction to arrive at the
Per Share Selling Price. A sale of shares of Common Stock shall include
Convertible Securities, and in such circumstances the Per Share Selling Price
of the Common Stock covered thereby shall also include the exercise or
conversion price thereof (in addition to the consideration received by the
Company upon such sale or issuance less the fee amount as provided above). In
the case of any such security issued in a Variable Rate Transaction or any
MFN Transaction, the Per' hare Selling Price shall be deemed to be the lower
conversion or exercise price at which such securities are converted or
exercised or might have been converted or exercised in the case of a Variable
Rate Transaction, or the lower adjustment price in the case of an MFN
Transaction, over the life of such securities. If shares are issued for a
consideration other than cash, the Per Share Selling Price shall be the fair
value of such consideration as determined in good faith by independent
certified public accountants mutually acceptable to the Company and the
Holder.
"TRADING DAY" means a day on which the Common Stock is traded on a
national stock exchange or quotation system.
"UNDERLYING SHARES" means the shares of Common Stock into which the
Notes are convertible in accordance with the terms hereof and the Purchase
Agreement.
Section 6. GENERAL
(a) PAYMENT OF EXPENSES. The Company agrees to pay all
reasonable charges and expenses, including attorneys' fees and expenses,
which may be incurred by the Holder in enforcing this Note and/or
collecting any amount due under this Note.
(b) SAVINGS CLAUSE. In case any provision of this Note is held by a
court of competent jurisdiction to be excessive in scope or otherwise invalid
or unenforceable, such provision shall be adjusted rather than voided, if
possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Note will not
in any way be affected or impaired thereby. In no event shall the amount of
interest paid hereunder exceed the maximum rate of interest on the unpaid
principal balance hereof allowable by applicable law. If any sum is collected
in excess of the applicable maximum rate, the excess collected shall be
applied to reduce the principal debt. If the interest actually collected
hereunder is still in excess of the applicable maximum rate, the interest
rate shall be reduced so as not to exceed the maximum allowable under law.
(c) AMENDMENT. Neither this Note nor any term hereof may be amended,
waived, discharged or terminated other than by a written instrument signed
by the Company and Holder.
(d) ASSIGNMENT, ETC. The Holder may assign or transfer this Note to any
transferee only with the prior consent of the Company, which may not be
unreasonably withheld or
11
delayed, provided that the Holder may assign or transfer this Note to any of
such Holder's affiliates without the consent of the Company. This Note shall
be binding upon the Company and its successors and shall inure to the benefit
of the Holder and its successors and permitted assigns.
(e) NO WAIVER. No failure on the part of the Holder to exercise, and no
delay in exercising any right, remedy or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by the Holder of any
right, remedy or power hereunder preclude any other or future exercise of any
other right, remedy or power. Each and every right, remedy or power hereby
granted to the Holder or allowed it by law or other agreement shall be
cumulative and not exclusive of any other, and may be exercised by the Holder
from time to time.
(f) GOVERNING LAW; JURISDICTION.
(i) THIS NOTE WILL BE GOVERNED BY AND CONSTRUED 1N ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CONFLICTS OF
LAWS PROVISIONS THEREOF THAT WOULD OTHERWISE REQUIRE THE APPLICATION OF THE
LAW OF ANY OTHER JURISDICTION.
(ii) The Company irrevocably submits to the exclusive
jurisdiction of any State or Federal Court sitting in the State of New York,
County of New York, over any suit, action, or proceeding arising out of or
relating to this Note. The Company irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the
laying of the venue of any such suit, action, or proceeding brought in such a
court and any claim that suit, action, or proceeding has been brought in an
inconvenient forum.
The Company agrees that the service of process upon it mailed by
certified or registered mail (and service so made shall be deemed complete
three days after the same has been posted as aforesaid) or by personal
service shall be deemed in every respect effective service of process upon it
in any such suit or proceeding. Nothing herein shall affect Holder's right to
serve process in any other manner permitted by law. The Company agrees that a
final non-appealable judgement 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.
(iii) THE COMPANY HERETO KNOWINGLY AND VOLUNTARILY WAIVES ANY
AND ALL RIGHTS IT MAY HAVE TO ATRIAL BY JURY WITH RESPECT TO ANY LITIGATION
BASED ON, OR ARISING OUT Of, UNDER, OR IN CONNECTION WITH, THIS NOTE.
[SIGNATURE PAGE FOLLOWS]
12
IN WITNESS WHEREOF, the Company has caused this Note to be
duly executed on the day and in the year first above written.
LINK TWO COMMUNICATIONS, INC.
By:
----------------------------------------
Name:
Title:
ATTEST:
------
--------------------------
EXHIBIT A
PAYMENT STATEMENT
Date:___________
To: [NAME OF HOLDER OF NOTE] ("HOLDER")
RE: 2% CONVERTIBLE NOTE DUE APRIL 30, 2002 ("NOTE") OF LINK TWO
COMMUNICATIONS, INC. (THE "COMPANY"), IN THE OUTSTANDING
PRINCIPAL AMOUNT OF US$____________.
The Company hereby irrevocably elects to pay interest on the Note, for the
Interest Payment Date indicated below, in the following manner (the Company
should check its selection):
_____cash interest; or
_____PIK Interest;
Interest Payment Date:_______________________
If the selection above is PIK Interest, the Company should
fill in the following:
Outstanding Principal Amount prior
to issuance of this Payment Statement: US$................
PIK Interest: US$................
Outstanding Principal Amount after
issuance of this Payment Statement: US$................
The Company hereby certifies to the Holder, its successors and assigns
that the Outstanding Principal Amount due under the Note after delivery of
this Payment Statement equals the amount indicated below. Capitalized terms
used in this Payment Statement and not otherwise defined shall have the
meaning ascribed thereto in the Note.
IN WITNESS WHEREOF, this Payment Statement has been duly executed and
delivered on the date first written above.
LINK TWO COMMUNICATIONS, INC.
By:_______________________________
Name:
Title:
EXHIBIT B
FORM OF NOTICE OF CONVERSION
(To be Executed by the Holder
in order to Convert a Note)
The undersigned hereby elects to convert the aggregate Principal Amount (as
defined in the Note) indicated below of this Note into shares of Common
Stock, par value $.01 per share (the "Common Stock"), of Link Two
Communications, 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.
The undersigned hereby represents that the number of shares of Common Stock
issuable pursuant to this Notice of Conversion does not violate or breach the
restrictions on conversions contained in Section 3 of the Note.
Conversion information: __________________________________________________
Date to Effect Conversion
__________________________________________________
Aggregate Principal Amount of Note Being Converted
__________________________________________________
Number of shares of Common Stock to be Issued
__________________________________________________
Applicable Conversion Price
__________________________________________________
Equivalent conversion price for Eagle Common Stock
__________________________________________________
Signature
__________________________________________________
Name
__________________________________________________
Address
EXHIBIT 1.1B
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS, IN RELIANCE UPON
EXEMPTIONS FROM REGISTRATION FOR NON-PUBLIC OFFERINGS. THIS SECURITY MAY NOT BE
SOLD OR TRANSFERRED UNLESS IT IS REGISTERED UNDER THE ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR UNLESS LINK TWO COMMUNICATIONS, INC. RECEIVES AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT AN EXEMPTION FROM
REGISTRATION IS AVAILABLE (UNLESS WAIVED).
VOID AFTER 5:00 P.M. EASTERN TIME ON JULY 31, 2006 ("EXPIRATION DATE").
LINK TWO COMMUNICATIONS, INC.
WARRANT
WARRANT ("WARRANT") TO PURCHASE SHARES OF
COMMON STOCK,$.01 PAR VALUE PER SHARE
This is to certify that, for VALUE RECEIVED, THE TAIL WIND FUND, LTD.
("Warrantholder"), is entitled to purchase, subject to the provisions of this
Warrant, from LINK TWO COMMUNICATIONS, INC., a corporation organized under the
laws of Texas ("Company"), at any time beginning on July 1, 2002 (or such
earlier date as provided for pursuant to Section 10 hereof) and ending on 5:00
P.M., Eastern time, on the Expiration Date, 1,367,188 shares ("Warrant Shares")
of Common Stock, par value $.01 per share ("Common Stock"), of the Company, at
an exercise price per share equal to $1.54 (the exercise price in effect from
time to time hereafter being herein called the "Warrant Price"). The number of
Warrant Shares purchasable upon exercise of this Warrant and the Warrant Price
shall be subject to adjustment from time to time as described herein.
This Warrant has been issued pursuant to the terms of the Note Purchase
Agreement ("Purchase Agreement") dated on or about the date hereof between the
Company and the Warrantholder. Capitalized terms used herein and not defined
shall have the meaning specified in the Purchase Agreement or the Debenture
issued in connection therewith.
Section 1. REGISTRATION. The Company shall maintain books for the
transfer and registration of the Warrant. Upon the initial issuance of the
Warrant, the Company shall issue and register the Warrant in the name of the
Warrantholder.
Section 2. TRANSFERS. As provided herein, this Warrant may be
transferred only pursuant to a registration statement filed under the Securities
Act of 1933, as amended ("Securities Act") or an exemption from registration
thereunder. Subject to such restrictions, the Company shall transfer this
Warrant from time to time, upon the books to be maintained by the Company for
that purpose, upon surrender thereof for transfer properly endorsed or
accompanied by appropriate instructions for transfer upon any such transfer, and
a new Warrant shall be issued to the transferee and the surrendered Warrant
shall be canceled by the Company.
Section 3.
(a) EXERCISE OF WARRANT.
(i) Subject to the provisions hereof, the Warrantholder may
exercise this Warrant in whole or in part at any time and from time to time upon
surrender of the Warrant, together with delivery of the duly executed Warrant
exercise form attached hereto (the "Exercise Notice"), 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 Warrantholder hereof), and, at the option of the Warrantholder,
upon payment to the Company in cash, by certified or official bank check or by
wire transfer for the account of the Company of the Warrant Price for the
Warrant Shares specified in the Exercise Notice for the Warrant Shares specified
in the Exercise Notice. The Warrant Shares so purchased shall be deemed to be
issued to the Warrantholder hereof or such Warrantholder's designee, as the
record owner of such shares, as of the close of business on the date on which
this Warrant (or evidence of loss, theft or destruction thereof) shall have been
surrendered, the completed Exercise Notice shall have been delivered.
Certificates for the Warrant Shares so purchased, representing the aggregate
number of shares specified in the Exercise Notice, shall be delivered to the
Warrantholder hereof within a reasonable time, not exceeding ten (10) 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
Warrantholder hereof and shall be registered in the name of such Warrantholder
or such other name as shall be designated by such Warrantholder. 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 Warrantholder a new Warrant representing the number of shares
with respect to which this Warrant shall not then have been exercised.
(ii) If in the case of any Exercise Notice, such certificate
or certificates for the Warrant Shares are not delivered to or as directed by
the Warrantholder by the third business day after the Warrant shall have been so
exercised, the Warrantholder shall be entitled by written notice to the Company
at any time on or before its receipt of such certificate or certificates
thereafter, to rescind such exercise, in which event the Company shall
immediately return this Warrant tendered for exercise. If the Company fails to
deliver to the Warrantholder such certificate or certificates pursuant to this
Section 3(a)(ii), prior to the tenth business day after the Warrant shall have
been so exercised, the Company shall pay to the Warrantholder, an amount equal
to 2% (collectively, the "LATE PAYMENTS") equal to (x) the number of Warrant
2
Shares issuable hereunder times (y) the Market Price per share, per month
payable in cash; PROVIDED, HOWEVER, that such Late Payments shall not be payable
unless and until the Warrantholder provides the Company or its transfer agent
with all accurate information completed on the Exercise Notice.
For this purpose, the "Market Price" of the Common Stock shall
be equal to the price of one share of Common Stock determined as follows:
(A) if the Common Stock is listed on the New York Stock
Exchange or the American Stock Exchange, the average of the closing prices of
the Common Stock as reported by such exchange for the thirty (30) trading days
immediately preceding the valuation date (which shall be, for the purpose of
this definition, the trading day immediately preceding the date of the Exercise
Notice);
(B) if (A) does not apply and the Common Stock is listed on the
NASDAQ National Market System, the NASDAQ Small-Cap Market or the NASDAQ OTC
Bulletin Board, the mean between the average of the last reported "bid" and
"asked" prices thereof for the thirty (30) trading days immediately preceding
the valuation date;
(C) if neither (A) nor (B) apply but the Common Stock is quoted
in the over-the-counter market, another recognized exchange or on the pink
sheets, the mean between the average of the last reported "bid" and "asked"
prices thereof for the thirty (30) trading days preceding the valuation date;
and
(D) if neither clause (A), (B) nor (C) above applies, the fair
market value (the "Fair Market Value") as determined by the Company's Board of
Directors in good faith on the date immediately preceding the valuation date;
provided, however, that if the Warrantholder disputes such determination, the
Warrantholder may select a nationally recognized or major regional investment
banking firm or firm of independent certified public accountants of recognized
standing (an "Appraiser") paid for by the Warrantholder, in which case the Fair
Market Value shall be equal to the average of the determinations by the
Company's Board of Directors and such Appraiser.
(iv) Notwithstanding anything to the contrary set forth herein,
upon conversion of any portion of this Warrant in accordance with the terms
hereof, the Warrantholder thereof shall NOT be required to physically surrender
this Warrant to the Company unless the Warrant is being exercised in full. The
Warrantholder and the Company shall maintain records showing the amount of the
Warrant so exercised and the dates of such exercise or shall use such other
method, reasonably satisfactory to the Warrantholder and the Company, so as not
to require physical surrender of this Warrant upon each such Exercise. In the
event of any dispute or discrepancy, such records of the Company shall be
controlling and determinative in the absence of manifest error. Notwithstanding
the foregoing, if this Warrant is exercised as aforesaid, the Warrantholder may
not transfer this Warrant unless the Warrantholder first physically surrenders
this Warrant to the Company, whereupon the
3
Company will forthwith issue and deliver upon the order of the Warrantholder a
new Warrant of like tenor, registered as the Warrantholder may request,
representing in the aggregate the number of shares with respect to which this
Warrant shall not then have been exercised. The Warrantholder and any assignee,
by acceptance of this Warrant or a new Warrant, acknowledge and agree that, by
reason of the provisions of this paragraph, following exercise of any portion of
this Warrant, the number of Warrant Shares that the Warrantholder may receive
upon exercise of the Warrant may be less than the full amount set forth on the
face hereof.
(b) NO REDEMPTION OF WARRANT. The Company may not redeem this Warrant
in whole or in part.
Section 4. COMPLIANCE WITH THE SECURITIES ACT OF 1933. Neither this
Warrant nor the Common Stock issued upon exercise hereof nor any other security
issued or issuable upon exercise of this Warrant may be offered or sold except
as provided herein and in conformity with the Securities Act of 1933, as
amended, and then only against receipt of an agreement of such person to whom
such offer of sale is made to comply with the provisions of this Section 4 with
respect to any resale or other disposition of such security. The Company may
cause the legend set forth on the first page of this Warrant to be set forth on
each Warrant or similar legend on any security issued or issuable upon exercise
of this Warrant until the Warrant Shares have been registered for resale
pursuant to an effective registration statement or until Rule 144 is available,
unless counsel for the Company is of the opinion as to any such security that
such legend is unnecessary. In the event that the Warrant Shares have been
registered for resale pursuant to an effective registration statement or once
Rule 144 is available, at the option of the Warrantholder, the Company shall, or
shall cause the Transfer Agent (as defined below), to promptly reissue each
Warrant or other security issued upon exercise thereof without such legend.
Section 5. PAYMENT OF TAXES. The Company will pay any documentary
stamp taxes attributable to the initial issuance of Warrant Shares issuable upon
the exercise of the Warrant; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificates for Warrant Shares in a
name other than that of the registered Warrantholder of this Warrant in respect
of which such shares are issued, and in such case, the Company shall not be
required to issue or deliver any certificate for Warrant Shares or any Warrant
until the person requesting the same has paid to the Company the amount of such
tax or has established to the Company's satisfaction that such tax has been
paid. The Warrantholder shall be responsible for income taxes due under federal
or state law, if any such tax is due.
Section 6. MUTILATED OR MISSING WARRANTS. In case this Warrant shall
be mutilated, lost, stolen, or destroyed, the Company shall issue in exchange
and substitution of and upon cancellation of the mutilated Warrant, or in lieu
of and substitution for the Warrant lost, stolen or destroyed, a new Warrant of
like tenor and for the purchase of a like number of Warrant Shares, but only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
4
theft or destruction of the Warrant, and with respect to a lost, stolen or
destroyed Warrant, reasonable indemnity or bond with respect thereto, if
requested by the Company.
Section 7. RESERVATION OF COMMON STOCK. The Company hereby represents
and warrants that there have been reserved, and the Company shall at all
applicable times keep reserved, out of the authorized and unissued Common Stock,
a number of shares sufficient to provide for the exercise of the rights of
purchase represented by the Warrant, and the transfer agent for the Common Stock
("Transfer Agent"), and every subsequent transfer agent for the Common Stock or
other shares of the Company's capital stock issuable upon the exercise of any of
the right of purchase aforesaid, shall be irrevocably authorized and directed at
all times to reserve such number of authorized and unissued shares of Common
Stock as shall be requisite for such purpose. The Company agrees that all
Warrant Shares issued upon exercise of the Warrant shall be, at the time of
delivery of the certificates for such Warrant Shares, duly authorized, validly
issued, fully paid and non-assessable shares of Common Stock of the Company. The
Company will keep a conformed copy of this Warrant on file with the Transfer
Agent and with every subsequent transfer agent for the Common Stock or other
shares of the Company's capital stock issuable upon the exercise of the rights
of purchase represented by the Warrant. The Company will supply from time to
time the Transfer Agent with duly executed stock certificates required to honor
the outstanding Warrant.
Section 8. WARRANT PRICE. The Warrant Price, subject to adjustment as
provided in Section 9, shall, if payment is made in cash, by wire transfer or by
certified check, be payable in lawful money of the United States of America.
Section 9. ADJUSTMENTS. Subject and pursuant to the provisions of
this Section 9, the Warrant Price and number of Warrant Shares subject to this
Warrant shall be subject to adjustment from time to time as set forth
hereinafter.
(a) If the Company shall at any time or from time to time while
the Warrant is outstanding, pay a dividend or make a distribution on its Common
Stock in shares of Common Stock, subdivide its outstanding shares of Common
Stock into a greater number of shares or combine its outstanding shares into a
smaller number of shares or issue by reclassification of its outstanding shares
of Common Stock any shares of its capital stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), then the number of Warrant Shares
purchasable upon exercise of the Warrant and the Warrant Price in effect
immediately prior to the date upon which such change shall become effective,
shall be adjusted by the Company so that the Warrantholder thereafter exercising
the Warrant shall be entitled to receive the number of shares of Common Stock or
other capital stock which the Warrantholder would have received if the Warrant
had been exercised immediately prior to such event. Such adjustment shall be
made successively whenever any event listed above shall occur.
(b) If any capital reorganization, reclassification of the
capital stock of the Company, consolidation or merger of the Company with
another corporation, or sale, transfer
5
or other disposition of all or substantially all of the Company's assets to
another corporation shall be effected, then, as a condition of such
reorganization, reclassification, consolidation, merger, sale, transfer or
other disposition, lawful and adequate provision shall be made whereby each
Warrantholder shall thereafter have the right to purchase and receive upon the
basis and upon the terms and conditions herein specified and in lieu of the
Warrant Shares immediately theretofore issuable upon exercise of the Warrant,
such shares of stock, securities or assets as would have been issuable or
payable with respect to or in exchange for a number of Warrant Shares equal to
the number of Warrant Shares immediately theretofore issuable upon exercise of
the Warrant had such reorganization, reclassification, consolidation, merger,
sale, transfer or other disposition not taken place, and in any such case
appropriate provision shall be made with respect to the rights and interests of
each Warrantholder to the end that the provisions hereof (including, without
limitations, provision for adjustment of the Warrant Price) shall thereafter be
applicable, as nearly equivalent as may be practicable in relation to any shares
of stock, securities or properties thereafter deliverable upon the exercise
hereof. The Company shall not effect any such consolidation, merger, sale,
transfer or other disposition unless prior to or simultaneously with the
consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger, or the corporation purchasing or
otherwise acquiring such assets or other appropriate corporation or entity shall
assume, by written instrument executed and delivered to the Company, the
obligation to deliver to the Warrantholder of the Warrant such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
Warrantholder may be entitled to purchase and the other obligations under this
Warrant. The provisions of this paragraph (b) shall similarly apply to
successive reorganizations, reclassifications, consolidations, mergers, sales,
transfers or other dispositions. The provisions of this paragraph (b) shall not
apply to the transactions between the Company and Clearworks and Clearworks and
the Guarantor, and which are described in the Note Purchase Agreement.
(c) In case the Company shall fix a record date for the making
of a distribution to all Warrantholders of Common Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing corporation) of evidences of indebtedness or assets
(other than cash dividends or cash distributions payable out of consolidated
earnings or earned surplus or dividends or distributions referred to in Section
9(a)), or subscription rights or warrants, the Warrant Price to be in effect
after such record date shall be determined by multiplying the Warrant Price in
effect immediately prior to such record date by a fraction, the numerator of
which shall be the current Market Price per share of Common Stock (as determined
pursuant to Section 3), less the Fair Market Value of said assets or evidences
of indebtedness so distributed, or of such subscription rights or warrants,
attributable to a share of Common Stock and the denominator of which shall be
the current Market Price per share of Common Stock. The number of Warrant Shares
shall be proportionally increased in the event of any adjustments to this
paragraph. Such adjustments shall be made successively whenever such a record
date is fixed.
(d) Notwithstanding and in addition to anything contained
herein, if the Company sells any shares of its Common Stock, or securities which
are convertible into or exchangeable for its Common Stock, or any warrants or
other rights to subscribe for or to
6
purchase or any options for the purchase of its Common Stock or if the Company
sells shares of Common Stock or other Convertible Securities pursuant to a
Variable Rate Transaction (as defined in the Purchase Agreement) or MFN
Transaction (as defined in the Purchase Agreement) at a Per Share Selling Price
which is less than:
(i) the Warrant Price then in effect, then
the Warrant Price per share in effect immediately
prior to such issue or sale shall be adjusted
downward to equal such lower Per Share Selling Price
effective concurrently with such issue or sale;
and/or
(ii) $5.00 (as such price may be
subsequently equitably adjusted for stock splits,
reverse splits, stock dividends and consolidations)
but greater than the Warrant Price then in effect,
then the Warrant Price per share shall be reduced
effective concurrently with such issue or sale to an
amount determined by multiplying the Warrant Price
then in effect by a fraction, (A) the numerator of
which shall be the sum of (1) the number of shares of
Common Stock outstanding immediately prior to such
issue or sale, plus (2) the number of shares of
Common Stock which the aggregate consideration
received by the Company for such additional shares
would purchase at $5.00 per share (as such price may
be subsequently equitably adjusted for stock splits,
reverse splits, stock dividends and consolidation)
for shares of Common Stock and (B) the denominator of
which shall be the number of shares of Common Stock
of the Company outstanding immediately after such
issue or sale.
For the purposes of the foregoing
adjustment, in the case of the issuance of any convertible securities, warrants,
options or other rights to subscribe for or to purchase or exchange for, shares
of Common Stock ("Convertible Securities"), the maximum number of shares of
Common Stock issuable upon exercise, exchange or conversion of such Convertible
Securities shall be deemed to be outstanding, provided that no further
adjustment shall be made upon the actual issuance of Common Stock upon exercise,
exchange or conversion of such Convertible Securities.
Such adjustments shall be made successively
whenever such sales are made. If an adjustment (the "Adjustment") of the Warrant
Price is required pursuant hereto, the Company shall deliver to the
Warrantholder, within eight business days of the closing of the transaction
giving rise to the Adjustment ("Delivery Date"), a notice ("Adjustment Notice")
stating that such Warrant Price has been automatically adjusted as of the
Delivery Date, and such notice shall constitute an amendment to this Warrant. In
the event the Company fails to deliver the Adjustment Notice by the applicable
Delivery Date, the Company shall be liable to the Warrantholder for Late
Payments (as set forth in Section 3(a)(ii) above). The Company shall give to the
Warrantholder written notice of any such sale of Common Stock within 72 hours of
the closing of any such sale.
7
(e) An adjustment shall become effective immediately after the
record date in the case of each dividend or distribution and immediately after
the effective date of each other event which requires an adjustment.
(f) In the event that, as a result of an adjustment made
pursuant to Section 9, the Warrantholder of this Warrant shall become entitled
to receive any shares of capital stock of the Company other than shares of
Common Stock, the number of such other shares so receivable upon exercise of
this Warrant shall be subject thereafter to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Warrant Shares contained in this Warrant.
Section 10. ACCELERATION OF EXERCISABILITY. Notwithstanding anything
herein to the contrary, prior to 5:00 p.m. on the Expiration Date, the
Warrantholder shall be entitled (subject to waiver by the Warrantholder in its
sole discretion) to exercise its Warrants at any time and from time to time
immediately following the event of the announcement as pending or planned of any
of the following Extraordinary Transactions. For purposes hereof, "Extraordinary
Transactions" shall mean:
(a) a "going private" transaction under Rule 13e-3 promulgated
pursuant to the Exchange Act shall have been announced; or
(b) a tender offer by the Company under Rule 13e-4 promulgated
pursuant to the Exchange Act shall have been announced; or
(c) the merger of the Company with or into another entity,
and/or the consolidation or sale, transfer or disposition of all or
substantially all of the assets of the Company in one or a series of
transactions;
(d) a tender offer or exchange offer by a third party is
completed pursuant to which holders of Common Stock are permitted to tender or
exchange their shares for other securities, cash or property; or
(e) the Company effects any compulsory share exchange pursuant
to which the Common Stock is effectively exchanged for other securities, cash or
property.
Section 11. FRACTIONAL INTEREST. The Company shall not be required to
issue fractions of Warrant Shares upon the exercise of the Warrant. If any
fraction of a Warrant Share would, except for the provisions of this Section, be
issuable upon the exercise of the Warrant (or specified portions thereof), the
Company shall round such calculation to the nearest whole number and disregard
the fraction.
Section 12. BENEFITS. Nothing in this Warrant shall be construed to
give any person, firm or corporation (other than the Company and the
Warrantholder) any legal or
8
equitable right, remedy or claim, it being agreed that this Warrant shall be for
the sole and exclusive benefit of the Company and the Warrantholder.
Section 13. NOTICES TO WARRANTHOLDER. Upon the happening of any event
requiring an adjustment of the Warrant Price, the Company shall forthwith give
written notice thereof to the Warrantholder at the address appearing in the
records of the Company, stating the adjusted Warrant Price and the adjusted
number of Warrant Shares resulting from such event and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. In the event of a dispute with respect to any such
calculation, the certificate of the Company's independent certified public
accountants shall be conclusive evidence of the correctness of any computation
made, absent manifest error. Failure to give such notice to the Warrantholder or
any defect therein shall not affect the legality or validity of the subject
adjustment. At the Warrantholder's request, the Company shall deliver to the
Warrantholder as of a requested date a notice specifying the Warrant Price and
the number of Warrant Shares into which this Warrant is exercisable as of such
date.
Section 14. IDENTITY OF TRANSFER AGENT. The Transfer Agent for the
Common Stock is:
Registrar and Transfer Co.
00 Xxxxxxxx Xxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Telephone: 1-800-866-1340 ext. 2620
Telefax: (000) 000-0000
Attention: Xxxxxxx Xxxxx
Forthwith upon the appointment of any subsequent transfer agent for
the Common Stock or other shares of the Company's capital stock issuable upon
the exercise of the rights of purchase represented by the Warrant, the Company
will fax to the Warrantholder a statement setting forth the name and address of
such transfer agent.
Section 15. NOTICES. Any notice pursuant hereto to be given or made
by the Warrantholder to or on the Company shall be sufficiently given or made
personally or if sent by an internationally recognized courier by next day or
two day delivery service, addressed as follows:
LINK TWO COMMUNICATIONS, INC.
c/o X.X. Xxxxxxxx
000 Xxxxxxxxxx Xxxxx
Xxxxxx Xxxx, Xxxxx 00000
Telephone: (000) 000-0000
Telefax: (000) 000-0000
Attention: X.X. Xxxxxxxx
9
or such other address as the Company may specify in writing by notice to the
Warrantholder complying as to delivery with the terms of this Section 15.
Any notice pursuant hereto to be given or made by the Company to or
on the Warrantholder shall be sufficiently given or made if personally delivered
or if sent by an internationally recognized courier service by overnight or
two-day service, to the address set forth on the books of the Company or, as to
each of the Company and the Warrantholder, at such other address as shall be
designated by such party by written notice to the other party complying as to
delivery with the terms of this Section 15.
All such notices, requests, demands, directions and other
communications shall, when sent by courier, be effective two (2) days after
delivery to such courier as provided and addressed as aforesaid.
Section 16. SUCCESSORS. All the covenants and provisions hereof by or
for the benefit of the Warrantholder shall bind and inure to the benefit of its
respective successors and assigns hereunder.
Section 17. GOVERNING LAW. This Warrant shall be deemed to be a
contract made under the laws of the State of New York, without giving effect to
its conflict of law principles, and for all purposes shall be construed in
accordance with the laws of said State.
Section 18. The Company agrees that within ten (10) business days
after any request from time to time of the Warrantholder, it shall deliver to
such Warrantholder a new Warrant in substitution of this Warrant which is
identical in all respects except that the then Warrant Price shall be
appropriately specified in the Warrant, and the Warrant shall specify the fixed
number of Warrant Shares into which the Warrants are then exercisable. Such
changes are intended not as amendments to the Warrant but only as clarification
of the foregoing numbers for convenience purposes, and such changes shall not
affect any provisions concerning adjustments to the Warrant Price or number of
Warrant Shares contained herein. This Warrant may also be exchanged by the
Warrantholder at any time and from time to time for a Warrant or Warrants with
different denominations representing an equal aggregate number of Warrant Shares
issuable upon exercise thereof, as reasonably requested by Warrantholder, upon
surrendering the same. No service charge will be made for any such substitution
or exchange.
[SIGNATURE PAGE FOLLOWS]
10
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
as of February 9, 2001.
LINK TWO COMMUNICATIONS, INC.
By: /s/ X.X. Xxxxxxxx
---------------------------
Name: X.X. Xxxxxxxx
Title: President
Attest:
Sign:
------------------------------
Print Name:
11
LINK TWO COMMUNICATIONS, INC.
WARRANT EXERCISE FORM
LINK TWO COMMUNICATIONS, INC.
---------------------------
---------------------------
Telephone:
------------------
Telefax:
------------------
Attention:
This undersigned hereby irrevocably elects to exercise the
right of purchase represented by the within Warrant ("Warrant") for, and to
purchase thereunder by :
_______________ shares of Common Stock* ("Warrant Shares") provided for therein,
and requests that certificates for the Warrant Shares be issued as follows:
---------------------------
Name
--------------------------------
Address
--------------------------------
--------------------------------
and, if the number of Warrant Shares shall not be all the Warrant Shares
purchasable upon exercise of the Warrant, that a new Warrant for the balance of
the Warrant Shares.
In lieu of delivering physical certificates representing the Warrant Shares
purchasable upon exercise of this Warrant, provided the Company's transfer agent
is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer ("FAST") program, upon request of the Warrantholder, the
Company shall use its best efforts to cause its transfer agent to electronically
transmit the Warrant Shares issuable upon conversion or exercise to the
undersigned, by crediting the account of the undersigned's prime broker with DTC
through its Deposit Withdrawal Agent Commission ("DWAC") system.
Dated: Signature:
----------------------- ------------------------------
------------------------------
Name (please print)
------------------------------
Address
--------
* NOTE: If conversion of the Warrant is made by surrender of the Warrant and
the number of shares indicated exceeds the maximum number of shares to which
a Warrantholder is entitled, the Company will issue such maximum number of
shares purchasable upon exercise of the Warrant registered in the name of the
undersigned Warrantholder or the undersigned's Assignee as below indicated
and deliver same to the address stated below.
