Document:

PURCHASE

AGREEMENT                                                        Exhibit

10.19

 

                THIS

PURCHASE AGREEMENT (the “Agreement”) is made as of the 22nd day of

May, 2002, by and between Datalink Corporation, a corporation

organized under the laws of the State of Minnesota (the “Company”), with its

principal offices at 8170 Upland Circle, Chanhassen, Minnesota 55317, and Needham Emerging Growth Partners, L.P., Needham Contrarian

Fund, L.P., Needham Emerging Growth Partners (Caymans), L.P., Needham Growth

Fund and Needham Aggressive Growth Fund  (each a “Purchaser” and together, the “Purchasers”), with their

principal offices at 445 Park Avenue, Third Floor, New York, New York 10022.

 

                IN CONSIDERATION of the

mutual covenants contained in this Agreement, the Company and the Purchasers

agree as follows:

 

                Section 1.              Authorization of Sale of the Shares and Warrants.  Subject to the terms and conditions of this

Agreement, the Company has authorized the sale of (i) 1,180,000 shares (the

“Shares”) of common stock, $.001 par value per share (the “Common Stock”), of

the Company and (ii) 200,000 five-year warrants in the form of Exhibit A

attached hereto (the “Warrants”) to purchase an additional 200,000 shares of

Common Stock at an exercise price of $4.50 per share (the “Warrant Shares”).

 

                Section 2.              Agreement to Sell and Purchase the Shares and

Warrants.  At the Closing

(as defined in Section 3), the Company will sell to the Purchasers and each

Purchaser will buy (severally and not jointly) from the Company, at a purchase

price of $4.50 per Share and upon the other terms and conditions hereinafter

set forth, the number of Shares and Warrants shown below:

 

	

  Purchaser

  	

   

  	

  Shares

  	

   

  	

  Warrants

  	

   

  	

  Dollar Amount

  	

   

  
	

  Needham Emerging

  Growth Partners, L.P.

  	

   

  	

  400,000

  	

   

  	

  68,000

  	

   

  	

  $

  	

  1,800,000

  	

   

  
	

  Needham

  Contrarian Fund, L.P.

  	

   

  	

  200,000

  	

   

  	

  34,000

  	

   

  	

  $

  	

  900,000

  	

   

  
	

  Needham Emerging

  Growth

  Partners (Caymans), L.P.

  	

   

  	

  155,000

  	

   

  	

  26,000

  	

   

  	

  $

  	

  697,500

  	

   

  
	

  Needham Growth

  Fund

  	

   

  	

  400,000

  	

   

  	

  68,000

  	

   

  	

  $

  	

  1,800,000

  	

   

  
	

  Needham

  Aggressive Growth Fund

  	

   

  	

  25,000

  	

   

  	

  4,000

  	

   

  	

  $

  	

  112,500

  	

   

  
	

  TOTAL

  	

   

  	

  1,180,000

  	

   

  	

  200,000

  	

   

  	

  $

  	

  5,310,000

  	

   

  

 

                Section 3.              Delivery of the Shares and Warrants.  The completion of the purchase and sale of

the Shares (the “Closing”) shall occur at the offices of Messerli & Kramer

P.A., 150 South Fifth Street, Suite 1800, Minneapolis, Minnesota 55402 at 10:00

a.m., Central Time, on the date hereof or at such other date, time and place as

the parties may agree to in writing, but not prior to the date that the

conditions for Closing set forth below have been satisfied or waived by the

appropriate party (the “Closing Date”).

 

 

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                Within ten business days after

the Closing, the Company shall deliver to each Purchaser one or more stock and

warrant certificates dated as of the Closing Date, registered in the name of

such Purchaser representing the number of Shares and Warrants set forth in

Section 2 above being purchased by such Purchaser and bearing an appropriate

legend referring to the fact that the Shares and Warrants were sold in reliance

upon the exemption from registration under the Securities Act of 1933, as

amended (the “Securities Act”) provided by Section 4(2) thereof and Rule 506

thereunder.  The Company’s obligation to

complete the purchase and sale of the Shares and Warrants and deliver such

stock and warrant certificate(s) to each Purchaser at the Closing shall be

subject to the following conditions, any one or more of which may be waived by

the Company:  (a) receipt by the Company

of same-day funds in the full amount of the purchase price for all of the

Shares and Warrants being purchased by each Purchaser hereunder and (b) the

accuracy of the representations and warranties (as if such representations and

warranties were made on the Closing Date) made by the Purchasers and the

fulfillment of those undertakings of the Purchasers to be fulfilled prior to

the Closing.  Each Purchaser’s

obligation to accept delivery of such stock and warrant certificate(s) and to

pay for the Shares and Warrants evidenced thereby shall be subject to the

conditions:  (1) that the representations

and warranties made by the Company herein are accurate as of the Closing

Date;  (2) that the Company has

fulfilled all undertakings to be fulfilled prior to the Closing;  (3) that the Closing Date shall occur on a

date that is not later than May 22, 2002; 

and (4) that the Common Stock shall be quoted on the Nasdaq National

Market System.

 

Section

4.              Representations,

Warranties and Covenants of the Company. The Company hereby represents and warrants to,

and covenants with, the Purchaser as follows:

 

                4.1          Organization

and Qualification.  The

Company is a corporation duly incorporated, validly existing and in good

standing under the laws of the State of Minnesota and the Company is qualified

to do business as a foreign corporation in each jurisdiction in which

qualification is required, except where failure to so qualify would not

reasonably be expected to have a material adverse effect upon the business,

financial condition, properties or operations of the Company, taken as a whole

(a “Material Adverse Effect”).  The

Company has no subsidiaries.

 

                4.2          Authorized

Capital Stock.  As of May

22, 2002, the authorized capital stock of the Company consists of 50,000,000

undesignated shares of capital stock, of which 8,976,299 shares of Common Stock

are issued and outstanding and 3,550,000 shares of Common Stock are reserved

for issuance under the Company’s stock option and purchase plans.  The issued and outstanding shares of the

Company’s Common Stock have been duly authorized and validly issued, are fully

paid and nonassessable, have been issued in compliance with all federal and

state securities laws and were not issued in violation of or subject to any

preemptive rights or other rights to subscribe for or purchase securities, and

conform in all material respects to the description thereof contained in the

Company’s filings (the “Public Filings”) with the U.S. Securities and Exchange

Commission (the “Commission”) pursuant to the Securities Act of

 

 

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1933,

as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as

amended (the “Exchange Act”).  Except

for stock options and other awards granted under the option, award and purchase

plans of the Company described in the Public Filings, the Company does not have

outstanding any options to purchase, or any preemptive rights or other rights

to subscribe for or to purchase, any securities or obligations convertible

into, or any contracts or commitments to issue or sell, shares of its capital stock

or any such options, rights, convertible securities or obligations.  The description of the Company’s stock,

stock bonus and other stock plans or arrangements and the options or other

rights granted and exercised thereunder set forth in the Public Filings

accurately and fairly presents all material information with respect to such

plans, arrangements, options and rights.

 

                4.3          Issuance,

Sale and Delivery of the Shares and Warrants.  The Shares and Warrants, and the Warrant

Shares underlying the Warrants, have been duly authorized and, when issued,

delivered and paid for in the manner set forth in this Agreement or by the

Warrants, will be duly authorized, validly issued, fully paid and

nonassessable.  No preemptive rights or

other rights to subscribe for or purchase exist with respect to the issuance

and sale of the Shares and Warrants by the Company pursuant to this

Agreement.  No stockholder of the

Company has any right (which has not been waived or has not expired by reason

of lapse of time following notification of the Company’s intent to file the

registration statement to be filed by it pursuant to Section 7.1 (the

“Registration Statement”)) to require the Company to register the sale of any

shares owned by such stockholder under the Securities Act in the Registration

Statement.  No further approval or

authority of the stockholders or the Board of Directors of the Company will be

required for the issuance and sale of the Shares and Warrants to be sold by the

Company as contemplated herein or the Warrant Shares upon payment therefor as

provided by the Warrants.  The Company

has reserved an adequate number of shares of its Common Stock for possible

issuance upon exercise of the Warrants.

 

                4.4          Due

Execution, Delivery and Performance of this Agreement.  The Company has full legal right, corporate

power and authority to enter into this Agreement and perform the transactions

contemplated hereby.  This Agreement has

been duly authorized, executed and delivered by the Company.  The execution, delivery and performance of

this Agreement by the Company and the consummation of the transactions herein

contemplated will not violate any provision of the organizational documents of

the Company and will not result in the creation of any lien, charge, security

interest or encumbrance upon any assets of the Company pursuant to the terms or

provisions of, or will not conflict with, result in the breach or violation of,

or constitute, either by itself or upon notice or the passage of time or both,

a default under any agreement, mortgage, deed of trust, lease, franchise,

license, indenture, permit or other instrument to which the Company is a party

or by which the Company or any of its properties may be bound or affected and

in each case which would have a Material Adverse Effect or any statute or any

authorization, judgment, decree, order, rule or regulation of any court or any

regulatory body, administrative agency or other governmental body applicable to

the Company or any of its properties where such conflict, breach, violation or

default is likely to result in a 

 

 

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Material

Adverse Effect.  No consent, approval,

authorization or other order of any court, regulatory body, administrative

agency or other governmental body is required for the execution and delivery of

this Agreement or the consummation of the transactions contemplated by this

Agreement, except for compliance with the Blue Sky laws and federal securities

laws applicable to the offering of the Shares, the Warrants and the Warrant

Shares.  Upon the execution and delivery

of this Agreement, and assuming the valid execution thereof by the Purchasers,

this Agreement will constitute a valid and binding obligation of the Company, enforceable

in accordance with its terms, except as enforceability may be limited by

applicable bankruptcy, insolvency, reorganization, moratorium or similar laws

affecting creditors’ and contracting parties’ rights generally and except as

enforceability may be subject to general principles of equity (regardless of

whether such enforceability is considered in a proceeding in equity or at law)

and except as the indemnification agreements of the Company in Section 7.3

hereof may be legally unenforceable.

 

                4.5          Accountants.  The firms of Arthur Andersen LLP and

PricewaterhouseCoopers LLP, which together have expressed their respective

opinions with respect to the consolidated financial statements to be included

in the Registration Statement and the Prospectus which forms a part thereof,

have each represented to the Company that such respective firm is an

independent accountant as required by the Securities Act and the rules and

regulations promulgated thereunder (the “Rules and Regulations”).

 

                4.6          No

Defaults.  The Company is

not in violation or default of any provision of its articles of incorporation

or bylaws, or in breach of or default with respect to any provision of any

agreement, judgment, decree, order, mortgage, deed of trust, lease, franchise,

license, indenture, permit or other instrument to which it is a party or by

which it or any of its properties are bound and where such breach or default is

reasonably likely to result in a Material Adverse Effect; and there does not

exist any state of fact which, with notice or lapse of time or both, would

constitute an event of default on the part of the Company as defined in such

documents and which would have a Material Adverse Effect.

 

                4.7          Contracts.  The contracts described in the Public

Filings that are material to the Company are in full force and effect on the

date hereof; and neither the Company nor, to the Company’s knowledge, any other

party thereto, is in breach of or default under any of such contracts which

breach or default would have a Material Adverse Effect.

 

                4.8          No

Actions.  There are no

legal or governmental actions, suits, proceedings, pending and to the Company’s

knowledge, there are no inquiries or investigations, nor are there any legal or

governmental actions, suits, or proceedings threatened, to which the Company is

or may be a party or subject or of which property owned or leased by the

Company is or may be the subject, or related to environmental or discrimination

matters, or instituted by the Commission, the National Association of

Securities Dealers, Inc., any state securities commission or other governmental

or regulatory entity, which actions, suits or proceedings, individually or in

the 

 

 

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aggregate,

might prevent or might reasonably be expected to prevent or materially and

adversely affect the transactions contemplated by this Agreement or result in a

Material Adverse Effect; and, to the Company’s knowledge, no labor disturbance

by the employees of the Company exists, or is imminent which is reasonably

expected to have a Material Adverse Effect. 

The Company is not party to or subject to the provisions of any material

injunction, judgment, decree or order of any court, regulatory body

administrative agency or other governmental body.

 

                4.9          Properties.  The Company has good and marketable title to

all the properties and assets reflected as owned by it in the consolidated

financial statements included in the Public Filings, subject to no lien,

mortgage, pledge, charge or encumbrance of any kind except (i) those, if any,

reflected in such consolidated financial statements or (ii) those which are not

material in amount and do not adversely affect the use made and intended to be

made of such property by the Company. 

The Company owns or leases all such properties as are necessary to its

operations as now conducted.  The

Company holds its leased properties under valid and binding leases, with such

exceptions as are not materially significant in relation to its business.

 

                4.10        No

Material Change.  Since

March 31, 2002 and except as described in or specifically contemplated by the

Public Filings:  (i) the Company has not

incurred any material liabilities or obligations, indirect, or contingent, or

entered into any material verbal or written agreement or other transaction not

in the ordinary course of business or which could reasonably be expected to

have a Material Adverse Effect;  (ii)

the Company has not sustained any material loss or interference with its

businesses or properties from fire, flood, windstorm, accident or other calamity

not covered by insurance;  (iii) the

Company has not paid or declared any dividends or other distributions with

respect to its capital stock and the Company is not in default in the payment

of principal or interest on any outstanding debt obligations;  (iv) there has not been any change in the

capital stock of the Company other than the sale of the Shares hereunder and

shares or options issued pursuant to employee equity incentive plans or

purchase plans approved by the Company’s Board of Directors and repurchases of

shares or options pursuant to repurchase plans already approved by the

Company’s Board of Directors, or any increase in indebtedness material to the

Company;  and (v) there has not been any

other event or change that would have a Material Adverse Effect.

 

                4.11        Intellectual

Property.  The Company

owns or has obtained valid and enforceable licenses or options for the

inventions, patent applications, patents, trademarks (both registered and

unregistered), trade names, copyrights and trade secrets necessary for the

conduct of the Company’s business as currently conducted (collectively, the

“Intellectual Property”).  There are no

third parties who have any ownership rights to any Intellectual Property that is

owned by, or has been licensed to, the Company for the products or services

described in the Public Filings that would preclude the Company from conducting

its business as currently conducted and have a Material Adverse Effect, except

for the ownership rights of the owners of the Intellectual Property licensed or

optioned by the Company.  To the

Company’s knowledge, there are currently no sales of any products that would

constitute an infringement by third parties of any 

 

 

7

 

 

Intellectual

Property owned, licensed or optioned by the Company, which infringement would

have a Material Adverse Effect.  There

is no pending or, to the Company’s knowledge, threatened action, suit,

proceeding or claim by others challenging the rights of the Company in or to

any Intellectual Property owned, licensed or optioned by the Company, other

than claims which would not reasonably be expected to have a Material Adverse

Effect.  There is no pending or, to the

Company’s knowledge, threatened action, suit, proceeding or claim by others

challenging the validity or scope of any Intellectual Property owned, licensed

or optioned by the Company, other than non-material actions, suits, proceedings

and claims.  There is no pending or, to

the Company’s knowledge, threatened action, suit, proceeding or claim by others

that the Company infringes or otherwise violates any patent, trademark,

copyright, trade secret or other proprietary right of others, other than

non-material actions, suits, proceedings and claims.

 

                4.12        Compliance.  The Company has not been advised, nor has

reason to believe, that it is not conducting business in compliance with all

applicable laws, rules and regulations of the jurisdictions in which it is

conducting its business, including, without limitation, all applicable local,

state and federal environmental laws and regulations; in each case, except

where failure to be in compliance would not have a Material Adverse Effect.

 

                4.13        Taxes.  The Company has filed all necessary federal,

state and foreign income and franchise tax returns and has paid or accrued all

taxes shown as due thereon (or has appropriately and timely contested such

taxes), and the Company has no knowledge of a tax deficiency which has been or

might be asserted or threatened against it which is reasonably likely to have a

Material Adverse Effect.

 

                4.14        Transfer

Taxes.  On the Closing

Date, all stock transfer or other taxes which are required to be paid in

connection with the sale and transfer of the Shares and Warrants to be sold to

the Purchasers hereunder will be, or will have been, fully paid or provided for

by the Company and all laws imposing such taxes will be or will have been

complied with.

 

                4.15        Investment

Company.  The Company is

not an “investment company” or an “affiliated person” of, or “promoter” or

“principal underwriter” for an investment company, within the meaning of the

Investment Company Act of 1940, as amended.

 

                4.16        Offering

Materials.  The Company

has not distributed and will not distribute prior to the Closing Date any offering

material in connection with the offering and sale of the Shares and Warrants

other than the Public Filings or any amendment or supplement thereto.  Neither the Company nor any person acting on

its behalf has in the past or will hereafter take any action to sell, offer for

sale or solicit offers to buy any securities of the Company which would subject

the offer, issuance or sale of the Shares and Warrants, as contemplated by this

Agreement, to the registration requirements of Section 5 of the Securities Act.

 

 

8

 

 

                4.17        Insurance.  The Company maintains insurance of the types

and in the amounts that the Company reasonably believes is adequate for its

business, including, but not limited to, insurance covering all real and

personal property owned or leased by the Company against theft, damage,

destruction, acts of vandalism and all other risks customarily insured against

by similarly situated companies, all of which insurance is in full force and

effect.

 

                4.18        Contributions.  The Company has not at any time since its

incorporation, directly or indirectly, (i) made any unlawful contribution to

any candidate for public office, or failed to disclose fully any contribution

in violation of law or (ii) made any payment to any federal or state

governmental officer or official, or other person charged with similar public

or quasi-public duties, other than payments required or permitted by the laws

of the United States or any jurisdiction thereof.

 

                4.19        Additional

Information.  The

information contained in the following documents, which the Company has

furnished to the Purchasers, or will furnish prior to the Closing, does not

include any untrue statement of a material fact or omit to state any material

fact required to be stated therein or necessary to make the statements therein,

in the light of the circumstances in which they were made, not misleading, as

of their respective filing dates or, if amended, as so amended:

 

(a)                                  the Company’s Annual Report on Form 10-K

for the year ended December 31, 2001;

 

(b)                                 the Company’s Quarterly Report on Form

10-Q for the quarter ended March 31, 2002; 

and

 

(c)                                  all other documents, if any, filed by the

Company with the Commission thereafter pursuant to the reporting requirements

of the Exchange Act.

 

                4.20        Legal

Opinion.  Prior to the

Closing, Messerli & Kramer P.A., counsel to the Company, will deliver its

legal opinion to the Purchasers substantially in the form attached as Exhibit B

to this Agreement.

 

                4.21        Certificate.  At the Closing, the Company will deliver to

the Purchasers a certificate executed by the Chief Executive Officer, or the

Chief Financial or Accounting Officer of the Company, dated the Closing Date,

in form and substance reasonably satisfactory to the Purchasers, to the effect

that the representations and warranties of the Company set forth in this

Section 4 are true and correct as of the date of this Agreement and as of the

Closing Date, and the Company has complied in all material respects with all

the agreements and satisfied all the conditions herein on its part to be

performed or satisfied on or prior to such Closing Date;  provided, however, that if the Closing Date

is on the same date as this Agreement, the execution 

 

 

9

 

 

and

delivery of this Agreement shall constitute the signing officer’s certification

as to such matters.

 

                4.22        Price

of Common Stock.  The

Company has not taken, and will not take, directly or indirectly, any action

designed to cause or result in, or which has constituted or which might

reasonably be expected to constitute, the stabilization or manipulation of the

price of the shares of the Common Stock to facilitate the sale or resale of the

Shares, the Warrant or the Warrant Shares.

 

                4.23        Reporting

Company; Form S-3.  The

Company is subject to the reporting requirements of the Exchange Act, has a

class of securities registered under Section 12 of the Exchange Act, and has

filed all reports required thereby.  The

Company is eligible to register the Shares and the Warrant Shares for resale by

the Purchasers on a registration statement on Form S-3 under the Securities

Act.  There exist no facts or

circumstances (including without limitation any required approvals or waivers

or any circumstances that may delay or prevent the obtaining of accountants’

consents) that reasonably could be expected to prohibit or delay the

preparation and filing of a registration statement on Form S-3 that will be

available for the resale of the Shares or the Warrant Shares by the Purchasers.

 

                4.24        Quotation

on Nasdaq.  The Company

shall use its commercially reasonable efforts to maintain the designation and

quotation, or listing, of the Common Stock on the Nasdaq National Market System

or on another national securities exchange for a minimum of two (2) years

following the Closing Date.

 

                Section 5.              Representations, Warranties and Covenants of the

Purchasers.

 

(a)           Each

of the Purchasers represents and warrants to, and covenants with, the Company

that:  (i) such Purchaser is

knowledgeable, sophisticated and experienced in making, and is qualified to

make, decisions with respect to investments in securities representing an

investment decision like that involved in the purchase of the Shares, the

Warrants and the Warrant Shares, including investments in securities issued by

the Company and comparable entities, and has requested, received, reviewed and

considered all information it deems relevant in making an informed decision to

purchase the Shares and Warrants;  (ii)

such Purchaser is acquiring the number of Shares and Warrants set forth in

Section 2 above in the ordinary course of its business and for its own account

for investment only and with no present intention of distributing any of such

Shares and Warrants, and no arrangement or understanding exists with any other

persons regarding the distribution of such Shares or Warrants (this

representation and warranty not limiting such Purchaser’s right to sell such

Shares and the Warrant Shares pursuant to the Registration Statement or in

compliance with the Securities Act and the Rules and Regulations, or, other

than with respect to any claims arising out of a breach of this representation

and warranty, such Purchaser’s right to indemnification under Section 7.3);  (iii) except pursuant to the Registration

Statement or otherwise in compliance with the Securities Act 

 

 

10

 

 

and

the Rules and Regulations, such Purchaser will not, directly or indirectly,

offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to

buy, purchase or otherwise acquire or take a pledge of) any of the Shares,

Warrants or Warrant Shares, nor will such Purchaser engage in any short sale

which results in a disposition of any of the Shares, Warrants or Warrant Shares

by Purchaser (except for a short sale executed at a price in excess of the then

applicable “Warrant Exercise Price” per share as defined in the Warrant);  (iv) such Purchaser has completed or caused

to be completed the Registration Statement Questionnaire attached hereto as

part of Appendix I, for use in preparation of the Registration Statement, and

the answers thereto are true and correct as of the date hereof and will be true

and correct as of the effective date of the Registration Statement, and such

Purchaser will notify the Company immediately of any material change in any

such information provided in the Registration Statement Questionnaire;  (v) such Purchaser has, in connection with

its decision to purchase the number of Shares and Warrants set forth in Section

2 above, relied solely upon the Public Filings and the documents included

therein or incorporated by reference and the representations and warranties of

the Company contained herein;  (vi) such

Purchaser is an “accredited investor” within the meaning of Rule 501(a) of

Regulation D promulgated under the Securities Act;  and (vii) such Purchaser agrees to notify the Company immediately

of any change in any of the foregoing information until such time as such Purchaser

has sold all of its Shares, Warrants and Warrant Shares or the Company is no

longer required to keep the Registration Statement effective.

 

                (b)           Each of the Purchasers understands that the Shares and

Warrants are being offered and sold to it in reliance upon specific exemptions

from the registration requirements of Securities Act, the Rules and Regulations

and state securities laws, and that the Company is relying upon the truth and

accuracy of, and each Purchaser’s compliance with, the representations,

warranties, agreements, acknowledgments and understandings of the Purchasers

set forth herein in order to determine the availability of such exemptions and

the eligibility of the Purchasers to acquire the Shares and Warrants.

 

(c)           The

Purchasers have used any information provided by the Company for the sole

purpose of evaluating a possible investment in the Shares and Warrants and the

Purchasers hereby acknowledge that they are prohibited from reproducing or

distributing this Purchase Agreement or any other offering materials or other

information provided by the Company in connection with the Purchasers’

consideration of their investment in the Company, in whole or in part, or

divulging or discussing any of their contents. 

Further, the Purchasers understand that the existence and nature of all

conversations and presentations, if any, regarding the Company and this

offering must be kept strictly confidential. 

The Purchasers understand that the federal securities laws impose

restrictions on trading based on information regarding this offering.  In addition, the Purchasers hereby

acknowledge that unauthorized disclosure of information regarding this offering

may cause the Company to violate Regulation FD.  In addition to the above, the Purchasers shall maintain in

confidence the receipt and content of any notice of a Suspension (as defined in

Section 5(h) below).  The foregoing

agreements shall not apply to any information that is or becomes publicly

available through no fault of the Purchasers, or that the 

 

 

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Purchasers

are legally required to disclose; 

provided, however, that if a Purchaser is requested or ordered to

disclose any such information pursuant to any court or other government order

or any other applicable legal procedure, it shall provide the Company with

prompt notice of any such request or order in time sufficient to enable the

Company to seek an appropriate protective order.

 

                (d)           The Purchasers understand that their investment in the

Shares and Warrants involves a significant degree of risk and that the market

price of the Common Stock has been and continues to be volatile and that no

representation is being made as to the future value of the Common Stock.  The Purchasers have the knowledge and

experience in financial and business matters as to be capable of evaluating the

merits and risks of an investment in the Shares and Warrants and have the

ability to bear the economic risks of an investment in the Shares and Warrants.  The Purchasers have been afforded the

opportunity to ask questions of the Company regarding such matters.

 

                (e)           The Purchasers understand that no United States federal or

state agency or any other government or governmental agency has passed upon or

made any recommendation or endorsement of the Shares and Warrants.

 

                (f)            The Purchasers understand that, until such time as the

Registration Statement has been declared effective or the Shares and Warrant

Shares may be sold by non-affiliates of the Company pursuant to Rule 144 under

the Securities Act without any restriction as to the number of securities as of

a particular date that can then be immediately sold, the Shares, Warrant and

Warrant Shares may bear a restrictive legend in substantially the following

form (and a stop-transfer order may be placed against transfer of the

certificates for the Shares, Warrants and Warrant Shares):

 

“THE

SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE

SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED

OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE

SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND

SCOPE REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED

UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.”

 

                (g)           Except for Needham Emerging Growth Partners (Cayman),

L.P., whose principal executive offices are in the Cayman Islands, each

Purchaser’s principal executive offices are in the State of New York.

 

                (h)           The Purchasers hereby covenant with the Company not to

make any sale of the Shares or Warrant Shares under the Registration Statement

without effectively causing the 

 

 

12

 

 

prospectus

delivery requirement under the Securities Act to be satisfied, and the

Purchasers acknowledge and agree that such Shares and Warrant Shares are not

transferable on the books of the Company unless the certificate submitted to

the transfer agent evidencing the Shares and Warrant Shares is accompanied by a

separate Purchaser’s Certificate of Subsequent Sale (i) in the form of Appendix

II hereto, (ii) executed by an officer of, or other authorized person

designated by, the Purchaser and (iii) to the effect that (A) the Shares and

Warrant Shares have been sold in accordance with the Registration Statement,

the Securities Act and any applicable state securities or Blue Sky laws and (B)

if applicable, the requirement of delivering a current prospectus has been

satisfied.  The Purchasers acknowledge

that there may occasionally be times when the Company must suspend the use of

the prospectus forming a part of the Registration Statement (a “Suspension”)

until such time as an amendment to the Registration Statement has been filed by

the Company and declared effective by the Commission, or such time as such

prospectus has been supplemented, or until such time as the Company has filed

an appropriate report with the Commission pursuant to the Exchange Act.  The Purchasers hereby covenant that they

will not sell any Shares or Warrant Shares pursuant to such prospectus during

the period commencing at the time at which the Company gives the Purchasers

written notice of the Suspension of the use of such prospectus and ending at

the time the Company gives the Purchasers written notice that the Purchasers

may thereafter effect sales pursuant to such prospectus.  The Purchasers shall not be prohibited from

selling Shares or Warrant Shares under the Registration Statement as a result

of Suspensions on more than two occasions of not more than 30 days each in any

twelve-month period, unless, in the good faith judgment of the Company’s Board

of Directors, upon advice of counsel, the sale of Shares and Warrant Shares

under the Registration Statement in reliance on this paragraph would be

reasonably likely to cause a violation of the Securities Act or the Exchange

Act.

 

                (i)            Each Purchaser further represents and warrants to, and

covenants with, the Company that (i) such Purchaser has full right, power,

authority and capacity to enter into this Agreement and to consummate the

transactions contemplated hereby and has taken all necessary action to

authorize the execution, delivery and performance of this Agreement and (ii)

upon the execution and delivery of this Agreement, this Agreement shall

constitute a legal, valid and binding obligation of such Purchaser, enforceable

in accordance with its terms, except as enforceability may be limited by

applicable bankruptcy, insolvency, reorganization, moratorium or similar laws

affecting creditors’ and contracting parties’ rights generally and except as

enforceability may be subject to general principles of equity (regardless of

whether such enforceability is considered in a proceeding in equity or at law)

and except as the indemnification agreements of such Purchaser in Section 7.3

hereof may be legally unenforceable.

 

                Section 6.              Survival of Representations, Warranties and

Agreements. 

Notwithstanding any investigation made by any party to this Agreement,

all covenants, agreements, representations and warranties made by the Company

and the Purchasers herein and in the certificates for the Shares and Warrants

delivered pursuant hereto shall survive 

 

 

13

 

 

the

execution of this Agreement, the delivery to the Purchasers of the Shares and

Warrants being purchased and the payment therefor.

 

                Section 7.              Registration of the Shares and Warrant Shares;

Compliance with the Securities Act.

 

                7.1          Registration

Procedures and Expenses. 

The Company shall:

 

                (a)           as soon as reasonably practicable, but in no event later

than thirty (30) days following the Closing Date, prepare and file with the

Commission the Registration Statement on Form S-3 relating to the sale of the

Shares and the Warrant Shares by the Purchasers from time to time on the Nasdaq

National Market or the facilities of any national securities exchange on which

the Common Stock is then traded or in privately-negotiated transactions;

 

                (b)           use its best efforts, subject to receipt of necessary

information from the Purchasers, to cause the Commission to declare the

Registration Statement effective within 60 days after the initial filing

thereof;

 

                (c)           use its best efforts to promptly prepare and file with the

Commission such amendments and supplements to the Registration Statement and

the prospectus used in connection therewith as may be necessary to keep the

Registration Statement effective until the earliest of (i) two years after the

later of (a) the effective date of the Registration Statement or (b) the

exercise of all of the Warrants or (ii) such time as the Shares and Warrant

Shares become eligible for resale by non-affiliates pursuant to Rule 144(k)

under the Securities Act;

 

                (d)           furnish to each Purchaser with respect to the Shares and

Warrant Shares registered under the Registration Statement (and to each

underwriter, if any, of such Shares and Warrant Shares) such number of copies

of prospectuses and such other documents as such Purchaser may reasonably

request, in order to facilitate the public sale or other disposition of all or

any of the Shares and Warrant Shares by such Purchaser;

 

                (e)           file documents required of the Company for normal Blue Sky

clearance in states specified in writing by the Purchasers;  provided, however, that the Company shall

not be required to qualify to do business or consent to service of process in

any jurisdiction in which it is not now so qualified or has not so consented;

 

                (f)            bear all expenses in connection with the procedures in

paragraphs (a) through (e) of this Section 7.1 and the registration of the

Shares and Warrant Shares pursuant to the Registration Statement, other than

fees and expenses, if any, of counsel or other advisers to the Purchasers or

underwriting discounts, brokerage fees and commissions incurred by the

Purchasers, if any;

 

 

 

14

 

 

                (g)           file a Form D with respect to the Shares and Warrant

Shares as required under Regulation D and to provide a copy thereof to the

Purchasers promptly after filing;

 

                (h)           issue a press release describing the transactions

contemplated by this Agreement on the Closing Date;  and

 

                (i)            make available, while the Registration Statement is

effective and available for resale, its Chief Executive Officer and Chief

Financial Officer for questions regarding information which the Purchasers may

reasonably request in order to fulfill any due diligence obligation on their

part.

 

                The Company understands that

each Purchaser disclaims being an underwriter, but any Purchaser being deemed

an underwriter shall not relieve the Company of any obligations it has

hereunder.  A questionnaire related to

the Registration Statement to be completed by each Purchaser is attached hereto

as Appendix I.

 

                7.2          Transfer

of Securities After Registration.  While the Registration Statement is effective and available for

resale, each Purchaser agrees that it will not effect any disposition of the

Shares or Warrant Shares or its right to purchase the Warrant Shares that would

constitute a sale within the meaning of the Securities Act, except as

contemplated in the Registration Statement referred to in Section 7.1 hereof in

the section to be titled “Plan of Distribution,” and that it will promptly

notify the Company of any changes in the information set forth in the

Registration Statement regarding such Purchaser or its plan of distribution.

 

                7.3          Indemnification.  For the purpose of this Section 7.3:

 

(i)            the

term “Purchaser/Affiliate” shall mean any affiliates of the Purchaser and any

person who controls the Purchaser or any affiliate of the Purchaser within the

meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act;

and

 

(ii)           the

term “Registration Statement” shall include any final prospectus, exhibit,

supplement or amendment included in or relating to, and any document

incorporated by reference in, the Registration Statement referred to in Section

7.1 hereof.

 

                (a)           The Company agrees to indemnify and hold harmless each

Purchaser and each Purchaser/Affiliate against any losses, claims, damages,

liabilities or expenses, joint or several, to which such Purchaser or

Purchaser/Affiliate may become subject, under the Securities Act, the Exchange

Act or any other federal or state statutory law or regulation, or at common law

or otherwise (including in settlement of any litigation, if such settlement is

effected with the written consent of the Company), insofar as such losses,

claims, damages, liabilities or expenses (or 

 

 

15

 

 

actions

in respect thereof as contemplated below) arise out of or are based upon any

untrue statement or alleged untrue statement of any material fact contained in

the Registration Statement, including the prospectus, financial statements and

schedules, and all other documents filed as a part thereof, as amended at the

time of effectiveness of the Registration Statement, including any information

deemed to be a part thereof as of the time of effectiveness pursuant to

paragraph (b) of Rule 430A, or pursuant to Rule 434, of the Rules and

Regulations, or the prospectus, in the form first filed with the Commission

pursuant to Rule 424(b) of the Regulations, or filed as part of the

Registration Statement at the time of effectiveness if no Rule 424(b) filing is

required (the “Prospectus”), or any amendment or supplement thereto, or arise

out of or are based upon the omission or alleged omission to state in any of

them a material fact required to be stated therein or necessary to make the

statements in the Registration Statement or any amendment or supplement thereto

not misleading or in the Prospectus or any amendment or supplement thereto not

misleading in the light of the circumstances under which they were made, or

arise out of or are based in whole or in part on any inaccuracy in the

representations and warranties of the Company contained in this Agreement, or

any failure of the Company to perform its obligations hereunder or under law,

and will reimburse such Purchaser or Purchaser/Affiliate for any legal and

other expenses as such expenses are reasonably incurred by such Purchaser or

Purchaser/Affiliate in connection with investigating, defending, settling,

compromising or paying any such loss, claim, damage, liability, expense or

action;  provided, however, that the

Company will not be liable in any such case to the extent that any such loss,

claim, damage, liability or expense arises out of or is based upon (i) an

untrue statement or alleged untrue statement or omission or alleged omission

made in the Registration Statement, the Prospectus or any amendment or

supplement thereto in reliance upon and in conformity with written information

furnished to the Company by or on behalf of such Purchaser expressly for use

therein, (ii) the failure of such Purchaser to comply with the covenants and

agreements contained in Sections 5(h) or 7.2 hereof respecting the sale of the

Shares, (iii) the inaccuracy of any representations made by such Purchaser

herein or (iv) any statement or omission in any Prospectus that is corrected in

any subsequent Prospectus that was delivered to such Purchaser prior to the

pertinent sale or sales by such Purchaser.

 

                (b)           Each Purchaser will severally, but not jointly, indemnify

and hold harmless the Company, each of its directors, each of its officers who

signed the Registration Statement and each person, if any, who controls the

Company within the meaning of Section 15 of the Securities Act or Section 20 of

the Exchange Act, against any losses, claims, damages, liabilities or expenses to

which the Company, each of its directors, each of its officers who signed the

Registration Statement or controlling person may become subject, under the

Securities Act, the Exchange Act or any other federal or state statutory law or

regulation, or at common law or otherwise (including in settlement of any

litigation, if such settlement is effected with the written consent of such

Purchaser) insofar as such losses, claims, damages, liabilities or expenses (or

actions in respect thereof as contemplated below) arise out of or are based

upon (i) any failure to comply with the covenants and agreements contained in

Sections 5(h) or 7.2 hereof respecting the sale of the Shares or (ii) the

inaccuracy of any representation made by such Purchaser herein 

 

 

16

 

 

or

(iii) any untrue or alleged untrue statement of any material fact contained in

the Registration Statement, the Prospectus, or any amendment or supplement

thereto, or arise out of or are based upon the omission or alleged omission to

state therein a material fact required to be stated therein or necessary to

make the statements in the Registration Statement or any amendment or

supplement thereto not misleading or in the Prospectus or any amendment or

supplement thereto not misleading in the light of the circumstances under which

they were made, in each case to the extent, but only to the extent, that such

untrue statement or alleged untrue statement or omission or alleged omission

was made in the Registration Statement, the Prospectus, or any amendment or

supplement thereto, in reliance upon and in conformity with written information

furnished to the Company by such Purchaser expressly for use therein, and will

reimburse the Company, each of its directors, each of its officers who signed

the Registration Statement or controlling person for any legal and other

expense reasonably incurred by the Company, each of its directors, each of its

officers who signed the Registration Statement or controlling person in connection

with investigating, defending, settling, compromising or paying any such loss,

claim, damage, liability, expense or action.

 

                (c)           Promptly after receipt by an indemnified party under this

Section 7.3 of notice of the threat or commencement of any action, such

indemnified party will, if a claim in respect thereof is to be made against an

indemnifying party under this Section 7.3 promptly notify the indemnifying

party in writing thereof;  but the

omission so to notify the indemnifying party will not relieve it from any

liability which it may have to any indemnified party for contribution or

otherwise than under the indemnity agreement contained in this Section 7.3 or

to the extent it is not prejudiced as a result of such failure.  In case any such action is brought against

any indemnified party and such indemnified party seeks or intends to seek

indemnity from an indemnifying party, the indemnifying party will be entitled

to participate in, and, to the extent that it may wish, jointly with all other

indemnifying parties similarly notified, to assume the defense thereof with

counsel reasonably satisfactory to such indemnified party;  provided, however, if the defendants in any

such action include both the indemnified party, based upon the advice of such

indemnified party’s counsel, and the indemnifying party and the indemnified

party shall have reasonably concluded that there may be a conflict of interest

between the positions of the indemnifying party and the indemnified party in

conducting the defense of any such action or that there may be legal defenses

available to it and/or other indemnified parties which are different from or

additional to those available to the indemnifying party, the indemnified party

or parties shall have the right to select separate counsel to assume such legal

defenses and to otherwise participate in the defense of such action on behalf

of such indemnified party or parties. 

Upon receipt of notice from the indemnifying party to such indemnified

party of its election so to assume the defense of such action and approval by

the indemnified party of counsel, the indemnifying party will not be liable to

such indemnified party under this Section 7.3 for any legal or other expenses

subsequently incurred by such indemnified party in connection with the defense

thereof unless (i) the indemnified party shall have employed such counsel in

connection with the assumption of legal defenses in accordance with the proviso

to the preceding sentence (it being understood, however, that the indemnifying

party shall not be 

 

 

17

 

 

liable

for the expenses of more than one separate counsel, approved by such

indemnifying party in the case of paragraph (a), representing the indemnified

parties who are parties to such action, plus local counsel, if appropriate) or

(ii) the indemnifying party shall not have employed counsel reasonably

satisfactory to the indemnified party to represent the indemnified party within

a reasonable time after notice of commencement of action, in each of which

cases the reasonable fees and expenses of counsel shall be at the expense of

the indemnifying party.

 

                (d)           If the indemnification provided for in this Section 7.3 is

required by its terms but is for any reason held to be unavailable to or

otherwise insufficient to hold harmless an indemnified party under paragraphs

(a), (b) or (c) of this Section 7.3 in respect to any losses, claims, damages,

liabilities or expenses referred to herein, then each applicable indemnifying

party shall contribute to the amount paid or payable by such indemnified party

as a result of any losses, claims, damages, liabilities or expenses referred to

herein (i) in such proportion as is appropriate to reflect the relative

benefits received by the Company and the Purchasers from the placement of the

securities contemplated by this Agreement or (ii) if the allocation provided by

clause (i) above is not permitted by applicable law, in such proportion as is

appropriate to reflect not only the relative benefits referred to in clause (i)

above but the relative fault of the Company and the Purchasers in connection

with the statements or omissions or inaccuracies in the representations and

warranties in this Agreement that resulted in such losses, claims, damages,

liabilities or expenses, as well as any other relevant equitable

considerations.  The relative benefits

received by the Company on the one hand and the Purchasers on the other shall

be deemed to be in the same proportion as the amount paid by the Purchasers to

the Company pursuant to this Agreement and upon exercise of the Warrants for

the Shares, Warrants and Warrant Shares purchased by the Purchasers that were

sold pursuant to the Registration Statement bears to the difference between the

amount the Purchasers paid for the Shares and Warrant Shares that were sold

pursuant to the Registration Statement and the amount received by the

Purchasers from such sale.  The relative

fault of the Company on the one hand and the Purchasers on the other shall be

determined by reference to, among other things, whether the untrue or alleged

statement of a material fact or the omission or alleged omission to state a

material fact or the inaccurate or the alleged inaccurate representation and/or

warranty relates to information supplied by the Company or by the Purchasers

and the parties’ relative intent, knowledge, access to information and

opportunity to correct or prevent such statement or omission.  The amount paid or payable by a party as a

result of the losses, claims, damages, liabilities and expenses referred to

above shall be deemed to include, subject to the limitations set forth in

paragraph (c) of this Section 7.3, any legal or other fees or expenses

reasonably incurred by such party in connection with investigating or defending

any action or claim.  The provisions set

forth in paragraph (c) of this Section 7.3 with respect to the notice of the

threat or commencement of any threat or action shall apply if a claim for

contribution is to be made under this paragraph (d);  provided, however, that no additional notice shall be required

with respect to any threat or action for which notice has been given under

paragraph (c) for purposes of indemnification. 

The Company and the Purchasers agree that it would not be just and equitable

if contribution pursuant to this Section 7.3 were determined solely by pro rata

allocation (even if 

 

 

18

 

 

the

Purchasers were treated as one entity for such purpose) or by any other method

of allocation which does not take account of the equitable considerations

referred to in this paragraph. Notwithstanding the provisions of this Section

7.3, no Purchaser shall be required to contribute any amount in excess of the

amount such Purchaser paid to the Company pursuant to this Agreement and upon

exercise of the Warrants for the Shares and Warrant Shares purchased by such

Purchaser that were sold pursuant to the Registration Statement.  No person guilty of fraudulent misrepresentation

(within the meaning of Section 11(f) of the Securities Act) shall be entitled

to contribution from any person who was not guilty of such fraudulent

misrepresentation.  Each Purchaser’s

obligation to contribute pursuant to this Section 7.3 is several and not joint.

 

                7.4          Information

Available.  So long as

the Registration Statement is effective covering the resale of Shares or

Warrant Shares owned by a Purchaser, the Company will furnish to such

Purchaser:

 

                (a)           as soon as practicable after available (but in the case of

the Company’s Annual Report to Stockholders, concurrently with delivery to its

shareholders generally) one copy of (i) its Annual Report to Stockholders

(which Annual Report shall contain financial statements audited in accordance

with U.S. generally accepted accounting principles by a national firm of

certified public accountants), (ii) if not included in substance in the Annual

Report to Stockholders, upon the request of such Purchaser, its Annual Report

on Form 10-K, (iii) upon the request of such Purchaser, its Quarterly Reports

on Form 10-Q, (iv) upon the request of such Purchaser, its Current Reports on

Form 8-K and (v) a full copy of the particular Registration Statement covering

the Shares and Warrant Shares (the foregoing, in each case, excluding

exhibits);

 

                (b)           upon the request of such Purchaser, all exhibits excluded

by the parenthetical to subparagraph (a)(v) of this Section 7.4;  and

 

                (c)           upon the request of such Purchaser, a reasonable number of

copies of the prospectuses to supply to any other party requiring such

prospectuses;

 

and

the Company, upon the reasonable request of such Purchaser, will meet with such

Purchaser or a representative thereof at the Company’s headquarters to discuss

information relevant for disclosure in the Registration Statement covering the

Shares and Warrant Shares.

 

                Section 8.              No Broker’s Fee.  Each of the parties hereto hereby represents

that, on the basis of any actions and agreements by it, there are no brokers or

finders entitled to compensation in connection with the sale of the Shares and

Warrants to the Purchasers.

 

                Section 9.              Notices.  All notices, requests, consents and other communications

hereunder shall be in writing, shall be mailed by first-class registered or

certified airmail, 

 

 

19

 

 

confirmed

facsimile or nationally recognized overnight express courier postage prepaid,

and shall be deemed given when so mailed and shall be delivered as addressed as

follows:

 

	

  (a)

  	

   

  	

  if

  to the Company, to:

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Datalink

  Corporation

  
	

   

  	

   

  	

  8170

  Upland Circle

  
	

   

  	

   

  	

  Chanhassen,

  Minnesota 55317

  
	

   

  	

   

  	

  Attention:  Greg R. Meland, President and Chief

  Executive Officer

  
	

   

  	

   

  	

  Facsimile:  (952) 946-7894

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  with

  a copy to:

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Messerli

  & Kramer P.A.

  
	

   

  	

   

  	

  150

  South Fifth Street, Suite 1800

  
	

   

  	

   

  	

  Minneapolis,

  MN 55402

  
	

   

  	

   

  	

  Attention:  Jeffrey C. Robbins, Esq.

  
	

   

  	

   

  	

  Facsimile:  (612) 672-3777

  

 

                                or to such other

person at such other place as the Company shall designate to the Purchaser in

writing;

 

	

   

  	

   

  	

  and

  
	

   

  	

   

  	

   

  
	

  (b)

  	

   

  	

  if

  to the Purchasers, in care of:

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Needham

  & Company, Inc.

  
	

   

  	

   

  	

  445

  Park Avenue

  
	

   

  	

   

  	

  New

  York, New York 10022

  
	

   

  	

   

  	

  Attention:  Glen Albenese, Chief Financial Officer

  
	

   

  	

   

  	

  Facsimile:  (212) 371-8702.

  

 

                Section 10.            Changes.  This Agreement may not be modified or amended except pursuant to

an instrument in writing signed by the Company and the affected Purchaser(s).

 

                Section 11.            Headings.  The headings of the various sections of this Agreement have been

inserted for convenience of reference only and shall not be deemed to be part

of this Agreement.

 

                Section 12.            Severability.  In case any provision contained in this Agreement should be

invalid, illegal or unenforceable in any respect, the validity, legality and

enforceability of the remaining provisions contained herein shall not in any

way be affected or impaired thereby.

 

 

20

 

 

                Section 13.            Governing Law.  This Agreement shall be governed by and

construed in accordance with the laws of the State of Minnesota and the federal

law of the United States of America.

 

                Section 14.            Counterparts.  This Agreement may be executed in two or more counterparts, each

of which shall constitute an original, but all of which, when taken together,

shall constitute but one instrument, and shall become effective when one or

more counterparts have been signed by each party hereto and delivered to the

other parties.  Facsimile signatures

shall be deemed original signatures.

 

                Section 15.            Entire Agreement.  This Agreement and the instruments

referenced herein contain the entire understanding of the parties with respect

to the matters covered herein and therein and, except as specifically set forth

herein or therein, neither the Company nor the Purchasers makes any

representation, warranty, covenant or undertaking with respect to such matters.

 

                Section 16.            Third Party Beneficiaries.  This Agreement is intended for the benefit

of the parties hereto and their respective permitted successors and assigns,

and is not for the benefit of, nor may any provision hereof be enforced by, any

other person.

 

[continued

on next page]

 

 

21

 

 

                Section 17.            Assignment.  This Agreement and the rights of the Purchasers hereunder may not

be assigned by Purchasers without the prior written consent of the Company

(except (x) by operation of law; (y) by a Purchaser to its wholly owned

subsidiary; or (z) by an investment advisor to a fund for which it is the

advisor or by or among funds that are under common control, provided that such

assignee agrees to be bound by the terms of this Agreement) and shall be

binding upon and shall inure to the benefit of the parties hereto and their

respective permitted successors, heirs and legal representatives.

 

                IN WITNESS WHEREOF, the

undersigned have hereunto affixed their signatures.

 

	

  DATALINK CORPORATION

  	

   

  	

  NEEDHAM

  EMERGING GROWTH

  
	

   

  	

   

  	

   

  	

  PARTNERS, L.P.

  
	

   

  	

   

  	

   

  	

  NEEDHAM

  CONTRARIAN FUND, L.P.

  
	

   

  	

   

  	

   

  	

   

  	

  and

  	 

	

  By

  	

  /s/ Greg R. Meland

  	

   

  	

  NEEDHAM

  EMERGING GROWTH

  
	

   

  	

  Greg R. Meland, President and

  	

   

  	

  PARTNERS (CAYMANS), L.P.

  
	

   

  	

  Chief Executive Officer

  	

   

  	

  By Needham Management Partners, L.P.

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  NEEDHAM

  GROWTH FUND

  	

   

  	

   

  	

   

  
	

  and

  	

   

  	

   

  	

   

  
	

  NEEDHAM

  AGGRESSIVE GROWTH FUND,

  	

   

  	

   

  	

   

  
	

  each a series of the Needham Fund, Inc.

  	

   

  	

  By

  	

  /s/ Glen Albanese

  
	

   

  	

   

  	

   

  	

   

  	

  Glen Albanese, Chief Financial Officer

  
	

  By

  	

  /s/ Glen Albanese

  	

   

  	

   

  	

   

  
	

   

  	

  Glen Albanese, Treasurer

  	

   

  	

   

  	

   

  
										

 

 

22

 

 

                                                                                 WARRANT

NO. ______                                                             EXHIBIT

A

 

To Purchase Shares of Common Stock of

DATALINK CORPORATION

 

                This Warrant and the Securities

issuable upon exercise of this Warrant have not been registered under the

Securities Act of 1933 (the “1933 Act”) or under any state securities or “Blue

Sky” laws (“Blue Sky Laws”).  No

transfer, sale, assignment, pledge, hypothecation or other disposition of this

Warrant or the Securities issuable upon exercise of this Warrant or any

interest therein may be made except (a) pursuant to an effective

registration statement under the 1933 Act and any applicable Blue Sky Laws or

(b) if the Corporation has been furnished with an opinion of counsel for the

holder, which opinion and counsel shall be reasonably satisfactory to the

Corporation, to the effect that no registration is required because of the

availability of an exemption from registration under the 1933 Act and

applicable Blue Sky laws.

 

                THIS CERTIFIES THAT, for good and

valuable consideration

                           

(the “Holder”), or the Holder’s registered assigns, is entitled to subscribe

for and purchase from Datalink Corporation, a Minnesota corporation (the

“Corporation”), at any time on or after May 22, 2002, to and including May 21,

2007,             fully

paid and nonassessable shares of the Common Stock of the Corporation at the

exercise price of $4.50 per share (the “Warrant Exercise Price”), subject to

the anti-dilution provisions of this Warrant.

 

                The

shares which may be acquired upon exercise of this Warrant are referred to

herein as the “Warrant Shares.”  As used

herein, the term “Holder” means the Holder, any party who acquires all or a

part of this Warrant as a registered transferee of the Holder, or any record

holder or holders of the Warrant Shares issued upon exercise, whether in whole

or in part, of the Warrant.  The term

“Common Stock” means the common stock, par value $.001 per share, of the

Corporation.

 

                This Warrant is subject to the

following provisions, terms and conditions:

 

1.             Exercise; Transferability.

 

                (a)           The rights represented by this Warrant may be exercised by

the Holder hereof, in whole or in part (but not as to a fractional share of

Common Stock), by written notice of exercise (in the form attached hereto)

delivered to the Corporation at the principal office of the Corporation prior

to 5:00 p.m. Central Time on the date of the expiration of this Warrant and

accompanied or preceded by the surrender of this Warrant along with a check in

payment of the Warrant Exercise Price per share for the Warrant Shares to be

purchased.

 

 

23

 

 

                (b)           Except as provided in Section 7 hereof, this Warrant may

not be sold, transferred, assigned, hypothecated or divided into two or more

Warrants of smaller denominations, nor may any Warrant Shares issued pursuant

to exercise of this Warrant be trans­ferred.

 

2.             Exchange and Replacement.  Subject to Sections 1 and 7 hereof,

this Warrant is exchangeable upon the surrender hereof by the Holder to the

Corporation at its office for new Warrants of like tenor and date representing

in the aggregate the right to purchase the number of Warrant Shares purchasable

hereunder, each of such new Warrants to represent the right to purchase such

number of Warrant Shares (not to exceed the aggregate total number purchasable

hereunder) as shall be designated by the Holder at the time of such

surrender.  Upon receipt by the

Corporation of evidence reasonably satisfactory to it of the loss, theft,

destruction or mutilation of this Warrant, and, in case of loss, theft or

destruction, of indemnity or security reasonably satisfactory to it, and upon

surrender and cancellation of this Warrant, if mutilated, the Corporation will

make and deliver a new Warrant of like tenor, in lieu of this Warrant.  This Warrant shall be promptly canceled by

the Corporation upon the surrender hereof in connection with any exchange or

replacement.  The Corporation shall pay

all expenses, taxes (other than stock transfer taxes), and other charges

payable in connection with the preparation, execution, and delivery of Warrants

pursuant to this Section 2.

 

3.             Issuance of the Warrant Shares.

 

                (a)           The Corporation agrees that the Warrant Shares shall be

and are deemed to be issued to the Holder as of the close of business on the

date on which this Warrant shall have been surrendered and the payment made for

such Warrant Shares as aforesaid. 

Subject to the provisions of paragraph (b) of this Section 3, certificates

for the Warrant Shares so purchased shall be delivered to the Holder within a

reasonable time after the rights represented by this Warrant shall have been so

exercised, and, unless this Warrant has expired, a new Warrant representing the

right to purchase the number of Warrant Shares, if any, with respect to which

this Warrant shall not then have been exercised shall also be delivered to the

Holder.

 

                (b)           Notwithstanding the foregoing, however, the Corporation

shall not be required to deliver any certificate for Warrant Shares upon

exercise of this Warrant except in accordance with exemptions from the

applicable securities registration requirements or registrations under

applicable securities laws.  Except as described

in Section 9, nothing herein shall obligate the Corporation to effect

registrations under federal or state securities laws.  If registrations are not in effect and if exemptions are not

available when the Holder seeks to exercise the Warrant, the Warrant exercise

period will be extended, if need be, to prevent the Warrant from expiring,

until such time as either registrations become effective or exemptions are

availa­ble, and the Warrant shall then remain exercisable for a period of at

least 30 calendar days from the date the Corporation delivers to the Holder

written notice of the availability of such registrations or exemptions.  The Holder agrees to execute such documents

and make such representations, 

 

 

24

 

 

warranties

and agreements as may be required solely to comply with the exemptions relied

upon by the Corporation, or the registrations made, for the issuance of the

Warrant Shares.

 

4.             Covenants of the Corporation.  The Corporation covenants and agrees that

all Warrant Shares will, upon issuance, be duly authorized and issued, fully

paid, non-assessable and free from all taxes, liens and charges with respect to

the issue thereof.  The Corporation

further covenants and agrees that during the period within which the rights

represented by this Warrant may be exercised, the Corporation will at all times

have authorized and reserved for the purpose of issue or transfer upon exercise

of the subscription rights evidenced by this Warrant a sufficient number of

shares of Common Stock to provide for the exercise of the rights represented by

this Warrant.

 

5.             Anti-dilution Adjustments.  The provisions of this Warrant are subject

to adjustment as provided in this Section 5.

 

                (a)           The Warrant Exercise Price shall be adjusted from time to

time such that in case the Corporation shall hereafter:

 

                                (i)  pay any dividends on any class of stock of

the Corporation payable in Common Stock or securities convertible into Common

Stock;

 

                                (ii)  subdivide its then outstanding shares of

Common Stock into a greater number of shares; 

or

 

                                (iii)  combine outstanding shares of Common Stock,

by reclassification or otherwise;

 

then,

in any such event, the Warrant Exercise Price in effect immediately prior to

such event shall (until adjusted again pursuant hereto) be adjusted immediately

after such event to a price (calculated to the nearest full cent) determined by

dividing (A) the number of shares of Common Stock outstanding immediately

prior to such event, multiplied by the then existing Warrant Exercise Price, by

(B) the total number of shares of Common Stock outstanding immediately

after such event (including in each case the maximum number of shares of Common

Stock issuable in respect of any securities convertible into Common Stock), and

the resulting quotient shall be the adjusted Warrant Exercise Price per

share.  An adjustment made pursuant to

this Subsection shall become effective immediately after the record date in the

case of a dividend or distribution and shall become effective immediately after

the effective date in the case of a subdivision, combina­tion or

reclassification.  If, as a result of an

adjustment made pursuant to this Subsection, the Holder of any Warrant

thereafter surrendered for exercise shall become entitled to receive shares of

two or more classes of capital stock or shares of Common Stock and other

capital stock of the Corporation, the Board of Directors (whose determination

shall be conclusive) shall determine the allocation of the adjusted Warrant

Exercise Price between or 

 

 

25

 

 

among

shares of such classes of capital stock or shares of Common Stock and other

capital stock.  All calculations under

this Subsection shall be made to the nearest cent or to the nearest 1/100 of a

share, as the case may be.  In the event

that at any time as a result of an adjustment made pursuant to this Subsection,

the holder of any Warrant thereafter surrendered for exercise shall become

entitled to receive any shares of the Corporation other than shares of Common

Stock, thereafter the Warrant Exercise Price of such other shares so receivable

upon exercise of any Warrant shall be subject to adjustment from time to time

in a manner and on terms as nearly equivalent as practicable to the provisions

with respect to Common Stock contained in this Section.

 

                (b)           Upon each adjustment of the Warrant Exercise Price

pursuant to Section 5(a) above, the Holder of each Warrant shall

thereafter (until another such adjustment) be entitled to purchase at the

adjusted Warrant Exercise Price the number of shares, calculated to the nearest

full share, obtained by multiplying the number of shares specified in such

Warrant (as adjusted as a result of all adjustments in the Warrant Exercise

Price in effect prior to such adjustment) by the Warrant Exercise Price in

effect prior to such adjustment and dividing the product so obtained by the

adjusted Warrant Exercise Price.

 

                (c)           In case of any consolidation or merger to which the

Corporation is a party other than a merger or consolidation in which the

Corporation is the continuing corporation, or in case of any sale or conveyance

to another corporation of the property of the Corporation as an entirety or

substantially as an entirety, or in the case of any statutory exchange of

securities with another corporation (including any exchange effected in

connection with a merger of a third corporation into the Corporation), there

shall be no adjustment under Subsection (a) of this Section 5;  but the Holder of each Warrant then

outstanding shall have the right thereafter to convert such Warrant into the

kind and amount of shares of stock and other securities and property which he

would have owned or have been entitled to receive immediately after such

consolidation, merger, statutory exchange, sale or conveyance had such Warrant

been converted immediately prior to the effective date of such consolidation,

merger, statutory exchange, sale or conveyance and, in any such case, if

necessary, appropriate adjustment shall be made in the application of the

provisions set forth in this Section with respect to the rights and interests

thereafter of any Holders of the Warrant, to the end that the provisions set

forth in this Section shall thereafter correspondingly be made applicable, as

nearly as may reasonably be, in relation to any shares of stock and other

securities and property thereafter deliverable on the exercise of the

Warrant.  The provisions of this

Subsection shall similarly apply to successive consolidations, mergers,

statutory exchanges, sales or conveyances.

 

                (d)           Upon any adjustment of the Warrant Exercise Price, then

and in each such case, the Corporation shall give written notice thereof, by

first-class mail, postage prepaid, addressed to the Holder as shown on the

books of the Corporation, which notice shall state the Warrant Exercise Price

resulting from such adjustment and the increase or decrease, if any, in the

number of shares of Common Stock purchasable at such price upon the exercise of

this Warrant, setting 

 

 

26

 

 

forth

in reasonable detail the method of calculation and the facts upon which such

calculation is based.

 

6.             No Voting Rights.  This Warrant shall not entitle the Holder to

any voting rights or other rights as a shareholder of the Corporation.

 

7.             Notice of Transfer of Warrant or

Resale of the Warrant Shares.

 

                (a)           Subject to the sale, assignment, hypothecation or other

transfer restrictions set forth in Section 1 hereof, the Holder, by

acceptance hereof, agrees to give written notice to the Corporation before

transferring this Warrant or transferring any Warrant Shares of such Holder’s

intention to do so, describing briefly the manner of any proposed

transfer.  Promptly upon receiving such

written notice, the Corporation shall present copies thereof to the

Corporation’s counsel.  If in the

opinion of such counsel the proposed transfer may be effected without registra­tion

or qualification (under any federal or state securities laws), the Corporation,

as promptly as practicable, shall notify the Holder of such opinion, whereupon

the Holder shall be entitled to transfer this Warrant or to dispose of Warrant

Shares received upon the previous exercise of this Warrant, all in accordance

with the terms of the notice delivered by the Holder to the Corporation;

provided that an appropriate legend may be endorsed on this Warrant or the

certificates for such Warrant Shares respecting restrictions upon transfer

thereof necessary or advisable in the opinion of counsel and satisfactory to the

Corporation to prevent further transfers which would be in violation of

Section 5 of the 1933 Act and applicable state securities laws;  and provided further that the prospective

transferee or purchaser shall execute such documents and make such representations,

warranties and agreements as may be required solely to comply with the

exemptions relied upon by the Corporation for the transfer or disposition of

the Warrant or Warrant Shares.

 

                (b)           If, in the opinion of the Corporation’s counsel, the

proposed transfer or disposition of this Warrant or such Warrant Shares

described in the written notice given pursuant to this Section 7 may not

be effected without registration or qualification of this Warrant or such

Warrant Shares, the Corporation shall promptly give written notice thereof to

the Holder, and the Holder will limit its activities in respect to such

transfer or disposition as, in the opinion of such counsel, are permitted by

law.

 

8.             Fractional Shares.  Fractional shares shall not be issued upon

the exercise of this Warrant, but in any case where the holder would, except

for the provisions of this Section, be entitled under the terms hereof to

receive a fractional share, the Corporation shall, upon the exercise of this

Warrant for the largest number of whole shares then called for, pay a sum in

cash equal to the sum of (a) the excess, if any, of the Market Price of

such fractional share over the proportional part of the Warrant Exercise Price

represented by such fractional share, plus (b) the proportional part of

the Warrant Exercise Price represented by such fractional share.  For purposes of this Section, the term

“Market Price” with respect to shares of Common Stock of any 

 

 

27

 

 

class

or series means the last reported sale price or, if none, the average of the

last reported closing bid and asked prices on any national or regional

securities exchange or quoted in the National Association of Securities

Dealers, Inc.’s Automated Quotations System (“Nasdaq”), or if not listed on a

national or regional securities exchange or quoted in Nasdaq, the average of

the last reported closing bid and asked prices as reported by Metro Data

Corporation, Inc. or the Electronic Bulletin Board of the National Association of

Securities Dealers, Inc. from quotations by market makers in such Common Stock

on the Minneapolis-St. Paul local over-the-counter market, or if no

quotations in such Common Stock are available, the fair market value of the

shares as determined in good faith by the Board of Directors of the

Corporation.

 

9.             Registration Rights.  This is one of a series of warrants being

issued pursuant to a Purchase Agreement of this date (the “Purchase Agreement”)

by and among the Corporation and Needham

Emerging Growth Partners, L.P., Needham Contrarian Fund, Needham Emerging

Growth Partners (Caymans), L.P., Needham Growth Fund and Needham Aggressive

Growth Fund (the “Purchasers”).  A

Holder hereof who is a Purchaser or a permitted assignee of a Purchaser under

the Purchase Agreement shall have the registration rights with respect to the

Warrant Shares as described in Section 7 of the Purchase Agreement.

 

                IN WITNESS WHEREOF, Datalink

Corporation has caused this Warrant to be signed by its duly authorized officer

and this Warrant to be dated May 22, 2002.

 

                                                                                                                Datalink

Corporation

 

 

	

  By

  	

   

  	

   

  

 

	

  Its

  	

   

  	

   

  

 

 

28

 

 

EXERCISE FORM

 

(To Be Executed by the

Registered Holder in Order to Exercise the Warrant)

 

To:          Datalink Corporation

 

The

undersigned hereby irrevocably elects to exercise the attached Warrant to

purchase for cash,

                

of the shares issuable upon the exercise of such Warrant, and requests that

certificates for such shares (together with a new Warrant to purchase the number

of shares, if any, with respect to which this Warrant is not exercised) shall

be issued in the name of:

 

 

	

   

  	

   

  	

  NAME:

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  SOC.

  SEC. or

  	

   

  
	

   

  	

   

  	

  TAX

  I.D. NO.

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  ADDRESS:

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  Date:

                ,

  20

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  Signature

  *

  

 

   *                                The signature

on the Notice of Exercise of Warrant must correspond to the name as written

upon the face of the Warrant in every particular without alteration or enlarge­ment

or any change whatsoever.  When signing

on behalf of a corporation, partnership, trust or other entity, please indicate

your position(s) and title(s) with such entity.

 

 

29

 

ASSIGNMENT FORM

 

(To be Executed by the

Registered Holder in Order to Transfer the Warrant)

 

To:          Datalink Corporation

 

 

                FOR VALUE RECEIVED, the

undersigned hereby sells, assigns, and transfers unto

                    

the right to purchase the securities of Datalink Corporation to which the

within Warrant relates and appoints

                    ,

attorney, to transfer said right on the books of Datalink Corporation with full

power of substitution in the premises.

 

	

  Dated:

                 ,

  20      

  	

   

  	

   

  
	

   

  	

   

  	

  (Signature)

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Address:

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  

 

 

 

30<PAGE>

                                                                    EXHIBIT 10.1

                                PALL CORPORATION

                             1991 STOCK OPTION PLAN
                      (as amended effective April 17, 2002)

         Pall Corporation (the "Company"), in order to retain and attract
personnel for positions of responsibility with the Company and its subsidiaries
and to provide additional incentive to such personnel by offering them an
opportunity to obtain a proprietary interest in the Company, hereby authorizes
options to be granted to eligible employees (as hereinafter defined) of the
Company and its subsidiaries and to members of the Board of Directors of the
Company to purchase shares of Common Stock of the Company ("shares") upon the
terms and conditions described below in this Pall Corporation 1991 Stock Option
Plan (the "Plan")

         1. Administration of the Plan. The Plan shall be administered, and the
options under the Plan shall be granted, by the Compensation Committee of the
Company as from time to time constituted (the "Committee"). The Committee shall
consist of three members of the Board of Directors who are appointed by the
Board and are (i) "Non-Employee Directors" as defined in Rule 16b-3 of the
Securities and Exchange Commission under the Securities Exchange Act of 1934 or
any successor regulation, and (ii) "outside directors" as defined in the
regulations of the Internal Revenue Service under Section 162(m) of the Internal
Revenue Code. The members of the Committee shall serve, without compensation, at
the pleasure of the Board. Subject to the provisions of the Plan, the Committee
shall be authorized to interpret the Plan and the options granted under the
Plan, to establish, amend and rescind any rules and regulations relating to the
Plan, to determine the terms and provisions of the options described in Section
4 hereof, and to make all other decisions necessary or advisable for the
administration of the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any option in the
manner and to the extent the Committee deems desirable to carry it into effect.
Any decision of the Committee in the administration of the Plan, as described
herein, shall be final and conclusive. The Committee may act only by a majority
of its members in office, except that the members thereof may authorize any one
or more of their number or any officer of the Company to execute and deliver
documents on behalf of the Committee. No member of the Committee shall be liable
for anything done or omitted to be done by him or by any other member of the
Committee in connection with the Plan, except for his own willful misconduct or
as expressly provided by statute.

         2. Number of Shares Subject to Option. The aggregate number of shares
which may be issued under the Plan is one million five hundred thousand
(1,500,000) shares of Common Stock of the Company. Such shares may be either
authorized but unissued or reacquired shares. If after July 2, 1991 the Company
effects one or more stock splits, stock dividends, combinations, exchanges of
shares or similar capital adjustments, the number and kind of shares with
respect to which options may be granted under the Plan, the number and kind of
shares subject to each outstanding option and the option price per share under
each such option shall be proportionately and appropriately adjusted by the
Committee. If any option granted under the Plan, or any portion thereof, shall
expire or terminate for any reason without having been exercised in full, the
shares with respect to which it has not been exercised shall be available for
further options under the Plan.
<PAGE>

         With respect to incentive stock options granted after December 31, 1986
under this Plan and under all stock option plans of the Company and its parent
and subsidiary corporations, the aggregate fair market value (determined at the
time the option is granted) of the stock with respect to which such incentive
stock options are exercisable for the first time by the optionee during any
calendar year shall not exceed $100,000.

         3. Eligible Employees. Options may be granted only to officers and
other employees of the Company and of such other corporations as are subsidiary
corporations of the Company at the time of grant who, in the judgment of the
Committee, are in a position to contribute significantly to the Company's
success ("eligible employees") and to members of the Board of Directors of the
Company ("directors") except that no options shall be granted to members of the
Committee. The Committee is hereby given the authority to select the particular
eligible employees and directors (other than members of the Committee) to whom
options under the Plan are to be granted, to determine the number of shares to
be optioned to each such employee and director and to grant one or more options
under the Plan to any such employee or director from time to time, irrespective
of whether one or more options have been granted to such employee or director
under previous stock option plans of the Company. In exercising its authority
under the foregoing provisions of this Section 3, each member of the Committee,
as authorized by ss.717(a) of the New York Business Corporation Law, shall be
entitled to rely on information, opinions, reports and statements prepared or
presented by (i) one or more officers of the Company or any subsidiary of the
Company whom the member believes to be reliable and competent in the matters
presented or (ii) counsel, public accountants or other persons as to matters
which the member believes to be within such person's professional or expert
competence. Nothing in the Plan or in any option granted under the Plan shall
confer any rights (a) on any officer or other employee to continue in the employ
of the Company or any of its subsidiary corporations or shall interfere in any
way with the right of the Company or any of its subsidiary corporations, as the
case may be, to terminate his employment at any time or (b) on any director to
continue as a director.

         4. Terms of Options. Options granted under the Plan, irrespective of
the date of grant thereof, may be "incentive stock options" meeting the
requirements for such options prescribed by Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), or may be options not so qualifying as
incentive stock options ("nonqualified options"). The determination as to
whether or not an option granted under the Plan shall be an incentive stock
option shall be made by the Committee except that all options granted to
directors who are not also employees of the Company or a subsidiary ("outside
directors") shall be nonqualified options; outside directors shall not be
eligible to receive incentive stock options.

         Each option granted under the Plan shall comply with the following
terms and conditions:

                  (a) The option price shall be not less than the fair market
         value of the shares subject to the option at the time the option is
         granted. Fair market value shall be as determined in good faith by the
         Committee. In no event shall the option price be less than the par
         value of the shares.

                                       2
<PAGE>

                  (b) The option shall not be transferable by the optionee
         otherwise than by will or the laws of descent and distribution, and
         shall be exercisable during his or her lifetime only by him or her
         except that, at the discretion of the Committee, a nonqualified option
         may provide that the option is transferable to any "family member" of
         the optionee, as the term "family member" is defined in the General
         Instructions to Form S-8 promulgated by the Securities and Exchange
         Commission under the Securities Act of 1933.

                  (c)      An option shall not be exercisable

                           (i) after the expiration of ten years from the date
                  it is granted (the "date of grant");

                           (ii) unless counsel for the Company shall be
                  satisfied that the issuance of shares upon exercise will be in
                  compliance with the Securities Act of 1933, as amended, and
                  applicable state laws;

                           (iii) unless written notice of exercise, in form
                  satisfactory to the Committee, is given to the Company;

                           (iv) unless the optionee has been, at all times
                  during the period beginning with the date of grant of an
                  option and ending on the date of exercise thereof: (I) an
                  officer or employee of the Company or of one of its subsidiary
                  corporations, or of a corporation or a parent or subsidiary of
                  a corporation assuming the option in a transaction to which
                  Section 424(a) of the Code applies or (II) an outside director
                  if the optionee was an outside director on the date of grant,
                  except that

                                    (A) if the optionee shall cease to be such
                           an officer or employee or outside director by reason
                           of his disability or by reason of his retirement
                           under an approved retirement program of the Company
                           or a subsidiary thereof while holding an option which
                           has not expired and has not been fully exercised, the
                           option shall remain in full force and effect and may
                           be exercised in accordance with its terms until it
                           expires by its terms by the passage of time or is
                           canceled or terminated in accordance with its terms
                           (it being understood, however, that incentive stock
                           option federal income tax treatment will not be
                           accorded with respect to an option exercise made more
                           than three months after the optionee ceased to be
                           such officer or employee by reason of such retirement
                           or one year after he ceased to be such officer or
                           employee by reason of disability within the meaning
                           of Section 22(e)(3) of the Code or successor
                           section); and

                                    (B) if any person to whom an option has been
                           granted shall die holding an option which has not
                           been fully exercised, his estate or any person who
                           acquired the right to exercise the option by bequest
                           or inheritance or by reason of the death of such
                           person may, at any time within one year after the
                           date of such death (but in no event after the option
                           has expired by its terms by the passage of time or
                           has been canceled or terminated in accordance with
                           its terms) exercise the option with respect to any
                           shares as to which the decedent could have exercised
                           the option at the time of his death; and

                                       3
<PAGE>

                                    (C) if the optionee shall cease to be an
                           employee for any reason other than disability,
                           retirement or death as provided in paragraphs (A) and
                           (B) of this Section 4(a)(iv), while holding an option
                           which has not expired and has not been fully
                           exercised, the Committee may, in its sole discretion,
                           amend the option to permit its exercise at any time
                           within six months (or such shorter period as the
                           Committee may specify) after the date on which the
                           optionee ceases to be an employee (but in no event
                           after the option has expired by its terms by the
                           passage of time or has been canceled or terminated in
                           accordance with its terms), provided that (I) any
                           optionee who exercises an option under this paragraph
                           (C) after he or she ceases to be an employee may not
                           elect to pay the "purchase price" on an installment
                           basis as provided in Section 4(d) hereof, and (II) it
                           is understood that incentive stock option federal
                           income tax treatment will not be accorded with
                           respect to an option exercise made, in accordance
                           with action by the Committee pursuant to this
                           paragraph, more than three months after the optionee
                           ceased to be an employee; and

                           (v) unless the person exercising the option makes
                  payment to the Company in full in United States dollars by
                  cash or check of such amount as is sufficient to satisfy the
                  Company's obligation, if any, to withhold federal, state and
                  local taxes by reason of such exercise or makes such other
                  arrangement satisfactory to the Committee as will enable the
                  Company to satisfy such obligation.

                  (d) Each option granted under the Plan shall be evidenced by
         an instrument in such form as the Committee shall prescribe from time
         to time in accordance with the Plan and all applicable laws and
         regulations and shall be subject to such terms and conditions relating
         to the time at which the option may first be exercised and the number
         of shares with respect to which it may thereafter be exercised from
         time to time (for example, in cumulative annual or other periodic
         installments), and to such additional terms and conditions not
         inconsistent with the Plan or applicable laws and regulations, as the
         Committee may in its discretion determine. Each nonqualified option
         granted under the Plan shall state that it is not to be treated as an
         incentive stock option. Each option granted under the Plan shall
         require that the person exercising the option shall, at the time notice
         of exercise is given pursuant to Section 4(c)(iii) hereof, make full
         payment in United States dollars by cash or check of the option
         exercise price of the shares being acquired except that, at the
         election of the Committee, an option may provide that, at the time
         notice of exercise is given pursuant to section 4(c)(iii) hereof, the
         person exercising the option, at his or her election, shall either make
         full payment in United States dollars by cash or check of the option
         exercise price of the shares being acquired (sometimes hereafter called
         the "purchase price") or agree to pay such purchase price on an
         installment payment basis on the following terms and conditions:

                                       4
<PAGE>

                                    (A) The installments payable shall be the
                           minimum amounts required to be paid by Regulation U
                           of the Board of Governors of the Federal Reserve
                           System as in effect as of the date of exercise of the
                           option (hereinafter "Regulation U") or such greater
                           installment payments as the Committee may prescribe.

                                    (B) The person exercising the option shall
                           not be required to pay interest to the Company on the
                           unpaid balance of the purchase price.

                                    (C) The unpaid balance of the purchase price
                           shall be immediately payable in full upon demand made
                           by the Company to the optionee (or to the successor
                           owner of the stock if the optionee has died).

                                    (D) The shares for which the option is
                           exercised shall be issued to and registered in the
                           name of the person exercising the option but shall be
                           endorsed by the person exercising the option in blank
                           (either on the certificate or on a separate stock
                           power) and held by the Company as collateral security
                           for the unpaid balance of the purchase price. The
                           person exercising the option shall not be permitted
                           to sell, withdraw, pledge or otherwise dispose of all
                           or any part of such collateral except at a time when
                           such sale, withdrawal, pledge or other disposition is
                           permitted by Regulation U. Subject to compliance with
                           the immediately preceding sentence, the person
                           exercising the option shall have the right at any
                           time and from time to time to withdraw part or all of
                           the shares from the collateral so held by the Company
                           upon payment of the unpaid balance of the purchase
                           price of the shares withdrawn. For purposes of
                           determining such unpaid balance, each payment made
                           otherwise than to obtain withdrawal of shares under
                           the immediately preceding sentence shall be applied
                           pro rata to all shares which at the time of such
                           payment are held by the Company as collateral for the
                           payment of the purchase price by the person
                           exercising the option. Upon default by the person
                           exercising the option in the making of any payment
                           due under the foregoing provisions of this
                           subparagraph (d), the Company shall have with respect
                           to the collateral all of the rights of a secured
                           party under the Uniform Commercial Code as in effect
                           in the State of New York.

                                    (E) The person exercising an option shall be
                           entitled, from the date of exercise of such option,
                           to all of the rights of a shareholder, including the
                           right to vote the shares and to receive and retain
                           all dividends paid thereon.

                                       5
<PAGE>

                  (e) The Committee is authorized in its discretion and with the
         consent of the optionee to make amendments, not in conflict with the
         Plan or any applicable law or regulation, in the terms of any option
         granted under the Plan.

                  (f) In addition to the methods of payment of the option
         exercise price authorized by subparagraph (d) next above, the option
         may provide that the person exercising the option, at his or her
         election, shall have the right to make payment at the time of exercise
         by delivering to the Company shares of Common Stock of the Company
         having a total fair market value equal to the option exercise price, or
         a combination of cash and such shares having a total fair market value
         equal to the option exercise price, provided, however, that all shares
         so delivered must have been beneficially owned by the person exercising
         the option for at least six months prior to the option exercise date
         and, upon request, the Company shall be given satisfactory proof of
         such beneficial ownership. For the purposes of the preceding sentence,
         the fair market value of a share of Common Stock shall be the mean
         between the high and low sale prices of the Common Stock on the trading
         day preceding the option exercise date as such prices are reported by
         and for the New York Stock Exchange, Inc. Composite Transactions.
         Certificates representing shares delivered to the Company pursuant to
         this paragraph shall be duly endorsed or accompanied by appropriate
         stock powers, in either case with signature guaranteed if so required
         by the Company.

         5. Interpretation. The words "employee", "own", "outstanding" and
"disposition", the term "subsidiary corporation" and any other words or terms
used in the Plan or in the options granted under the Plan which are defined or
used in Section 422 or 424 of the Code shall, unless the context clearly
requires otherwise, have the meanings assigned to them therein, irrespective of
whether or not such options are incentive stock options.

         6. Reports and Returns. The appropriate officers of the company shall
cause to be filed, or furnished to all employees to whom options have been
granted, any reports, returns or other information regarding the options granted
hereunder or any shares issued pursuant to the exercise thereof as may be
required by the Code, the Securities Act of 1933, the Securities Exchange Act of
1934, the Employee Retirement Income Security Act of 1974, Regulation U of the
Board of Governors of the Federal Reserve System or any other applicable
statute, rule or regulation, as any such statute, rule or regulation has been
amended to the time in question.

         7. Amendment. The Plan may be amended at any time and from time to time
by the Board of Directors of the Company, but no amendment increasing the
aggregate number of shares which may be issued under options granted pursuant to
the Plan or affecting this sentence shall be effective unless the same be
approved by the shareholders of the Company not later than the date 12 months
after the Board adopts the amendment. No amendment of the Plan shall alter or
impair any of the rights or obligations of any person, without his or her
consent, under any option theretofore granted under the Plan.

                                       6
<PAGE>

         8. Termination. The Plan shall terminate upon the earlier of the
following dates or events to occur:

                  (a) upon the adoption of a resolution of the Board of
Directors of the Company terminating the Plan; or

                  (b) July 1, 2001.

         No termination of the Plan shall alter or impair any of the rights or
obligations of any person, without his or her consent, under any option
theretofore granted under the Plan.

         9. Shareholder Approval. The Plan shall be submitted to the
shareholders of the Company for their approval before July 2, 1992. No option
granted hereunder shall be exercisable until such approval has been obtained. If
the shareholders do not approve the Plan before July 2, 1992, the Plan shall
terminate and all options theretofore granted hereunder shall thereupon be void
without further action of the Company. The shareholders shall be deemed to have
approved the Plan only if it is approved at a meeting of the shareholders duly
held before July 2, 1992, by vote taken in the manner required by the laws of
the State of New York.

As adopted by the Board of Directors of
Pall Corporation on July 2, 1991, approved
by the shareholders at the annual meeting
on November 22, 1991, amended by the
Executive Committee on November 19, 1998,
and amended by the Board of Directors on
April 17, 2002.

                                       7

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