-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RM+VdR0vYI/iWLDJ6La4btfx1NjhqtI4kPnrc2al8zeX4/+HbLjaUXdJ61NwRSHu gUx1TaZTsClgfns/ztV7DA== 0001010549-00-000306.txt : 20000516 0001010549-00-000306.hdr.sgml : 20000516 ACCESSION NUMBER: 0001010549-00-000306 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FULLNET COMMUNICATIONS INC CENTRAL INDEX KEY: 0001092570 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 731473361 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-27031 FILM NUMBER: 635640 BUSINESS ADDRESS: STREET 1: 200 N. HARVEY STREET 2: SUITE 1704 CITY: OKLAHOMA CITY STATE: OK ZIP: 73102 BUSINESS PHONE: 4052320958 MAIL ADDRESS: STREET 1: 200 N HARVEY STREET 2: SUITE 1704 CITY: OKLAHOMA CITY STATE: OK ZIP: 73102 10QSB 1 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period ended March 31, 2000 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________________ to _____________________. Commission File Number: 000-27031 FullNet Communications, Inc. ---------------------------- (Exact name of registrant as specified in its charter) Oklahoma 73-1473361 -------- ---------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 200 N. Harvey, Suite 1704,Oklahoma City, Oklahoma 73102 ------------------------------------------------------- (Address of principal executive offices and zip code) Registrant's telephone number, including area code: (405) 232-0958 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares outstanding of the Issuer's Common Stock, $.00001 par value, as of May 9, 2000 was 2,981,460. Transitional Small Business Disclosure Format (check one): Yes No X --- --- FORM 10-QSB TABLE OF CONTENTS Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets - March 31, 2000 (unaudited) and December 31, 1999......................................... 3 Consolidated Statements of Operations - Three months ended March 31, 2000 and 1999 (unaudited)..................... 4 Consolidated Statement of Stockholders' Equity (Deficit) - Three months ended March 31, 2000 (unaudited)................. 5 Consolidated Statements of Cash Flows - Three months ended March 31, 2000 and 1999 (unaudited)........................... 6 Notes to Consolidated Financial Statements (unaudited) ....... 8 Item 2. Management's Discussion and Analysis or Plan of Operation..... 11 PART II. OTHER INFORMATION Item 2. Changes in Securities.......................................... 17 Item 6. Exhibits and Reports on Form 8-K............................... 17 Signatures.............................................................. 19 - 2 -
FullNet Communications, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS ASSETS March 31, 2000 December 31, 1999 -------------- ----------------- (Unaudited) CURRENT ASSETS: Cash $ 350,979 $ 12,671 Accounts receivable, net 77,543 70,306 Inventory 32,460 -- Prepaid and other current assets 72,326 15,491 ----------- ----------- Total current assets 533,308 98,468 PROPERTY AND EQUIPMENT, net 420,965 117,262 COST IN EXCESS OF NET ASSETS OF BUSINESSES ACQUIRED, net of accumulated amortization of $196,798 In 2000 and $93,512 in 1999 2,522,168 295,084 OTHER ASSETS Deferred income taxes 17,500 17,500 Deferred offering costs 20,000 30,899 Other 6,257 5,000 ----------- ----------- 43,757 53,399 ----------- ----------- $ 3,520,198 $ 564,213 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Accounts payable - trade $ 187,852 $ 100,684 Accrued liabilities 19,624 42,424 Notes payable, current portion 938,247 58,949 Capital lease obligations 6,203 -- Deferred revenue 147,781 74,720 ----------- ----------- Total current liabilities 1,299,707 276,777 NOTES PAYABLE, less current portion 582,565 586,922 CAPITAL LEASE OBLIGATIONS, less current portion 17,686 -- STOCKHOLDERS' EQUITY (DEFICIT) Common stock - $.00001 par value; 10,000,000 shares Authorized; 2,981,460 and 2,088,928 shares issued and outstanding respectively 30 21 Common stock issuable, 253,117 and 318,709 shares in 2000 and 1999, respectively 182,052 318,709 Additional paid-in capital 2,955,786 429,295 Accumulated deficit (1,517,628) (1,047,511) ----------- ----------- Total stockholders' equity (deficit) 1,620,240 (299,486) ----------- ----------- TOTAL $ 3,520,198 $ 564,213 =========== ===========
See accompanying notes to financial statements -3-
FullNet Communications, Inc. and Subsidiaries Consolidated Statements of Operations (Unaudited) Three Months Ended -------------------------------- March 31, March 31, 2000 1999 -------------- ---------------- REVENUES: Access service revenues $ 176,146 $ 128,691 Network solution and other revenues 163,857 125,027 ---------- ----------- Total revenues 340,003 253,718 OPERATING EXPENSES: Cost of access service revenues 87,192 47,546 Cost of network solution and other revenues 61,881 46,924 Selling, general and administrative expenses 464,041 143,037 Depreciation and amortization 130,185 29,547 ---------- ----------- 743,299 267,054 ---------- ----------- LOSS FROM OPERATIONS (403,296) (13,336) OTHER INCOME (EXPENSE) INTEREST EXPENSE (62,331) (23,292) OTHER (4,490) (15,442) ---------- ---------- NET LOSS $(470,117) $ (52,070) ========== ========== BASIC AND DILUTED LOSS PER COMMON SHARE $ (.18) $ (.03) WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 2,645,896 1,452,383
See accompanying notes to financial statements. -5-
FullNet Communications, Inc. and Subsidiaries Consolidated Statement of Stockholders' Equity (Deficit) Three Months Ended March 31, 2000 (Unaudited) Common Stock Common Additional ------------ Stock Paid-in Accumulated Shares Amount issuable capital deficit Total ----------- ----------- ----------- ----------- ----------- ----------- Balance at January 1, 2000 2,088,928 $ 21 $ 318,709 $ 429,295 $(1,047,511) $ (299,486) Issuance of common stock in conjunction with acquisition 580,244 6 -- 1,740,727 -- 1,740,733 Common stock issued, net of offering expenses 31,233 -- 41,902 80,907 -- 122,809 Exercise of stock options issued relating to services performed for offering -- -- 34,830 -- -- 34,830 Warrant exercise relating to bridge financing -- -- 1,000 -- -- 1,000 Common stock issued for employee bonuses 181,055 2 (181,055) 181,053 -- -- Common stock issued in exchange for services 100,000 1 (33,334) 99,999 -- 66,666 Warrants to purchase common stock issued relating to bridge financing -- -- -- 400,367 -- 400,367 Compensation from issuance of stock options -- -- -- 23,438 -- 23,438 Net loss -- -- -- -- (470,117) (470,117) ----------- ----------- ----------- ----------- ----------- ----------- Balance at March 31, 2000 $ 2,981,460 $ 30 $ 182,052 $ 2,955,786 $(1,517,628) $ 1,620,240 =========== =========== =========== =========== =========== ===========
See accompanying notes to financial statements. -6-
FullNet Communications, Inc. and Subsidiaries Consolidated Statements of Cash Flows (Unaudited) March 31, March 31, 2000 1999 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(470,117) $ (52,070) Adjustments to reconcile net loss to net cash used in operating activities Noncash compensation expense 23,438 -- Depreciation and amortization 130,185 29,547 Common stock issued for services 25,000 -- Provision for non-collection of accounts receivable 3,349 -- Net (increase) decrease in Accounts Receivable 40,862 (13,000) Prepaid expenses and other current assets (65,445) 337 Other assets (1,257) (7,503) Net increase (decrease) in Accounts payable - trade (42,461) (37,163) Accrued and other liabilities (29,766) (11,536) Cash overdraft -- (2,262) Deferred revenue (13,308) 25,001 --------- --------- Net cash used in operating activities (399,520) (68,649) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (45,857) -- Acquisitions of businesses, net of cash acquired (122,947) -- --------- --------- Net cash used in investing activities (168,804) -- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Common stock issuable 77,731 -- Principal payments on borrowings under notes payable (14,499) (16,258) Proceeds from issuance of bridge financing and warrants, net of offering Costs 721,250 -- Principal payments on capital lease obligations (659) (3,317) Proceeds from borrowings under convertible notes payable -- 50,000 Issuance of common stock, net of offering costs 122,808 33,820 --------- --------- Net cash provided by financing activities 906,632 64,245 --------- --------- NET INCREASE (DECREASE) IN CASH 338,308 (4,404) Cash at beginning of year 12,671 198 --------- --------- Cash at end of period $ 350,979 $ 4,206 ========= ========= (continued)
-8-
FullNet Communications, Inc. and Subsidiaries Consolidated Statements of Cash Flows (Unaudited) (continued) March 31, March 31, 2000 1999 ---------- ---------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for interest $ 15,532 $ 24,236 NONCASH INVESTING AND FINANCING ACTIVITIES Fair value of liabilities assumed in conjunction with the acquisition of Harvest Communications, Inc. 73,062 -- Fair value of common stock issued to purchase Harvest Communications 1,612,500 -- Note payable issued in conjunction with the acquisition of Harvest Communications 175,000 -- Fair value of liabilities assumed in conjunction with the acquisition of FullNet of Bartlesville 1,754 -- Fair value of common stock issued to purchase FullNet of Bartlesville 128,232 -- Note payable issued in conjunction with FullNet of Bartlesville acquisition 50,168 -- Acquisition of net assets of FullNet of Tahlequah 6,763 -- Note payable issued in conjunction with FullNet of Tahlequah acquisition 61,845 -- Assets acquired through issuance of capital lease 24,548 -- (concluded)
See accompanying notes to financial statements. -9- FullNet Communications, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. UNAUDITED INTERIM FINANCIAL STATEMENTS The unaudited financial statements and related notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. The accompanying financial statements and related notes should be read in conjunction with the audited consolidated financial statements of the Company and notes thereto for the year ended December 31, 1999. The information furnished reflects, in the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results of the interim periods presented. Operating results of the interim period are not necessarily indicative of the amounts that will be reported for the year ending December 31, 2000. 2. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. STOCKHOLDERS' EQUITY (DEFICIT) In February 2000, the Company raised an aggregate $135,600 in an offering of its common stock. The offering was made pursuant to an exemption from the registration requirements of the Securities Act pursuant to Rule 504 of Regulation D of such act. As of March 31, 2000, 13,967 of the shares had not yet been issued and are reflected as common stock issuable in the accompanying balance sheet. 4. EARNINGS (LOSS) PER SHARE Basic earnings (loss) per common share is computed based upon net earnings (loss) divided by the weighted average number of common shares outstanding during each period. Diluted earnings (loss) per common share is computed based upon net loss divided by the weighted average number of common shares outstanding during each period adjusted for the effect of dilutive potential common shares calculated using the treasury stock method. The basic and diluted earnings (loss) per common share are the same since the Company had a net loss for 2000 and 1999 and the inclusion of stock options and warrants would be anti-dilutive. -10- 5. NOTES PAYABLE In February and March 2000, the Company obtained bridge loans totaling $275,000 through the issuance of 14% promissory notes to 10 accredited investors. The terms of the financing additionally provided for the issuance of five-year warrants to purchase an aggregate of 137,500 shares of the Company's common stock at $0.01 per share, and provided for certain registration rights. The promissory notes require monthly interest payments, mature in six months, and are extendible for two 90-day periods upon issuance of an additional warrants for an aggregate 137,500 shares exercisable at $0.01 per share for each extension. None of the warrants were exercised as of March 31,2000. In March 2000, the Company obtained bridge loans totaling $500,000 through the issuance of 14% promissory notes to two accredited investors. The terms of the financing additionally provided for the issuance of five-year warrants to purchase 100,000 shares of the Company's common stock at $0.01 per share, and provided for certain registration rights. The promissory notes require quarterly interest payments, mature in six months, and are extendible for two 90 day periods upon issuance of additional warrants for an aggregate 10,000 shares exercisable at $0.01 per share for each extension. On March 8, 2000, the bridge loan investors exercised their warrants and purchased 100,000 shares of common stock of the Company at an aggregate exercise price of $1,000. The 100,000 shares have not been issued as of March 31, 2000 and are included in the accompanying balance sheet as common stock issuable. A portion of the proceeds of the bridge loans has been allocated to the warrants and accounted for as additional paid-in capital. The allocation was based on the estimated relative fair values of the bridge loans and the warrants and resulted in a discount on the bridge loans of $401,000. This discount is being amortized as interest expense over the life of the bridge loans using the interest method. 6. ACQUISITIONS On January 25, 2000, the Company entered into an Asset Purchase Agreement with FullNet of Tahlequah, Inc., an Oklahoma corporation ("FOT"), in which the Company purchased substantially all of FOT's assets, including approximately 400 individual and business Internet access accounts. The Company paid FOT an aggregate amount of $97,735, comprised of $35,890 in cash and a note payable for $61,845. The note is payable in eighteen monthly installments. On February 4, 2000, the Company entered into an Asset Purchase Agreement with David Looper, d/b/a FullNet of Bartlesville ("FOB"), an Oklahoma sole proprietorship. Pursuant to the Asset Purchase Agreement, the Company purchased substantially all of FOB's assets, including approximately 400 individual and business Internet access accounts. The Company paid FOB an aggregate amount of $178,400, payable in 42,744 shares of the Company's common stock (valued for purposes of the acquisition at $3.00 per share) and a note payable for $50,168. The note bears an interest rate of 8% per annum, with the principal and interest thereon payable on the earlier to occur of (a) the closing of any private equity placement in excess of $351,000, (b) the closing of any underwritten offering of the Company's common stock, or (c) one year from the closing date of the Asset Purchase Agreement. -11- On February 29, 2000, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Harvest Communications, Inc. ("Harvest"), an Oklahoma corporation, pursuant to which Harvest merged with and into FullNet. Harvest had approximately 2,500 individual and business dial-up Internet access accounts, 15 wireless Internet access accounts and 35 Web hosting accounts. Pursuant to the terms of the Merger Agreement, the Company paid the shareholders of Harvest an aggregate amount of $1,912,500, payable in 537,500 shares of the Company's common stock (valued for purposes of the merger at $3.00 per share), a note payable for $175,000 and $125,000 in cash. The note bears an interest rate of 8% per annum, with the principal and interest thereon payable on the earlier to occur of (a) the closing of any single funding (whether debt or equity) obtained by the Company subsequent to the date of the Merger Agreement in an aggregate amount of at least $2,000,000, (b) the closing of any underwritten offering of the Company's common stock, or (c) March 6, 2001. These acquisitions were accounted for as purchases. The aggregate purchase price has been allocated to the underlying net assets purchased or net liabilities assumed based on their estimated fair values at the respective acquisition date. This allocation results in cost in excess of net assets of businesses acquired of $2,327,000, which is being amortized over the estimated periods benefited of three to five years. Prior to the acquisitions, each of FOT, FOB and Harvest was a customer of the Company's Internet access services. The unaudited pro forma combined historical results, as if the entities listed above (excluding FOT) had been acquired at the beginning of the three months ended March 31, 2000 and 1999, respectively, are included in the table below. Three Months Ended March 31, 2000 1999 ---- ---- Revenue $ 470,379 $ 455,369 Net loss $ (564,989) $ (209,757) Basic and diluted loss per share $ (0.19) $ (0.11) The pro forma results above include amortization of cost in excess of net assets of businesses acquired and interest expense on debt assumed issued to finance the acquisitions. The pro forma results are not necessarily indicative of what actually would have occurred if the acquisitions had been completed as of the beginning of each of the fiscal periods presented, nor are they necessarily indicative of future consolidated results. -12- Item 2. Management's Discussion and Analysis or Plan of Operation The following discussion is qualified in its entirety by the more detailed information in the Company's Annual Report on Form 10-KSB for the Year Ended December 31, 1999 under "ITEM 6--MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION," the financial statements contained therein, including the notes thereto, and the Company's other periodic reports and all Current Reports on Form 8-K filed with the Securities and Exchange Commission since December 31, 1999 (collectively referred to as the "Disclosure Documents"). Certain forward-looking statements contained herein and in such Disclosure Documents regarding the Company's business and prospects are based upon numerous assumptions about future conditions which may ultimately prove to be inaccurate and actual events and results may materially differ from anticipated results described in such statements. The Company's ability to achieve such results is subject to certain risks and uncertainties, such as those inherent generally in the Internet service provider and competitive local exchange carrier industries, the impact of competition and pricing, changing market conditions, and other risks. Any forward-looking statements contained herein represent the Company's judgment as of the date hereof. The Company disclaims, however, any intent or obligation to update these forward-looking statements. As a result, the reader is cautioned not to place undue reliance on these forward-looking statements. As used herein, the word "Company" means FullNet Communications, Inc. and its wholly owned subsidiaries, FullNet, Inc. ("FullNet"), FullSolutions, Inc. ("FullSolutions"), FullTel, Inc. ("FullTel") and FullWeb, Inc. ("FullWeb"), a wholly owned subsidiary of FullSolutions, unless the context indicates otherwise. Overview FullNet Communications Inc. (the "Company") is a regional integrated communications provider ("ICP") offering integrated communications and network solutions to individuals, businesses, organizations, educational institutions, and government agencies. Through its subsidiaries, the Company provides high quality, reliable and scalable Internet, telephony, and network solutions designed to meet its customers' needs. The Company's overall strategy is to become the dominant ICP, Internet service provider ("ISP"), network solutions and broadband backbone provider for residents and small to medium-sized businesses in Oklahoma and contiguous states. References to the Company in this Form 10-QSB include the Company's direct and indirect subsidiaries: FullNet, Inc. ("FullNet"), FullTel, Inc. ("FullTel"), FullSolutions, Inc. ("FullSolutions") and FullWeb, Inc. ("FullWeb"). The Company's principal executive offices are located at 200 North Harvey Avenue, Suite 1704, Oklahoma City, Oklahoma 73102, and its telephone number is (405) 232-0958. The Company also maintains an Internet site on the World Wide Web ("WWW") at www.fullnet.net. However, information contained on the Company's Web site is not, and should not be deemed to be, a part of this Form 10-QSB. Company History The Company was founded in 1995 as CEN-COM of Oklahoma, Inc., an Oklahoma corporation, to bring dial-up Internet access and education to rural locations in Oklahoma that did not have dial-up Internet access. The Company changed its name to FullNet Communications, Inc. in December 1995, and shifted its focus from offering dial-up services to providing wholesale and private label network connectivity and related services to other ISPs. During 1995 and 1996, the Company furnished wholesale and private label network connectivity services to ISPs in Bartlesville, Cushing, Durant, Perry, Tahlequah, and Tulsa. During 1996, the Company sold its ISP operations in Enid, Oklahoma and began ISP operations in Ponca City, Oklahoma. -13- In 1997 the Company continued its focus on being a backbone provider by upgrading and acquiring more equipment. The Company also started offering its own ISP brand access and services to its wholesale customers. As of March 31, 2000, there were three ISPs in Oklahoma that used the FullNet brand name where the Company provides the backbone to the Internet. There are an additional two ISPs that use a private label brand name, where the Company is their access backbone and provides their technical support, managing and operating their systems on an outsource basis. Additionally, the Company provides high-speed broadband connectivity, website hosting, network management and consulting solutions to over 50 businesses in Oklahoma. In 1998 the Company's gross revenues exceeded $1,000,000 and the Company made the Metro Oklahoma City Top 50 Fastest Growing Companies list. In 1998 the Company commenced the process of organizing a competitive local exchange carrier ("CLEC") through FullTel, and acquired Animus Communications, Inc. ("Animus"), a wholesale Web-service company, thereby enabling the Company to become a total solutions provider to individuals and companies seeking a "one-stop shop" in Oklahoma. Animus was renamed FullWeb in January 2000. With the incorporation of FullTel and the acquisition of FullWeb, the Company's current business strategy is to become the dominant ICP in Oklahoma and surrounding states, focusing on rural areas. The Company expects to grow through the acquisition of ISPs and network solutions providers, as well as through a marketing campaign, the design and implementation of which is expected to be completed in the second quarter 2000. During the first three months of 2000, the Company has completed three separate acquisitions of ISP companies, operating in, respectively, Tahlequah, Oklahoma, Bartlesville, Oklahoma and Enid, Oklahoma. During the month of February 2000, the Company's common stock began trading on the OTC Bulletin Board under the symbol FULO. While the Company's common stock currently is quoted on the OTC Bulletin Board, the market for the common stock remains limited. Hence, there can be no assurance that stockholders will be able to sell their shares should they desire to do so. Any -14-
Results of Operations The following table sets forth certain statement of operations data as a percentage of revenues for the three months ended March 31, 2000 and 1999: Three Months Ended ---------------------------------------------- March 31, 2000 March 31, 1999 ----------------- -------------------- Revenues: Access service revenues 51.8% 50.7% Network solution and other revenues 48.2 49.3 ---------- ---------- Total revenues 100.0 100.0 Cost of access service revenues 25.6 18.7 Cost of network solution and other revenues 18.2 18.5 Selling, general and administrative expenses 136.5 56.4 Depreciation and amortization 38.3 11.6 ---------- ---------- Total operating costs and expenses 218.6 105.3 Loss from operations (118.6) (5.3) Interest expense (18.3) (9.2) Other expense (1.3) (6.1) ---------- ---------- Net loss (138.3)% (20.5)% ========== ==========
Three Months Ended March 31, 2000 compared to Three Months Ended March 31, 1999 Revenues Access service revenues increased $47,000 to $176,000 for the three months ended March 31, 2000 from $129,000 for the three months ended March 31, 1999. This additional revenue is due to the acquisition of three ISPs in the first quarter 2000. Network solution and other revenues increased $39,000 to $164,000 for the three months ended March 31, 2000, compared to $125,000 for the three months ended March 31, 1999. This increase is due to the acquisition of Harvest Communications, Inc., in February 2000. Network solution and other revenues attributable to the Harvest acquisition were $15,000 for March 2000. Additionally, co-location revenues represented an increase of $20,000 in 2000 over the prior comparative quarter. Operating costs and expenses Cost of access service revenues increased $40,000 to $87,000 for the three months ended March 31, 2000, compared to $47,000 for the three months ended March 31, 1999. The increase in costs is attributable primarily to $30,000 of connectivity costs incurred in conjunction with the access service customers acquired during the first quarter 2000 in three Oklahoma towns: Enid, Bartlesville, and Tahlequah. Cost of network solutions and other revenues increased $15,000 from $47,000 for the three months ended March 31, 1999 to $62,000 for the three months ended March 31, 2000. This increase is primarily due to the increase in costs of bandwidth of $13,000 incurred by FullWeb for the increase in the number of web hosting and co-location customers over the prior comparative quarter. -15- Selling, general and administrative expenses increased $321,000 to $464,000 for the three months ended March 31, 2000, compared to $143,000 for the three months ended March 31, 1999. This increase is comprised principally of an increase in payroll costs of $155,000 related to the hiring of additional personnel and $131,000 of professional service fees for attorneys, investment bankers, and consultants. The Company also incurred additional rent expense of $14,000 over the prior comparative quarter related to the new office space that was rented in January 2000 which will house the Company's Network Operations Center. An increase in miscellaneous fees of $15,000 over the prior comparative quarter includes amounts paid for various annual memberships. Depreciation and amortization expense increased $101,000 from $29,000 for the three months ended March 31, 1999 to $130,000 for the three months ended March 31, 2000. Of this increase, $53,000 is attributable to the amortization of cost in excess of net assets of businesses acquired relating to the three ISP acquisitions closed in 2000. An increase of $43,000 of amortization of cost in excess of net assets of businesses acquired is attributable to the effect of shortening the estimated period of benefit to three and five years, respectively, for two acquisitions made in 1997 and 1998 that were originally being amortized over fifteen years. Interest Expense Interest expense increased $39,000 to $62,000 for the three months ended March 31, 2000, compared to $23,000 for the three months ended March 31, 1999. This increase is due to $38,000 of interest expense recorded for the three months ended March 31, 2000 associated with amortization of the loan discount relating to bridge financing issued with warrants. Acquisitions The Company's acquisition strategy is designed to leverage its existing network backbone and internal operations to enable the Company to enter new markets in Oklahoma, Arkansas and Kansas, as well as to expand its presence in existing markets, and to benefit from economies of scale. The Company has acquired three Internet service provider businesses in Oklahoma during the three months ended March 31, 2000. On January 25, 2000, the Company entered into an Asset Purchase Agreement with FullNet of Tahlequah, Inc. ("FOT"), an Oklahoma corporation, in which the Company purchased substantially all of FOT's assets, including approximately 400 individual and business Internet access accounts. The Company paid FOT an aggregate amount of $97,735, comprised of $35,890 in cash and a note payable for $61,845. The note is payable in eighteen monthly installments. On February 4, 2000, the Company entered into an Asset Purchase Agreement with David Looper, d/b/a FullNet of Bartlesville ("FOB"), an Oklahoma sole proprietorship. Pursuant to the Asset Purchase Agreement, the Company purchased substantially all of FOB's assets, including approximately 400 individual and business Internet access accounts. The Company paid FOB an aggregate amount of $178,400, payable in 42,744 shares of the Company's common stock (valued for purposes of the acquisition at $3.00 per share) and a note payable for $50,168. The note bears an interest rate of 8% per annum, with the principal and interest thereon payable on the earlier to occur of (a) the closing of any private equity placement in excess of $351,000, (b) the closing of any underwritten offering of the Company's common stock, or (c) one year from the closing date of the Asset Purchase Agreement. -16- On February 29, 2000, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Harvest Communications, Inc., ("Harvest") an Oklahoma corporation, pursuant to which Harvest merged with and into FullNet. Harvest had approximately 2,500 individual and business dial up Internet access accounts, 15 wireless Internet access accounts and 35 Web hosting accounts. Pursuant to the terms of the Merger Agreement, the Company paid the shareholders of Harvest an aggregate amount of $1,912,500 payable in 537,500 shares of the Company's common stock (valued for purposes of the merger at $3.00 per share), a note payable for $175,000 and $125,000 in cash. The note bears an interest rate of 8% per annum, with the principal and interest thereon payable on the earlier to occur of (a) the closing of any single funding (whether debt or equity) obtained by the Company subsequent to the date of the Merger Agreement in an aggregate amount of at least $2,000,000, (b) the closing of any underwritten offering of the Company's common stock, or (c) March 6, 2001. These acquisitions were accounted for as purchases. The aggregate purchase price has been allocated to the underlying net assets purchased or net liabilities assumed based on their estimated fair values at the respective acquisition date. This allocation results in cost in excess of net assets of businesses acquired of $2,327,000, which is being amortized over the estimated periods benefited of three to five years. Prior to the acquisitions, each of FOT, FOB and Harvest was a customer of the Company's ISP access services. The Company is currently in various levels of discussions with a number of Internet service providers in targeted markets in Oklahoma and Arkansas. However, there can be no assurance that the Company will successfully complete any of the acquisitions it is currently evaluating. Liquidity and Capital Resources The Company used $400,000 and $69,000 of cash for operating activities for the three months ended March 31, 2000 and 1999, respectively, as a result of a net loss for the periods. As of March 31, 2000, the Company had $351,000 in cash and $1,300,000 in current liabilities, including $775,000 of bridge financing that was negotiated with six month terms and $148,000 of deferred revenues which will not require settlement in cash. Capital expenditures relating to acquisitions were $123,000 for the three months ended March 31, 2000. In addition, computer equipment purchases amounted to $46,000 for the three months ended March 31, 2000. Net cash provided by financing activities was $907,000 and $64,000 for the three months ended March 31, 2000 and 1999, respectively. The cash provided in 2000 is due primarily to the issuance of bridge notes payable and the sale of equity securities pursuant to Rule 504 of Regulation D of the Securities Act of 1933. The Company received net proceeds of $722,000 from the bridge loans and $123,000 from the 504 offering. The planned expansion of the Company's business will require significant capital to fund capital expenditures, working capital needs, debt service and the cash flow deficits generated by operating losses. The Company's principal capital expenditure requirements will include: * the completion of the Company's Network Operations Center * the purchase and installation of telephone switches in Oklahoma, Arkansas and Kansas * purchase and installation of wireless and DSL Internet access equipment * mergers and acquisitions * further development of operations support systems and other automated back office systems * domain name registration startup costs -17- The Company expects to make capital outlays of between $3 million and $4 million during 2000 in order to continue activities called for in its current business plan and to fund expected operating losses. As the Company's cost of developing new networks and services, funding other strategic initiatives and operating its business will depend on a variety of factors (including, among other things, the number of subscribers and the service for which they subscribe, the nature and penetration of services that may be offered by the Company, regulatory changes, and actions taken by competitors in response to the Company's strategic initiatives), it is almost certain that actual costs and revenues will vary from expected amounts, very likely to a material degree, and that such variations are likely to affect the Company's future capital requirements. Current cash balances will not be sufficient to fund the Company's current business plan beyond the next year. As a consequence, the Company is currently seeking additional debt and/or equity financing as well as the placement of a credit facility to fund the Company's liquidity. There can be no assurance that the Company will be able to raise additional capital on satisfactory terms or at all. In the event that the Company is unable to obtain such additional capital or to obtain it on acceptable terms or in sufficient amounts, the Company will be required to delay the development of its network or take other actions. This could have a material adverse effect on the Company's business, operating results and financial condition and its ability to achieve sufficient cash flow to service debt requirements. The ability of the Company to fund the capital expenditures and other costs contemplated by its business plan and to make scheduled payments with respect to borrowings will depend upon, among other things, its ability to seek and obtain additional financing within the next year. Capital will be needed in order to implement its business plan, deploy its network, expand its operations and obtain and retain a significant number of customers in its target markets. Each of these factors is, to a large extent, subject to economic, financial, competitive, political, regulatory and other factors, many of which are beyond the Company's control. No assurance can be given that the Company will be successful in developing and maintaining a level of cash flow from operations sufficient to permit it to pay the principal of, and interest and any other payments on, outstanding indebtedness. If the Company is unable to generate sufficient cash flow from operations to service its indebtedness, it may have to modify its growth plans, limit its capital expenditures, restructure or refinance its indebtedness or seek additional capital or liquidate its assets. There can be no assurance (i) that any of these strategies could be effected on satisfactory terms, if at all, or (ii) that any such strategy would yield sufficient proceeds to service the Company's debt or otherwise adequately fund operations. Financing Activities In February and March 2000, the Company obtained bridge loans totaling $275,000 through the issuance of 14% promissory notes to 10 accredited investors. The terms of the financing additionally provided for the issuance of five-year warrants to purchase an aggregate of 137,500 shares of the Company's common stock at $0.01 per share, and provided for certain registration rights. The promissory notes require monthly interest payments, mature in six months, and are extendible for two 90-day periods upon issuance of an additional warrants for an aggregate 137,500 shares exercisable at $0.01 per share for each extension. None of the warrants were exercised as of March 31,2000. -18- In March 2000, the Company obtained bridge loans totaling $500,000 through the issuance of 14% promissory notes to two accredited investors. The terms of the financing additionally provided for the issuance of five-year warrants to purchase 100,000 shares of the Company's common stock at $0.01 per share, and provided for certain registration rights. The promissory notes require quarterly interest payments, mature in six months, and are extendible for two 90 day periods upon issuance of additional warrants for an aggregate 10,000 shares exercisable at $0.01 per share for each extension. On March 8, 2000, the bridge loan investors exercised their warrants and purchased 100,000 shares of common stock of the Company at an aggregate exercise price of $1,000. The 100,000 shares have not been issued as of March 31, 2000 and are included in the accompanying balance sheet as common stock issuable. In February 2000, the Company raised an aggregate $135,600 in an offering of its common stock. The offering was made pursuant to an exemption from the registration requirements of the Securities Act pursuant to Rule 504 of Regulation D of such act. Proceeds from the bridge loans and the 504 offering were used for acquisitions, working capital and general corporate purposes. Year 2000 Issue Prior to entering the year 2000, or Y2K, the Company developed plans for implementing, testing and completing any necessary modifications to its key computer systems and equipment with embedded chips to ensure that they were Y2K compliant. Subsequent to entering the year 2000, the Company has tested its key computer systems and to date, it has not encountered any material Y2K related disruptions or failures of its systems or services, nor has it been notified of any disruptions or failures in the systems of any of its third parties with whom it deals. There is an ongoing risk that Y2K related problems could still occur and the Company will continue to evaluate these risks. However, the Company believes that the Y2K issue will not pose any significant operational problems for it. PART II-OTHER INFORMATION Item 2. Changes in Securities. See "Item 2. Management's Discussion and Analysis or Plan of Operation-Financing Activities" of this Report, incorporated herein by reference. -19- Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit Number Exhibit ------- -------------------------------------------------------------- 4.1* Form of Warrant Agreement 4.2* Form of Warrant Certificate for Florida Investors 4.3* Form of Promissory Note for Florida Investors 4.4* Form of Warrant Certificate for Georgia Investors 4.5* Form of Promissory Note for Georgia Investors 4.6* Form of Warrant Certificate for Illinois Investors 4.7* Form of Promissory Note for Illinois Investors 4.8* Form of Warrant Agreement 4.9* Form of Warrant Certificate 4.10* Form of Promissory Note 10.1* Registrar Accreditation Agreement effective February 8, 2000, by and between Internet 27.1* Financial Data Schedule - ------------------------ *Filed electronically herewith (b) Reports on Form 8-K On February 9, 2000, the Company filed a Form 8-K reporting that, on January 25, 2000, the Company entered into an Asset Purchase Agreement with FullNet of Tahlequah, Inc., an Oklahoma corporation ("Seller"), and the shareholders of Seller in which the Company purchased substantially all of the Seller's assets. On February 18, 2000, the Company filed a Form 8-K reporting that, on February 4, 2000, the Company entered into an Asset Purchase Agreement with David Looper, d/b/a FullNet of Bartlesville, an Oklahoma sole proprietorship ("Seller"), in which the Company purchased substantially all of Seller's assets. On March 9, 2000, the Company filed a Form 8-K reporting that, on February 29, 2000, the Company entered into an Agreement and Plan of Merger with Harvest Communications, Inc., ("Harvest") an Oklahoma corporation, pursuant to which Harvest merged with and into FullNet, Inc., a wholly owned subsidiary of the Company. -20- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FULLNET COMMUNICATIONS, INC., An Oklahoma corporation Date: May 15, 2000 /s/ Timothy J. Kilkenny ------------------------------------------ Timothy J. Kilkenny Chairman of the Board of Directors; President and Chief Executive Officer Date: May 15, 2000 /s/ Travis Lane ------------------------------------------ Travis Lane Vice-President and Chief Financial Officer (Chief Accounting Officer) -21- EX-4.1 2 FORM OF WARRANT AGREEMENT FULLNET COMMUNICATIONS, INC. (an Oklahoma corporation) WARRANT AGREEMENT ___________ ____, 2000 - -------------------------- - -------------------------- - -------------------------- - --------------- FullNet Communications, Inc., an Oklahoma corporation (the "Company"), agrees to issue to you warrants (the "Warrants") to purchase the number of shares of common stock, par value $0.00001 per share (the "Common Stock"), of the Company set forth herein, subject to the terms and conditions contained herein. 1. Issuance of Warrants; Exercise Price. The Warrants, which shall be certificated in the form attached hereto as EXHIBIT "A," (each, a "Warrant Certificate") shall be issued to you concurrently with the execution hereof in consideration of the Promissory Loan in the amount of $____________ pursuant to the terms of the 14% Promissory Note dated of even date herewith (the "Note"). The Warrants shall provide that you, or such other holder or holders of the Warrants to whom transfer is authorized in accordance with the terms of this Agreement, shall have the right to purchase an aggregate of ________ shares of Common Stock for an exercise price equal to $.01 per share (the "Exercise Price"); provided, however, that in the event the Company desires to extend for ninety (90) days the maturity date of the Note, the Company shall issue to you the right to purchase an additional ________ shares of Common Stock at the Exercise Price. The Company shall have the option to extend for two (2) ninety (90) day periods the maturity date of the Note, subject in each case to the grant of additional Warrants as set forth in the preceding sentence. 2. Exercise of Warrants. At any time and from time to time after the date hereof and expiring on the fifth anniversary of the effective date of this Agreement at 5:00 p.m., Central Standard Time, Warrants may be exercised as to all or any portion of the whole number of shares of Common Stock covered by the Warrants by the holder thereof by surrender of the Warrants, accompanied by a subscription for shares to be purchased in the form attached to each Warrant Certificate and by payment to the Company as set forth in the Warrant Certificate in the amount required for purchase of the shares as to which the Warrant is being exercised, delivered to the Company at its principal office at 200 North Harvey Avenue, Suite 1704, Oklahoma City, Oklahoma 73102, Attention: President. Upon the exercise of a Warrant, in whole or in part, the Company will, within ten (10) days thereafter, at its expense (including the payment by the Company of any applicable issue or transfer taxes), cause to be issued in the name of and delivered to the holder a certificate or certificates for the number of fully paid and non-assessable shares of Common Stock to which such holder is entitled upon exercise of the Warrant. In the event such holder is entitled to a fractional share, in lieu thereof, such holder shall be paid a cash amount equal to such fraction, multiplied by the Current Value (as hereafter defined) of one full share of Common Stock on the date of exercise. Certificates for shares of Common Stock issuable by reason of the exercise of the Warrant or Warrants shall be dated and shall be effective as the date of the surrendering of the certificates for the shares so purchased. In the event a Warrant is exercised, as to less than the aggregate amount of all shares of Common Stock issuable upon exercise of all Warrants held by such person, the Company shall issue a new Warrant to the holder of the Warrant so exercised covering the aggregate number of shares of Common Stock as to which Warrants remain unexercised. -1- For purposes of this section, Current Value is defined (i) in the case for which a public market exists for the Common Stock at the time of such exercise, the average of the daily closing prices of the Common Stock for twenty (20) consecutive business days commencing thirty (30) business days before the date of exercise, and (ii) in the case no public market exists at the time of such exercise, at the Appraised Value. For the purposes of this Agreement, "Appraised Value" is the value determined in accordance with the following procedures. For a period of five (5) days after the date of an event (a "Valuation Event") requiring determination of Current Value at a time when no public market exists for the Common Stock (the "Negotiation Period"), each party to this Agreement agrees to negotiate in good faith to reach agreement upon the Appraised Value of the securities or property at issue, as of the date of the Valuation Event, which will be the fair market value of such securities or property, without premium for control or discount for minority interests, illiquidity or restrictions on transfer. In the event that the parties are unable to agree upon the Appraised Value of such securities or other property by the end of the Negotiation Period, then the Appraised Value of such securities or property will be determined for purposes of this Agreement by a recognized appraisal or investment banking firm mutually agreeable to the holders of the Warrants and the Company (the "Appraiser"). If the holders of the Warrants and the Company cannot agree on an Appraiser within two (2) business days after the end of the Negotiation Period, the Company, on the one hand, and the holders of the Warrants, on the other hand, will each select an Appraiser within ten (10) business days after the end of the Negotiation Period and those two (2) Appraisers will select ten (10) days after the end of the Negotiation Period an independent Appraiser to determine the fair market value of such securities or property, without premium for control or discount for minority interests. Such independent Appraiser will be directed to determine fair market value of such securities as soon as practicable, but in no event later than thirty (30) days from the date of its selection. The determination by an Appraiser of the fair market value will be conclusive and binding on all parities to this Agreement. Appraised Value of each share of Common stock at a time when (i) the Company is not a reporting company under the Exchange Act and (ii) the Common Stock is not traded in the organized securities markets, will, in all cases, be calculated by determining the Appraised Value of the entire Company taken as a whole and dividing that value by the number of shares of Common Stock then outstanding, without premium for control or discount for minority interests, illiquidity or restrictions on transfer. The costs of the Appraiser will be borne by the Company. In no event will the Appraised Value of the Common Stock be less than the per share consideration received or receivable with respect to the Common Stock or securities or property of the same class in connection with a pending transaction involving a sale, merger, recapitalization, reorganization, consolidation, or share exchange, dissolution of the Company, sale or transfer of all or a majority of its assets or revenue or income generating capacity, or similar transaction. -2- 3. Registration Rights. -------------------- (a) S-3 Registration Rights. The Company will register the shares of Common Stock underlying the Warrants (the "Warrant Shares") within thirty (30) days following the date upon which the Company shall become eligible to register its securities on Form S-3 under the Securities Act of 1933, as amended (the "Securities Act") or any successor to such form in a manner that will, upon being declared effective, constitute a "shelf" registration for purposes of Rule 415 under the Securities Act, pursuant to which the Warrant Shares may be sold from time to time and in such amounts as the holder(s) thereof may hereafter determine, all in a manner consistent with all applicable provisions of the Securities Act; provided, however, if at the time of such S-3 eligibility, the Company has formulated plans to file within 60 days thereof a registration statement covering the sale of any of its securities in a public offering under the Securities Act, no registration of the Warrant Shares shall be initiated under this Section 3(a) until 90 days after the effective date of such registration statement unless the Company is no longer proceeding diligently to secure the effectiveness of such registration statement; provided that the Company shall provide the Warrant holder(s) the right to participate in such public offering pursuant to, and subject to, Section 3(b). The Company will use its best efforts to have the Form S-3 declared effective. At its expense, the Company will keep such registration effective for a period of one hundred eighty (180) days or until the holder or holders have completed the distribution described in the registration statement relating thereto, whichever first occurs; and furnish such number of prospectuses and other documents incident thereto as a holder from time to time may reasonably request. (b) Piggyback Registration Rights. At any time following the date hereof, whenever the Company proposes to register any Common Stock for its own or the account of others under the Securities Act for a public offering, other than (i) any shelf registration of shares to be used as consideration for acquisitions of additional businesses by the Company and (ii) registrations relating to employee benefit plans, the Company shall give each Warrant holder prompt written notice of its intent to do so. Upon the written request of any Warrant holder given within 15 business days after receipt of such notice, the Company shall cause to be included in such registration all Warrant Securities (including any shares of Common Stock issued as a dividend or other distribution with respect to, or in exchange for, or in replacement of such Warrant Securities) which any Warrant holder requests; provided, however, if the Company is advised in writing in good faith by any managing underwriter of an underwritten offering of the securities being offered pursuant to any registration statement under this Section 3(b) that the number of shares to be sold by persons other than the Company is greater than the number of such shares which can be offered without adversely affecting the offering, the Company may reduce pro rata the number of shares offered for the accounts of such persons (based upon the number of shares held by such person) to a number deemed satisfactory by such managing underwriter. (c) Lock-up Agreement. In consideration for the Company's agreeing to its obligations under this Section 3, each Warrant holder agrees that, effective upon the request of the underwriters managing the Company's initial public offering, such holder shall be obligated, so long as all executive officers and directors of the Company are bound by a comparable obligation, not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any shares of Common Stock underlying the Warrants (other than those included in the registration) without the prior written consent of such underwriters, for such period of time (not to exceed one hundred eighty (180) days) from the effective date of such initial public offering as the underwriters may specify. 4. Specific Performance. The Company stipulates that remedies at law, in money damages, available to the holder of a Warrant, or of a holder of Common Stock issued pursuant to exercise of a Warrant, in the event of any default or threatened default by the Company in the performance of or compliance with any of the terms of this Agreement are not and will not be adequate. Therefore, the Company agrees that the terms of this Agreement may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise. 5. Successors and Assigns; Binding Effect. This Agreement shall be binding upon and insure to the benefit of you and the Company and their respective successors and permitted assigns. -3- 6. Notices. Any notice hereunder shall be given by registered or certified mail, if to the Company, at its principal office, and, if to the holders, to the respective addresses shown in the Warrant ledger of the Company, provided that any holder may at any time on three (3) days' written notice to the Company designate or substitute another address where notice is to be given. Notice shall be deemed given and received after a certified or registered letter, properly addressed with postage prepaid, is deposited in the U.S. mail. 7. Severability. Every provision of this Agreement is intended to be severable. If any term or provision hereof is illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the remainder of this Agreement. 8. Assignment; Replacement of Warrants. If the Warrant or Warrants are assigned, in whole or in part, the Warrants shall be surrendered at the principal office of the Company, and thereupon, in the case of a partial assignment, a new Warrant shall be issued to the holder thereof covering the number of shares not assigned, and the assignee shall be entitled to receive a new Warrant covering the number of shares so assigned. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of any Warrant and appropriate bond or indemnification protection, the Company shall issue a new Warrant of like tenor. The Warrants will not be transferred, sold, or otherwise hypothecated by you or any other person and the Warrants will be nontransferable, except to (i) one or more persons, each of which on the date of transfer is an officer, shareholder, or employee of you; (ii) a partnership or partnerships, the partners of which are you and one or more persons, each of whom on the date of transfer is an officer of you; (iii) a successor to you in merger or consolidation; (iv) a purchaser of all or substantially all of your assets; or (v) a person that receives a Warrant upon death of a holder pursuant to will, trust, or the laws of intestate succession. 9. Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Oklahoma without giving effect to the principles of choice of laws thereof. 10. Definition. All references to the word "you" in this Agreement shall be deemed to apply with equal effect to any persons or entities to whom Warrants have been transferred in accordance with the terms hereof, and, where appropriate, to any persons or entities holding shares of Common Stock issuable upon exercise of Warrants. 11. Headings. The headings herein are for purposes of reference only and shall not limit or otherwise affect the meaning of any of the provisions hereof. 12. Counterparts. This Agreement may be executed in two or more counterparts, and it will not be necessary that the signatures of all parties hereto be contained on any one counterpart hereof. Each counterpart will be deemed an original, but all counterparts together will constitute one and the same instrument. The parties agree that a facsimile of this Agreement signed by the parties will constitute an agreement in accordance with the terms hereof as if all of the parties had executed an original of this Agreement. Very truly yours, FULLNET COMMUNICATIONS, INC. By: --------------------------------------- Timothy J. Kilkenny, President and CEO ACCEPTED AS OF THE ________ DAY OF ____________, 2000: _________________________________________ -4- EX-4.2 3 FORM OF WARRANT CERTIFICATE FOR FLORIDA INVESTORS WARRANT CERTIFICATE THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE FLORIDA SECURITIES ACT IN RELIANCE UPON EXEMPTION PROVISIONS CONTAINED THEREIN. ss.517.061(11)(a)(5) OF THE FLORIDA SECURITIES AND INVESTOR PROTECTION ACT (THE "FLORIDA ACT") PROVIDES THAT ANY PURCHASER OF SECURITIES IN FLORIDA WHICH ARE EXEMPTED FROM REGISTRATION UNDER ss.517.061(11) OF THE FLORIDA ACT MAY WITHDRAW HIS PURCHASE AND RECEIVE A FULL REFUND OF ALL MONIES PAID, WITHIN THREE BUSINESS DAYS AFTER HE TENDERS CONSIDERATION FOR SUCH SECURITIES. THEREFORE, ANY FLORIDA RESIDENT WHO PURCHASES SECURITIES IS ENTITLED TO EXERCISE THE FOREGOING STATUTORY RESCISSION RIGHT WITHIN THREE BUSINESS DAYS AFTER TENDERING CONSIDERATION FOR THE SECURITIES BY TELEPHONE, TELEGRAM, OR LETTER NOTICE TO THE COMPANY AT THE ADDRESS OR TELEPHONE NUMBER SET FORTH IN THIS AGREEMENT. ANY TELEGRAM OR LETTER SHOULD BE SENT OR POSTMARKED PRIOR TO THE END OF THE THIRD BUSINESS DAY. A LETTER SHOULD BE MAILED BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ENSURE ITS RECEIPT AND TO EVIDENCE THE TIME OF MAILING. ANY ORAL REQUESTS SHOULD BE CONFIRMED IN WRITING. THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN. FULLNET COMMUNICATIONS, INC. No.: W-00-0___ ________ Warrants Date: ___________ _____, 2000 THIS IS TO CERTIFY that __________________ or his assigns, as permitted in that certain Warrant Agreement (the "Warrant agreement"), dated of even date herewith, by and among FullNet Communications, Inc. (the "Company") and _________________ is entitled to purchase at any time or from time to time on or after the date hereof, until 5:00 p.m., Central Standard Time on ____________ _____, 2005, an aggregate of _____________________________________ shares of common stock, par value $0.00001 per share, of the Company, for an exercise price per share of $.01 per share as set forth in the Warrant Agreement referred to herein. This Warrant is issued pursuant to the Warrant Agreement, and all rights of the holder of this Warrant are further governed by, and subject to the terms and provisions of such Warrant Agreement, copies of which are available upon request to the Company. The holder of this Warrant and the shares issuable upon the exercise hereof shall be entitled to the benefits, rights and privileges and subject to the obligations, duties and liabilities provided for in the Warrant Agreement. WARRANT CERTIFICATE Page 1 of 4 The issuance of this Warrant and the shares issuable upon the due and timely exercise hereof have not been registered under the Securities Act of 1933, as amended (the "Act"), or any similar state securities law or act, and, as such, no public offering of either this Warrant or any of the shares of common stock issuable upon exercise of this Warrant may be made other than under an exemption under the Act or until the effectiveness of a registration statement under such Act covering such offering. Transfer of this Warrant is restricted pursuant to the terms of Section 8 of the Warrant Agreement. Subject to the provisions of the Act, of the Warrant Agreement and of this Warrant, this Warrant and all rights hereunder are transferable, in whole or in part, only to the extent expressly permitted in such documents and then only at the office of the Company at 200 North Harvey Avenue, Suite 1704, Oklahoma City, Oklahoma 73102, Attention President, by the holder hereof or by a duly authorized attorney-in-fact, upon surrender of this Warrant duly endorsed, together with the Assignment hereof duly endorsed. Until transfer hereof on the books of the Company, the Company may treat the registered holder hereof as the owner hereof for all purposes. THIS WARRANT CERTIFICATE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE COMPANY AND THE HOLDER HEREOF SHALL BE GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF OKLAHOMA, WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES OF OKLAHOMA LAW. IN WITNESS WHEREOF, the Company has caused this Warrant to be executed and its corporate seal to be hereunto affixed by its proper corporate officers thereunto duly authorized. FULLNET COMMUNICATIONS, INC. By:______________________________________ Timothy J. Kilkenny, President and CEO (SEAL) Attest: - ---------------------------------- Jeanette C. Timmons, Secretary WARRANT CERTIFICATE Page 2 of 4 FULLNET COMMUNICATIONS, INC. SUBSCRIPTION ------------ To Be Signed Only Upon Exercise (in whole or in part) of the Warrants TO: FULLNET COMMUNICATIONS, INC. 200 North Harvey, Suite 1704 Oklahoma City, Oklahoma 73102 Attention: President 1. The undersigned, _________________________________, pursuant to the provisions of the Warrant Agreement dated as of ______________ _____, 2000 and the attached Warrant Certificate, hereby agrees to subscribe for the purchase of _______ shares of the common stock of FullNet Communications, Inc. covered by the attached Warrant Certificate, and makes payment therefore in full at the price per share provided by the Warrant Agreement. 2. The undersigned Holder elects to pay the aggregate purchase price for such shares of common stock (i) by lawful money of the United States or the enclosed certified or official bank check payable in United States dollars to the order of the Company in the amount of $______________, or (ii) by wire transfer of United States funds to the account of the Company in the amount of $___________, which transfer has been made before or simultaneously with the delivery of this Subscription pursuant to the instructions of the Company. 3. Please issue a stock certificate or certificates representing the appropriate number of shares of common stock in the name of the undersigned or in such other name(s) as is specified below: - -------------------------------------- -------------------------------------- (Name) (Social Security or Fed ID #) - -------------------------------------- -------------------------------------- (Signature) (Address) - -------------------------------------- -------------------------------------- (Date) (Address) WARRANT CERTIFICATE Page 3 of 4 ASSIGNMENT ---------- FOR VALUE RECEIVED ____________________________ hereby sells, assigns and transfer unto ______________________ the foregoing Warrant and all rights evidenced thereby, and does irrevocably constitute and appoint ________________________, attorney, to transfer said Warrant on the books of FullNet Communications, Inc. - ----------------------------------- ---------------------------------------- (Name) (Name of Assignee) - ----------------------------------- ---------------------------------------- (Signature) (Signature of Assignee) - ----------------------------------- ---------------------------------------- (Social Security or Fed ID #) (Social Security or Fed ID # of Assignee) - ----------------------------------- ---------------------------------------- - ----------------------------------- ---------------------------------------- (Address) (Address of Assignee) - ----------------------------------- (Date) PARTIAL ASSIGNMENT ------------------ FOR VALUE RECEIVED ____________________________ hereby sells, assigns and transfer unto ______________________ the right to purchase _____ shares of the common stock of FullNet Communications, Inc. by the foregoing Warrant, and a proportionate part of said Warrant and the rights evidenced thereby, and does irrevocably constitute and appoint ________________________, attorney, to transfer that part of said Warrant on the books of FullNet Communications, Inc. - ----------------------------------- ---------------------------------------- (Name) (Name of Assignee) - ----------------------------------- ---------------------------------------- (Signature) (Signature of Assignee) - ----------------------------------- ---------------------------------------- (Social Security or Fed ID #) (Social Security or Fed ID # of Assignee) - ----------------------------------- ---------------------------------------- - ----------------------------------- ---------------------------------------- (Address) (Address of Assignee) - ----------------------------------- (Date) WARRANT CERTIFICATE PAGE 4 OF 4 EX-4.3 4 FORM OF PROMISSORY NOTE FOR FLORIDA INVESTORS THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), NOR UNDER ANY STATE SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNTIL (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAW OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE COMPANY OR OTHER COUNSEL TO THE HOLDER OF SUCH NOTE WHICH OTHER COUNSEL IS REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH NOTE MAY BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE FLORIDA SECURITIES ACT IN RELIANCE UPON EXEMPTION PROVISIONS CONTAINED THEREIN. ss.517.061(11)(a)(5) OF THE FLORIDA SECURITIES AND INVESTOR PROTECTION ACT (THE "FLORIDA ACT") PROVIDES THAT ANY PURCHASER OF SECURITIES IN FLORIDA WHICH ARE EXEMPTED FROM REGISTRATION UNDER ss.517.061(11) OF THE FLORIDA ACT MAY WITHDRAW HIS PURCHASE AND RECEIVE A FULL REFUND OF ALL MONIES PAID, WITHIN THREE BUSINESS DAYS AFTER HE TENDERS CONSIDERATION FOR SUCH SECURITIES. THEREFORE, ANY FLORIDA RESIDENT WHO PURCHASES SECURITIES IS ENTITLED TO EXERCISE THE FOREGOING STATUTORY RESCISSION RIGHT WITHIN THREE BUSINESS DAYS AFTER TENDERING CONSIDERATION FOR THE SECURITIES BY TELEPHONE, TELEGRAM, OR LETTER NOTICE TO THE COMPANY AT THE ADDRESS OR TELEPHONE NUMBER SET FORTH IN THIS AGREEMENT. ANY TELEGRAM OR LETTER SHOULD BE SENT OR POSTMARKED PRIOR TO THE END OF THE THIRD BUSINESS DAY. A LETTER SHOULD BE MAILED BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ENSURE ITS RECEIPT AND TO EVIDENCE THE TIME OF MAILING. ANY ORAL REQUESTS SHOULD BE CONFIRMED IN WRITING. FULLNET COMMUNICATIONS, INC. 14% Promissory Note DATED: _________ _____, 2000 PRINCIPAL AMOUNT (US$): $________ FULLNET COMMUNICATIONS, INC., an Oklahoma corporation (the "Company"), for value received, hereby promises to pay to _____________, residing at ______________________________________________________________________________ or registered assigns (the "Payee" or "Holder") upon due presentation and surrender of this Note on the Repayment Date (as hereinafter defined) the principal amount of __________________________________________________________, and accrued interest thereon as hereinafter provided. Page 1 of 6 1. PAYMENT OF PRINCIPAL AND INTEREST; METHOD OF PAYMENT. 1.1 Payment. Payment of the principal and accrued interest on this Note shall be made in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. Interest (computed for the actual number of days elapsed on the basis of a year consisting of 365 days) on the unpaid portion of said principal amount from time to time outstanding shall be paid by the Company at the rate of fourteen percent (14%) per annum (the "Stated Interest Rate"), said interest payable to the Payee on the 10th day following the end of each calendar month. The principal shall be due and payable on the Repayment Date, which payment shall be made only upon presentation and surrender of this Note to the Company at its address set forth herein. The Company will pay or cause to be paid all sums becoming due hereon for principal and interest by check sent to the Holder's above address or to such other address as the Holder may designate for such purpose from time to time by written notice to the Company, 1.2 Repayment Date. (a) For purposes hereof, unless sooner repaid by the Company, the "Repayment Date" shall mean the earlier of the following dates: (i) the date which is within five (5) days of receipt of funds by the Company of any offering raising gross proceeds to the Company of at least $1,250,000 (which offering the Company intends to conduct but of which there is no assurance); provided, however, if funds related to any such offering are received in tranches, "Repayment Date" shall be deemed to mean the date which is within five (5) days of receipt of first funds received by the Company, or (ii) the date which is six (6) months after the above-stated issuance date of this Note (the "Initial Six-Month Term"), unless extended pursuant to Section 1.2(b) hereunder. (b) The Company may, by written notice to the Holder within ten (10) days prior to the end of the Initial Six-Month Term and the delivery to Holder with such notice of __________ Warrants (as such term is defined in Section 1.3 hereof), extend the Repayment Date for an additional ninety (90) days (the "First Extension Period"); provided, however, that the Company may, by written notice to the Holder within ten (10) days prior to the end of the First Extension Period and the delivery to Holder with such notice of another _________ Warrants (as such term is defined in Section 1.3 hereof), extend the Repayment Date for a second ninety (90) day period (the "Second Extension Period"), in which case all principal and any accrued and unpaid interest thereon shall be due and payable on the last day of the Second Extension Period. 1.3 Issuance of Common Stock Purchase Warrants. In addition to the interest payable pursuant to Section 1.1 above, the Company agrees to issue to the Holder as additional compensation, __________ common stock purchase warrants (the "Warrants"), giving the Holder the right to purchase from the Company _________ shares of the Company's $.00001 common stock ("Common Stock"), at the per share price and on the terms set forth in the Warrants, a form of which is attached hereto as Exhibit "A." The Warrants are deemed earned on the initial advance by the Holder under this Agreement and will not terminate on the payment or prepayment of this Note. Page 2 of 6 1.4 Prepayment. The Note may be prepaid in full or in part by the Company at any time prior to the Repayment Date. Any prepayment of this Note shall be applied first to any accrued but unpaid interest, then to the principal amount of the Note. 2. RANKING OF NOTE. 2.1 Junior to Existing Debt. The Company, for itself, its successors and assigns, covenants and agrees, and the Payee and each successive Holder by acceptance of this Note, likewise covenants and agrees that the payment of the principal of and interest on this Note ranks junior and is subordinate to all existing indebtedness, including trade debt. 2.2 Indebtedness. "Indebtedness" means (a) any liability of the Company (i) for borrowed money, or (ii) evidenced by a note, debenture, bond or other instrument of indebtedness (including, without limitation, a purchase money obligation), given in connection with the acquisition of property, assets or services, (iii) for the payment of rent or other amounts relating to capitalized lease obligations, or (iv) trade accounts payable and trade credit; (b) any liability of others described in the preceding clause (a) which the Company has guaranteed or which is otherwise its legal liability; and (c) any modification, renewal, extension, replacement or refunding of any such liability described in the preceding clauses (a) and (b) except that Indebtedness. 2.3 Further Actions. The Holder agrees to execute such subordination agreements, instruments or waivers as may be reasonably necessary to reflect the subordination of this Note to the Indebtedness. 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to the Holder that the Company: (a) is a corporation duly organized, validly existing and in good standing under the laws of the State of Oklahoma; (b) has all requisite power and authority and all necessary licenses and permits to own and operate its properties and to carry on its business as now conducted and as presently proposed to be conducted, the failure of which would not have a material adverse effect on the business, operations, properties, liabilities or condition (financial or otherwise) of the Company; and (c) has adequate authority, power and legal right to enter into, execute and deliver the Note. On execution and delivery, the Note will be a legal, valid and binding obligation of the Company enforceable in accordance with its terms. Page 3 of 6 4. EVENTS OF DEFAULT. It shall be an Event of Default with respect to this Note upon the occurrence and continuation uncured of any of the following events: 4.1 Default in Payment, Etc. (a) A default in the payment of any interest or principal payments on this Note, and such default shall continue uncured for fifteen (15) days after due date and notice is received from Holder of such default for the making of such interest or principal payment; or (b) default in the performance, or breach, of any other covenant of the Company in this Note and continuance of such default or breach uncured for a period of thirty (30) days after receipt of notice as to such breach or after the Company knew or should have known of such breach. 4.2 Bankruptcy. The entry of a decree or order by a court having jurisdiction adjudging the Company a bankrupt or insolvent, or approving a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company, under federal bankruptcy law, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency or other similar law, and the continuance of any such decree or order unstayed and in effect for a period of sixty (60) days; or the commencement by the Company of a voluntary case under federal bankruptcy law, as now or hereafter constituted, or any other applicable Federal or state bankruptcy, insolvency, or other similar law, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under federal bankruptcy law or any other applicable Federal or state law, or the consent by it to the filing of such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action. 5. REMEDIES UPON DEFAULT. 5.1 Acceleration. Upon an Event of Default and at any time during the continuation thereof, the Holder, by notice in writing given to the Company, may declare the entire principal of this Note then outstanding to be due and payable immediately, and upon any such declaration the same shall become and be due and payable immediately, anything herein contained to the contrary notwithstanding. 5.2 Proceedings and Actions. During the continuation of any Event of Default, the Holder may institute such actions or proceedings in law or equity as it shall deem expedient for the protection of its rights and may prosecute and enforce its claims against all assets of the Company, and in connection with any such action or proceeding shall be entitled to receive from the Company payment of the principal amount of this Note plus accrued interest to the date of payment plus reasonable expenses of collection including, without limitation, attorney's fees and expenses. Page 4 of 6 6. RESTRICTIONS ON TRANSFER. 6.1 The Holder acknowledges that he has been advised by the Company that this Note has not been registered under the Act, that the Note is being issued on the basis of the statutory exemption provided by section 4(2) of the Act and/or Regulation D promulgated thereunder relating to transactions by an issuer not involving any public offering, and that the Company's reliance thereon is based in part upon the representations made by the Holder in the Holder's Investor Representation Letter, previously furnished to the Company. The Holder acknowledges that he has been informed by the Company of, or is otherwise familiar with, the nature of the limitations imposed by the Act and the rules and regulations thereunder on the transfer of securities. In particular, the Holder agrees that no sale, assignment or transfer of the Note shall be valid or effective, and the Company shall not be required to give any effect to any such sale, assignment or transfer, unless (i) the sale, assignment or transfer of the Note is registered under the Act, it being understood that the Note is not currently registered for sale and that the Company has no obligation or intention to so register the Notes, or (ii) the Note is sold, assigned or transferred in accordance with all the requirements and limitations of Rule 144 under the Act, it being understood that Rule 144 is not available at the present time for the sale of the Note and that there can be no assurance that Rule 144 sales will be available at any time in the future, or (iii) such sale, assignment, or transfer is otherwise exempt from registration under the Act. The Holder of this Note and each transferee hereof further agrees that if any distribution of this Note is proposed to be made by them otherwise than by delivery of a prospectus meeting the requirements of Section 10 of the Act, such action shall be taken only after submission to the Company of an opinion of counsel, reasonably satisfactory in form and substance to the Company's counsel, to the effect that the proposed distribution will not be in violation of the Act or of applicable state law. Furthermore, it shall be a condition to the transfer of this Note that any transferee thereof deliver to the Company his written agreement to accept and be bound by all of the terms and conditions contained in this Note. 7. MISCELLANEOUS. 7.1 No Recourse. No recourse whatsoever, either directly or through the Company or any trustee, receiver or assignee, shall be had in any event or in any manner against any past, present or future stockholder, director or officer of the Company for the payment of the principal of or interest on this Note or for any claim based thereon or otherwise in respect this Note, this Note being a corporate obligation only. 7.2 Notices. All communications provided hereunder shall be in writing and, if to the Company, delivered or mailed by registered or certified mail addressed to FullNet Communications, Inc., 200 North Harvey Avenue, Suite 1704, Oklahoma City, Oklahoma 73102 or, if to the Holder, at _____________________________________. Page 5 of 6 7.3 Lost, Stolen or Mutilated Note. In case this Note shall be mutilated, lost, stolen or destroyed, the Company may, in its discretion, issue and deliver in exchange and substitution for and upon cancellation of the mutilated Note, or in lieu of and substitution for the Note, lost, stolen or destroyed, a new Note of like tenor and representing an equivalent right or interest, but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction and an indemnity, if requested, also satisfactory to it. 7.4 Course of Dealing. No course of dealing between the Company and the Holder hereof shall operate as a waiver of any right of any Holder hereof, and no delay on the part of the Holder in exercising any right hereunder shall so operate. 7.5 Amendments. This Note may be amended only by a written instrument executed by the Company and the Holder hereof. Any amendment shall be endorsed upon this Note, and all future holders shall be bound thereby. 7.6 Governing Law. This Note shall be construed in accordance with and governed by the laws of the State of Oklahoma, without giving effect to conflict of laws principles. DATED the date first written above. FULLNET COMMUNICATIONS, INC. By:________________________________________ Timothy J. Kilkenny, President and Chief Executive Officer (SEAL) Attest: ________________________________________ Jeanette C. Timmons, Secretary Page 6 of 6 EX-4.4 5 WARRANT CERTIFICATE FOR GEORGIA INVESTORS WARRANT CERTIFICATE ------------------- THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE. THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13) OF CODE SECTION 10-5-9 OF THE "GEORGIA SECURITIES ACT OF 1973," AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT. THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN. FULLNET COMMUNICATIONS, INC. No.: W-00-01 __________Warrants Date: February __, 2000 THIS IS TO CERTIFY that ____________ or its assigns, as permitted in that certain Warrant Agreement (the "Warrant agreement"), dated of even date herewith, by and among FullNet Communications, Inc. (the "Company") and ___________ is entitled to purchase at any time or from time to time on or after February __, 2001, until 5:00 p.m., Central Standard Time on February __, 2004, an aggregate of __________________________________________________ (___________) shares of common stock, par value $0.00001 per share, of the Company, for an exercise price per share of $.01 per share as set forth in the Warrant Agreement referred to herein. This Warrant is issued pursuant to the Warrant Agreement, and all rights of the holder of this Warrant are further governed by, and subject to the terms and provisions of such Warrant Agreement, copies of which are available upon request to the Company. The holder of this Warrant and the shares issuable upon the exercise hereof shall be entitled to the benefits, rights and privileges and subject to the obligations, duties and liabilities provided for in the Warrant Agreement. The issuance of this Warrant and the shares issuable upon the due and timely exercise hereof have not been registered under the Securities Act of 1933, as amended (the "Act"), or any similar state securities law or act, and, as such, no public offering of either this Warrant or any of the shares of common stock issuable upon exercise of this Warrant may be made other than under an exemption under the Act or until the effectiveness of a registration statement under such Act covering such offering. Transfer of this Warrant is restricted pursuant to the terms of Section 8 of the Warrant Agreement. WARRANT CERTIFICATE Page 1 of 4 Subject to the provisions of the Act, of the Warrant Agreement and of this Warrant, this Warrant and all rights hereunder are transferable, in whole or in part, only to the extent expressly permitted in such documents and then only at the office of the Company at 200 North Harvey Avenue, Suite 1704, Oklahoma City, Oklahoma 73102, Attention President, by the holder hereof or by a duly authorized attorney-in-fact, upon surrender of this Warrant duly endorsed, together with the Assignment hereof duly endorsed. Until transfer hereof on the books of the Company, the Company may treat the registered holder hereof as the owner hereof for all purposes. THIS WARRANT CERTIFICATE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE COMPANY AND THE HOLDER HEREOF SHALL BE GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF OKLAHOMA, WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES OF OKLAHOMA LAW. IN WITNESS WHEREOF, the Company has caused this Warrant to be executed and its corporate seal to be hereunto affixed by its proper corporate officers thereunto duly authorized. FULLNET COMMUNICATIONS, INC. By:_______________________________________ Timothy J. Kilkenney, President and CEO (SEAL) Attest: _______________________________________ Jeanette C. Timmons, Secretary WARRANT CERTIFICATE Page 2 of 4 FULLNET COMMUNICATIONS, INC. SUBSCRIPTION ------------ To Be Signed Only Upon Exercise (in whole or in part) of the Warrants TO: FULLNET COMMUNICATIONS, INC. 200 North Harvey, Suite 1704 Oklahoma City, Oklahoma 73102 Attention: President 1. The undersigned, _________________________________, pursuant to the provisions of the Warrant Agreement dated as of February __, 2000 and the attached Warrant Certificate, hereby agrees to subscribe for the purchase of _______ shares of the common stock of FullNet Communications, Inc. covered by the attached Warrant Certificate, and makes payment therefor in full at the price per share provided by the Warrant Agreement. 2. The undersigned Holder elects to pay the aggregate purchase price for such shares of common stock (i) by lawful money of the United States or the enclosed certified or official bank check payable in United States dollars to the order of the Company in the amount of $______________, or (ii) by wire transfer of United States funds to the account of the Company in the amount of $___________, which transfer has been made before or simultaneously with the delivery of this Subscription pursuant to the instructions of the Company. 3. Please issue a stock certificate or certificates representing the appropriate number of shares of common stock in the name of the undersigned or in such other name(s) as is specified below: - -------------------------------------- -------------------------------------- (Name) (Social Security or Fed ID #) - -------------------------------------- -------------------------------------- (Signature) (Address) - -------------------------------------- -------------------------------------- (Date) (Address) WARRANT CERTIFICATE Page 3 of 4 ASSIGNMENT FOR VALUE RECEIVED ____________________________ hereby sells, assigns and transfer unto ______________________ the foregoing Warrant and all rights evidenced thereby, and does irrevocably constitute and appoint ________________________, attorney, to transfer said Warrant on the books of FullNet Communications, Inc. - ------------------------------------ ---------------------------------------- (Name) (Name of Assignee) - ------------------------------------ ---------------------------------------- (Signature) (Signature of Assignee) - ------------------------------------ ---------------------------------------- (Social Security or Fed ID #) (Social Security or Fed ID # of Assignee) - ------------------------------------ ---------------------------------------- - ------------------------------------ ---------------------------------------- (Address) (Address of Assignee) - ------------------------------------ (Date) PARTIAL ASSIGNMENT ------------------ FOR VALUE RECEIVED ____________________________ hereby sells, assigns and transfer unto ______________________ the right to purchase _____ shares of the common stock of FullNet Communications, Inc. by the foregoing Warrant, and a proportionate part of said Warrant and the rights evidenced thereby, and does irrevocably constitute and appoint ________________________, attorney, to transfer that part of said Warrant on the books of FullNet Communications, Inc. - ------------------------------------ ---------------------------------------- (Name) (Name of Assignee) - ------------------------------------ ---------------------------------------- (Signature) (Signature of Assignee) - ------------------------------------ ---------------------------------------- (Social Security or Fed ID #) (Social Security or Fed ID # of Assignee) - ------------------------------------ ---------------------------------------- - ------------------------------------ ---------------------------------------- (Address) (Address of Assignee) - ------------------------------------ (Date) WARRANT CERTIFICATE Page 4 of 4 EX-4.5 6 PROMISSORY NOTE FOR GEORGIA INVESTORS THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), NOR UNDER ANY STATE SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNTIL (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAW OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE COMPANY OR OTHER COUNSEL TO THE HOLDER OF SUCH NOTE WHICH OTHER COUNSEL IS REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH NOTE MAY BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13) OF CODE SECTION 10-5-9 OF THE "GEORGIA SECURITIES ACT OF 1973," AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT. FULLNET COMMUNICATIONS, INC. 14% Promissory Note DATED: ___________ ____, 2000 PRINCIPAL AMOUNT (US$): $________ FULLNET COMMUNICATIONS, INC., an Oklahoma corporation (the "Company"), for value received, hereby promises to pay to _________________________, residing at _____________________________________________________ or registered assigns (the "Payee" or "Holder") upon due presentation and surrender of this Note on the Repayment Date (as hereinafter defined) the principal amount of ____________________________, and accrued interest thereon as hereinafter provided. 1. PAYMENT OF PRINCIPAL AND INTEREST; METHOD OF PAYMENT. 1.1 Payment. Payment of the principal and accrued interest on this Note shall be made in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. Interest (computed for the actual number of days elapsed on the basis of a year consisting of 365 days) on the unpaid portion of said principal amount from time to time outstanding shall be paid by the Company at the rate of fourteen percent (14%) per annum (the "Stated Interest Rate"), said interest payable to the Payee on the 10th day following the end of each calendar month. The principal shall be due and payable on the Repayment Date, which payment shall be made only upon presentation and surrender of this Note to the Company at its address set forth herein. The Company will pay or cause to be paid all sums becoming due hereon for principal and interest by check sent to the Holder's above address or to such other address as the Holder may designate for such purpose from time to time by written notice to the Company, Page 1 of 6 1.2 Repayment Date. (a) For purposes hereof, unless sooner repaid by the Company, the "Repayment Date" shall mean the earlier of the following dates: (i) the date which is within five (5) days of receipt of funds by the Company of any offering raising gross proceeds to the Company of at least $1,250,000 (which offering the Company intends to conduct but of which there is no assurance); provided, however, if funds related to any such offering are received in tranches, "Repayment Date" shall be deemed to mean the date which is within five (5) days of receipt of first funds received by the Company, or (ii) the date which is six (6) months after the above-stated issuance date of this Note (the "Initial Six-Month Term"), unless extended pursuant to Section 1.2(b) hereunder. (b) The Company may, by written notice to the Holder within ten (10) days prior to the end of the Initial Six-Month Term and the delivery to Holder with such notice of ________ Warrants (as such term is defined in Section 1.3 hereof), extend the Repayment Date for an additional ninety (90) days (the "First Extension Period"); provided, however, that the Company may, by written notice to the Holder within ten (10) days prior to the end of the First Extension Period and the delivery to Holder with such notice of another _________ Warrants (as such term is defined in Section 1.3 hereof), extend the Repayment Date for a second ninety (90) day period (the "Second Extension Period"), in which case all principal and any accrued and unpaid interest thereon shall be due and payable on the last day of the Second Extension Period. 1.3 Issuance of Common Stock Purchase Warrants. In addition to the interest payable pursuant to Section 1.1 above, the Company agrees to issue to the Holder as additional compensation, ________ common stock purchase warrants (the "Warrants"), giving the Holder the right to purchase from the Company ________ shares of the Company's $.00001 common stock ("Common Stock"), at the per share price and on the terms set forth in the Warrants, a form of which is attached hereto as Exhibit "A." The Warrants are deemed earned on the initial advance by the Holder under this Agreement and will not terminate on the payment or prepayment of this Note. 1.4 Prepayment. The Note may be prepaid in full or in part by the Company at any time prior to the Repayment Date. Any prepayment of this Note shall be applied first to any accrued but unpaid interest, then to the principal amount of the Note. 2. RANKING OF NOTE. 2.1 Junior to Existing Debt. The Company, for itself, its successors and assigns, covenants and agrees, and the Payee and each successive Holder by acceptance of this Note, likewise covenants and agrees that the payment of the principal of and interest on this Note ranks junior and is subordinate to all existing indebtedness, including trade debt. Page 2 of 6 2.2 Indebtedness. "Indebtedness" means (a) any liability of the Company (i) for borrowed money, or (ii) evidenced by a note, debenture, bond or other instrument of indebtedness (including, without limitation, a purchase money obligation), given in connection with the acquisition of property, assets or services, (iii) for the payment of rent or other amounts relating to capitalized lease obligations, or (iv) trade accounts payable and trade credit; (b) any liability of others described in the preceding clause (a) which the Company has guaranteed or which is otherwise its legal liability; and (c) any modification, renewal, extension, replacement or refunding of any such liability described in the preceding clauses (a) and (b) except that Indebtedness. 2.3 Further Actions. The Holder agrees to execute such subordination agreements, instruments or waivers as may be reasonably necessary to reflect the subordination of this Note to the Indebtedness. 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to the Holder that the Company: (a) is a corporation duly organized, validly existing and in good standing under the laws of the State of Oklahoma; (b) has all requisite power and authority and all necessary licenses and permits to own and operate its properties and to carry on its business as now conducted and as presently proposed to be conducted, the failure of which would not have a material adverse effect on the business, operations, properties, liabilities or condition (financial or otherwise) of the Company; and (c) has adequate authority, power and legal right to enter into, execute and deliver the Note. On execution and delivery, the Note will be a legal, valid and binding obligation of the Company enforceable in accordance with its terms. 4. EVENTS OF DEFAULT. It shall be an Event of Default with respect to this Note upon the occurrence and continuation uncured of any of the following events: 4.1 Default in Payment, Etc. (a) A default in the payment of any interest or principal payments on this Note, and such default shall continue uncured for fifteen (15) days after due date and notice is received from Holder of such default for the making of such interest or principal payment; or (b) default in the performance, or breach, of any other covenant of the Company in this Note and continuance of such default or breach uncured for a period of thirty (30) days after receipt of notice as to such breach or after the Company knew or should have known of such breach. Page 3 of 6 4.2 Bankruptcy. The entry of a decree or order by a court having jurisdiction adjudging the Company a bankrupt or insolvent, or approving a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company, under federal bankruptcy law, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency or other similar law, and the continuance of any such decree or order unstayed and in effect for a period of sixty (60) days; or the commencement by the Company of a voluntary case under federal bankruptcy law, as now or hereafter constituted, or any other applicable Federal or state bankruptcy, insolvency, or other similar law, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under federal bankruptcy law or any other applicable Federal or state law, or the consent by it to the filing of such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action. 5. REMEDIES UPON DEFAULT. 5.1 Acceleration. Upon an Event of Default and at any time during the continuation thereof, the Holder, by notice in writing given to the Company, may declare the entire principal of this Note then outstanding to be due and payable immediately, and upon any such declaration the same shall become and be due and payable immediately, anything herein contained to the contrary notwithstanding. 5.2 Proceedings and Actions. During the continuation of any Event of Default, the Holder may institute such actions or proceedings in law or equity as it shall deem expedient for the protection of its rights and may prosecute and enforce its claims against all assets of the Company, and in connection with any such action or proceeding shall be entitled to receive from the Company payment of the principal amount of this Note plus accrued interest to the date of payment plus reasonable expenses of collection including, without limitation, attorney's fees and expenses. 6. RESTRICTIONS ON TRANSFER. 6.1 The Holder acknowledges that he has been advised by the Company that this Note has not been registered under the Act, that the Note is being issued on the basis of the statutory exemption provided by section 4(2) of the Act and/or Regulation D promulgated thereunder relating to transactions by an issuer not involving any public offering, and that the Company's reliance thereon is based in part upon the representations made by the Holder in the Holder's Investor Representation Letter, previously furnished to the Company. Page 4 of 6 The Holder acknowledges that he has been informed by the Company of, or is otherwise familiar with, the nature of the limitations imposed by the Act and the rules and regulations thereunder on the transfer of securities. In particular, the Holder agrees that no sale, assignment or transfer of the Note shall be valid or effective, and the Company shall not be required to give any effect to any such sale, assignment or transfer, unless (i) the sale, assignment or transfer of the Note is registered under the Act, it being understood that the Note is not currently registered for sale and that the Company has no obligation or intention to so register the Notes, or (ii) the Note is sold, assigned or transferred in accordance with all the requirements and limitations of Rule 144 under the Act, it being understood that Rule 144 is not available at the present time for the sale of the Note and that there can be no assurance that Rule 144 sales will be available at any time in the future, or (iii) such sale, assignment, or transfer is otherwise exempt from registration under the Act. The Holder of this Note and each transferee hereof further agrees that if any distribution of this Note is proposed to be made by them otherwise than by delivery of a prospectus meeting the requirements of Section 10 of the Act, such action shall be taken only after submission to the Company of an opinion of counsel, reasonably satisfactory in form and substance to the Company's counsel, to the effect that the proposed distribution will not be in violation of the Act or of applicable state law. Furthermore, it shall be a condition to the transfer of this Note that any transferee thereof deliver to the Company his written agreement to accept and be bound by all of the terms and conditions contained in this Note. 7. MISCELLANEOUS. 7.1 No Recourse. No recourse whatsoever, either directly or through the Company or any trustee, receiver or assignee, shall be had in any event or in any manner against any past, present or future stockholder, director or officer of the Company for the payment of the principal of or interest on this Note or for any claim based thereon or otherwise in respect this Note, this Note being a corporate obligation only. 7.2 Notices. All communications provided hereunder shall be in writing and, if to the Company, delivered or mailed by registered or certified mail addressed to FullNet Communications, Inc., 200 North Harvey Avenue, Suite 1704, Oklahoma City, Oklahoma 73102 or, if to the Holder, at - -------------------------------------------. 7.3 Lost, Stolen or Mutilated Note. In case this Note shall be mutilated, lost, stolen or destroyed, the Company may, in its discretion, issue and deliver in exchange and substitution for and upon cancellation of the mutilated Note, or in lieu of and substitution for the Note, lost, stolen or destroyed, a new Note of like tenor and representing an equivalent right or interest, but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction and an indemnity, if requested, also satisfactory to it. 7.4 Course of Dealing. No course of dealing between the Company and the Holder hereof shall operate as a waiver of any right of any Holder hereof, and no delay on the part of the Holder in exercising any right hereunder shall so operate. 7.5 Amendments. This Note may be amended only by a written instrument executed by the Company and the Holder hereof. Any amendment shall be endorsed upon this Note, and all future holders shall be bound thereby. Page 5 of 6 7.6 Governing Law. This Note shall be construed in accordance with and governed by the laws of the State of Oklahoma, without giving effect to conflict of laws principles. DATED the date first written above. FULLNET COMMUNICATIONS, INC. By:________________________________________ Timothy J. Kilkenney, President and Chief Executive Officer (SEAL) Attest: ________________________________________ Jeanette C. Timmons, Secretary Page 6 of 6 EX-4.6 7 FORM OF WARRANT AGREEMENT FOR ILLINOIS INVESTORS WARRANT CERTIFICATE ------------------- THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE. THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN. FULLNET COMMUNICATIONS, INC. No.: W-00-0___ _________ Warrants Date: _________ ____, 2000 THIS IS TO CERTIFY that _________________ or its assigns, as permitted in that certain Warrant Agreement (the "Warrant agreement"), dated of even date herewith, by and among FullNet Communications, Inc. (the "Company") and __________________ is entitled to purchase at any time or from time to time on or after the date hereof, until 5:00 p.m., Central Standard Time on _______________ ____, 2005, an aggregate of __________________________________ shares of common stock, par value $0.00001 per share, of the Company, for an exercise price per share of $.01 per share as set forth in the Warrant Agreement referred to herein. This Warrant is issued pursuant to the Warrant Agreement, and all rights of the holder of this Warrant are further governed by, and subject to the terms and provisions of such Warrant Agreement, copies of which are available upon request to the Company. The holder of this Warrant and the shares issuable upon the exercise hereof shall be entitled to the benefits, rights and privileges and subject to the obligations, duties and liabilities provided for in the Warrant Agreement. The issuance of this Warrant and the shares issuable upon the due and timely exercise hereof have not been registered under the Securities Act of 1933, as amended (the "Act"), or any similar state securities law or act, and, as such, no public offering of either this Warrant or any of the shares of common stock issuable upon exercise of this Warrant may be made other than under an exemption under the Act or until the effectiveness of a registration statement under such Act covering such offering. Transfer of this Warrant is restricted pursuant to the terms of Section 8 of the Warrant Agreement. Subject to the provisions of the Act, of the Warrant Agreement and of this Warrant, this Warrant and all rights hereunder are transferable, in whole or in part, only to the extent expressly permitted in such documents and then only at the office of the Company at 200 North Harvey Avenue, Suite 1704, Oklahoma City, Oklahoma 73102, Attention President, by the holder hereof or by a duly authorized attorney-in-fact, upon surrender of this Warrant duly endorsed, together with the Assignment hereof duly endorsed. Until transfer hereof on the books of the Company, the Company may treat the registered holder hereof as the owner hereof for all purposes. WARRANT CERTIFICATE Page 1 of 4 THIS WARRANT CERTIFICATE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE COMPANY AND THE HOLDER HEREOF SHALL BE GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF OKLAHOMA, WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES OF OKLAHOMA LAW. IN WITNESS WHEREOF, the Company has caused this Warrant to be executed and its corporate seal to be hereunto affixed by its proper corporate officers thereunto duly authorized. FULLNET COMMUNICATIONS, INC. By:_______________________________________ Timothy J. Kilkenney, President and CEO (SEAL) Attest: ___________________________________ Jeanette C. Timmons, Secretary WARRANT CERTIFICATE Page 2 of 4 FULLNET COMMUNICATIONS, INC. SUBSCRIPTION ------------ To Be Signed Only Upon Exercise (in whole or in part) of the Warrants TO: FULLNET COMMUNICATIONS, INC. 200 North Harvey, Suite 1704 Oklahoma City, Oklahoma 73102 Attention: President 1. The undersigned, _________________________________, pursuant to the provisions of the Warrant Agreement dated as of _____________ ____, 2000 and the attached Warrant Certificate, hereby agrees to subscribe for the purchase of _______ shares of the common stock of FullNet Communications, Inc. covered by the attached Warrant Certificate, and makes payment therefore in full at the price per share provided by the Warrant Agreement. 2. The undersigned Holder elects to pay the aggregate purchase price for such shares of common stock (i) by lawful money of the United States or the enclosed certified or official bank check payable in United States dollars to the order of the Company in the amount of $______________, or (ii) by wire transfer of United States funds to the account of the Company in the amount of $___________, which transfer has been made before or simultaneously with the delivery of this Subscription pursuant to the instructions of the Company. 3. Please issue a stock certificate or certificates representing the appropriate number of shares of common stock in the name of the undersigned or in such other name(s) as is specified below: - -------------------------------------- -------------------------------------- (Name) (Social Security or Fed ID #) - -------------------------------------- -------------------------------------- (Signature) (Address) - -------------------------------------- -------------------------------------- (Date) (Address) WARRANT CERTIFICATE Page 3 of 4 ASSIGNMENT ---------- FOR VALUE RECEIVED ____________________________ hereby sells, assigns and transfer unto ______________________ the foregoing Warrant and all rights evidenced thereby, and does irrevocably constitute and appoint ________________________, attorney, to transfer said Warrant on the books of FullNet Communications, Inc. - ------------------------------------ ---------------------------------------- (Name) (Name of Assignee) - ------------------------------------ ---------------------------------------- (Signature) (Signature of Assignee) - ------------------------------------ ---------------------------------------- (Social Security or Fed ID #) (Social Security or Fed ID # of Assignee) - ------------------------------------ ---------------------------------------- - ------------------------------------ ---------------------------------------- (Address) (Address of Assignee) - ------------------------------------ (Date) PARTIAL ASSIGNMENT ------------------ FOR VALUE RECEIVED ____________________________ hereby sells, assigns and transfer unto ______________________ the right to purchase _____ shares of the common stock of FullNet Communications, Inc. by the foregoing Warrant, and a proportionate part of said Warrant and the rights evidenced thereby, and does irrevocably constitute and appoint ________________________, attorney, to transfer that part of said Warrant on the books of FullNet Communications, Inc. - ------------------------------------ ---------------------------------------- (Name) (Name of Assignee) - ------------------------------------ ---------------------------------------- (Signature) (Signature of Assignee) - ------------------------------------ ---------------------------------------- (Social Security or Fed ID #) (Social Security or Fed ID # of Assignee) - ------------------------------------ ---------------------------------------- - ------------------------------------ ---------------------------------------- (Address) (Address of Assignee) - ------------------------------------ (Date) WARRANT CERTIFICATE PAGE 4 OF 4 EX-4.7 8 FORM OF PROMISSORY NOTE FOR ILLINOIS INVESTORS THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), NOR UNDER ANY STATE SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNTIL (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAW OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE COMPANY OR OTHER COUNSEL TO THE HOLDER OF SUCH NOTE WHICH OTHER COUNSEL IS REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH NOTE MAY BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS. FULLNET COMMUNICATIONS, INC. 14% Promissory Note DATED: __________ ____, 2000 PRINCIPAL AMOUNT (US$): $_________ FULLNET COMMUNICATIONS, INC., an Oklahoma corporation (the "Company"), for value received, hereby promises to pay to _________________, residing at __________________________________________________ or registered assigns (the "Payee" or "Holder") upon due presentation and surrender of this Note on the Repayment Date (as hereinafter defined) the principal amount of _________________________________, and accrued interest thereon as hereinafter provided. 1. PAYMENT OF PRINCIPAL AND INTEREST; METHOD OF PAYMENT. 1.1 Payment. Payment of the principal and accrued interest on this Note shall be made in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. Interest (computed for the actual number of days elapsed on the basis of a year consisting of 365 days) on the unpaid portion of said principal amount from time to time outstanding shall be paid by the Company at the rate of fourteen percent (14%) per annum (the "Stated Interest Rate"), said interest payable to the Payee on the 10th day following the end of each calendar month. The principal shall be due and payable on the Repayment Date, which payment shall be made only upon presentation and surrender of this Note to the Company at its address set forth herein. The Company will pay or cause to be paid all sums becoming due hereon for principal and interest by check sent to the Holder's above address or to such other address as the Holder may designate for such purpose from time to time by written notice to the Company, Page 1 of 6 1.2 Repayment Date. (a) For purposes hereof, unless sooner repaid by the Company, the "Repayment Date" shall mean the earlier of the following dates: (i) the date which is within five (5) days of receipt of funds by the Company of any offering raising gross proceeds to the Company of at least $1,250,000 (which offering the Company intends to conduct but of which there is no assurance); provided, however, if funds related to any such offering are received in tranches, "Repayment Date" shall be deemed to mean the date which is within five (5) days of receipt of first funds received by the Company, or (ii) the date which is six (6) months after the above-stated issuance date of this Note (the "Initial Six-Month Term"), unless extended pursuant to Section 1.2(b) hereunder. (b) The Company may, by written notice to the Holder within ten (10) days prior to the end of the Initial Six-Month Term and the delivery to Holder with such notice of ___________ Warrants (as such term is defined in Section 1.3 hereof), extend the Repayment Date for an additional ninety (90) days (the "First Extension Period"); provided, however, that the Company may, by written notice to the Holder within ten (10) days prior to the end of the First Extension Period and the delivery to Holder with such notice of another ___________ Warrants (as such term is defined in Section 1.3 hereof), extend the Repayment Date for a second ninety (90) day period (the "Second Extension Period"), in which case all principal and any accrued and unpaid interest thereon shall be due and payable on the last day of the Second Extension Period. 1.3 Issuance of Common Stock Purchase Warrants. In addition to the interest payable pursuant to Section 1.1 above, the Company agrees to issue to the Holder as additional compensation, __________ common stock purchase warrants (the "Warrants"), giving the Holder the right to purchase from the Company ___________ shares of the Company's $.00001 common stock ("Common Stock"), at the per share price and on the terms set forth in the Warrants, a form of which is attached hereto as Exhibit "A." The Warrants are deemed earned on the initial advance by the Holder under this Agreement and will not terminate on the payment or prepayment of this Note. 1.4 Prepayment. The Note may be prepaid in full or in part by the Company at any time prior to the Repayment Date. Any prepayment of this Note shall be applied first to any accrued but unpaid interest, then to the principal amount of the Note. 2. RANKING OF NOTE. 2.1 Junior to Existing Debt. The Company, for itself, its successors and assigns, covenants and agrees, and the Payee and each successive Holder by acceptance of this Note, likewise covenants and agrees that the payment of the principal of and interest on this Note ranks junior and is subordinate to all existing indebtedness, including trade debt. Page 2 of 6 2.2 Indebtedness. "Indebtedness" means (a) any liability of the Company (i) for borrowed money, or (ii) evidenced by a note, debenture, bond or other instrument of indebtedness (including, without limitation, a purchase money obligation), given in connection with the acquisition of property, assets or services, (iii) for the payment of rent or other amounts relating to capitalized lease obligations, or (iv) trade accounts payable and trade credit; (b) any liability of others described in the preceding clause (a) which the Company has guaranteed or which is otherwise its legal liability; and (c) any modification, renewal, extension, replacement or refunding of any such liability described in the preceding clauses (a) and (b) except that Indebtedness. 2.3 Further Actions. The Holder agrees to execute such subordination agreements, instruments or waivers as may be reasonably necessary to reflect the subordination of this Note to the Indebtedness. 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to the Holder that the Company: (a) is a corporation duly organized, validly existing and in good standing under the laws of the State of Oklahoma; (b) has all requisite power and authority and all necessary licenses and permits to own and operate its properties and to carry on its business as now conducted and as presently proposed to be conducted, the failure of which would not have a material adverse effect on the business, operations, properties, liabilities or condition (financial or otherwise) of the Company; and (c) has adequate authority, power and legal right to enter into, execute and deliver the Note. On execution and delivery, the Note will be a legal, valid and binding obligation of the Company enforceable in accordance with its terms. 4. EVENTS OF DEFAULT. It shall be an Event of Default with respect to this Note upon the occurrence and continuation uncured of any of the following events: 4.1 Default in Payment, Etc. (a) A default in the payment of any interest or principal payments on this Note, and such default shall continue uncured for fifteen (15) days after due date and notice is received from Holder of such default for the making of such interest or principal payment; or (b) default in the performance, or breach, of any other covenant of the Company in this Note and continuance of such default or breach uncured for a period of thirty (30) days after receipt of notice as to such breach or after the Company knew or should have known of such breach. Page 3 of 6 4.2 Bankruptcy. The entry of a decree or order by a court having jurisdiction adjudging the Company a bankrupt or insolvent, or approving a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company, under federal bankruptcy law, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency or other similar law, and the continuance of any such decree or order unstayed and in effect for a period of sixty (60) days; or the commencement by the Company of a voluntary case under federal bankruptcy law, as now or hereafter constituted, or any other applicable Federal or state bankruptcy, insolvency, or other similar law, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under federal bankruptcy law or any other applicable Federal or state law, or the consent by it to the filing of such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action. 5. REMEDIES UPON DEFAULT. 5.1 Acceleration. Upon an Event of Default and at any time during the continuation thereof, the Holder, by notice in writing given to the Company, may declare the entire principal of this Note then outstanding to be due and payable immediately, and upon any such declaration the same shall become and be due and payable immediately, anything herein contained to the contrary notwithstanding. 5.2 Proceedings and Actions. During the continuation of any Event of Default, the Holder may institute such actions or proceedings in law or equity as it shall deem expedient for the protection of its rights and may prosecute and enforce its claims against all assets of the Company, and in connection with any such action or proceeding shall be entitled to receive from the Company payment of the principal amount of this Note plus accrued interest to the date of payment plus reasonable expenses of collection including, without limitation, attorney's fees and expenses. 6. RESTRICTIONS ON TRANSFER. 6.1 The Holder acknowledges that he has been advised by the Company that this Note has not been registered under the Act, that the Note is being issued on the basis of the statutory exemption provided by section 4(2) of the Act and/or Regulation D promulgated thereunder relating to transactions by an issuer not involving any public offering, and that the Company's reliance thereon is based in part upon the representations made by the Holder in the Holder's Investor Representation Letter, previously furnished to the Company. The Holder acknowledges that he has been informed by the Company of, or is otherwise familiar with, the nature of the limitations imposed by the Act and the rules and regulations thereunder on the transfer of securities. In particular, the Holder agrees that no sale, assignment or transfer of the Note shall be valid or effective, and the Company shall not be required to give any effect to any such sale, assignment or transfer, unless (i) the sale, assignment or transfer of the Note is registered under the Act, it being understood that the Note is not currently registered for sale and that the Company has no obligation or intention to so register the Notes, or (ii) the Note is sold, assigned or transferred in accordance with all the requirements and limitations of Rule 144 under the Act, it being understood that Rule 144 is not available at the present time for the sale of the Note and that there can be no assurance that Rule 144 sales will be available at any time in the future, or (iii) such sale, assignment, or transfer is otherwise exempt from registration under the Act. The Holder of this Note and each transferee hereof further agrees that if any distribution of this Note is proposed to be made by them otherwise than by delivery of a prospectus meeting the requirements of Section 10 of the Act, such action shall be taken only after submission to the Company of an opinion of counsel, reasonably satisfactory in form and substance to the Company's counsel, to the effect that the proposed distribution will not be in violation of the Act or of applicable state law. Furthermore, it shall be a condition to the transfer of this Note that any transferee thereof deliver to the Company his written agreement to accept and be bound by all of the terms and conditions contained in this Note. Page 4 of 6 7. MISCELLANEOUS. 7.1 No Recourse. No recourse whatsoever, either directly or through the Company or any trustee, receiver or assignee, shall be had in any event or in any manner against any past, present or future stockholder, director or officer of the Company for the payment of the principal of or interest on this Note or for any claim based thereon or otherwise in respect this Note, this Note being a corporate obligation only. 7.2 Notices. All communications provided hereunder shall be in writing and, if to the Company, delivered or mailed by registered or certified mail addressed to FullNet Communications, Inc., 200 North Harvey Avenue, Suite 1704, Oklahoma City, Oklahoma 73102 or, if to the Holder, at - -----------------------------------------------. 7.3 Lost, Stolen or Mutilated Note. In case this Note shall be mutilated, lost, stolen or destroyed, the Company may, in its discretion, issue and deliver in exchange and substitution for and upon cancellation of the mutilated Note, or in lieu of and substitution for the Note, lost, stolen or destroyed, a new Note of like tenor and representing an equivalent right or interest, but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction and an indemnity, if requested, also satisfactory to it. 7.4 Course of Dealing. No course of dealing between the Company and the Holder hereof shall operate as a waiver of any right of any Holder hereof, and no delay on the part of the Holder in exercising any right hereunder shall so operate. 7.5 Amendments. This Note may be amended only by a written instrument executed by the Company and the Holder hereof. Any amendment shall be endorsed upon this Note, and all future holders shall be bound thereby. 7.6 Governing Law. This Note shall be construed in accordance with and governed by the laws of the State of Oklahoma, without giving effect to conflict of laws principles. Page 5 of 6 DATED the date first written above. FULLNET COMMUNICATIONS, INC. By:________________________________________ Timothy J. Kilkenney, President and Chief Executive Officer (SEAL) Attest: ________________________________ Jeanette C. Timmons, Secretary Page 6 of 6 EX-4.8 9 FORM OF WADDELL WARRANT AGREEMENT FULLNET COMMUNICATIONS, INC. (an Oklahoma corporation) WARRANT AGREEMENT _____________ _____, 2000 - ------------------------------- - ------------------------------- - ------------------------------- - ----------------: FullNet Communications, Inc., an Oklahoma corporation (the "Company"), agrees to issue to you warrants (the "Warrants") to purchase the number of shares of common stock, par value $0.00001 per share (the "Common Stock"), of the Company set forth herein, subject to the terms and conditions contained herein. 1. Issuance of Warrants; Exercise Price. The Warrants, which shall be certificated in the form attached hereto as EXHIBIT "A," (each, a "Warrant Certificate") shall be issued to you concurrently with the execution hereof in consideration of the Promissory Loan in the amount of $____________ pursuant to the terms of the 14% Promissory Note dated of even date herewith (the "Note"). The Warrants shall provide that you, or such other holder or holders of the Warrants to whom transfer is authorized in accordance with the terms of this Agreement, shall have the right to purchase an aggregate of _____________ shares of Common Stock for an exercise price equal to $.01 per share (the "Exercise Price"); provided, however, that in the event the Company desires to extend for ninety (90) days the maturity date of the Note, the Company shall issue to you the right to purchase an additional ________ shares of Common Stock at the Exercise Price. The Company shall have the option to extend for two (2) ninety (90) day periods the maturity date of the Note, subject in each case to the grant of additional Warrants as set forth in the preceding sentence. 2. Exercise of Warrants. At any time and from time to time after the date hereof and expiring on the fifth anniversary of the effective date of this Agreement at 5:00 p.m., Central Standard Time, Warrants may be exercised as to all or any portion of the whole number of shares of Common Stock covered by the Warrants by the holder thereof by surrender of the Warrants, accompanied by a subscription for shares to be purchased in the form attached to each Warrant Certificate and by payment to the Company as set forth in the Warrant Certificate in the amount required for purchase of the shares as to which the Warrant is being exercised, delivered to the Company at its principal office at 200 North Harvey Avenue, Suite 1704, Oklahoma City, Oklahoma 73102, Attention: President. Upon the exercise of a Warrant, in whole or in part, the Company will, within ten (10) days thereafter, at its expense (including the payment by the Company of any applicable issue or transfer taxes), cause to be issued in the name of and delivered to the holder a certificate or certificates for the number of fully paid and non-assessable shares of Common Stock to which such holder is entitled upon exercise of the Warrant. In the event such holder is entitled to a fractional share, in lieu thereof, such holder shall be paid a cash amount equal to such fraction, multiplied by the Current Value (as hereafter defined) of one full share of Common Stock on the date of exercise. Certificates for shares of Common Stock issuable by reason of the exercise of the Warrant or Warrants shall be dated and shall be effective as the date of the surrendering of the certificates for the shares so purchased. In the event a Warrant is exercised, as to less than the aggregate amount of all shares of Common Stock issuable upon exercise of all Warrants held by such person, the Company shall issue a new Warrant to the holder of the Warrant so exercised covering the aggregate number of shares of Common Stock as to which Warrants remain unexercised. -1- For purposes of this section, Current Value is defined (i) in the case for which a public market exists for the Common Stock at the time of such exercise, the average of the daily closing prices of the Common Stock for twenty (20) consecutive business days commencing thirty (30) business days before the date of exercise, and (ii) in the case no public market exists at the time of such exercise, at the Appraised Value. For the purposes of this Agreement, "Appraised Value" is the value determined in accordance with the following procedures. For a period of five (5) days after the date of an event (a "Valuation Event") requiring determination of Current Value at a time when no public market exists for the Common Stock (the "Negotiation Period"), each party to this Agreement agrees to negotiate in good faith to reach agreement upon the Appraised Value of the securities or property at issue, as of the date of the Valuation Event, which will be the fair market value of such securities or property, without premium for control or discount for minority interests, illiquidity or restrictions on transfer. In the event that the parties are unable to agree upon the Appraised Value of such securities or other property by the end of the Negotiation Period, then the Appraised Value of such securities or property will be determined for purposes of this Agreement by a recognized appraisal or investment banking firm mutually agreeable to the holders of the Warrants and the Company (the "Appraiser"). If the holders of the Warrants and the Company cannot agree on an Appraiser within two (2) business days after the end of the Negotiation Period, the Company, on the one hand, and the holders of the Warrants, on the other hand, will each select an Appraiser within ten (10) business days after the end of the Negotiation Period and those two (2) Appraisers will select ten (10) days after the end of the Negotiation Period an independent Appraiser to determine the fair market value of such securities or property, without premium for control or discount for minority interests. Such independent Appraiser will be directed to determine fair market value of such securities as soon as practicable, but in no event later than thirty (30) days from the date of its selection. The determination by an Appraiser of the fair market value will be conclusive and binding on all parities to this Agreement. Appraised Value of each share of Common stock at a time when (i) the Company is not a reporting company under the Exchange Act and (ii) the Common Stock is not traded in the organized securities markets, will, in all cases, be calculated by determining the Appraised Value of the entire Company taken as a whole and dividing that value by the number of shares of Common Stock then outstanding, without premium for control or discount for minority interests, illiquidity or restrictions on transfer. The costs of the Appraiser will be borne by the Company. In no event will the Appraised Value of the Common Stock be less than the per share consideration received or receivable with respect to the Common Stock or securities or property of the same class in connection with a pending transaction involving a sale, merger, recapitalization, reorganization, consolidation, or share exchange, dissolution of the Company, sale or transfer of all or a majority of its assets or revenue or income generating capacity, or similar transaction. 3. Registration Rights. (a) S-3 Registration Rights. The Company will register the shares of Common Stock underlying the Warrants (the "Warrant Shares") within thirty (30) days following the date upon which the Company shall become eligible to register its securities on Form S-3 under the Securities Act of 1933, as amended (the "Securities Act") or any successor to such form in a manner that will, upon being declared effective, constitute a "shelf" registration for purposes of Rule 415 under the Securities Act, pursuant to which the Warrant Shares may be sold from time to time and in such amounts as the holder(s) thereof may hereafter determine, all in a manner consistent with all applicable provisions of the Securities Act; provided, however, if at the time of such S-3 eligibility, the Company has formulated plans to file within 60 days thereof a registration statement covering the sale of any of its securities in a public offering under the Securities Act, no registration of the Warrant Shares shall be initiated under this Section 3(a) until 90 days after the effective date of such registration statement unless the Company is no longer proceeding diligently to secure the effectiveness of such registration statement; provided that the Company shall provide the Warrant holder(s) the right to participate in such public offering pursuant to, and subject to, Section 3(b). The Company will use its best efforts to have the Form S-3 declared effective. At its expense, the Company will keep such registration effective for a period of one hundred eighty (180) days or until the holder or holders have completed the distribution described in the registration statement relating thereto, whichever first occurs; and furnish such number of prospectuses and other documents incident thereto as a holder from time to time may reasonably request. -2- (b) Piggyback Registration Rights. At any time following the date hereof, whenever the Company proposes to register any Common Stock for its own or the account of others under the Securities Act for a public offering, other than (i) any shelf registration of shares to be used as consideration for acquisitions of additional businesses by the Company and (ii) registrations relating to employee benefit plans, the Company shall give each Warrant holder prompt written notice of its intent to do so. Upon the written request of any Warrant holder given within 15 business days after receipt of such notice, the Company shall cause to be included in such registration all Warrant Securities (including any shares of Common Stock issued as a dividend or other distribution with respect to, or in exchange for, or in replacement of such Warrant Securities) which any Warrant holder requests; provided, however, if the Company is advised in writing in good faith by any managing underwriter of an underwritten offering of the securities being offered pursuant to any registration statement under this Section 3(b) that the number of shares to be sold by persons other than the Company is greater than the number of such shares which can be offered without adversely affecting the offering, the Company may reduce pro rata the number of shares offered for the accounts of such persons (based upon the number of shares held by such person) to a number deemed satisfactory by such managing underwriter. (c) Lock-up Agreement. In consideration for the Company's agreeing to its obligations under this Section 3, each Warrant holder agrees that, effective upon the request of the underwriters managing the Company's initial public offering, such holder shall be obligated, so long as all executive officers and directors of the Company are bound by a comparable obligation, not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any shares of Common Stock underlying the Warrants (other than those included in the registration) without the prior written consent of such underwriters, for such period of time (not to exceed one hundred eighty (180) days) from the effective date of such initial public offering as the underwriters may specify. 4. Specific Performance. The Company stipulates that remedies at law, in money damages, available to the holder of a Warrant, or of a holder of Common Stock issued pursuant to exercise of a Warrant, in the event of any default or threatened default by the Company in the performance of or compliance with any of the terms of this Agreement are not and will not be adequate. Therefore, the Company agrees that the terms of this Agreement may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise. 5. Successors and Assigns; Binding Effect. This Agreement shall be binding upon and insure to the benefit of you and the Company and their respective successors and permitted assigns. 6. Notices. Any notice hereunder shall be given by registered or certified mail, if to the Company, at its principal office, and, if to the holders, to the respective addresses shown in the Warrant ledger of the Company, provided that any holder may at any time on three (3) days' written notice to the Company designate or substitute another address where notice is to be given. Notice shall be deemed given and received after a certified or registered letter, properly addressed with postage prepaid, is deposited in the U.S. mail. -3- 7. Severability. Every provision of this Agreement is intended to be severable. If any term or provision hereof is illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the remainder of this Agreement. 8. Assignment; Replacement of Warrants. If the Warrant or Warrants are assigned, in whole or in part, the Warrants shall be surrendered at the principal office of the Company, and thereupon, in the case of a partial assignment, a new Warrant shall be issued to the holder thereof covering the number of shares not assigned, and the assignee shall be entitled to receive a new Warrant covering the number of shares so assigned. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of any Warrant and appropriate bond or indemnification protection, the Company shall issue a new Warrant of like tenor. The Warrants will not be transferred, sold, or otherwise hypothecated by you or any other person and the Warrants will be nontransferable, except to (i) one or more persons, each of which on the date of transfer is an officer, shareholder, or employee of you; (ii) a partnership or partnerships, the partners of which are you and one or more persons, each of whom on the date of transfer is an officer of you; (iii) a successor to you in merger or consolidation; (iv) a purchaser of all or substantially all of your assets; or (v) a person that receives a Warrant upon death of a holder pursuant to will, trust, or the laws of intestate succession. 9. Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Oklahoma without giving effect to the principles of choice of laws thereof. 10. Definition. All references to the word "you" in this Agreement shall be deemed to apply with equal effect to any persons or entities to whom Warrants have been transferred in accordance with the terms hereof, and, where appropriate, to any persons or entities holding shares of Common Stock issuable upon exercise of Warrants. 11. Headings. The headings herein are for purposes of reference only and shall not limit or otherwise affect the meaning of any of the provisions hereof. 12. Counterparts. This Agreement may be executed in two or more counterparts, and it will not be necessary that the signatures of all parties hereto be contained on any one counterpart hereof. Each counterpart will be deemed an original, but all counterparts together will constitute one and the same instrument. The parties agree that a facsimile of this Agreement signed by the parties will constitute an agreement in accordance with the terms hereof as if all of the parties had executed an original of this Agreement. Very truly yours, FULLNET COMMUNICATIONS, INC. By: _______________________________________ Timothy J. Kilkenny, President and CEO ACCEPTED AS OF THE ______ DAY OF _______________, 2000: _______________________________________ -4- EX-4.9 10 FLORIDA WADDELL PROMISSORY NOTE WARRANT CERTIFICATE ------------------- THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE FLORIDA SECURITIES ACT IN RELIANCE UPON EXEMPTION PROVISIONS CONTAINED THEREIN. ss.517.061(11)(a)(5) OF THE FLORIDA SECURITIES AND INVESTOR PROTECTION ACT (THE "FLORIDA ACT") PROVIDES THAT ANY PURCHASER OF SECURITIES IN FLORIDA WHICH ARE EXEMPTED FROM REGISTRATION UNDER ss.517.061(11) OF THE FLORIDA ACT MAY WITHDRAW HIS PURCHASE AND RECEIVE A FULL REFUND OF ALL MONIES PAID, WITHIN THREE BUSINESS DAYS AFTER HE TENDERS CONSIDERATION FOR SUCH SECURITIES. THEREFORE, ANY FLORIDA RESIDENT WHO PURCHASES SECURITIES IS ENTITLED TO EXERCISE THE FOREGOING STATUTORY RESCISSION RIGHT WITHIN THREE BUSINESS DAYS AFTER TENDERING CONSIDERATION FOR THE SECURITIES BY TELEPHONE, TELEGRAM, OR LETTER NOTICE TO THE COMPANY AT THE ADDRESS OR TELEPHONE NUMBER SET FORTH IN THIS AGREEMENT. ANY TELEGRAM OR LETTER SHOULD BE SENT OR POSTMARKED PRIOR TO THE END OF THE THIRD BUSINESS DAY. A LETTER SHOULD BE MAILED BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ENSURE ITS RECEIPT AND TO EVIDENCE THE TIME OF MAILING. ANY ORAL REQUESTS SHOULD BE CONFIRMED IN WRITING. THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN. FULLNET COMMUNICATIONS, INC. No.: W-00-0____ _________ Warrants Date: _____________ ___, 2000 THIS IS TO CERTIFY that _____________________ or its assigns, as permitted in that certain Warrant Agreement (the "Warrant agreement"), dated of even date herewith, by and among FullNet Communications, Inc. (the "Company") and _____________________, is entitled to purchase at any time and from time to time after the date hereof until 5:00 p.m., Central Standard Time on ________ ___, 2005, an aggregate of ______________________________ shares of common stock, par value $0.00001 per share, of the Company, for an exercise price per share of $.01 per share as set forth in the Warrant Agreement referred to herein. This Warrant is issued pursuant to the Warrant Agreement, and all rights of the holder of this Warrant are further governed by, and subject to the terms and provisions of such Warrant Agreement, copies of which are available upon request to the Company. The holder of this Warrant and the shares issuable upon the exercise hereof shall be entitled to the benefits, rights and privileges and subject to the obligations, duties and liabilities provided for in the Warrant Agreement. WARRANT CERTIFICATE Page 1 of 4 The issuance of this Warrant and the shares issuable upon the due and timely exercise hereof have not been registered under the Securities Act of 1933, as amended (the "Act"), or any similar state securities law or act, and, as such, no public offering of either this Warrant or any of the shares of common stock issuable upon exercise of this Warrant may be made other than under an exemption under the Act or until the effectiveness of a registration statement under such Act covering such offering. Transfer of this Warrant is restricted pursuant to the terms of Section 8 of the Warrant Agreement. Subject to the provisions of the Act, of the Warrant Agreement and of this Warrant, this Warrant and all rights hereunder are transferable, in whole or in part, only to the extent expressly permitted in such documents and then only at the office of the Company at 200 North Harvey Avenue, Suite 1704, Oklahoma City, Oklahoma 73102, Attention President, by the holder hereof or by a duly authorized attorney-in-fact, upon surrender of this Warrant duly endorsed, together with the Assignment hereof duly endorsed. Until transfer hereof on the books of the Company, the Company may treat the registered holder hereof as the owner hereof for all purposes. THIS WARRANT CERTIFICATE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE COMPANY AND THE HOLDER HEREOF SHALL BE GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF OKLAHOMA, WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES OF OKLAHOMA LAW. IN WITNESS WHEREOF, the Company has caused this Warrant to be executed and its corporate seal to be hereunto affixed by its proper corporate officers thereunto duly authorized. FULLNET COMMUNICATIONS, INC. By:______________________________________ Timothy J. Kilkenny, President and CEO (SEAL) Attest: ___________________________________ Jeanette C. Timmons, Secretary WARRANT CERTIFICATE Page 2 of 4 FULLNET COMMUNICATIONS, INC. SUBSCRIPTION ------------ To Be Signed Only Upon Exercise (in whole or in part) of the Warrants TO: FULLNET COMMUNICATIONS, INC. 200 North Harvey, Suite 1704 Oklahoma City, Oklahoma 73102 Attention: President 1. The undersigned, ________________________________________, pursuant to the provisions of the Warrant Agreement dated as of ____________ ____, 2000 and the attached Warrant Certificate, hereby agrees to subscribe for the purchase of _______ shares of the common stock of FullNet Communications, Inc. covered by the attached Warrant Certificate, and makes payment therefor in full at the price per share provided by the Warrant Agreement. 2. The undersigned Holder elects to pay the aggregate purchase price for such shares of common stock (i) by lawful money of the United States or the enclosed certified or official bank check payable in United States dollars to the order of the Company in the amount of $______________, or (ii) by wire transfer of United States funds to the account of the Company in the amount of $___________, which transfer has been made before or simultaneously with the delivery of this Subscription pursuant to the instructions of the Company. 3. Please issue a stock certificate or certificates representing the appropriate number of shares of common stock in the name of the undersigned or in such other name(s) as is specified below: - -------------------------------------- ------------------------------------- (Name) Social Security or Fed ID #) - -------------------------------------- ------------------------------------- (Signature) Address) - -------------------------------------- ------------------------------------- (Date) Address) WARRANT CERTIFICATE Page 3 of 4 ASSIGNMENT ---------- FOR VALUE RECEIVED ____________________________ hereby sells, assigns and transfer unto ______________________ the foregoing Warrant and all rights evidenced thereby, and does irrevocably constitute and appoint ________________________, attorney, to transfer said Warrant on the books of FullNet Communications, Inc. - ------------------------------------ ---------------------------------------- (Name) (Name of Assignee) - ------------------------------------ ---------------------------------------- (Signature) (Signature of Assignee) - ------------------------------------ ---------------------------------------- (Social Security or Fed ID #) (Social Security or Fed ID # of Assignee) - ------------------------------------ ---------------------------------------- - ------------------------------------ ---------------------------------------- (Address) (Address of Assignee) - ------------------------------------ (Date) PARTIAL ASSIGNMENT ------------------ FOR VALUE RECEIVED ____________________________ hereby sells, assigns and transfer unto ______________________ the right to purchase _____ shares of the common stock of FullNet Communications, Inc. by the foregoing Warrant, and a proportionate part of said Warrant and the rights evidenced thereby, and does irrevocably constitute and appoint ________________________, attorney, to transfer that part of said Warrant on the books of FullNet Communications, Inc. - ------------------------------------ ---------------------------------------- (Name) (Name of Assignee) - ------------------------------------ ---------------------------------------- (Signature) (Signature of Assignee) - ------------------------------------ ---------------------------------------- (Social Security or Fed ID #) (Social Security or Fed ID # of Assignee) - ------------------------------------ ---------------------------------------- - ------------------------------------ ---------------------------------------- (Address) (Address of Assignee) - ------------------------------------ (Date) WARRANT CERTIFICATE PAGE 4 OF 4 EX-4.10 11 FLORIDA WADDELL PROMISSORY NOTE THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), NOR UNDER ANY STATE SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNTIL (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAW OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE COMPANY OR OTHER COUNSEL TO THE HOLDER OF SUCH NOTE WHICH OTHER COUNSEL IS REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH NOTE MAY BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE FLORIDA SECURITIES ACT IN RELIANCE UPON EXEMPTION PROVISIONS CONTAINED THEREIN. ss.517.061(11)(a)(5) OF THE FLORIDA SECURITIES AND INVESTOR PROTECTION ACT (THE "FLORIDA ACT") PROVIDES THAT ANY PURCHASER OF SECURITIES IN FLORIDA WHICH ARE EXEMPTED FROM REGISTRATION UNDER ss.517.061(11) OF THE FLORIDA ACT MAY WITHDRAW HIS PURCHASE AND RECEIVE A FULL REFUND OF ALL MONIES PAID, WITHIN THREE BUSINESS DAYS AFTER HE TENDERS CONSIDERATION FOR SUCH SECURITIES. THEREFORE, ANY FLORIDA RESIDENT WHO PURCHASES SECURITIES IS ENTITLED TO EXERCISE THE FOREGOING STATUTORY RESCISSION RIGHT WITHIN THREE BUSINESS DAYS AFTER TENDERING CONSIDERATION FOR THE SECURITIES BY TELEPHONE, TELEGRAM, OR LETTER NOTICE TO THE COMPANY AT THE ADDRESS OR TELEPHONE NUMBER SET FORTH IN THIS AGREEMENT. ANY TELEGRAM OR LETTER SHOULD BE SENT OR POSTMARKED PRIOR TO THE END OF THE THIRD BUSINESS DAY. A LETTER SHOULD BE MAILED BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ENSURE ITS RECEIPT AND TO EVIDENCE THE TIME OF MAILING. ANY ORAL REQUESTS SHOULD BE CONFIRMED IN WRITING. FULLNET COMMUNICATIONS, INC. 14% Promissory Note DATED: ______________ ___, 2000 PRINCIPAL AMOUNT (US$): $_________ FULLNET COMMUNICATIONS, INC., an Oklahoma corporation (the "Company"), for value received, hereby promises to pay to __________________ located at _____________________________________________________, or registered assigns (the "Payee" or "Holder") upon due presentation and surrender of this Note on the Repayment Date (as hereinafter defined) the principal amount of ________________________________, and accrued interest thereon as hereinafter provided. Page 1 of 6 1. PAYMENT OF PRINCIPAL AND INTEREST; METHOD OF PAYMENT. 1.1 Payment. Payment of the principal and accrued interest on this Note shall be made in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. Interest (computed for the actual number of days elapsed on the basis of a year consisting of 365 days) on the unpaid portion of said principal amount from time to time outstanding shall be paid by the Company at the rate of fourteen percent (14%) per annum (the "Stated Interest Rate"), said interest payable to the Payee on the tenth (10) day following the end of each three (3) month period (quarterly) from the above-stated issuance date of the Note. The principal shall be due and payable on the Repayment Date, which payment shall be made only upon presentation and surrender of this Note to the Company at its address set forth herein. The Company will pay or cause to be paid all sums becoming due hereon for principal and interest by check sent to the Holder's above address or to such other address as the Holder may designate for such purpose from time to time by written notice to the Company, 1.2 Repayment Date. (a) For purposes hereof, unless sooner repaid by the Company, the "Repayment Date" shall mean the earlier of the following dates: (i) the date which is within five (5) days of receipt of funds by the Company of any single offering raising gross proceeds to the Company of at least $3,000,000 (which offering the Company intends to conduct but of which there is no assurance); provided, however, if funds related to any such offering are received in tranches, "Repayment Date" shall be deemed to mean the date which is within five (5) days of receipt of first funds received by the Company, or (ii) the date which is six (6) months after the above-stated issuance date of this Note (the "Initial Six-Month Term"), unless extended pursuant to Section 1.2(b) hereunder. (b) The Company may, by written notice to the Holder within ten (10) days prior to the end of the Initial Six-Month Term and the delivery to Holder with such notice of ____________ Warrants (as such term is defined in Section 1.3 hereof), extend the Repayment Date for an additional ninety (90) days (the "First Extension Period"); provided, however, that the Company may, by written notice to the Holder within ten (10) days prior to the end of the First Extension Period and the delivery to Holder with such notice of another ____________ Warrants (as such term is defined in Section 1.3 hereof), extend the Repayment Date for a second ninety (90) day period (the "Second Extension Period"), in which case all principal and any accrued and unpaid interest thereon shall be due and payable on the last day of the Second Extension Period. 1.3 Issuance of Common Stock Purchase Warrants. In addition to the interest payable pursuant to Section 1.1 above, the Company agrees to issue to the Holder as additional compensation, _________ common stock purchase warrants (the "Warrants"), giving the Holder the right to purchase from the Company ____________ shares of the Company's $.00001 common stock ("Common Stock"), at the per share price and on the terms set forth in the Warrants, a form of which is attached hereto as Exhibit "A." The Warrants are deemed earned on the initial advance by the Holder under this Agreement and will not terminate on the payment or prepayment of this Note. Page 2 of 6 1.4 Prepayment. The Note may be prepaid in full or in part by the Company at any time prior to the Repayment Date. Any prepayment of this Note shall be applied first to any accrued but unpaid interest, then to the principal amount of the Note. 2. RANKING OF NOTE. 2.1 Junior to Existing Debt. The Company, for itself, its successors and assigns, covenants and agrees, and the Payee and each successive Holder by acceptance of this Note, likewise covenants and agrees that the payment of the principal of and interest on this Note ranks junior and is subordinate to all existing indebtedness, including trade debt. 2.2 Indebtedness. "Indebtedness" means (a) any liability of the Company (i) for borrowed money, or (ii) evidenced by a note, debenture, bond or other instrument of indebtedness (including, without limitation, a purchase money obligation), given in connection with the acquisition of property, assets or services, (iii) for the payment of rent or other amounts relating to capitalized lease obligations, or (iv) trade accounts payable and trade credit; (b) any liability of others described in the preceding clause (a) which the Company has guaranteed or which is otherwise its legal liability; and (c) any modification, renewal, extension, replacement or refunding of any such liability described in the preceding clauses (a) and (b) except that Indebtedness. 2.3 Further Actions. The Holder agrees to execute such subordination agreements, instruments or waivers as may be reasonably necessary to reflect the subordination of this Note to the Indebtedness. 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to the Holder that the Company: (a) is a corporation duly organized, validly existing and in good standing under the laws of the State of Oklahoma; (b) has all requisite power and authority and all necessary licenses and permits to own and operate its properties and to carry on its business as now conducted and as presently proposed to be conducted, the failure of which would not have a material adverse effect on the business, operations, properties, liabilities or condition (financial or otherwise) of the Company; and (c) has adequate authority, power and legal right to enter into, execute and deliver the Note. On execution and delivery, the Note will be a legal, valid and binding obligation of the Company enforceable in accordance with its terms. Page 3 of 6 4. EVENTS OF DEFAULT. It shall be an Event of Default with respect to this Note upon the occurrence and continuation uncured of any of the following events: 4.1 Default in Payment, Etc. (a) A default in the payment of any interest or principal payments on this Note, and such default shall continue uncured for fifteen (15) days after due date and notice is received from Holder of such default for the making of such interest or principal payment; or (b) default in the performance, or breach, of any other covenant of the Company in this Note and continuance of such default or breach uncured for a period of thirty (30) days after receipt of notice as to such breach or after the Company knew or should have known of such breach. 4.2 Bankruptcy. The entry of a decree or order by a court having jurisdiction adjudging the Company a bankrupt or insolvent, or approving a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company, under federal bankruptcy law, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency or other similar law, and the continuance of any such decree or order unstayed and in effect for a period of sixty (60) days; or the commencement by the Company of a voluntary case under federal bankruptcy law, as now or hereafter constituted, or any other applicable Federal or state bankruptcy, insolvency, or other similar law, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under federal bankruptcy law or any other applicable Federal or state law, or the consent by it to the filing of such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action. 5. REMEDIES UPON DEFAULT. 5.1 Acceleration. Upon an Event of Default and at any time during the continuation thereof, the Holder, by notice in writing given to the Company, may declare the entire principal of this Note then outstanding to be due and payable immediately, and upon any such declaration the same shall become and be due and payable immediately, anything herein contained to the contrary notwithstanding. 5.2 Proceedings and Actions. During the continuation of any Event of Default, the Holder may institute such actions or proceedings in law or equity as it shall deem expedient for the protection of its rights and may prosecute and enforce its claims against all assets of the Company, and in connection with any such action or proceeding shall be entitled to receive from the Company payment of the principal amount of this Note plus accrued interest to the date of payment plus reasonable expenses of collection including, without limitation, attorney's fees and expenses. Page 4 of 6 6. RESTRICTIONS ON TRANSFER. 6.1 The Holder acknowledges that he has been advised by the Company that this Note has not been registered under the Act, that the Note is being issued on the basis of the statutory exemption provided by section 4(2) of the Act and/or Regulation D promulgated thereunder relating to transactions by an issuer not involving any public offering, and that the Company's reliance thereon is based in part upon the representations made by the Holder in the Holder's Investor Representation Letter, previously furnished to the Company. The Holder acknowledges that he has been informed by the Company of, or is otherwise familiar with, the nature of the limitations imposed by the Act and the rules and regulations thereunder on the transfer of securities. In particular, the Holder agrees that no sale, assignment or transfer of the Note shall be valid or effective, and the Company shall not be required to give any effect to any such sale, assignment or transfer, unless (i) the sale, assignment or transfer of the Note is registered under the Act, it being understood that the Note is not currently registered for sale and that the Company has no obligation or intention to so register the Notes, or (ii) the Note is sold, assigned or transferred in accordance with all the requirements and limitations of Rule 144 under the Act, it being understood that Rule 144 is not available at the present time for the sale of the Note and that there can be no assurance that Rule 144 sales will be available at any time in the future, or (iii) such sale, assignment, or transfer is otherwise exempt from registration under the Act. The Holder of this Note and each transferee hereof further agrees that if any distribution of this Note is proposed to be made by them otherwise than by delivery of a prospectus meeting the requirements of Section 10 of the Act, such action shall be taken only after submission to the Company of an opinion of counsel, reasonably satisfactory in form and substance to the Company's counsel, to the effect that the proposed distribution will not be in violation of the Act or of applicable state law. Furthermore, it shall be a condition to the transfer of this Note that any transferee thereof deliver to the Company his written agreement to accept and be bound by all of the terms and conditions contained in this Note. 7. MISCELLANEOUS. 7.1 No Recourse. No recourse whatsoever, either directly or through the Company or any trustee, receiver or assignee, shall be had in any event or in any manner against any past, present or future stockholder, director or officer of the Company for the payment of the principal of or interest on this Note or for any claim based thereon or otherwise in respect this Note, this Note being a corporate obligation only. 7.2 Notices. All communications provided hereunder shall be in writing and, if to the Company, delivered or mailed by registered or certified mail addressed to FullNet Communications, Inc., 200 North Harvey Avenue, Suite 1704, Oklahoma City, Oklahoma 73102 or, if to the Holder, at - ------------------------------------------. Page 5 of 6 7.3 Lost, Stolen or Mutilated Note. In case this Note shall be mutilated, lost, stolen or destroyed, the Company may, in its discretion, issue and deliver in exchange and substitution for and upon cancellation of the mutilated Note, or in lieu of and substitution for the Note, lost, stolen or destroyed, a new Note of like tenor and representing an equivalent right or interest, but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction and an indemnity, if requested, also satisfactory to it. 7.4 Course of Dealing. No course of dealing between the Company and the Holder hereof shall operate as a waiver of any right of any Holder hereof, and no delay on the part of the Holder in exercising any right hereunder shall so operate. 7.5 Amendments. This Note may be amended only by a written instrument executed by the Company and the Holder hereof. Any amendment shall be endorsed upon this Note, and all future holders shall be bound thereby. 7.6 Governing Law. This Note shall be construed in accordance with and governed by the laws of the State of Oklahoma, without giving effect to conflict of laws principles. DATED the date first written above. FULLNET COMMUNICATIONS, INC. By:________________________________________ Timothy J. Kilkenny, President and Chief Executive Officer (SEAL) Attest: ________________________________ Jeanette C. Timmons, Secretary Page 6 of 6 EX-10.1 12 REGISTRAR ACCREDITATION AGREEMENT REGSITRAR ACCREDITATION AGREEMENT Table of Contents I. DEFINITIONS II. TERMS AND CONDITIONS OF AGREEMENT A. Accreditation. B. Registrar Use of ICANN Name. C. General Obligations of ICANN. D. General Obligations of Registrar. E. Submission of SLD Holder Data to Registry. F. Public Access to Data on SLD Registrations. G. Retention of SLD Holder and Registration Data. H. Rights in Data. I. Data Escrow. J. Business Dealings, Including with SLD Holders. K. Domain-Name Dispute Resolution. L. Accreditation Fees. M. Specific Performance. N. Termination of Agreement. O. Term of Agreement; Renewal; Right to Substitute Updated Agreement. P. Resolution of Disputes Under This Agreement. Q. Limitations on Monetary Remedies for Violations of this Agreement. R. Handling by ICANN of Registrar-Supplied Data. S. Miscellaneous. ________________________________________________________________________________ This REGISTRAR ACCREDITATION AGREEMENT ("Agreement") is by and between the Internet Corporation for Assigned Names and Numbers, a not-for-profit corporation, and FullWeb, Inc., d/b/a FullNic f/k/a Animus Communications, Inc. ("Registrar"), a corporation, and shall be deemed made on February 8, 2000, at Los Angeles, California, USA. I. DEFINITIONS As used in this Agreement, the following terms shall have the following meanings: A. "Accredit" means to identify and set minimum standards for the performance of registration functions, to recognize persons or entities meeting those standards, and to enter into an accreditation agreement that sets forth the rules and procedures applicable to the provision of registration services. B. A "Consensus Policy" is one adopted by ICANN as follows: 1. "Consensus Policies" are those adopted based on a consensus among Internet stakeholders represented in the ICANN process, as demonstrated by (1) the adoption of the policy by the ICANN Board of Directors, (2) a recommendation that the policy should be adopted, by at least a two-thirds vote of the council of the ICANN Supporting Organization to which the matter is delegated, and (3) a written report and supporting materials (which must include all substantive submissions to the Supporting Organization relating to the proposal) that (i) documents the extent of agreement and disagreement among impacted groups, (ii) documents the outreach process used to seek to achieve adequate representation of the views of groups that are likely to be impacted, and (iii) documents the nature and intensity of reasoned support and opposition to the proposed policy. -1- 2. In the event that Registrar disputes the presence of such a consensus, it shall seek review of that issue from an Independent Review Panel established under ICANN's bylaws. Such review must be sought within fifteen working days of publication of the Board's action adopting the policy. The decision of the panel shall be based on the report and supporting materials required by Section I.B.1 above. In the event that Registrar seeks review and the Panel sustains the Board's determination that the policy is based on a consensus among Internet stakeholders represented in the ICANN process, then Registrar must implement such policy unless it promptly seeks and obtains a stay or injunctive relief under Section II.P. 3. In the event, following a decision by the Independent Review Panel convened under Section I.B.2 above, that Registrar still disputes the presence of such a consensus, it may seek further review of that issue within fifteen working days of publication of the decision in accordance with the dispute-resolution procedures set forth in Section II.P below; provided, however, that Registrar must continue to implement the policy unless it has obtained a stay or injunctive relief under Section II.P or a final decision is rendered in accordance with the provisions of Section II.P that relieves Registrar of such obligation. The decision in any such further review shall be based on the report and supporting materials required by Section I.B.1 above. 4. A policy adopted by the ICANN Board of Directors on a temporary basis, without a prior recommendation by the council of an ICANN Supporting Organization, shall also be considered to be a Consensus Policy if adopted by the ICANN Board of Directors by a vote of at least two-thirds of its members, and if immediate temporary adoption of a policy on the subject is necessary to maintain the stability of the Internet or the operation of the domain name system, and if the proposed policy is as narrowly tailored as feasible to achieve those objectives. In adopting any policy under this provision, the ICANN Board of Directors shall state the period of time for which the policy is temporarily adopted and shall immediately refer the matter to the appropriate Supporting Organization for its evaluation and review with a detailed explanation of its reasons for adopting the temporary policy and why the Board believes the policy should receive the consensus support of Internet stakeholders. If the period of time for which the policy is adopted exceeds 45 days, the Board shall reaffirm its temporary adoption every 45 days for a total period not to exceed 180 days, in order to maintain such policy in effect until such time as it meets the standard set forth in Section I.B.1. If the standard set forth in Section I.B.1 above is not met within the temporary period set by the Board, or the council of the Supporting Organization to which it has been referred votes to reject the temporary policy, it will no longer be a "Consensus Policy." 5. For all purposes under this Agreement, the policies specifically identified by ICANN on its website (www.icann.org/general/consensus-policies.htm) at the date of this Agreement as having been adopted by the ICANN Board of Directors before the date of this Agreement shall be treated in the same manner and have the same effect as "Consensus Policies" and accordingly shall not be subject to review under Section I.B.2. 6. In the event that, at the time the ICANN Board adopts a policy under Section I.B.1 during the term of this Agreement, ICANN does not have in place an Independent Review Panel established under ICANN's bylaws, the fifteen-working-day period allowed under Section I.B.2 to seek review shall be extended until fifteen working days after ICANN does have such an Independent Review Panel in place and Registrar shall not be obligated to comply with the policy in the interim. -2- C. "DNS" refers to the Internet domain-name system. D. "ICANN" refers to the Internet Corporation for Assigned Names and Numbers, a party to this Agreement. E. An "ICANN-adopted policy" (and references to ICANN "adopt[ing]" a policy or policies) refers to a Consensus Policy adopted by ICANN (i) in conformity with applicable provisions of its articles of incorporation and bylaws and Section II.C of this Agreement and (ii) of which Registrar has been given notice and a reasonable period in which to comply. F. "IP" means Internet Protocol. G. "Personal Data" refers to data about any identified or identifiable natural person. H. The word "Registrar," when appearing with an initial capital letter, refers to FullWeb, Inc. d/b/a FullNic f/k/a Animus Communications, Inc., a party to this Agreement. I. The word "registrar," when appearing without an initial capital letter, refers to a person or entity that contracts with SLD holders and a registry, collecting registration data about the SLD holders and submitting zone file information for entry in the registry database. J. A "Registry" is the person(s) or entity(ies) then responsible, in accordance with an agreement between ICANN and that person or entity (those persons or entities) or, if that agreement is terminated or expires, in accordance with an agreement between the US Government and that person or entity (those persons or entities), for providing registry services. K. An "SLD" is a second-level domain of the DNS. L. An SLD registration is "sponsored" by the registrar that placed the record associated with that registration into the registry. Sponsorship of a registration may be changed at the express direction of the SLD holder or, in the event a registrar loses accreditation, in accordance with then-current ICANN-adopted policies. M. A "TLD" is a top-level domain of the DNS. II. TERMS AND CONDITIONS OF AGREEMENT The parties agree as follows: A. Accreditation. During the term of this Agreement, Registrar is hereby accredited by ICANN to act as a registrar (including to insert and renew registration of SLDs in the registry database) for the .com, .net, and .org TLDs. B. Registrar Use of ICANN Name. Registrar is hereby granted a non-exclusive worldwide license to state during the term of this Agreement that it is accredited by ICANN as a registrar in the .com, .net, and .org TLDs. No other use of ICANN's name is licensed hereby. This license may not be assigned or sublicensed by Registrar. -3- C. General Obligations of ICANN. With respect to all matters that impact the rights, obligations, or role of Registrar, ICANN shall during the Term of this Agreement: 1. exercise its responsibilities in an open and transparent manner; 2. not unreasonably restrain competition and, to the extent feasible, promote and encourage robust competition; 3. not apply standards, policies, procedures or practices arbitrarily, unjustifiably, or inequitably and not single out Registrar for disparate treatment unless justified by substantial and reasonable cause; and 4. ensure, through its reconsideration and independent review policies, adequate appeal procedures for Registrar, to the extent it is adversely affected by ICANN standards, policies, procedures or practices. D. General Obligations of Registrar. 1. During the Term of this Agreement: a. Registrar agrees that it will operate as a registrar for TLDs for which it is accredited by ICANN in accordance with this Agreement; b. Registrar shall comply, in such operations, with all ICANN-adopted Policies insofar as they: i. relate to one or more of the following: (A) issues for which uniform or coordinated resolution is reasonably necessary to facilitate interoperability, technical reliability and/or stable operation of the Internet or domain-name system, (B) registrar policies reasonably necessary to implement Consensus Policies relating to the Registry, or (C) resolution of disputes regarding the registration of domain names (as opposed to the use of such domain names), and ii. do not unreasonably restrain competition. 2. To the extent that Consensus Policies are adopted in conformance with Section II.C of this Agreement, the measures permissible under Section II.D.1.b.i shall include, without limitation: i. principles for allocation of SLD names (e.g., first-come/first-served, timely renewal, holding period after expiration); ii. prohibitions on warehousing of or speculation in domain names by registrars; iii. reservation of SLD names that may not be registered initially or that may not be renewed due to reasons reasonably related to (a) avoidance of confusion among or misleading of users, (b) intellectual property, or (c) the technical management of the DNS or the Internet (e.g., "example.com" and single-letter/digit names); iv. the allocation among continuing registrars of the SLD names sponsored in the registry by a registrar losing accreditation; -4- v. the transfer of registration data upon a change in registrar sponsoring the registration; and vi. dispute resolution policies that take into account the use of a domain name. Nothing in this Section II.D shall limit or otherwise affect Registrar's obligations as set forth elsewhere in this Agreement. E. Submission of SLD Holder Data to Registry. During the term of this Agreement: 1. As part of its registration of SLDs in the .com, .net, and .org TLDs, Registrar shall submit to, or shall place in the registry database operated by Registry the following data elements concerning SLD registrations that Registrar processes: a. The name of the SLD being registered; b. The IP addresses of the primary nameserver and secondary nameserver(s) for the SLD; c. The corresponding names of those nameservers; d. Unless automatically generated by the registry system, the identity of the registrar; e. Unless automatically generated by the registry system, the expiration date of the registration; and f. Other data required as a result of further development of the registry system by the Registry. 2. Within five (5) business days after receiving any updates from the SLD holder to the data elements listed in Sections II.E.1.b and c for any SLD registration Registrar sponsors, Registrar shall submit the updated data elements to, or shall place those elements in the registry database operated by Registry. 3. In order to allow reconstitution of the registry database in the event of an otherwise unrecoverable technical failure or a change in the designated Registry permitted by the contract Registry has with ICANN and/or the United States Department of Commerce, within ten days of any such request by ICANN Registrar shall submit an electronic database containing the data elements listed in Sections II.F.1.a through d for all active records in the registry sponsored by Registrar, in a format specified by ICANN, to the Registry for the appropriate TLD. F. Public Access to Data on SLD Registrations. During the term of this Agreement: 1. At its expense, Registrar shall provide an interactive web page and a port 43 Whois service providing free public query-based access to up-to-date (i.e. updated at least daily) data concerning all active SLD registrations sponsored by Registrar in the registry for the .com, .net, and .org TLDs. The data accessible shall consist of elements that are designated from time to time according to an ICANN-adopted policy. Until ICANN otherwise specifies by means of an ICANN-adopted policy, this data shall consist of the following elements as contained in Registrar's database: -5- a. The name of the SLD being registered and the TLD for which registration is being requested; b. The IP addresses of the primary nameserver and secondary nameserver(s) for the SLD; c. The corresponding names of those nameservers; d. The identity of Registrar (which may be provided through Registrar's website); e. The original creation date of the registration; f. The expiration date of the registration; g. The name and postal address of the SLD holder; h. The name, postal address, e-mail address, voice telephone number, and (where available) fax number of the technical contact for the SLD; and i. The name, postal address, e-mail address, voice telephone number, and (where available) fax number of the administrative contact for the SLD. 2. Upon receiving any updates to the data elements listed in Sections II.F.1.b through d and f through i from the SLD holder, Registrar shall promptly update its database used to provide the public access described in Section II.F.1. 3. Registrar may subcontract its obligation to provide the public access described in Section II.F.1 and the updating described in Section II.F.2, provided that Registrar shall remain fully responsible for the proper provision of the access and updating. 4. Registrar shall abide by any ICANN-adopted Policy that requires registrars to cooperatively implement a distributed capability that provides query-based Whois search functionality across all registrars. If the Whois service implemented by registrars does not in a reasonable time provide reasonably robust, reliable, and convenient access to accurate and up-to-date data, the Registrar shall abide by any ICANN-adopted Policy requiring Registrar, if reasonably determined by ICANN to be necessary (considering such possibilities as remedial action by specific registrars), to supply data from Registrar's database to facilitate the development of a centralized Whois database for the purpose of providing comprehensive Registrar Whois search capability. 5. In providing query-based public access to registration data as required by Sections II.F.1 and II.F.4, Registrar shall not impose terms and conditions on use of the data provided except as permitted by an ICANN-adopted policy. Unless and until ICANN adopts a different policy, Registrar shall permit use of data it provides in response to queries for any lawful purposes except to: (a) allow, enable, or otherwise support the transmission of mass unsolicited, commercial advertising or solicitations via e-mail (spam); or (b) enable high volume, automated, electronic processes that apply to Registrar (or its systems). 6. In addition, Registrar shall provide third-party bulk access to the data subject to public access under Section II.F.1 under the following terms and conditions: -6- a. Registrar shall make a complete electronic copy of the data available at least one time per week for download by third parties who have entered into a bulk access agreement with Registrar. b. Registrar may charge an annual fee, not to exceed US$10,000, for such bulk access to the data. c. Registrar's access agreement shall require the third party to agree not to use the data to allow, enable, or otherwise support the transmission of mass unsolicited, commercial advertising or solicitations via e-mail (spam). d. Registrar's access agreement may require the third party to agree not to use the data to enable high-volume, automated, electronic processes that apply to Registrar (or its systems). e. Registrar's access agreement may require the third party to agree not to sell or redistribute the data except insofar as it has been incorporated by the third party into a value-added product or service that does not permit the extraction of a substantial portion of the bulk data from the value-added product or service for use by other parties. f. Registrar may enable SLD holders who are individuals to elect not to have Personal Data concerning their registrations available for bulk access for marketing purposes based on Registrar's "Opt-Out" policy, and if Registrar has such a policy Registrar shall require the third party to abide by the terms of that Opt-Out policy; provided, however, that Registrar may not use such data subject to opt-out for marketing purposes in its own value-added product or service. 7. Registrar's obligations under Section II.F.6 shall remain in effect until the earlier of (a) replacement of this policy with a different ICANN-adopted policy governing bulk access to the data subject to public access under Section II.F.1, or (b) demonstration, to the satisfaction of the United States Department of Commerce, that no individual or entity is able to exercise market power with respect to registrations or with respect to registration data used for development of value-added products and services by third parties. 8. To comply with applicable statutes and regulations and for other reasons, ICANN may from time to time adopt policies establishing limits on the Personal Data concerning SLD registrations that Registrar may make available to the public through a public-access service described in this Section II.F and on the manner in which Registrar may make them available. In the event ICANN adopts any such policy, Registrar shall abide by it. G. Retention of SLD Holder and Registration Data. 1. During the term of this Agreement, Registrar shall maintain its own electronic database, as updated from time to time, containing data for each active SLD registration sponsored by it in the registry for the .com, .net, and .org TLDs. The data for each such registration shall include the elements listed in Sections II.F.1.a through i, as well as the name and (where available) postal address, e-mail address, voice telephone number, and fax number of the billing contact. 2. During the term of this Agreement and for three years thereafter, Registrar (itself or by its agent) shall maintain the following records relating to its dealings with the Registry and SLD holders: -7- a. In electronic form, the submission date and time, and the content, of all registration data (including updates) submitted in electronic form to the Registry; b. In electronic, paper, or microfilm form, all written communications constituting registration applications, confirmations, modifications, or terminations and related correspondence with actual SLD holders, including registration contracts; and c. In electronic form, records of the accounts of all SLD holders with Registrar, including dates and amounts of all payments and refunds. Registrar shall make these records available for inspection by ICANN upon reasonable notice. ICANN shall not disclose such records except as expressly permitted by an ICANN-adopted policy. H. Rights in Data. Registrar disclaims all rights to exclusive ownership or use of the data elements listed in Sections II.E.1.a through c for all SLD registrations submitted by Registrar to, or sponsored by Registrar in, the registry database for the .com, .net, and .org TLDs. Registrar does not disclaim rights in the data elements listed in Sections II.E.1.d through f and II.F.1.d through i concerning active SLD registrations sponsored by it in the registry for the .com, .net, and .org TLDs, and agrees to grant non-exclusive, irrevocable, royalty-free licenses to make use of and disclose the data elements listed in Sections II.F.1.d through i for the purpose of providing a service (such as a Whois service under Section II.F.4) providing interactive, query-based public access. Upon a change in sponsorship from Registrar of any SLD registration in the registry for the .com, .net, and .org TLDs, Registrar acknowledges that the registrar gaining sponsorship shall have the rights of an owner to the data elements listed in Sections II.E.1.d and e and II.F.1.d through i concerning that registration, with Registrar also retaining the rights of an owner in that data. Nothing in this Section II.H prohibits Registrar from (1) restricting bulk public access to data elements in a manner consistent with any ICANN-adopted policies or (2) transferring rights it claims in data elements subject to the provisions of this Section II.H. I. Data Escrow. During the term of this Agreement, on a schedule, under the terms, and in the format specified in the then-current ICANN-adopted policy on registrar escrow requirements, Registrar shall submit an electronic copy of the database described in Section II.G.1 to ICANN or, at Registrar's election and at its expense, to a reputable escrow agent mutually approved by Registrar and ICANN, such approval also not to be unreasonably withheld by either party. The data shall be held under an agreement among Registrar, ICANN, and the escrow agent (if any) providing that (1) the data shall be received and held in escrow, with no use other than verification that the deposited data is complete and in proper format, until released to ICANN; (2) the data shall be released from escrow upon expiration without renewal or termination of this Agreement; and (3) ICANN's rights under the escrow agreement shall be assigned with any assignment of this Agreement. The escrow shall provide that in the event the escrow is released under this Section II.I, ICANN (or its assignee) shall have a non-exclusive, irrevocable, royalty-free license to exercise (only for transitional purposes) or have exercised all rights necessary to provide registrar services. J. Business Dealings, Including with SLD Holders. 1. In the event ICANN adopts a policy supported by a consensus of ICANN-accredited registrars establishing or approving a Code of Conduct for such registrars, Registrar shall abide by that Code. 2. Registrar shall abide by applicable laws and governmental regulations. -8- 3. Registrar shall not represent to any actual or potential SLD holder that Registrar enjoys access to a registry for which Registrar is accredited that is superior to that of any other registrar accredited for that registry. 4. Registrar shall not activate any SLD registration unless and until it is satisfied that it has received a reasonable assurance of payment of its registration fee. For this purpose, a charge to a credit card, general commercial terms extended to creditworthy customers, or other mechanism providing a similar level of assurance of payment shall be sufficient, provided that the obligation to pay becomes final and non-revocable by the SLD holder upon activation of the registration. 5. Registrar shall register SLDs to SLD holders only for fixed periods. At the conclusion of the registration period, failure by or on behalf of the SLD holder to pay a renewal fee within the time specified in a second notice or reminder shall, in the absence of extenuating circumstances, result in cancellation of the registration. In the event that ICANN adopts a policy concerning procedures for handling expiration of registrations, Registrar shall abide by that policy. 6. Registrar shall not insert or renew any SLD name in any registry for which Registrar is accredited by ICANN in a manner contrary to an ICANN-adopted policy stating a list or specification of excluded SLD names that is in effect at the time of insertion or renewal. 7. Registrar shall require all SLD holders to enter into an electronic or paper registration agreement with Registrar including at least the following provisions: a. The SLD holder shall provide to Registrar accurate and reliable contact details and promptly correct and update them during the term of the SLD registration, including: the full name, postal address, e-mail address, voice telephone number, and fax number if available of the SLD holder; name of authorized person for contact purposes in the case of an SLD holder that is an organization, association, or corporation; and the data elements listed in Section II.F.1.b, c, and h through i above. An SLD holder's willful provision of inaccurate or unreliable information, its willful failure promptly to update information provided to Registrar, or its failure to respond for over fifteen calendar days to inquiries by Registrar concerning the accuracy of contact details associated with the SLD holder's registration shall constitute a material breach of the SLD holder-registrar contract and be a basis for cancellation of the SLD registration. Any SLD holder that intends to license use of a domain name to a third party is nonetheless the SLD holder of record and is responsible for providing its own full contact information and for providing and updating accurate technical and administrative contact information adequate to facilitate timely resolution of any problems that arise in connection with the SLD. An SLD holder licensing use of an SLD according to this provision shall accept liability for harm caused by wrongful use of the SLD, unless it promptly discloses the identity of the licensee to a party providing the SLD holder reasonable evidence of actionable harm. b. Registrar shall provide notice to each new or renewed SLD holder stating: i. The purposes for which any Personal Data collected from the applicant are intended; -9- ii. The intended recipients or categories of recipients of the data (including the Registry and others who will receive the data from Registry); iii. Which data are obligatory and which data, if any, are voluntary; and iv. How the SLD holder or data subject can access and, if necessary, rectify the data held about them. c. The SLD holder shall consent to the data processing referred to in Section II.J.7.b. d. The SLD holder shall represent that notice has been provided equivalent to that described in Section II.J.7.b. above to any third-party individuals whose Personal Data are supplied to Registrar by the SLD holder, and that the SLD holder has obtained consent equivalent to that referred to in Section II.J.7.c of any such third-party individuals. e. Registrar shall agree that it will not process the Personal Data collected from the SLD holder in a way incompatible with the purposes and other limitations about which it has provided notice to the SLD holder in accordance with Section II.J.7.b, above. f. Registrar shall agree that it will take reasonable precautions to protect Personal Data from loss, misuse, unauthorized access or disclosure, alteration, or destruction. g. The SLD holder shall represent that, to the best of the SLD holder's knowledge and belief, neither the registration of the SLD name nor the manner in which it is directly or indirectly used infringes the legal rights of a third party. h. For the adjudication of disputes concerning or arising from use of the SLD name, the SLD holder shall submit, without prejudice to other potentially applicable jurisdictions, to the jurisdiction of the courts (1) of the SLD holder's domicile and (2) where Registrar is located. i. The SLD holder shall agree that its registration of the SLD name shall be subject to suspension, cancellation, or transfer pursuant to any ICANN-adopted policy, or pursuant to any registrar or registry procedure not inconsistent with an ICANN-adopted policy, (1) to correct mistakes by Registrar or the Registry in registering the name or (2) for the resolution of disputes concerning the SLD name. j. The SLD holder shall indemnify and hold harmless the Registry and its directors, officers, employees, and agents from and against any and all claims, damages, liabilities, costs, and expenses (including reasonable legal fees and expenses) arising out of or related to the SLD holder's domain name registration. 8. Registrar shall abide by any ICANN-adopted policies requiring reasonable and commercially practicable (a) verification, at the time of registration, of contact information associated with an SLD registration sponsored by Registrar or (b) periodic re-verification of such information. Registrar shall, upon notification by any person of an inaccuracy in the contact information associated with an SLD registration sponsored by Registrar, take reasonable steps to investigate that claimed inaccuracy. In the event Registrar learns of inaccurate contact information associated with an SLD registration it sponsors, it shall take reasonable steps to correct that inaccuracy. -10- 9. Registrar shall abide by any ICANN-adopted policy prohibiting or restricting warehousing of or speculation in domain names by registrars. 10. Registrar shall maintain in force commercial general liability insurance with policy limits of at least US$500,000 covering liabilities arising from Registrar's registrar business during the term of this Agreement. 11. Nothing in this Agreement prescribes or limits the amount Registrar may charge SLD holders for registration of SLD names. K. Domain-Name Dispute Resolution. During the term of this Agreement, Registrar shall have in place a policy and procedure for resolution of disputes concerning SLD names. In the event that ICANN adopts a policy or procedure for resolution of disputes concerning SLD names that by its terms applies to Registrar, Registrar shall adhere to the policy or procedure. L. Accreditation Fees. As a condition of accreditation, Registrar shall pay accreditation fees to ICANN. These fees consist of yearly and on-going components. 1. The yearly component for the term of this Agreement shall be US $5,000. Payment of the yearly component shall be due upon execution by Registrar of this Agreement and upon each anniversary date after such execution during the term of this Agreement (other than the expiration date). 2. Registrar shall pay the on-going component of Registrar accreditation fees adopted by ICANN in accordance with the provisions of Section II.C above, provided such fees are reasonably allocated among all registrars that contract with ICANN and that any such fees must be expressly approved by registrars accounting, in aggregate, for payment of two-thirds of all registrar-level fees. Registrar shall pay such fees in a timely manner for so long as all material terms of this Agreement remain in full force and effect, and notwithstanding the pendency of any dispute between Registrar and ICANN. 3. On reasonable notice given by ICANN to Registrar, accountings submitted by Registrar shall be subject to verification by an audit of Registrar's books and records by an independent third-party that shall preserve the confidentiality of such books and records (other than its findings as to the accuracy of, and any necessary corrections to, the accountings). M. Specific Performance. While this Agreement is in effect, either party may seek specific performance of any provision of this Agreement in the manner provided in Section II.P below, provided the party seeking such performance is not in material breach of its obligations. N. Termination of Agreement. This Agreement may be terminated before its expiration by Registrar by giving ICANN thirty days written notice. It may be terminated before its expiration by ICANN in any of the following circumstances: 1. There was a material misrepresentation, material inaccuracy, or materially misleading statement in Registrar's application for accreditation or any material accompanying the application. -11- 2. Registrar: a. is convicted of a felony or other serious offense related to financial activities, or is judged by a court to have committed fraud or breach of fiduciary duty, or is the subject of a judicial determination that ICANN reasonably deems as the substantive equivalent of any of these; or b. is disciplined by the government of its domicile for conduct involving dishonesty or misuse of funds of others. 3. Any officer or director of Registrar is convicted of a felony or of a misdemeanor related to financial activities, or is judged by a court to have committed fraud or breach of fiduciary duty, or is the subject of a judicial determination that ICANN deems as the substantive equivalent of any of these; provided, such officer or director is not removed in such circumstances. 4. Registrar fails to cure any breach of this Agreement (other than a failure to comply with a policy adopted by ICANN during the term of this Agreement as to which Registrar is seeking, or still has time to seek, review under Section I.B.2 of whether a consensus is present) within fifteen working days after ICANN gives Registrar notice of the breach. 5. Registrar fails to comply with a ruling granting specific performance under Sections II.M and II.P. 6. Registrar continues acting in a manner that ICANN has reasonably determined endangers the stability or operational integrity of the Internet after receiving three days notice of that determination. 7. Registrar becomes bankrupt or insolvent. This Agreement may be terminated in circumstances 1 through 6 above only upon fifteen days written notice to Registrar (in the case of circumstance 4 occurring after Registrar's failure to cure), with Registrar being given an opportunity during that time to initiate arbitration under Section II.P to determine the appropriateness of termination under this Agreement. In the event Registrar initiates litigation or arbitration concerning the appropriateness of termination by ICANN, the termination shall be stayed an additional thirty days to allow Registrar to obtain a stay of termination under Section II.P below. If Registrar acts in a manner that ICANN reasonably determines endangers the stability or operational integrity of the Internet and upon notice does not immediately cure, ICANN may suspend this Agreement for five working days pending ICANN's application for more extended specific performance or injunctive relief under Section II.P. This Agreement may be terminated immediately upon notice to Registrar in circumstance 7 above. -12- O. Term of Agreement; Renewal; Right to Substitute Updated Agreement. This Agreement shall have an initial term until [specific date to be inserted: five years for most agreements; for agreements substituting for the prior one-year agreements the inserted date will be the existing (one year) termination date of those agreements, as required by Section III.M of those agreements], unless sooner terminated. Thereafter, if Registrar seeks to continue its accreditation, it may apply for renewed accreditation, and shall be entitled to renewal provided it meets the ICANN-adopted policy on accreditation criteria then in effect, is in compliance with its obligations under this Agreement, as amended, and agrees to be bound by the then-current Registrar accreditation agreement (which may differ from those of this Agreement) that ICANN adopts in accordance with Sections II.C and II.D (as Section II.D may have been amended by an ICANN-adopted policy). In connection with renewed accreditation, Registrar shall confirm its assent to the terms and conditions of the such then-current Registrar accreditation agreement by signing that accreditation agreement. In the event that, during the term of this Agreement, ICANN posts on its web site an updated form of registrar accreditation agreement applicable to accredited registrars in the .com, .net, or .org TLDs, Registrar (provided it has not received (1) a notice of breach that it has not cured or (2) a notice of termination of this Agreement under Section II.N above) may elect, by giving ICANN written notice, to enter an agreement in the updated form in place of this Agreement. In the event of such election, Registrar and ICANN shall promptly sign a new accreditation agreement that contains the provisions of the updated form posted on the web site, with the length of the term of the substituted agreement as stated in the updated form posted on the web site, calculated as if it commenced on the date this Agreement was made, and this Agreement will be deemed terminated. P. Resolution of Disputes Under this Agreement. Disputes arising under or in connection with this Agreement, including (1) disputes arising from ICANN's failure to renew Registrar's accreditation and (2) requests for specific performance, shall be resolved in a court of competent jurisdiction or, at the election of either party, by an arbitration conducted as provided in this Section II.P pursuant to the International Arbitration Rules of the American Arbitration Association ("AAA"). The arbitration shall be conducted in English and shall occur in Los Angeles County, California, USA. There shall be three arbitrators: each party shall choose one arbitrator and, if those two arbitrators do not agree on a third arbitrator, the third shall be chosen by the AAA. The parties shall bear the costs of the arbitration in equal shares, subject to the right of the arbitrators to reallocate the costs in their award as provided in the AAA rules. The parties shall bear their own attorneys' fees in connection with the arbitration, and the arbitrators may not reallocate the attorneys' fees in conjunction with their award. The arbitrators shall render their decision within ninety days of the conclusion of the arbitration hearing. In the event Registrar initiates arbitration to contest the appropriateness of termination of this Agreement by ICANN, Registar may at the same time request that the arbitration panel stay the termination until the arbitration decision is rendered, and that request shall have the effect of staying the termination until the arbitration panel has granted an ICANN request for specific performance and Registrar has failed to comply with such ruling. In the event Registrar initiates arbitration to contest an Independent Review Panel's decision under Section I.B.2 sustaining the Board's determination that a policy is supported by consensus, Registar may at the same time request that the arbitration panel stay the requirement that it comply with the policy until the arbitration decision is rendered, and that request shall have the effect of staying the requirement until the decision or until the arbitration panel has granted an ICANN request for lifting of the stay. In all litigation involving ICANN concerning this Agreement (whether in a case where arbitration has not been elected or to enforce an arbitration award), jurisdiction and exclusive venue for such litigation shall be in a court located in Los Angeles, California, USA; however, the parties shall also have the right to enforce a judgment of such a court in any court of competent jurisdiction. For the purpose of aiding the arbitration and/or preserving the rights of the parties during the pendency of an arbitration, the parties shall have the right to seek temporary or preliminary injunctive relief from the arbitration panel or in a court located in Los Angeles, California, USA, which shall not be a waiver of this arbitration agreement. Q. Limitations on Monetary Remedies for Violations of this Agreement. ICANN's aggregate monetary liability for violations of this Agreement shall not exceed the amount of accreditation fees paid by Registrar to ICANN under Section II.L of this Agreement. Registrar's monetary liability to ICANN for violations of this Agreement shall be limited to accreditation fees owing to ICANN under this Agreement. In no event shall either party be liable for special, indirect, incidental, punitive, exemplary, or consequential damages for any violation of this Agreement. -13- R. Handling by ICANN of Registrar-Supplied Data. Before receiving any Personal Data from Registrar, ICANN shall specify to Registrar in writing the purposes for and conditions under which ICANN intends to use the Personal Data. ICANN may from time to time provide Registrar with a revised specification of such purposes and conditions, which specification shall become effective no fewer than thirty days after it is provided to Registrar. ICANN shall not use Personal Data provided by Registrar for a purpose or under conditions inconsistent with the specification in effect when the Personal Data were provided. ICANN shall take reasonable steps to avoid uses of the Personal Data by third parties inconsistent with the specification. S. Miscellaneous. 1. Assignment. Either party may assign or transfer this Agreement only with the prior written consent of the other party, which shall not be unreasonably withheld, except that ICANN may, with the written approval of the United States Department of Commerce, assign this agreement by giving Registrar written notice of the assignment. In the event of assignment by ICANN, the assignee may, with the approval of the United States Department of Commerce, revise the definition of "Consensus Policy" to the extent necessary to meet the organizational circumstances of the assignee, provided the revised definition requires that Consensus Policies be based on a demonstrated consensus of Internet stakeholders. 2. No Third-Party Beneficiaries. This Agreement shall not be construed to create any obligation by either ICANN or Registrar to any non-party to this Agreement, including any SLD holder. 3. Notices, Designations, and Specifications. All notices to be given under this Agreement shall be given in writing at the address of the appropriate party as set forth below, unless that party has given a notice of change of address in writing. Any notice required by this Agreement shall be deemed to have been properly given when delivered in person, when sent by electronic facsimile, or when scheduled for delivery by internationally recognized courier service. Designations and specifications by ICANN under this Agreement shall be effective when written notice of them is deemed given to Registrar. If to ICANN, addressed to: Internet Corporation for Assigned Names and Numbers Registrar Accreditation 4676 Admiralty Way, Suite 330 Marina Del Rey, California 90292 Telephone: 1/310/823-9358 Facsimile: 1/310/823-8649 If to Registrar, addressed to: FullWeb, Inc. d/b/a FullNic 200 N. Harvey Suite 1704 Oklahoma City, OK 73102 Attention: Jason Ayers Telephone Number: +1/405/236-8200 Facsimile Number: +1/405/236/8201 E-mail Address: admin@FullNic.com ----------------- 4. Dates and Times. All dates and times relevant to this Agreement or its performance shall be computed based on the date and time observed in Los Angeles, California, USA. 5. Language. All notices, designations, and specifications made under this Agreement shall be in the English language. -14- 6. Entire Agreement. Except for any written transition agreement that may be executed concurrently herewith by both parties, this Agreement constitutes the entire agreement of the parties hereto pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties. 7. Amendments and Waivers. No amendment, supplement, or modification of this Agreement or any provision hereof shall be binding unless executed in writing by both parties. No waiver of any provision of this Agreement shall be binding unless evidenced by a writing signed by the party waiving compliance with such provision. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof, nor shall any such waiver constitute a continuing waiver unless otherwise expressly provided. 8. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in duplicate by their duly authorized representatives. INTERNET CORPORATION FOR ASSIGNED NAMES AND NUMBERS By:__________________________ Michael M. Roberts President and CEO FULLWEB, INC. d/b/a FULLNIC f/k/a ANIMUS COMMUNICATIONS, INC. By:__________________________ Jason Ayers President -15- EX-27.1 13 FDS
5 0001092570 FullNet Communications, Inc 1 US Dollars 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 1 350,979 0 77,543 0 32,460 533,308 699,110 278,145 3,520,198 1,299,707 582,565 0 0 77,763 1,542,477 3,520,198 31,196 340,003 19,326 149,073 598,715 0 62,331 (470,117) 0 0 0 0 0 (470,117) (.18) (.18)
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