EXHIBIT B
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND
REGULATIONS THEREUNDER OR ANY STATE SECURITIES LAWS OR THE PROVISIONS OF THIS
WARRANT.
No. of Shares of Common Stock: 250,000
WARRANT
To Purchase Common Stock of
LMKI INC.
THIS IS TO CERTIFY THAT Mesora Investors LLC, a Delaware limited
liability company, or its registered assigns, is entitled, at any time from
the Warrant Issuance Date (as hereinafter defined) to the Expiration Date (as
hereinafter defined), to purchase from LMKI Inc., a Nevada corporation (the
"Company"), two hundred fifty thousand (250,000) shares of Common Stock (as
hereinafter defined and subject to adjustment as provided herein), in whole
or in part, including fractional parts, at a purchase price per share equal
to $_______ [exercise price will be 110% of average closing bid price for
five trading days prior to the Closing Date] (subject to any adjustments made
to such amount pursuant to Section 4 hereto) on the terms and conditions and
pursuant to the provisions hereinafter set forth.
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of
Common Stock issued by the Company after the Closing Date, other than Warrant
Stock.
"Book Value" shall mean, in respect of any share of Common Stock
on any date herein specified, the consolidated book value of the Company as
of the last day of any month immediately preceding such date, divided by the
number of Fully Diluted Outstanding shares of Common Stock as determined in
accordance with GAAP (assuming the payment of the exercise prices for such
shares) by a firm of independent certified public accountants of recognized
national standing selected by the Company and reasonably acceptable to the
Holder.
"Business Day" shall mean any day that is not a Saturday or
Sunday or a day on which banks are required or permitted to be closed in the
State of New York.
"Closing Date" shall have the meaning set forth in the Securities
Purchase Agreement.
"Commission" shall mean the Securities and Exchange Commission or
any other federal agency then administering the Securities Act and other
federal securities laws.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock, par value $.001 per share, of the Company as
constituted on the Closing Date, and any capital stock into which such Common
Stock may thereafter be changed, and shall also include (i) capital stock of
the Company of any other class (regardless of how denominated) issued to the
holders of shares of Common Stock upon any reclassification thereof which is
also not preferred as to dividends or assets over any other class of stock of
the Company and which is not subject to redemption and (ii) shares of common
stock of any successor or acquiring corporation received by or distributed to
the holders of Common Stock of the Company in the circumstances contemplated
by Section 4.4.
"Convertible Securities" shall mean evidences of indebtedness,
shares of stock or other securities which are convertible into or
exchangeable, with or without payment of additional consideration in cash or
property, for shares of Common Stock, either immediately or upon the
occurrence of a specified date or a specified event.
"Current Warrant Price" shall mean, [$____] subject to any
adjustments to such amount made in accordance with Section 4 hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any successor federal statute, and the rules and regulations
of the Commission thereunder, all as the same shall be in effect from time to
time.
"Exercise Period" shall mean the period during which this Warrant
is exercisable pursuant to Section 2.1.
"Expiration Date" shall mean November 23, 2004.
"Fully Diluted Outstanding" shall mean, when used with reference
to Common Stock, at any date as of which the number of shares thereof is to
be determined, all shares of Common Stock Outstanding at such date and all
shares of Common Stock issuable in respect of this Warrant, outstanding on
such date, and other options or warrants to purchase, or securities
convertible into, including without limitation the shares of Common Stock
outstanding on such date which would be deemed outstanding in accordance with
GAAP for purposes of determining book value or net income per share.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as from time to time in effect.
"Holder" shall mean the Person in whose name the Warrant or
Warrant Stock set forth herein is registered on the books of the Company
maintained for such purpose.
"Market Price" per Common Share means the average of the closing
bid prices of the Common Shares as reported on the National Association of
Securities Dealers Automated Quotation System for the National Market,
("NASDAQ") or, if such security is not listed or admitted to trading on the
NASDAQ, on the principal national security exchange or quotation system on
which such security is quoted or listed or admitted to trading, or, if not
quoted or listed or admitted to trading on any national securities exchange
or quotation system, the closing bid price of such security on the over-the-
counter market on the day in question as reported by the National Association
of Security Dealers, Inc., or a similar generally accepted reporting service,
as the case may be, for the five (5) trading days immediately preceding the
date of determination.
"Other Property" shall have the meaning set forth in Section 4.4.
"Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be
determined, all issued shares of Common Stock, except shares then owned or
held by or for the account of the Company or any subsidiary thereof, and
shall include all shares issuable in respect of outstanding scrip or any
certificates representing fractional interests in shares of Common Stock.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, incorporated organization, association,
corporation, institution, public benefit corporation, entity or government
(whether federal, state, county, city, municipal or otherwise, including,
without limitation, any instrumentality, division, agency, body or department
thereof).
"Registration Rights Agreement" shall mean the Registration
Rights Agreement dated a date even herewith by and between the Company and
Mesora Investors LLC, as it may be amended from time to time.
"Restricted Common Stock" shall mean shares of Common Stock which
are, or which upon their issuance on the exercise of this Warrant would be,
evidenced by a certificate bearing the restrictive legend set forth in
Section 9.1(a).
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
"Securities Purchase Agreement" shall mean the Securities
Purchase Agreement dated as of a date even herewith by and between the
Company and Mesora Investors LLC, as it may be amended from time to time.
"Transfer" shall mean any disposition of any Warrant or Warrant
Stock or of any interest in either thereof, which would constitute a sale
thereof within the meaning of the Securities Act.
"Transfer Notice" shall have the meaning set forth in Section
9.2.
"Warrant Issuance Date" shall mean any date on which Warrants are
issued pursuant to the Securities Purchase Agreement.
"Warrants" shall mean this Warrant and all warrants issued upon
transfer, division or combination of, or in substitution for, any thereof.
All Warrants shall at all times be identical as to terms and conditions and
date, except as to the number of shares of Common Stock for which they may be
exercised.
"Warrant Price" shall mean an amount equal to (i) the number of
shares of Common Stock being purchased upon exercise of this Warrant pursuant
to Section 2.1, multiplied by (ii) the Current Warrant Price as of the date
of such exercise.
"Warrant Stock" shall mean the shares of Common Stock purchased
by the holders of the Warrants upon the exercise thereof.
2. EXERCISE OF WARRANT
2.1. Manner of Exercise. From and after the Warrant Issuance
Date and until 5:00 P.M., New York City time, on the Expiration Date, Holder
may exercise this Warrant, on any Business Day, for all or any part of the
number of shares of Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, Holder
shall deliver to the Company at the office or agency designated by the
Company pursuant to Section 12, (i) a written notice of Holder's election to
exercise this Warrant, which notice shall specify the number of shares of
Common Stock to be purchased, (ii) payment by cash, check or bank draft
payable to the Company of the Warrant Price in cash or by wire transfer or
cashier's check drawn on a United States bank or by the Holder's surrender of
Warrant Stock (or the right to receive such number of shares) having an
aggregate Market Price equal to the Warrant Price for all shares then being
purchased and (iii) this Warrant. Such notice shall be substantially in the
form of the subscription form appearing at the end of this Warrant as Exhibit
A, duly executed by Holder or its agent or attorney. Upon receipt of the
items referred to in clauses (i), (ii) and (iii) above, the Company shall, as
promptly as practicable, and in any event within five (5) Business Days
thereafter, execute or cause to be executed and deliver or cause to be
delivered to Holder a certificate or certificates representing the aggregate
number of full shares of Common Stock issuable upon such exercise, together
with cash in lieu of any fraction of a share, as hereinafter provided. The
stock certificate or certificates so delivered shall be, to the extent
possible, in such denomination or denominations as Holder shall request in
the notice and shall be registered in the name of Holder or, subject to
Section 9, such other name as shall be designated in the notice. This
Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and Holder or any other
Person so designated to be named therein shall be deemed to have become a
holder of record of such shares for all purposes, as of the date the Warrant
has been exercised by payment to the Company of the Warrant Price. If this
Warrant shall have been exercised in part, the Company shall, at the time of
delivery of the certificate or certificates representing Warrant Stock,
deliver to Holder a new Warrant evidencing the rights of Holder to purchase
the unpurchased shares of Common Stock called for by this Warrant, which new
Warrant shall in all other respects be identical with this Warrant.
The Holder shall be entitled to exercise the Warrant
notwithstanding the commencement of any case under 11 U.S.C. 101 et seq.
(the "Bankruptcy Code"). In the event the Company is a debtor under the
Bankruptcy Code, the Company hereby waives to the fullest extent permitted
any rights to relief it may have under 11 U.S.C. 362 in respect of the
Holder's exercise right. The Company hereby waives to the fullest extent
permitted any rights to relief it may have under 11 U.S.C. 362 in respect
of the exercise of the Warrant. The Company agrees, without cost or expense
to the Holder, to take or consent to any and all action necessary to
effectuate relief under 11 U.S.C. 362.
2.2. Payment of Taxes and Charges. All shares of Common Stock
issuable upon the exercise of this Warrant pursuant to the terms hereof shall
be validly issued, fully paid and nonassessable, and without any preemptive
rights. The Company shall pay all expenses in connection with, and all taxes
and other governmental charges that may be imposed with respect to, the issue
or delivery thereof.
2.3. Fractional Shares. The Company shall not be required to
issue a fractional share of Common Stock upon exercise of any Warrant. As to
any fraction of a share which Holder would otherwise be entitled to purchase
upon such exercise, the Company shall pay a cash adjustment in respect of
such final fraction in an amount equal to the same fraction of the Market
Price per share of Common Stock on the relevant exercise date.
2.4. Continued Validity. A holder of shares of Common Stock
issued upon the exercise of this Warrant, in whole or in part (other than a
holder who acquires such shares after the same have been publicly sold
pursuant to a Registration Statement under the Securities Act or sold
pursuant to Rule 144 thereunder), shall continue to be entitled with respect
to such shares to all rights to which it would have been entitled as Holder
under Sections 9, 10 and 14 of this Warrant. The Company will, at the time
of exercise of this Warrant, in whole or in part, upon the request of Holder,
acknowledge in writing, in form reasonably satisfactory to Holder, its
continuing obligation to afford Holder all such rights; provided, however,
that if Holder shall fail to make any such request, such failure shall not
affect the continuing obligation of the Company to afford to Holder all such
rights.
2.5. Right to Convert Warrant. The Holder shall have the right
to convert, in whole or in part, this Warrant (the "Conversion Right") at any
time prior to the expiration of the Exercise Period, into shares of Common
Stock in accordance with this Section 2.5. Upon exercise of the Conversion
Right, the Company shall deliver to the Holder (without payment by the Holder
of the Warrant Price) that number of shares of Common Stock equal to the
quotient obtained by dividing (x) the value of the portion of this Warrant
being converted at the time the Conversion Right is exercised (determined by
subtracting the Warrant Price for the portion of this Warrant being converted
(in effect immediately prior to the exercise of the Conversion Right) from
the amount obtained by multiplying the number of shares of Common Stock
issuable upon the whole or partial exercise of this Warrant, as the case may
be, by the Market Price immediately prior to the exercise of the Conversion
Right) by (y) the Market Price of one share of Common Stock immediately prior
to the exercise of the Conversion Right.
The Conversion Right may be exercised by the Holder, at any time
or from time to time, prior to its expiration, on any business day by
delivering a written notice (the "Conversion Notice") to the Company at the
offices of the Company, exercising the Conversion Right and specifying (i)
the total number of shares of Common Stock the Holder will purchase pursuant
to the conversion and (ii) a place and date not less than two (2) nor more
than twenty (20) Business Days from the date of the Subscription Notice for
the closing of such purchase.
At any closing under this Section 2.5, (i) the Holder will
surrender this Warrant and (ii) the Company will deliver to the Holder a
certificate or certificates for the number of shares of Common Stock issuable
upon such conversion. If this Warrant shall have been converted only in
part, the Company shall, at the time of delivery of said stock certificate or
certificates, deliver to the Holder a new Warrant evidencing the rights of
the Holder to purchase the remaining shares of Common Stock called for by
this Warrant, which new Warrant shall in all other respects be identical to
this Warrant, or, at the request of the Holder, appropriate notation may be
made on this Warrant and the same returned to the Holder. The Company shall
pay all expenses, taxes and other charges payable in connection with the
preparation, issue and delivery of such stock certificates and new Warrants,
except that, in case such stock certificates and/or new Warrants shall be
registered in a name or names other than the name of the Holder, funds
sufficient to pay all stock transfer taxes that are payable upon the issuance
of such stock certificates or new Warrants shall be paid by the Holder at the
time of delivering the notice of exercise mentioned above.
3. TRANSFER, DIVISION AND COMBINATION
3.1. Transfer. Subject to compliance with Sections 9, transfer
of this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such purpose,
upon surrender of this Warrant at the principal office of the Company
referred to in Section 2.1 or the office or agency designated by the Company
pursuant to Section 12, together with a written assignment of this Warrant
substantially in the form of Exhibit B hereto duly executed by Holder or its
agent or attorney. Upon such surrender, the Company shall, subject to
Section 9, execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denomination specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing the
portion of this Warrant not so assigned, and this Warrant shall promptly be
cancelled. A Warrant, if properly assigned in compliance with Section 9, may
be exercised by a new Holder for the purchase of shares of Common Stock
without having a new Warrant issued.
3.2. Division and Combination. Subject to Section 9, this
Warrant may be divided or combined with other Warrants upon presentation
hereof at the aforesaid office or agency of the Company, together with a
written notice specifying the names and denominations in which new Warrants
are to be issued, signed by Holder or its agent or attorney. Subject to
compliance with Section 3.1 and with Section 9, as to any transfer which may
be involved in such division or combination, the Company shall execute and
deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to
be divided or combined in accordance with such notice.
3.3. Expenses. The Company shall prepare, issue and deliver at
its own expense the new Warrant or Warrants under this Section 3.
3.4. Maintenance of Books. The Company agrees to maintain, at
its aforesaid office or agency, books for the registration and the
registration of transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable, or the price at which such shares may be purchased upon exercise
of this Warrant, shall be subject to adjustment from time to time as set
forth in this Section 4. The Company shall give Holder notice of any event
described below which requires an adjustment pursuant to this Section 4 at
the time of such event.
4.1. Stock Dividends, Subdivisions and Combinations. If at any
time the Company shall:
(a) take a record of the holders of its Common Stock for
the purpose of entitling them to receive a dividend payable in, or other
distribution of, Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into
a larger number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be
adjusted to equal the number of shares of Common Stock which a record holder
of the same number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the occurrence of such event would own or be
entitled to receive after the happening of such event, and (ii) the Current
Warrant Price shall be adjusted to equal (A) the Current Warrant Price multi-
plied by the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the adjustment divided by (B) the number of
shares for which this Warrant is exercisable immediately after such
adjustment.
4.2. Certain Other Distributions.
(a) If at any time prior to the Expiration Date the
Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive any dividend or other distribution of:
(i) cash,
(ii) any evidences of its indebtedness, any
shares of its stock or any other securities or property of
any nature whatsoever (other than cash, Convertible Securi-
ties or Additional Shares of Common Stock), or
(iii) any warrants or other rights to subscribe
for or purchase any evidences of its indebtedness, any
shares of its stock or any other securities or property of
any nature whatsoever (other than cash, Convertible
Securities or Additional Shares of Common Stock),
then Holder shall be entitled to receive such dividend or distribution as if
Holder had exercised the Warrant. A reclassification of the Common Stock
(other than a change in par value, or from par value to no par value or from
no par value to par value) into shares of Common Stock and shares of any
other class of stock shall be deemed a distribution by the Company to the
holders of its Common Stock of such shares of such other class of stock
within the meaning of this Section 4.2 and, if the outstanding shares of
Common Stock shall be changed into a larger or smaller number of shares of
Common Stock as a part of such reclassification, such change shall be deemed
a subdivision or combination, as the case may be, of the outstanding shares
of Common Stock within the meaning of Section 4.1.
(b) In case the Company shall issue any Common Stock or
any rights, options or warrants to all holders of record of its Common Stock
entitling all holders to subscribe for or purchase shares of Common Stock at
a price per share less than the Market Price per share of the Common Stock on
the date fixed for such issue, the Current Warrant Price in effect
immediately prior to the close of business on the date fixed for such
determination shall be reduced to the amount determined by multiplying such
Current Warrant Price by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to the close
of business on the date fixed for such determination plus the number of
shares of Common Stock which the aggregate of the offering price of the total
number of shares of Common Stock so offered for subscription or purchase
would purchase at such Market Price and the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to the close
of business on the date fixed for such determination plus the number of
shares of Common Stock so offered for subscription or purchase, such reduced
amount to become effective immediately after the close of business on the
date fixed for such determination. For the purposes of this clause (b), (i)
the number of shares of Common Stock at any time outstanding shall not
include shares held in the treasury of the Company and (ii) in the case of
any rights, options or warrants which expire by their terms not more than 60
days after the date of issue, sale, grant or assumption thereof, no
adjustment of the Current Warrant Price shall be made until the expiration or
exercise of all rights, options or warrants, whereupon such adjustment shall
be made in the manner provided in this clause (b), but only with respect to
the shares of Common Stock actually issued pursuant thereto. Such adjustment
shall be made successively whenever any event specified above shall occur.
In the event that any or all rights, options or warrants covered by this
clause (b) are not so issued or expire or terminate before being exercised,
the Current Warrant Price then in effect shall be appropriately readjusted.
4.3. Other Provisions Applicable to Adjustments under this
Section. The following provisions shall be applicable to the making of
adjustments of the number of shares of Common Stock for which this Warrant is
exercisable and the Current Warrant Price provided for in this Section 4:
(f) When Adjustments to Be Made. The adjustments
required by this Section 4 shall be made whenever and as often as any
specified event requiring an adjustment shall occur. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at the close
of business on the date of its occurrence.
(g) Fractional Interests. In computing adjustments under
this Section 4, fractional interests in Common Stock shall be taken into
account to the nearest 1/10th of a share.
(h) When Adjustment Not Required. If the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive a dividend or distribution or subscription or purchase rights
and shall, thereafter and before the distribution to stockholders thereof,
legally abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights, then thereafter no adjustment shall be
required by reason of the taking of such record and any such adjustment
previously made in respect thereof shall be rescinded and annulled.
(i) Challenge to Good Faith Determination. Whenever the
Board of Directors of the Company shall be required to make a determination
in good faith of the fair value of any item under this Section 4, such
determination may be challenged in good faith by the Holder, and any dispute
shall be resolved by an investment banking firm of recognized national
standing selected by the Holder and reasonably acceptable to the Company.
4.4. Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where
there is a change in or distribution with respect to the Common Stock of the
Company), or sell, transfer or otherwise dispose of all or substantially all
its property, assets or business to another corporation and, pursuant to the
terms of such reorganization, reclassification, merger, consolidation or
disposition of assets, shares of common stock of the successor or acquiring
corporation, or any cash, shares of stock or other securities or property of
any nature whatsoever (including warrants or other subscription or purchase
rights) in addition to or in lieu of common stock of the successor or
acquiring corporation ("Other Property"), are to be received by or
distributed to the holders of Common Stock of the Company, then Holder shall
have the right thereafter to receive, upon exercise of the Warrant, the
number of shares of common stock of the successor or acquiring corporation or
of the Company, if it is the surviving corporation, and Other Property
receivable upon or as a result of such reorganization, reclassification,
merger, consolidation or disposition of assets by a holder of the number of
shares of Common Stock for which this Warrant is exercisable immediately
prior to such event. In case of any such reorganization, reclassification,
merger, consolidation or disposition of assets, the successor or acquiring
corporation (if other than the Company) shall expressly assume the due and
punctual observance and performance of each and every covenant and condition
of this Warrant to be performed and observed by the Company and all the
obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate, subject to the Holder's consent, in order to provide
for adjustments of shares of Common Stock for which this Warrant is exercis-
able which shall be as nearly equivalent as practicable to the adjustments
provided for in this Section 4. For purposes of this Section 4.4, "common
stock of the successor or acquiring corporation" shall include stock of such
corporation of any class which is not preferred as to dividends or assets
over any other class of stock of such corporation and which is not subject to
redemption and shall also include any evidences of indebtedness, shares of
stock or other securities which are convertible into or exchangeable for any
such stock, either immediately or upon the arrival of a specified date or the
happening of a specified event and any warrants or other rights to subscribe
for or purchase any such stock. The foregoing provisions of this Section 4.4
shall similarly apply to successive reorganizations, reclassifications,
mergers, consolidations or disposition of assets.
4.5. Other Action Affecting Common Stock. In case at any time
or from time to time the Company shall take any action in respect of its
Common Stock, other than any action taken in the ordinary course of the
Company's business or any action described in this Section 4, which would
have a material adverse effect upon the rights of the Holder, the number of
shares of Common Stock and/or the purchase price thereof shall be adjusted in
such manner as may be equitable in the circumstances, as determined in good
faith by an investment bank selected by Holder.
4.6. Certain Limitations. Notwithstanding anything herein to
the contrary, the Company agrees not to enter into any transaction which, by
reason of any adjustment hereunder, would cause the Current Warrant Price to
be less than the par value per share of Common Stock.
4.7. No Voting Rights. This Warrant shall not entitle its
Holder to any voting rights or other rights as a shareholder of the Company.
5. NOTICES TO HOLDER
5.1. Notice of Adjustments. Whenever the number of shares of
Common Stock for which this Warrant is exercisable, or whenever the price at
which a share of such Common Stock may be purchased upon exercise of the
Warrants, shall be adjusted pursuant to Section 4, the Company shall
forthwith prepare a certificate to be executed by an executive officer of the
Company setting forth, in reasonable detail, the event requiring the
adjustment and the method by which such adjustment was calculated, specifying
the number of shares of Common Stock for which this Warrant is exercisable
and (if such adjustment was made pursuant to Section 4.4 or 4.5) describing
the number and kind of any other shares of stock or Other Property for which
this Warrant is exercisable, and any change in the purchase price or prices
thereof, after giving effect to such adjustment or change. The Company shall
promptly cause a signed copy of such certificate to be delivered to the
Holder in accordance with Section 14.2. The Company shall keep at its office
or agency designated pursuant to Section 12 copies of all such certificates
and cause the same to be available for inspection at said office during
normal business hours by the Holder, its representatives, or any prospective
purchaser of a Warrant designated by the Holder.
5.2. Notice of Corporate Action. If at any time
(a) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) there shall be any capital reorganization of the
Company, any reclassification or recapitalization of the capital stock of the
Company or any consolidation or merger of the Company with, or any sale,
transfer or other disposition of all or substantially all the property,
assets or business of the Company to, another corporation, or
(c) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder
(i) at least thirty (30) Business Days' prior written notice of the date on
which a record date shall be selected for such dividend, distribution or
right or for determining rights to vote in respect of any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up, and (ii) in the case of
any such reorganization, reclassification, merger, consolidation, sale,
transfer, disposition, dissolution, liquidation or winding up, at least
thirty (30) Business Days' prior written notice of the date when the same
shall take place. Such notice in accordance with the foregoing clause also
shall specify (i) the date on which any such record is to be taken for the
purpose of such dividend, distribution or right, the date on which the
holders of Common Stock shall be entitled to any such dividend, distribution
or right, and the amount and character thereof, and (ii) the date on which
any such reorganization, reclassification, merger, consolidation, sale,
transfer, disposition, dissolution, liquidation or winding up is to take
place and the time, if any such time is to be fixed, as of which the holders
of Common Stock shall be entitled to exchange their shares of Common Stock
for securities or other property deliverable upon such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up. Each such written notice shall be
sufficiently given if addressed to Holder at the last address of Holder
appearing on the books of the Company and delivered in accordance with
Section 14.2.
6. NO IMPAIRMENT
The Company shall not by any action, including, without
limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms of this Warrant, but will
at all times in good faith assist in the carrying out of all such terms and
in the taking of all such actions as may be necessary or appropriate to
protect the rights of Holder against impairment. Without limiting the
generality of the foregoing, the Company will (a) not increase the par value
of any shares of Common Stock receivable upon the exercise of this Warrant
above the amount payable therefor upon such exercise immediately prior to
such increase in par value, (b) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully
paid and nonassessable shares of Common Stock upon the exercise of this
Warrant, and (c) use its best efforts to obtain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction
thereof as may be necessary to enable the Company to perform its obligations
under this Warrant.
Upon the request of Holder, the Company will at any time during
the period this Warrant is outstanding acknowledge in writing, in form
reasonably satisfactory to Holder, the continuing validity of this Warrant
and the obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK
From and after the Closing Date, the Company shall at all times
reserve and keep available for issue upon the exercise of Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock which shall be so issuable, when issued upon exercise
of any Warrant and payment therefor in accordance with the terms of such
Warrant, shall be duly and validly issued and fully paid and nonassessable,
and not subject to preemptive rights.
Before taking any action which would cause an adjustment reducing
the Current Warrant Price below the then par value, if any, of the shares of
Common Stock issuable upon exercise of the Warrants, the Company shall take
any corporate action which may be necessary in order that the Company may
validly and legally issue fully paid and non-assessable shares of such Common
Stock at such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment in
the number of shares of Common Stock for which this Warrant is exercisable or
in the Current Warrant Price, the Company shall obtain all such
authorizations or exemptions thereof, or consents thereto, as may be
necessary from any public regulatory body or bodies having jurisdiction
thereof.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the
Company to the holders of its Common Stock with respect to which any
provision of Section 4 refers to the taking of a record of such holders, the
Company will in each such case take such a record as of the close of business
on a Business Day. The Company will not at any time close its stock transfer
books or Warrant transfer books so as to result in preventing or delaying the
exercise or transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in
this Section 9, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer of any Warrant
or any Warrant Stock. Holder, by acceptance of this Warrant, agrees to be
bound by the provisions of this Section 9.
9.1. Restrictive Legend. The Holder by accepting this
Warrant and any Warrant Stock agrees that this Warrant and the Warrant Stock
issuable upon exercise hereof may not be assigned or otherwise transferred
unless and until (i) the Company has received an opinion of counsel for the
Holder that such securities may be sold pursuant to an exemption from
registration under the Securities Act or (ii) a registration statement
relating to such securities has been filed by the Company and declared
effective by the Commission.
(a) Each certificate for Warrant Stock issuable hereunder shall
bear a legend substantially worded as follows unless such securities have
been sold pursuant to an effective registration statement under the
Securities Act:
"The securities represented by this
certificate have not been registered under the
Securities Act of 1933, as amended (the "Act")
or any state securities laws. The securities
may not be offered for sale, sold, assigned,
offered, transferred or otherwise distributed
for value except (i) pursuant to an effective
registration statement under the Act or any
state securities laws or (ii) pursuant to an
exemption from registration or prospectus
delivery requirements under the Act or any
state securities laws in respect of which the
Company has received an opinion of counsel
satisfactory to the Company to such effect.
Copies of the agreement covering both the
purchase of the securities and restricting
their transfer may be obtained at no cost by
written request made by the holder of record of
this certificate to the Secretary of the
Company at the principal executive offices of
the Company."
(b) Except as otherwise provided in this Section 9, the Warrant
shall be stamped or otherwise imprinted with a legend in substantially the
following form:
"This Warrant and the securities
represented hereby have not been registered
under the Securities Act of 1933, as amended,
or any state securities laws and may not be
transferred in violation of such Act, the rules
and regulations thereunder or any state
securities laws or the provisions of this
Warrant."
9.2. Notice of Proposed Transfers. Prior to any Transfer or
attempted Transfer of any Warrants or any shares of Restricted Common Stock,
the Holder shall give five (5) days' prior written notice (a "Transfer
Notice") to the Company of Holder's intention to effect such Transfer,
describing the manner and circumstances of the proposed Transfer, and obtain
from counsel to Holder an opinion that the proposed Transfer of such Warrants
or such Restricted Common Stock may be effected without registration under
the Securities Act or state securities laws. After the Company's receipt of
the Transfer Notice and opinion, such Holder shall thereupon be entitled to
Transfer such Warrants or such Restricted Common Stock, in accordance with
the terms of the Transfer Notice. Each certificate, if any, evidencing such
shares of Restricted Common Stock issued upon such Transfer and the Warrant
issued upon such Transfer shall bear the restrictive legends set forth in
Section 9.1, unless in the opinion of such counsel such legend is not
required in order to ensure compliance with the Securities Act.
9.3. Required Registration. Pursuant to the terms and
conditions set forth in the Registration Rights Agreement, the Company shall
prepare and file with the Commission not later than the thirtieth (30th) day
after the Closing Date, a Registration Statement relating to the offer and
sale of the Common Stock issuable upon exercise of the Warrants and shall use
its best efforts to cause the Commission to declare such Registration
Statement effective in accordance with the terms set forth in Section 2(a) of
the Registration Rights Agreement.
9.4. Termination of Restrictions. Notwithstanding the foregoing
provisions of Section 9, the restrictions imposed by this Section upon the
transferability of the Warrants, the Warrant Stock and the Restricted Common
Stock (or Common Stock issuable upon the exercise of the Warrants) and the
legend requirements of Section 9.1 shall terminate as to any particular
Warrant or share of Warrant Stock or Restricted Common Stock (or Common Stock
issuable upon the exercise of the Warrants) (i) when and so long as such
security shall have been effectively registered under the Securities Act and
applicable state securities laws and disposed of pursuant thereto or
(ii) when the Company shall have received an opinion of counsel that such
shares may be transferred without registration thereof under the Securities
Act and applicable state securities laws. Whenever the restrictions imposed
by Section 9 shall terminate as to this Warrant, as hereinabove provided, the
Holder hereof shall be entitled to receive from the Company upon written
request of the Holder, at the expense of the Company, a new Warrant bearing
the following legend in place of the restrictive legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABIL-
ITY OF THE WITHIN WARRANT CONTAINED IN SECTION
9 HEREOF TERMINATED ON ________, 19__, AND ARE
OF NO FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination
of, or in substitution for, any Warrant or Warrants entitled to bear such
legend shall have a similar legend endorsed thereon. Whenever the
restrictions imposed by this Section shall terminate as to any share of
Restricted Common Stock, as hereinabove provided, the holder thereof shall be
entitled to receive from the Company, at the Company's expense, a new
certificate representing such Common Stock not bearing the restrictive
legends set forth in Section 9.1.
9.5. Listing on Securities Exchange. If the Company shall list
any shares of Common Stock on any securities exchange, it will, at its
expense, list thereon, maintain and, when necessary, increase such listing
of, all shares of Common Stock issued or, to the extent permissible under the
applicable securities exchange rules, issuable upon the exercise of this
Warrant so long as any shares of Common Stock shall be so listed during the
Exercise Period.
10. SUPPLYING INFORMATION
The Company shall cooperate with Holder in supplying such
information as may be reasonably necessary for Holder to complete and file
any information reporting forms presently or hereafter required by the
Commission as a condition to the availability of an exemption from the
Securities Act for the sale of any Warrant or Restricted Common Stock.
11. LOSS OR MUTILATION
Upon receipt by the Company from Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and indemnity reasonably satisfactory to it (it
being understood that the written agreement of the Holder shall be sufficient
indemnity), and in case of mutilation upon surrender and cancellation hereof,
the Company will execute and deliver in lieu hereof a new Warrant of like
tenor to Holder; provided, in the case of mutilation, no indemnity shall be
required if this Warrant in identifiable form is surrendered to the Company
for cancellation.
12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company
shall maintain an office or agency (which may be the principal executive
offices of the Company) where the Warrants may be presented for exercise,
registration of transfer, division or combination as provided in this
Warrant, such office to be initially located at 1720 East Garry, Suite #201,
Santa Ana, California 92705, fax: (949) 475-4518, provided, however, that
the Company shall provide prior written notice to Holder of a change in
address no less than thirty (30) days prior to such change.
13. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by
Holder to purchase shares of Common Stock, and no enumeration herein of the
rights or privileges of Holder hereof, shall give rise to any liability of
Holder for the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
14. MISCELLANEOUS
14.1. Nonwaiver and Expenses. No course of dealing or any delay
or failure to exercise any right hereunder on the part of Holder shall
operate as a waiver of such right or otherwise prejudice Holder's rights,
powers or remedies, notwithstanding all rights hereunder terminate on the
Expiration Date. If the Company fails to make, when due, any payments
provided for hereunder, or fails to comply with any other provision of this
Warrant, the Company shall pay to Holder such amounts as shall be sufficient
to cover any direct and indirect losses, damages, costs and expenses
including, but not limited to, reasonable attorneys' fees, including those of
appellate proceedings, incurred by Holder in collecting any amounts due
pursuant hereto or in otherwise enforcing any of its rights, powers or
remedies hereunder.
14.2. Notice Generally. Except as may be otherwise provided
herein, any notice or other communication or delivery required or permitted
hereunder shall be in writing and shall be delivered personally or sent by
certified mail, postage prepaid, or by a nationally recognized overnight
courier service, and shall be deemed given when so delivered personally or by
overnight courier service, or, if mailed, three (3) days after the date of
deposit in the United States mails, as follows:
(a) if to the Company, to: LMKI Inc.
1720 East Garry, Suite #201
Santa Ana, California 92705
Attention: William J. Kettle
Phone: (949) 475-4500
Fax: (949) 475-4518
with a copy to: Robert C. Weaver, Jr., Esq.
721 Devon Court
San Diego, California 92109
Phone: (858) 488-4433
Fax: (848) 488-2555
(b) if to the Purchaser to: Mesora Investor LLC
c\o WEC Asset Management LLC
One World Trade Center, Suite 4563
New York, New York 10048
Attention: Daniel J. Saks
Phone: (212) 775-9299
Fax: (212) 775-9311
with a copy to: Pryor Cashman Sherman & Flynn LLP
410 Park Avenue
New York, New York 10022
Attention: Mark Saks, Esq.
Phone: (212) 326-0140
Fax: (212) 326-0806
The Company or the Holder may change the foregoing address by notice given
pursuant to this Section 14.2.
14.3. Indemnification. The Company agrees to indemnify and hold
harmless Holder from and against any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, attorneys'
fees, expenses and disbursements of any kind which may be imposed upon,
incurred by or asserted against Holder in any manner relating to or arising
out of any failure by the Company to perform or observe in any respect any of
its covenants, agreements, undertakings or obligations set forth in this
Warrant.
14.4. Remedies. Holder in addition to being entitled to exercise
all rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company agrees
that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Warrant and
hereby agrees to waive the defense in any action for specific performance
that a remedy at law would be adequate.
14.5. Successors and Assigns. Subject to the provisions of
Sections 3.1 and 9, this Warrant and the rights evidenced hereby shall inure
to the benefit of and be binding upon the successors of the Company and the
successors and assigns of Holder. The provisions of this Warrant are
intended to be for the benefit of all Holders from time to time of this
Warrant and, with respect to Section 9 hereof, holders of Warrant Stock, and
shall be enforceable by any such Holder or holder of Warrant Stock.
14.6. Amendment. This Warrant and all other Warrants may be
modified or amended or the provisions hereof waived only with the prior
written consent of the Company and the Holder.
14.7. Severability. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Warrant shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Warrant.
14.8. Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a
part of this Warrant.
14.9. Governing Law. This Warrant shall be governed by the laws
of the State of New York, without regard to the provisions thereof relating
to conflict of laws. The Company consents to the jurisdiction of the federal
courts whose districts encompass any part of the City of New York or the
state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Warrant or any of the
transactions contemplated hereby, and hereby waives, to the maximum extent
permitted by law, any objection, including any objections based on forum non
conveniens, to the bringing of any such proceeding in such jurisdictions.
[Remainder of page intentionally blank, signature page follows]
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
and its corporate seal to be impressed hereon and attested by its Secretary
or an Assistant Secretary.
Dated: November 23, 1999
LMKI INC.
By:___________________________
Name:
Title:
Attest:
By:______________________
Name:
Title:
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises this
Warrant for the purchase of ______ Shares of Common Stock of LMKI Inc., and
herewith makes payment therefor in cash or by check or bank draft made
payable to the Company, all at the price and on the terms and conditions
specified in this Warrant and requests that certificates for the shares of
Common Stock hereby purchased (and any securities or other property issuable
upon such exercise) be issued in the name of and delivered to _____________
whose address is _________________ and, if such shares of Common Stock shall
not include all of the shares of Common Stock issuable as provided in this
Warrant, that a new Warrant of like tenor and date for the balance of the
shares of Common Stock issuable hereunder be delivered to the undersigned.
_______________________________
(Name of Registered Owner)
_______________________________
(Signature of Registered Owner)
_______________________________
(Street Address)
_______________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the
name as written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
EXHIBIT B
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 this Warrant, with respect to the
number of shares of Common Stock set forth below:
Name and Address of Assignee No. of Shares of
Common Stock
and does hereby irrevocably constitute and appoint _______ ________________
attorney-in-fact to register such transfer on the books of LMKI Inc.,
maintained for the purpose, with full power of substitution in the premises.
Dated:__________________ Print
Name:___________________
Signature:____________________
Witness:______________________
NOTICE: The signature on this assignment must correspond with the
name as written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.