THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS (i) A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. HOLDERS
MUST RELY ON THEIR OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT OF THE RISKS
INVOLVED.
Warrant to Purchase
________ shares
Warrant to Purchase Common Stock
of
LMKI INC.
THIS CERTIFIES that Dunwoody Brokerage Services, Inc. or any subsequent
holder hereof pursuant to Section 8 hereof ("Holder"), has the right to
purchase from LMKI INC., a Nevada corporation (the "Company"), up to 49,844
fully paid and nonassessable shares of our common stock, $.001 par
value per share ("Common Stock"), subject to adjustment as provided herein,
at a price equal to the Exercise Price as defined in Section 3 below, at any
time beginning on the Date of Issuance (defined below) and ending at 5:00
p.m., New York, New York time the date that is five (5) years after the Date
of Issuance (the "Exercise Period").
Holder agrees with the Company that this Warrant to Purchase Common
Stock of the Company(this "Warrant") is issued and all rights hereunder shall
be held subject to all of the conditions, limitations and provisions set
forth herein.
1. Date of Issuance and Term.
This Warrant shall be deemed to be issued on November 24, 1999 ("Date
of Issuance"). The term of this Warrant is five (5) years from the Date of
Issuance.
2. Exercise.
(a) Manner of Exercise. During the Exercise Period, this Warrant may
be exercised as to all or any lesser number of full shares of Common Stock
covered hereby (the "Warrant Shares") upon surrender of this Warrant, with
the Exercise Form attached hereto as Exhibit A (the "Exercise Form") duly
completed and executed, together with the full Exercise Price (as defined
below) for each share of Common Stock as to which this Warrant is exercised,
at the office of the Company, Attention: William Kettle or John Diehl, 1720
E. Garry Ave. #201, Santa Ana, CA 92705; (949) 475-4500, Facsimile: (949)
475-4511, or at such other office or agency as the Company may designate in
writing, by overnight mail, with an advance copy of the Exercise Form sent to
the Company and its Transfer Agent by facsimile (such surrender and payment
of the Exercise Price hereinafter called the "Exercise of this Warrant").
(b) Date of Exercise. The "Date of Exercise" of the Warrant shall be
defined as the date that the advance copy of the completed and executed
Exercise Form is sent by facsimile to the Company, provided that the original
Warrant and Exercise Form are received by the Company as soon as practicable
thereafter. Alternatively, the Date of Exercise shall be defined as the date
the original Exercise Form is received by the Company, if Holder has not sent
advance notice by facsimile.
(c) Cancellation of Warrant. This Warrant shall be canceled upon the
Exercise of this Warrant, and, as soon as practical after the Date of
Exercise, Holder shall be entitled to receive Common Stock for the number of
shares purchased upon such Exercise of this Warrant, and if this Warrant is
not exercised in full, Holder shall be entitled to receive a new Warrant
(containing terms identical to this Warrant) representing any unexercised
portion of this Warrant in addition to such Common Stock.
(d) Holder of Record. Each person in whose name any Warrant for shares
of Common Stock is issued shall, for all purposes, be deemed to be the Holder
of record of such shares on the Date of Exercise of this Warrant,
irrespective of the date of delivery of the Common Stock purchased upon the
Exercise of this Warrant. Nothing in this Warrant shall be construed as
conferring upon Holder any rights as a stockholder of the Company.
3. Payment of Warrant Exercise Price.
The Exercise Price per share ("Exercise Price") shall initially equal
(the "Initial Exercise Price") the average Closing Bid Price for the five (5)
trading days immediately preceding November 24, 1999 (which is $4.0125). If
the Date of Exercise is more than six (6) months after the Date of Issuance,
the lesser of (i) the Exercise Price then in effect, or (ii) the "Lowest
Reset Price," as that term is defined below. The Company shall calculate a
"Reset Price" on each six-month anniversary date of the Date of Issuance
which shall equal one hundred percent (100%) of the average Closing Bid Price
of the Company's Common Stock for the five (5) trading days ending on such
six-month anniversary date of the Date of Issuance. The "Lowest Reset Price"
shall equal the lowest Reset Price determined on any six-month anniversary
date of the Date of Issuance preceding the Date of Exercise, taking into
account, as appropriate, any adjustments made pursuant to Section 5 hereof.
Payment of the Exercise Price may be made by either of the following,
or a combination thereof, at the election of Holder:
(i) Cash Exercise: cash, bank or cashiers check or wire transfer; or
(ii) Cashless Exercise: The Holder, at its option, may exercise this
Warrant in a cashless exercise transaction under this subsection (ii) if and
only if, on the Date of Exercise, there is not then in effect a current
registration statement that covers the resale of the shares of Common Stock
to be issued upon exercise of this Warrant . In order to effect a Cashless
Exercise, the Holder shall surrender of this Warrant at the principal office
of the Company together with notice of cashless election, in which event the
Company shall issue 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 Holder.
Y = the number of shares of Common Stock for which this Warrant is
being exercised.
A = the Market Price of one (1) share of Common Stock (for purposes of this
Section 3(ii), the "Market Price" shall be defined as the average Closing Bid
Price of the Common Stock for the five (5) trading days prior to the Date of
Exercise of this Warrant (the "Average Closing Price"), as reported by the
O.T.C. Bulletin Board, National Association of Securities Dealers Automated
Quotation System ("Nasdaq") Small Cap Market, or if the Common Stock is not
traded on the Nasdaq Small Cap Market, the Average Closing Price in any other
over-the-counter market; provided, however, that if the Common Stock is
listed on a stock exchange, the Market Price shall be the Average Closing
Price on such exchange for the five (5) trading days prior to the date of
exercise of the Warrants. If the Common Stock is/was not traded during the
five (5) trading days prior to the Date of Exercise, then the closing price
for the last publicly traded day shall be deemed to be the closing price for
any and all (if applicable) days during such five (5) trading day period.
B = the Exercise Price.
For purposes hereof, the term "Closing Bid Price" shall mean the
closing bid price on the the Nasdaq Small Cap Market, the National Market
System ("NMS"), the New York Stock Exchange, or the O.T.C. Bulletin Board, or
if no longer traded on the Nasdaq Small Cap Market, the National Market
System ("NMS"), the New York Stock Exchange, or the O.T.C. Bulletin Board,
the "Closing Bid Price" shall equal the closing price on the principal
national securities exchange or the over-the-counter system on which the
Common Stock is so traded and, if not available, the mean of the high and low
prices on the principal national securities exchange on which the Common
Stock is so traded.
For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is
intended, understood and acknowledged that the Common Stock issuable upon
exercise of this Warrant in a cashless exercise transaction shall be deemed
to have been acquired at the time this Warrant was issued. Moreover, it is
intended, understood and acknowledged that the holding period for the Common
Stock issuable upon exercise of this Warrant in a cashless exercise
transaction shall be deemed to have commenced on the date this Warrant was
issued.
4. Transfer and Registration.
(a) Transfer Rights. Subject to the provisions of Section 8 of this
Warrant, this Warrant may be transferred on the books of the Company, in
whole or in part, in person or by attorney, upon surrender of this Warrant
properly completed and endorsed. This Warrant shall be canceled upon such
surrender and, as soon as practicable thereafter, the person to whom such
transfer is made shall be entitled to receive a new Warrant or Warrants as to
the portion of this Warrant transferred, and Holder shall be entitled to
receive a new Warrant as to the portion hereof retained.
(b) Registrable Securities. In addition to any other registration
rights of the Holder, if the Common Stock issuable upon exercise of this
Warrant is not registered for resale at the time the Company proposes to
register (including for this purpose a registration effected by the Company
for stockholders other than the Holders) any of its Common Stock under the
Act (other than a registration relating solely for the sale of securities to
participants in a Company stock plan or a registration on Form S-4
promulgated under the Act or any successor or similar form registering stock
issuable upon a reclassification, upon a business combination involving an
exchange of securities or upon an exchange offer for securities of the issuer
or another entity)(a "Piggyback Registration Statement"), the Company shall
cause to be included in such Piggyback Registration Statement ("Piggyback
Registration") all of the Common Stock issuable upon the exercise of this
Warrant ("Registrable Securities") to the extent such inclusion does not
violate the registration rights of any other securityholder of the Company
granted prior to the date hereof. Nothing herein shall prevent the Company
from withdrawing or abandoning the Piggyback Registration Statement prior to
its effectiveness.
(c) Limitation on Obligations to Register under a Piggyback
Registration. In the case of a Piggyback Registration pursuant to an
underwritten public offering by the Company, if the managing underwriter
determines and advises in writing that the inclusion in the registration
statement of all Registrable Securities proposed to be included would
interfere with the successful marketing of the securities proposed to be
registered by the Company, then the number of such Registrable Securities to
be included in the Piggyback Registration Statement, to the extent such
Registrable Securities may be included in such Piggyback Registration
Statement, shall be allocated among all Holders who had requested Piggyback
Registration pursuant to the terms hereof, in the proportion that the number
of Registrable Securities which each such Holder seeks to register bears to
the total number of Registrable Securities sought to be included by all
Holders. If required by the managing underwriter of such an underwritten
public offering, the Holders shall enter into a reasonable agreement limiting
the number of Registrable Securities to be included in such Piggyback
Registration Statement and the terms, if any, regarding the future sale of
such Registrable Securities.
5. Anti-Dilution Adjustments.
(a) Stock Dividend. If the Company shall at any time declare a
dividend payable in shares of Common Stock, then Holder, upon Exercise of
this Warrant after the record date for the determination of holders of Common
Stock entitled to receive such dividend, shall be entitled to receive upon
Exercise of this Warrant, in addition to the number of shares of Common Stock
as to which this Warrant is exercised, such additional shares of Common Stock
as such Holder would have received had this Warrant been exercised
immediately prior to such record date and the Exercise Price will be
proportionately adjusted.
(b) Recapitalization or Reclassification.
(i) Stock Split. If the Company shall at any time effect a
recapitalization, reclassification or other similar transaction of such
character that the shares of Common Stock shall be changed into or become
exchangeable for a larger number of shares (a "Stock Split"), then upon the
effective date thereof, the number of shares of Common Stock which Holder
shall be entitled to purchase upon Exercise of this Warrant shall be
increased in direct proportion to the increase in the number of shares of
Common Stock by reason of such recapitalization, reclassification or similar
transaction, and the Exercise Price shall be proportionally decreased.
(ii) Reverse Stock Split. If the Company shall at any time effect a
recapitalization, reclassification or other similar transaction of such
character that the shares of Common Stock shall be changed into or become
exchangeable for a smaller number of shares (a "Reverse Stock Split"), then
upon the effective date thereof, the number of shares of Common Stock which
Holder shall be entitled to purchase upon Exercise of this Warrant shall be
proportionately decreased and the Exercise Price shall be proportionally
increased. The Company shall give Holder the same notice it provides to
holders of Common Stock of any transaction described in this Section 5(b).
(c) Distributions. If the Company shall at any time distribute for
no consideration to holders of Common Stock cash, evidences of indebtedness
or other securities or assets (other than cash dividends or distributions
payable out of earned surplus or net profits for the current or preceding
years) then, in any such case, Holder shall be entitled to receive, upon
Exercise of this Warrant, with respect to each share of Common Stock issuable
upon such exercise, the amount of cash or evidences of indebtedness or other
securities or assets which Holder would have been entitled to receive with
respect to each such share of Common Stock as a result of the happening of
such event had this Warrant been exercised immediately prior to the record
date or other date fixing shareholders to be affected by such event (the
"Determination Date") or, in lieu thereof, if the Board of Directors of the
Company should so determine at the time of such distribution, a reduced
Exercise Price determined by multiplying the Exercise Price on the
Determination Date by a fraction, the numerator of which is the result of
such Exercise Price reduced by the value of such distribution applicable to
one share of Common Stock (such value to be determined by the Board of
Directors of the Company in its discretion) and the denominator of which is
such Exercise Price.
(d) Notice of Consolidation or Merger. In the event of a merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock shall be changed
into the same or a different number of shares of the same or another class or
classes of stock or securities or other assets of the Company or another
entity or there is a sale of all or substantially all the Company's assets (a
"Corporate Change"), then this Warrant shall be exerciseable into such class
and type of securities or other assets as Holder would have received had
Holder exercised this Warrant immediately prior to such Corporate Change;
provided, however, that Company may not affect any Corporate Change unless it
first shall have given thirty (30) days notice to Holder hereof of any
Corporate Change.
(e) Exercise Price Adjusted. As used in this Warrant, the term
"Exercise Price" shall mean the purchase price per share specified in Section
3 of this Warrant, until the occurrence of an event stated in subsection (a),
(b) or (c) of this Section 5, and thereafter shall mean said price as
adjusted from time to time in accordance with the provisions of said
subsection. No such adjustment under this Section 5 shall be made unless
such adjustment would change the Exercise Price at the time by $.01 or more;
provided, however, that all adjustments not so made shall be deferred and
made when the aggregate thereof would change the Exercise Price at the time
by $.01 or more.
(f) Adjustments: Additional Shares, Securities or Assets. In the
event that at any time, as a result of an adjustment made pursuant to this
Section 5, Holder shall, upon Exercise of this Warrant, become entitled to
receive shares and/or other securities or assets (other than Common Stock)
then, wherever appropriate, all references herein to shares of Common Stock
shall be deemed to refer to and include such shares and/or other securities
or assets; and thereafter the number of such shares and/or other securities
or assets shall be subject to adjustment from time to time in a manner and
upon terms as nearly equivalent as practicable to the provisions of this
Section 5.
6. Fractional Interests.
No fractional shares or scrip representing fractional shares
shall be issuable upon the Exercise of this Warrant, but on Exercise of this
Warrant, Holder may purchase only a whole number of shares of Common Stock.
If, on Exercise of this Warrant, Holder would be entitled to a fractional
share of Common Stock or a right to acquire a fractional share of Common
Stock, such fractional share shall be disregarded and the number of shares of
Common Stock issuable upon exercise shall be the next higher number of
shares.
7. Reservation of Shares.
The Company shall at all times reserve for issuance such number
of authorized and unissued shares of Common Stock (or other securities
substituted therefor as herein above provided) as shall be sufficient for the
Exercise of this Warrant and payment of the Exercise Price. The Company
covenants and agrees that upon the Exercise of this Warrant, all shares of
Common Stock issuable upon such exercise shall be duly and validly issued,
fully paid, nonassessable and not subject to preemptive rights, rights of
first refusal or similar rights of any person or entity.
8. Restrictions on Transfer.
(a) Registration or Exemption Required. This Warrant has been
issued in a transaction exempt from the registration requirements of the Act
by virtue of Regulation D and exempt from state registration under applicable
state laws. The Warrant and the Common Stock issuable upon the Exercise of
this Warrant may not be pledged, transferred, sold or assigned except
pursuant to an effective registration statement or unless the Company has
received an opinion from the Company's counsel to the effect that such
registration is not required, or the Holder has furnished to the Company an
opinion of the Holder's counsel, which counsel shall be reasonably
satisfactory to the Company, to the effect that such registration is not
required; the transfer complies with any applicable state securities laws;
and, if no registration covering the resale of the Warrant Shares is
effective at the time the Warrant Shares are issued, the Holder consents to a
legend being placed on certificates for the Warrant Shares stating that the
securities have not been registered under the Securities Act and referring to
such restrictions on transferability and sale.
(b) Assignment. If Holder can provide the Company with
reasonably satisfactory evidence that the conditions of (a) above regarding
registration or exemption have been satisfied, Holder may sell, transfer,
assign, pledge or otherwise dispose of this Warrant, in whole or in part.
Holder shall deliver a written notice to Company, substantially in the form
of the Assignment attached hereto as Exhibit B, indicating the person or
persons to whom the Warrant shall be assigned and the respective number of
warrants to be assigned to each assignee. The Company shall effect the
assignment within ten (10) days, and shall deliver to the assignee(s)
designated by Holder a Warrant or Warrants of like tenor and terms for the
appropriate number of shares.
9. Benefits of this Warrant.
Nothing in this Warrant shall be construed to confer upon any
person other than the Company and Holder any legal or equitable right, remedy
or claim under this Warrant and this Warrant shall be for the sole and
exclusive benefit of the Company and Holder.
10. Applicable Law.
This Warrant is issued under and shall for all purposes be
governed by and construed in accordance with the laws of the state of Nevada,
without giving effect to conflict of law provisions thereof.
11. Loss of Warrant.
Upon receipt by the Company of evidence of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of indemnity or security reasonably satisfactory to the Company,
and upon surrender and cancellation of this Warrant, if mutilated, the
Company shall execute and deliver a new Warrant of like tenor and date.
12. Notice or Demands.
Notices or demands pursuant to this Warrant to be given or made by Holder to
or on the Company shall be sufficiently given or made if sent by certified or
registered mail, return receipt requested, postage prepaid, and addressed,
until another address is designated in writing by the Company, to the
Attention: William Kettle or John Diehl, 1720 E. Garry Ave. #201, Santa Ana,
CA 92705; (949) 475-4500, Facsimile: (949) 475-4511 Notices or demands
pursuant to this Warrant to be given or made by the Company to or on Holder
shall be sufficiently given or made if sent by certified or registered mail,
return receipt requested, postage prepaid, and addressed, to the address of
Holder set forth in the Company's records, until another address is
designated in writing by Holder.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the
24th day of November, 1999.
LMKI INC.
By: ________________________________
William Kettle, CEO
EXHIBIT A
EXERCISE FORM FOR WARRANT
TO: LMKI INC.
The undersigned hereby irrevocably exercises the right to purchase
____________ of the shares of Common Stock (the "Common Stock") of LMKI INC..
a Nevada corporation (the "Company"), evidenced by the attached warrant (the
"Warrant"), and herewith makes payment of the exercise price with respect to
such shares in full, all in accordance with the conditions and provisions of
said Warrant.
1. The undersigned agrees not to offer, sell, transfer or otherwise dispose
of any of the Common Stock obtained on exercise of the Warrant, except in
accordance with the provisions of Section 8(a) of the Warrant.
2. The undersigned requests that stock certificates for such shares be
issued free of any restrictive legend, if appropriate, and a warrant
representing any unexercised portion hereof be issued, pursuant to the
Warrant in the name of the undersigned and delivered to the undersigned at
the address set forth below:
Dated: _________
________________________________________________________________________
Signature
_______________________________________________________________________
Print Name
________________________________________________________________________
Address
_______________________________________________________________________
NOTICE
The signature to the foregoing Exercise Form must correspond to the name as
written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.
________________________________________________________________________
EXHIBIT B
ASSIGNMENT
(To be executed by the registered holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned holder of the attached warrant (the
"Warrant") hereby sells, assigns and transfers unto the person or persons below
named the right to purchase _______ shares of the Common Stock of LMKI INC.,
evidenced by the attached Warrant and does hereby irrevocably constitute and
appoint _______________________ attorney to transfer the said Warrant on the
books of the Company, with full power of substitution in the premises.
Dated: ______________________________
Signature
Fill in for new registration of Warrant:
___________________________________
Name
___________________________________
Address
___________________________________
Please print name and address of assignee
(including zip code number)
_______________________________________________________________________
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.
________________________________________________________________________