Exhibit 4.1
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN A FORM REASONABLY
SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT.
Warrant No. WCS-001 Date of Issuance: April 24, 2001
BESTNET COMMUNICATIONS CORP.
WARRANT TO PURCHASE COMMON STOCK
VOID AFTER APRIL 23, 2006
This certifies that, for value received, NETWORK TWENTYONE INTERNATIONAL,
INC., a ____________ corporation or registered assigns ("Holder"), is entitled,
subject to the terms set forth below, to purchase from BESTNET COMMUNICATIONS
CORP., a Nevada corporation (the "Company"), ONE HUNDRED THOUSAND (100,000)
shares of the Common Stock of the Company (the "Warrant Shares"), as constituted
on the date hereof (the "Warrant Issue Date"), upon surrender hereof, at the
principal office of the Company referred to below, with the Notice of Exercise
form attached hereto as Annex A duly executed, and simultaneous payment therefor
in lawful money of the United States or otherwise as hereinafter provided, at
the Exercise Price as set forth in Section 2 below. The number, character and
Exercise Price of such shares of Common Stock are subject to adjustment as
provided below. The term "Warrant" as used herein shall include this Warrant,
which is one of a series of warrants issued for the Common Stock of the Company,
and any warrants delivered in substitution or exchange therefor as provided
herein.
1. TERM OF WARRANT; VESTING.
(a) TERM. Subject to the terms and conditions set forth herein, this
Warrant shall be exercisable, in whole or in part, during the term commencing on
the date of this Warrant and ending at 5:00 p.m., central time, on April 23,
2006 (the "Term"), and shall be void thereafter.
(b) VESTING OF WARRANT ISSUE DATE. Of the 100,000 Warrant Shares of
Common Stock represented by this Warrant, 50,000 shares shall immediately vest
upon the execution of that certain BestNet Telecommunication Services Agreement
by and between Company and Holder (the "Telecommunications Agreement"), and may
be immediately exercised from and after such date in accordance with the terms
hereof.
(c) POST-WARRANT ISSUE DATE VESTING SCHEDULE. The remaining 50,000
shares of Common Stock represented by this Warrant shall immediately vest upon
the date Holder begins to promote the Company's internet telephony products in
Australia, Germany and South Africa in accordance with the terms of the
Telecommunications Agreement, whereupon this Warrant may be immediately
exercised from and after such date/occurrence in accordance with the terms
hereof.
2. EXERCISE PRICE. The Exercise Price at which this Warrant may be
exercised shall be $1.00 per share of Common Stock, as adjusted from time to
time pursuant to Section 11 hereof.
3. EXERCISE OF WARRANT.
(a) EXERCISE MECHANICS. The purchase rights represented by this
Warrant are exercisable by the Holder in whole or in part, but not for less than
Ten Thousand (10,000) shares at a time (or such lesser number of shares which
may then constitute the maximum number purchasable; such number being subject to
adjustment as provided in Section 11 below), at any time, or from time to time,
during the term hereof as described in Section 1 above, by the surrender of this
Warrant and the Notice of Exercise annexed hereto duly completed and executed on
behalf of the Holder, at the office of the Company (or such other office or
agency of the Company as it may designate by notice in writing to the Holder at
the address of the Holder appearing on the books of the Company), upon payment
(i) in cash, certified or bank funds or wire transfer of immediately available
funds, (ii) by cancellation by the Holder of indebtedness of the Company to the
Holder, or (iii) by a combination of (i) and (ii), of the Exercise Price of the
shares to be purchased.
(b) DATE OF EXERCISE. This Warrant shall be deemed to have been
exercised immediately prior to the close of business on the date of its
surrender for exercise as provided above, and the person entitled to receive the
shares of Common Stock issuable upon such exercise shall be treated for all
purposes as the holder of record of such shares as of the close of business on
such date. As promptly as practicable on or after such date and in any event
within five (5) business days thereafter, the Company, at its expense, shall
issue and deliver to the person or persons entitled to receive the same a
certificate or certificates for the number of shares issuable upon such
exercise. In the event that this Warrant is exercised in part, the Company, at
its expense, will execute and deliver a new Warrant of like tenor exercisable
for the remaining number of shares for which this Warrant may then be exercised.
(c) NET ISSUE EXERCISE. Notwithstanding any provisions herein to the
contrary, if the fair market value of one share of Common Stock is greater than
the Exercise Price (at the date of calculation as set forth below), in lieu of
exercising this Warrant for cash, the Holder may elect to receive shares equal
to the value (as determined below) of this Warrant (or the portion thereof being
canceled) by surrender of this Warrant at the principal office of the Company
together with the properly endorsed Notice of Exercise and notice of such
election in which event the Company shall issue to the Holder a number of shares
of Common Stock computed using the following formula:
X = Y (A-B)
-------
A
Where X = The number of shares of Common Stock to be issued to the Holder
the number of shares of Common Stock purchasable under the
Warrant or, if only a portion of the Warrant is being exercised,
the portion of the Warrant being
Y = canceled (at the date of such calculation)
A = the fair market value of one share of the Company's Common Stock
(at the date of such calculation)
B = Exercise Price (as adjusted to the date of such calculation)
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For purposes of the above calculation, fair market value of one share of Common
Stock shall be determined by the Company's Board of Directors in good faith;
PROVIDED, HOWEVER, that where there exists a public market for the Company's
Common Stock at the time of such exercise, the fair market value per share shall
be the average of the highest and lowest sale prices of the stock quoted on an
established stock exchange or The Nasdaq National Market, if applicable, on the
trading day immediately preceding the computation day or if the stock is not
then listed on an established stock exchange or the Nasdaq National Market, the
average of the closing bid and asked prices per share for the stock in the
over-the-counter market or as quoted on The Nasdaq SmallCap Market on the
trading day immediately preceding the computation day.
4. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing shares shall be issued upon the exercise of this Warrant. In lieu
of any fractional share to which the Holder would otherwise be entitled, the
Company shall make a cash payment equal to the Exercise Price multiplied by such
fraction.
5. REPLACEMENT OF WARRANT. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant,
the Company shall execute and deliver, in lieu of this Warrant, a new warrant of
like tenor and amount. At the request of the Company, the Holder shall provide
the Company with an executed Lost Warrant Affidavit substantially in the form of
Annex B attached hereto, each at the cost of the Holder, in order to provide
reasonable protection to the Company concerning the replacement of this Warrant.
6. RIGHTS OF STOCKHOLDERS. Subject to Sections 9 and 11 of this Warrant,
the Holder shall not be entitled to vote or receive dividends or be deemed the
holder of Common Stock or any other securities of the Company that may at any
time be issuable on the exercise hereof for any purpose, nor shall anything
contained herein be construed to confer upon the Holder, as such, any of the
rights of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of stock, change of par
value, or change of stock to no par value, consolidation, merger, conveyance, or
otherwise) or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until the Warrant shall have been exercised as
provided herein.
7. TRANSFER OF WARRANT.
(a) WARRANT REGISTER. The Company will maintain a register (the
"Warrant Register") containing the names and addresses of the Holder or Holders.
Any Holder of this Warrant or any portion thereof may change his, her or its
address as shown on the Warrant Register by written notice to the Company
requesting such change. Any notice or written communication required or
permitted to be given to the Holder may be delivered or given by mail to such
Holder as shown on the Warrant Register as the absolute owner of this Warrant
for all purposes, notwithstanding any notice to the contrary. The initial Holder
of this Warrant hereby consents to the use of the address set forth below his
name on the signature page hereto for purposes of the Warrant Register.
(b) WARRANT AGENT. The Company may, by written notice to the Holder,
appoint an agent for the purpose of maintaining the Warrant Register referred to
in Section 7(a) above, issuing the Warrant Shares, exchanging this Warrant,
replacing this Warrant, or any or all of the foregoing. Thereafter, any such
registration, issuance, exchange, or replacement, as the case may be, shall be
made at the office of such agent.
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(c) TRANSFERABILITY AND NON-NEGOTIABILITY OF WARRANT. This Warrant may
not be transferred or assigned in whole or in part without compliance with all
applicable federal and state securities laws by the transferor and the
transferee (including the delivery of investment representation letters and
legal opinions reasonably satisfactory to the Company, if such are requested by
the Company). Subject to the provisions of this Warrant with respect to
compliance with the Securities Act of 1933, as amended (the "Securities Act"),
title to this Warrant may be transferred by endorsement (by the Holder executing
the Assignment Form annexed hereto as Annex C) and delivery in the same manner
as a negotiable instrument transferable by endorsement and delivery; PROVIDED,
HOWEVER, that this Warrant may not be transferred in part unless such transfer
is to a transferee who, pursuant to such transfer, receives the right to
purchase at least Ten Thousand (10,000) shares hereunder.
(d) EXCHANGE OF WARRANT UPON A TRANSFER. On surrender of this Warrant
for exchange, properly endorsed on the Assignment Form and subject to the
provisions of this Warrant with respect to compliance with the Securities Act
and with the limitations on assignments and transfers and contained in this
Section 7, the Company at its expense shall issue to or on the order of the
Holder a new warrant or warrants of like tenor, in the name of the Holder or as
the Holder (on payment by the Holder of any applicable transfer taxes) may
direct, for the number of shares issuable upon exercise hereof.
(e) COMPLIANCE WITH SECURITIES LAWS.
(i) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the shares of Common Stock to be issued
upon exercise hereof are being acquired solely for the Holder's own account
and not as a nominee for any other party, and for investment, and that the
Holder will not offer, sell or otherwise dispose of this Warrant or any
Warrant Shares except under circumstances that will not result in a
violation of the Securities Act or any applicable state securities laws.
Upon exercise of this Warrant, the Holder shall, if requested by the
Company, confirm in writing, in a form satisfactory to the Company, that
the Warrant Shares are being acquired solely for the Holder's own account
and not as a nominee for any other party, for investment, and not with a
view toward distribution or resale.
(ii) This Warrant and all Warrant Shares shall be stamped or
imprinted with a legend in substantially the following form (in addition to
any legend required by state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933. SUCH SECURITIES AND ANY SECURITIES OR SHARES ISSUED
HEREUNDER MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT.
8. RESERVATION OF STOCK. The Company covenants that during the Term this
Warrant is exercisable, the Company will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the exercise of this Warrant, PROVIDED, HOWEVER, the
Company shall at all times reserve the right to issue treasury shares to the
Holder upon the exercise hereof. The Company further covenants that all Warrant
Shares, upon exercise of the rights represented by this Warrant and payment of
the Exercise Price, all as set forth herein, will be free from all taxes, liens
and charges in respect of the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously or otherwise specified herein or liens
resulting from the Holder's actions). The Company agrees that its issuance of
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this Warrant shall constitute full authority to its officers who are charged
with the duty of executing stock certificates to execute and issue the necessary
certificates for shares of Common Stock upon the exercise of this Warrant.
9. NOTICES.
(a) CERTIFICATE OF CHIEF FINANCIAL OFFICER. Whenever the Exercise
Price or number of shares purchasable hereunder shall be adjusted pursuant to
Section 11 hereof, the Company shall, within thirty (30) days of the occurrence
of the event which triggered such adjustment, issue a certificate signed by its
Chief Financial Officer setting forth, in reasonable detail, the event requiring
the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated, and the Exercise Price and number of shares
purchasable hereunder after giving effect to such adjustment, and shall cause a
copy of such certificate to be mailed (by first-class mail, postage prepaid) to
the Holder of this Warrant. The Company shall, upon the written request, at any
time, of any such Holder, furnish or cause to be furnished to such Holder a like
certificate setting forth: (i) such adjustments and readjustments; (ii) the
Exercise Price at the time in effect; and (iii) the number of shares and the
amount, if any, of other property that at the time would be received upon the
exercise of the Warrant.
(b) NOTICE OF CERTAIN FUNDAMENTAL TRANSACTIONS. In case:
(i) the Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time receivable upon the
exercise of this Warrant) for the purpose of entitling them to receive any
dividend or other distribution, or any right to subscribe for or purchase
any shares of stock of any class or any other securities, or
(ii) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation, or any conveyance
of all or substantially all of the assets of the Company to another
corporation, or
(iii) of any voluntary dissolution, liquidation or winding-up of
the Company,
then, and in each such case, the Company will mail or cause to be mailed to the
Holder or Holders a notice specifying, as the case may be, (A) the date on which
a record is to be taken for the purpose of such dividend, distribution or right,
and stating the amount and character of such dividend, distribution or right, or
(B) the date on which such reorganization, reclassification, consolidation,
merger, conveyance, dissolution, liquidation or winding-up is to take place, and
the time, if any is to be fixed, as of which the holders of record of Common
Stock (or such stock or securities at the time receivable upon the exercise of
this Warrant) shall be entitled to exchange their shares of Common Stock (or
such other stock or securities) for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be mailed at least ten
(10) days prior to the date therein specified.
(c) DEEMED RECEIPT. All such notices, advices and communications shall
be deemed to have been received (i) in the case of personal delivery, on the
date of such delivery and (ii) in the case of mailing, on the third business day
following the date of such mailing.
10. AMENDMENTS.
(a) WITH THE CONSENT OF THE HOLDER. Any term of this Warrant may be
amended with the written consent of the Company and the Holders of the Warrant.
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(b) NO WAIVER. No waivers of, or exceptions to, any term, condition or
provision of this Warrant, in any one or more instances, shall be deemed to be,
or construed as, a further or continuing waiver of any such term, condition or
provision.
11. ADJUSTMENTS. The Exercise Price and the number of shares purchasable
hereunder are subject to adjustment from time to time as follows:
(a) MERGER, SALE OF ASSETS, ETC. If at any time while this Warrant, or
any portion thereof, is outstanding and unexpired there shall be (i) a
reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), (ii) a merger or
consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a reverse triangular merger in which the
Company is the surviving entity but the shares of the Company's capital stock
outstanding immediately prior to the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash, or
otherwise, or (iii) a sale or transfer of the Company's properties and assets
as, or substantially as, an entirety to any other person, then, as a part of
such reorganization, merger, consolidation, sale or transfer, lawful provision
shall be made so that the holder of this Warrant shall thereafter be entitled to
receive upon exercise of this Warrant, during the period specified herein and
upon payment of the Exercise Price then in effect, the number of shares of stock
or other securities or property of the successor corporation resulting from such
reorganization, merger, consolidation, sale or transfer that a holder of the
shares deliverable upon exercise of this Warrant would have been entitled to
receive in such reorganization, consolidation, merger, sale or transfer if this
Warrant had been exercised immediately before such reorganization, merger,
consolidation, sale or transfer, all subject to further adjustment as provided
in this Section 11. The foregoing provisions of this Section 11(a) shall
similarly apply to successive reorganizations, consolidations, mergers, sales
and transfers and to the stock or securities of any other corporation that are
at the time receivable upon the exercise of this Warrant. If the per-share
consideration payable to the Holder hereof for shares in connection with any
such transaction is in a form other than cash or marketable securities, then the
value of such consideration shall be determined in good faith by the Company's
Board of Directors. In all events, appropriate adjustment (as determined in good
faith by the Company's Board of Directors) shall be made in the application of
the provisions of this Warrant with respect to the rights and interests of the
Holder after the transaction, to the end that the provisions of this Warrant
shall be applicable after that event, as near as reasonably may be, in relation
to any shares or other property deliverable after that event upon exercise of
this Warrant.
(b) RECLASSIFICATION, ETC. If the Company, at any time while this
Warrant, or any portion thereof, remains outstanding and unexpired by
reclassification of securities or otherwise, shall change any of the securities
as to which purchase rights under this Warrant exist into the same or a
different number of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities that were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change and the Exercise
Price therefor shall be appropriately adjusted, all subject to further
adjustment as provided in this Section 11.
(c) SPLIT, SUBDIVISION OR COMBINATION OF SHARES. If the Company at any
time while this Warrant, or any portion thereof, remains outstanding and
unexpired shall split, subdivide or combine the securities as to which purchase
rights under this Warrant exist, into a different number of securities of the
same class, the Exercise Price for such securities shall be proportionately
decreased in the case of a split or subdivision or proportionately increased in
the case of a combination.
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(d) ADJUSTMENTS FOR DIVIDENDS IN STOCK OR OTHER SECURITIES OR
PROPERTY. If while this Warrant, or any portion hereof, remains outstanding and
unexpired the holders of the securities as to which purchase rights under this
Warrant exist at the time shall have received, or, on or after the record date
fixed for the determination of eligible stockholders, shall have become entitled
to receive, without payment therefor, other or additional stock or other
securities or property (other than cash) of the Company by way of dividend, then
and in each case, this Warrant shall represent the right to acquire, in addition
to the number of shares of the security receivable upon exercise of this
Warrant, and without payment of any additional consideration therefor, the
amount of such other or additional stock or other securities or property (other
than cash) of the Company that such holder would hold on the date of such
exercise had it been the holder of record of the security receivable upon
exercise of this Warrant on the date hereof and had thereafter, during the
period from the date hereof to and including the date of such exercise, retained
such shares and/or all other additional stock available by it as aforesaid
during such period, giving effect to all adjustments called for during such
period by the provisions of this Section 11.
(e) NO IMPAIRMENT. The Company will not, by any voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Section 11 and in
the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holders of this Warrant against impairment.
12. REGISTRATION RIGHTS.
(a) DEFINITIONS. As used in this Warrant, the following terms shall
have the following meanings:
AFFILIATE: the meaning set forth in Rule 12b-2 under the Exchange Act.
EXCHANGE ACT: the Securities Exchange Act of 1934, as amended.
PROSPECTUS: the prospectus included in any Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective Registration
Statement in reliance upon Rule 430A under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by such
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all materials incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
REGISTRABLE SECURITIES: the Warrant Shares (whether or not this Warrant is
then exercised) and any other securities issued or issuable with respect to the
Warrant Shares by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise, PROVIDED THAT any particular shares of such
Registrable Securities shall cease to be Registrable Securities when (i) a
Registration Statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of in accordance with such Registration Statement, (ii) such shares
shall have become eligible to be sold to the public by the Holder pursuant to
Rule 144 under the Securities Act and such securities have been disposed of in
accordance with such rule, (iii) subsequent disposition of such shares shall not
require registration or qualification of them under the Securities Act or of any
similar state law then in force; (iv) the Warrants shall have not been exercised
as of the expiration date specified in the respective Warrant, or (v) such
shares shall have ceased to be outstanding.
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REGISTRATION: a registration of securities (including Registrable
Securities) under the Securities Act.
REGISTRATION EXPENSES: any and all expenses incident to performance of or
compliance with this Warrant by the Company and its subsidiaries, including,
without limitation (i) all SEC, stock exchange, Nasdaq and other registration,
listing and filing fees (other than fees and expenses incurred in connection
with compliance with state securities or blue sky laws); (ii) all fees and
expenses incurred in connection with compliance with the rules for trading
securities on the Nasdaq or on any stock exchange on which the Common Stock is
traded (including reasonable fees and disbursements of counsel to the
underwriters in connection with such compliance and the preparation of a blue
sky memorandum and legal investment survey), (iii) all expenses of printing,
distributing, mailing and delivering, any Registration Statement, any
Prospectus, any underwriting agreements, transmittal letters, securities sales
agreements, securities certificates and other documents relating to the
performance of or compliance with this Agreement, (iv) the fees and
disbursements of counsel for the Company and of the independent public
accountants of the Company, including the expenses of any "cold comfort" letters
required by or incident to such performance and compliance, (v) the fees and
expenses of any trustee, transfer agent, registrar, escrow agent or custodian,
(vi) the expenses customarily borne by the issuer incurred in connection with
making road show presentations, if any, to facilitate the distribution and sale
of Registrable Securities, and (vii) all internal expenses of the Company
(including all salaries and expenses of officers and employees performing legal
or accounting duties).
RULE 144: Rule 144 (or any successor provision) under the Securities Act.
SEC: the Securities and Exchange Commission.
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: a Registration in which
securities of the Company (including Registrable Securities) are sold to an
underwriter for reoffering to the public.
(b) INCIDENTAL REGISTRATION RIGHTS. If the Company proposes to
register any of its equity securities (other than pursuant to a Registration
Statement on Form S-4 or S-8 or any successor form) and the Registration form to
be used may be used for Registration of the Registrable Securities, it will give
prompt written notice to the Holder of its intention to effect such Registration
(the "Incidental Registration"). Within five (5) business days of receiving such
written notice of an Incidental Registration, the Holder may make a written
request (the "Piggy-Back Request") that the Company include in the proposed
Incidental Registration all, or a portion, of the Registrable Securities owned
by the Holder (which Piggy-Back Request shall set forth the Registrable
Securities intended to be disposed of by the Holder and the intended method of
disposition thereof). The Company will use its best efforts to include in any
Incidental Registration all Registrable Securities which the Company has been
requested to register pursuant to any timely Piggy-Back Request to the extent
required to permit the disposition (in accordance with the intended methods
thereof as aforesaid) of the Registrable Securities so to be registered;
provided, however, that notwithstanding the preceding:
(i) the Company shall not be obligated pursuant to this Section
12(b) to effect a Registration of Registrable Securities requested pursuant
to a timely Piggy-Back Request if the Company discontinues the related
Incidental Registration at any time prior to the effective date of any
Registration Statement filed in connection therewith; and
(ii) if a Registration pursuant to this Section 12(b) involves an
underwritten offering, and the managing underwriter (or, in the case of an
offering that is not underwritten, an investment banker) shall advise the
Company that, in its opinion, the number of securities requested and
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otherwise proposed to be included in such Registration exceeds the number
which can be sold in such offering without adversely affecting the
marketability of the offering, the Company will include in such
Registration to the extent of the number which the Company is so advised
can be sold in such offering, FIRST, the securities the Company proposes to
sell for its own account in such Registration and SECOND, the Registrable
Securities of the Holder requesting to be included in such Registration and
all other securities requested to be included in such Registration on a PRO
RATA basis.
(c) UNDERWRITTEN OFFERS. The provisions of this Section 12(c) do not
establish additional registration rights but instead set forth procedures
applicable, in addition to those set forth in Sections 12(b) and (d), to any
Registration which is an underwritten offering.
(i) SELECTION OF UNDERWRITERS. If a Registration of Registrable
Securities is being effected pursuant to Section 12(b) and such securities
are to be distributed by or through one or more underwriters, the Company
shall have the sole right to select one or more underwriters to administer
the offering.
(ii) PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. The Holder may
not participate in any underwritten Registrations hereunder unless the
Holder agrees to sell the Holder's Registrable Securities on the basis
provided in any underwriting arrangements approved by the Company.
(iii) HOLDBACK AGREEMENT OF THE HOLDER. If and whenever the
Company proposes to register any of its equity securities under the
Securities Act for its own account (other than on Form S-4 or S-8 or any
successor form) or is required to use reasonable efforts to effect the
Registration of any Registrable Securities under the Securities Act
pursuant to Section 12(b), the Holder agrees not to effect any public sale
or distribution, including any sale pursuant to Rule 144, of any
Registrable Securities, of any other equity securities of the Company, or
any securities convertible into or exchangeable for any equity securities
of the Company, within fifteen (15) days prior to and ninety (90) days
(unless advised in writing by the managing underwriter that a longer
period, not to exceed one-hundred eighty (180) days, is required) after the
effective date of the Registration Statement relating to such Registration,
except as part of such Registration or with the prior written consent of
the Company and the managing underwriter, if any.
(d) REGISTRATION PROCEDURES/OBLIGATIONS OF THE COMPANY. If and
whenever the Company is required pursuant to Section 12(b) to effect a
Registration of Registrable Securities, the Company shall, subject to the
provisions of Section 12(b):
(i) prepare and file with the SEC a Registration Statement
covering such Registrable Securities and use commercially reasonable
efforts to cause such Registration Statement to become effective and remain
effective as provided herein;
(ii) use commercially reasonable efforts to prepare and file with
the SEC such amendments and supplements to such Registration Statement as
may be necessary to keep such Registration Statement and Prospectus used in
connection therewith effective at least until the earlier of (A) ninety
(90) days after the effective date of such Registration Statement, or (B)
the completion of the distribution by the Holder of all of the Registrable
Securities covered by such Registration Statement (the "Effectiveness
Period");
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(iii) use commercially reasonable efforts to register or qualify
the Registrable Securities covered by such Registration Statement under the
securities or blue sky laws of such states within the United States as the
Company determines, PROVIDED that the Company shall not for any such
purpose be required to qualify generally to do business as a foreign
corporation in any state wherein it is not so qualified, subject itself to
taxation in any state wherein it is not so subject, or take any action
which would subject it to general service of process in any state wherein
it is not so subject; and
(iv) notify the Holder of Registrable Securities covered by such
Registration Statement (A) if, to its knowledge, such Registration
Statement, at the time it or any amendment thereto became effective,
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and, as promptly as practicable, prepare
and file with the SEC a post-effective amendment to such Registration
Statement and use commercially reasonable efforts to cause such
post-effective amendment to become effective such that such Registration
Statement, as so amended, shall not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and (B)
at any time when a Prospectus relating thereto is required to be delivered
under the Securities Act, if, to its knowledge, the Prospectus included in
such Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, and, as
promptly as practicable, prepare and furnish to such Holder a reasonable
number of copies of a supplement to or an amendment of such Prospectus as
may be necessary so that, as thereafter delivered to the purchasers of such
securities, such Prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
The Holder agrees that upon receipt of any notice from the Company pursuant to
Section 12(d)(iv), the Holder will promptly discontinue the Holder's disposition
of Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until the Holder shall have received notice from the
Company that such Registration Statement has been amended and/or copies of the
supplemented or amended Prospectus contemplated by Section 12(d)(iv) have been
furnished. If so directed by the Company, the Holder of Registrable Securities
will deliver to the Company all copies, other than permanent file copies, in the
Holder's possession of the Prospectus covering such Registrable Securities at
the time of receipt of such notice.
(e) HOLDER INFORMATION. The Company may require the Holder of any
Registrable Securities as to which any Registration is being effected to furnish
to the Company such information regarding such Holder and the distribution of
such Registrable Securities as the Company may from time to time reasonably
request and as shall be required by law in connection therewith. The Holder
agrees to furnish promptly to the Company all information required to be
disclosed in order to make the information previously furnished to the Company
by such Holder not materially false or misleading.
(f) REGISTRATION EXPENSES. The Company shall pay all Registration
Expenses arising from or incidental to the performance of, or compliance with,
this Agreement, PROVIDED that the Holder requesting such Registration shall bear
any transfer taxes applicable to its Registrable Securities registered
thereunder, customary (both as to type and amount) commissions, discounts or
other compensation payable to the underwriters (including fees and expenses of
underwriters' counsel), selling brokers, managers or other similar persons
10
engaged in the distribution of any of the Registrable Securities, and the fees
and expenses of the Holder's own counsel.
(g) INDEMNIFICATION.
(i) INDEMNIFICATION BY THE HOLDER OF REGISTRABLE SECURITIES. The
Company may require, as a condition to including any Registrable Securities
in any Registration Statement filed pursuant to this Agreement that the
Company shall have received an undertaking satisfactory to it from the
Holder to indemnify, defend and hold harmless, the Company, its directors
and officers and each person, if any, who controls (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) the
Company from and against any and all losses, claims, damages and
liabilities, joint or several, to which any of the foregoing may become
subject, under the Securities Act or otherwise, based upon or arising out
of any untrue statement or alleged untrue statement of a material fact in a
Registration Statement, any preliminary prospectus, final Prospectus or
summary Prospectus, or any amendment or supplement thereto, or omission or
alleged omission to state therein any material fact required to be stated
therein or necessary to make the statements therein not misleading, if such
statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company by such Holder expressly for use in the preparation of such
Registration Statement, preliminary prospectus, final Prospectus, summary
Prospectus, amendment or supplement. Such indemnity shall remain in full
force and effect, regardless of any investigation made by or on behalf of
the Company or any such director, officer or controlling person and shall
survive the transfer of such Registrable Securities by such Holder.
(ii) INDEMNIFICATION PAYMENTS. Any indemnification required to be
made by an indemnifying party pursuant to this Section 12(g) shall be made
by periodic payments to the indemnified party during the course of the
action or proceeding, as and when bills are received by such indemnifying
party with respect to an indemnifiable loss, claim, damage, liability or
expense incurred by such indemnified party.
(iii) OTHER REMEDIES. If for any reason the foregoing indemnity
is unavailable, or is insufficient to hold harmless an indemnified party,
other than by reason of the exceptions provided therein, then the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such losses, claims, damages, liabilities,
actions, proceedings or expenses in such proportion as is appropriate to
reflect the relative benefits to and faults of the indemnifying party on
the one hand and the indemnified party on the other in connection with the
offering of Registrable Securities (taking into account the portion of the
proceeds of the offering realized by each such party) and the statements or
omissions or alleged statements or omissions which resulted in such loss,
claim, damage, liability, action, proceeding or expense, as well as any
other relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party shall be determined by
reference to, among other things, whether the untrue statement of a
material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statements or omissions. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. No party shall be
liable for contribution under this Section 12(g)(iii) except to the extent
and under such circumstances as such party would have been liable to
indemnify under this Section 12(g) if such indemnification were enforceable
under applicable law.
11
13. MISCELLANEOUS.
(a) NOTICES. All notices and other communications from the Company to
the Holder shall be mailed by first class registered or certified mail, postage
prepaid (unless specified otherwise herein), at the address contained in the
Warrant Register.
(b) GOVERNING LAW. This Warrant shall be construed and enforced in
accordance with and governed by the internal laws of the State of Nevada, other
than the conflicts of laws thereof.
(c) HEADINGS. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
(d) SEVERABILITY AND CONFLICTS. The invalidity or unenforceability of
any provision hereof shall in no way affect the validity or enforceability of
any other provision. To the extent any terms of this Warrant or the rights
granted hereby conflict with any provision(s) of the Telecommunications
Agreement, the terms of this Warrant shall control.
(e) DISPUTE RESOLUTION. Any dispute or claim arising out of, or in
connection with, this Warrant shall be finally settled by binding arbitration in
Washoe County, Nevada, United States of America, in accordance with the then
current rules and procedures of the American Arbitration Association by one (1)
arbitrator appointed pursuant to such rules and procedures. The arbitrator shall
apply the law of the State of Nevada, United States of America, without
reference to rules of conflicts of laws, to the merits of any dispute or claim.
Judgment on the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. Notwithstanding the above, either party may seek
injunctive relief or interim relief as necessary without breach of this
provision of this Warrant. All actions or proceedings relating to the Warrant
shall be maintained in a court located in Washoe County, Nevada, United States
of America, and the parties hereto consent to the jurisdiction of said court and
waive any objection to such venue.
14. REPRESENTATIONS OF HOLDER. The holder of this Warrant, by the
acceptance hereof, represents that it is acquiring this Warrant and the Warrant
Shares for its own account for investment only and not with a view towards, or
for resale in connection with, the public sale or distribution of this Warrant
or the Warrant Shares, except pursuant to sales registered or exempted under the
Securities Act; provided, however, that by making the representations herein,
the holder does not agree to hold this Warrant or any of the Warrant Shares for
any minimum or other specific term and reserves the right to dispose of this
Warrant and the Warrant Shares at any time in accordance with or pursuant to a
registration statement or an exemption under the Securities Act. The holder of
this Warrant further represents, by acceptance hereof, that, as of this date,
such holder is an "accredited investor" as such term is defined in Rule
501(a)(1) of Regulation D promulgated by the Securities and Exchange Commission
under the Securities Act (an "Accredited Investor").
[Signature Page Follows]
12
IN WITNESS WHEREOF, BestNet Communications Corp. has caused this Warrant to
be executed by its officer thereunto duly authorized.
Dated: ____________, 2001
NETWORK 21 INTERNATIONAL, INC. BESTNET COMMUNICATIONS CORP.
By:_____________________________ By:_____________________________
Name:___________________________ Name:___________________________
Title:__________________________ Title:__________________________
Address: Suite 100 Address: 5210 East Williams Circle
4550 River Green Parkway Suite 200
Duluth, Georgia 30096 Tucson, Arizona 85711
(770) 622.2121 - Telephone (520) 750-9093 - Telephone
(770) 622.1833 - Facsimile (520) 750-9194 - Facsimile
Annexes
- ------------------------------------
Annex A - Notice of Exercise
Annex B - Assignment Form
Annex C - Affidavit of Loss
13
ANNEX A
NOTICE OF EXERCISE
To: BESTNET COMMUNICATIONS CORP.
(1) The undersigned hereby elects to purchase _________ shares of Common
Stock of BESTNET COMMUNICATIONS CORP., pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price for such shares in
full as follows:
___________________________________
___________________________________
___________________________________
(2) In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock to be issued upon conversion
thereof are being acquired solely for the account of the undersigned and not as
a nominee for any other party, and for investment, and that the undersigned will
not offer, sell or otherwise dispose of any such shares of Common Stock, except
under circumstances that will not result in a violation of the Securities Act of
1933, as amended, or any state securities laws.
(3) Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
___________________________________
(Name)
___________________________________
(Name)
(4) Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned or in such other name as is specified
below:
___________________________________
(Name)
____________________ ___________________________________
(Date) (Signature)
ANNEX C
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the Assignee named below all of the rights of
the undersigned under the within Warrant, with respect to the number of shares
of Common Stock set forth below:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
and does hereby irrevocably constitute and appoint Attorney ____________________
to make such transfer on the books of BestNet Communications Corp., maintained
for the purpose, with full power of substitution in the premises.
The undersigned also represents that, by assignment hereof, the Assignee
acknowledges that this Warrant and the shares of stock to be issued upon
exercise hereof are being acquired for investment and that the Assignee will not
offer, sell or otherwise dispose of this Warrant or any shares of stock to be
issued upon exercise hereof except under circumstances which will not result in
a violation of the Securities Act of 1933, as amended, or any state securities
laws. Further, the Assignee has acknowledged that upon exercise of this Warrant,
the Assignee shall, if requested by the Company, confirm in writing, in a form
satisfactory to the Company, that the shares of stock so purchased are being
acquired for investment and not with a view toward distribution or resale.
Dated:______________________________
_______________________________________
Signature of Holder
ANNEX B
FORM OF AFFIDAVIT OF LOSS
STATE OF )
) ss:
COUNTY OF )
The undersigned (hereinafter "Deponent"), being duly sworn, deposes and
says that:
1. Deponent is an adult whose mailing address is:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
2. Deponent is the recipient of a Warrant (the "Warrant") from BestNet
Communications Corp. (the "Company"), dated ___________________________________
for the purchase of ___________________________________ shares of Common Stock,
par value $.001 per share, of the Company, at an exercise price of
$_________________________ per share.
3. The Warrant has been lost, stolen, destroyed or misplaced, under the
following circumstances:
4. The Warrant was not endorsed.
5. Deponent has made a diligent search for the Warrant, and has been unable
to find or recover same, and Deponent was the unconditional owner of the Warrant
at the time of loss, and is entitled to the full and exclusive possession
thereof; that neither the Warrant nor the rights of Deponent therein have, in
whole or in part, been assigned, transferred, hypothecated, pledged or otherwise
disposed of, in any manner whatsoever, and that no person, firm or corporation
other than the Deponent has any right, title, claim, equity or interest in, to,
or respecting the Warrant.
6. Deponent makes this Affidavit for the purpose of requesting and inducing
the Company and its agents to issue a new warrant in substitution for the
Warrant.
7. If the Warrant should ever come into the hands, custody or power of the
Deponent or the Deponent's representatives, agents or assigns, the Deponent will
immediately and without consideration surrender the Warrant to the Company, its
representatives, agents or assigns, its transfer agents or subscription agents
for cancellation.
B-1
8. The Deponent hereby indemnifies and holds harmless the Company from any
claim or demand for payment or reimbursement of any party arising in connection
with the subject matter of this Affidavit.
Signed, sealed and dated: _________________________
_______________________________________
Deponent
Sworn to and subscribed before me this
____ day of _____________, _________
_______________________________________
Notary Public