COMMON STOCK PURCHASE WARRANT To Purchase 2,000,000 Shares of Common Stock of SteelCloud, Inc.
Warrant
NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
REASONABLY ACCEPTABLE TO THE COMPANY TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR
OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS
DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT.
COMMON
STOCK PURCHASE WARRANT
To
Purchase 2,000,000 Shares of Common Stock of
SteelCloud,
Inc.
THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) CERTIFIES
that, for value received, Caledonia Capital Corporation, a Delaware corporation,
(the “Holder”),
is entitled, upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the date of this
Warrant (the “Initial
Exercise Date”) and on or prior to the fourth anniversary of the Initial
Exercise Date (the “Termination Date”)
but not thereafter, to subscribe for and purchase from SteelCloud, Inc., a
corporation incorporated in the Commonwealth of Virginia (the “Company”), up to
2,000,000 shares (the “Warrant Shares”) of
Common Stock, par value $0.001 per share, of the Company (the “Common Stock”). The
purchase price of each share of Common Stock (the “Exercise Price”)
issuable upon the exercise of this Warrant shall be $0.15, subject to adjustment
hereunder. The Exercise Price and the number of Warrant Shares for which the
Warrant is exercisable shall be subject to adjustment as provided
herein.
1
1. Title to Warrant.
Prior to the Termination Date and subject to compliance with applicable laws and
Section 7 of this Warrant, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by the
Holder in person or by duly authorized attorney, upon surrender of this Warrant
together with the Assignment Form annexed hereto properly endorsed. The
transferee shall sign an investment letter in form and substance reasonably
satisfactory to the Company.
2. Authorization of
Shares. The Company covenants that all Warrant Shares which may be issued
upon the exercise of the purchase rights represented by this Warrant will, upon
exercise of the purchase rights represented by this Warrant, be duly authorized,
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges in respect of the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously with such issue).
3. Exercise of
Warrant.
(a)
Subject to Section 3(b), exercise of the purchase rights represented by this
Warrant may be made at any time or times on or after the Initial Exercise Date
and on or before the Termination Date by delivery to the Company of a duly
executed facsimile copy of the Notice of Exercise/Exchange Form annexed hereto
(or such other office or agency of the Company as it may designate by notice in
writing to the registered Holder at the address of such Holder appearing on the
books of the Company); provided, however, within 5
business days of the date said Notice of Exercise is delivered to the Company, the
Holder shall have surrendered this Warrant to the Company and the Company shall
have received payment of the aggregate Exercise Price of the shares thereby
purchased by wire transfer or cashier’s check drawn on a United States bank.
Certificates for shares purchased hereunder shall be delivered to the Holder
within the earlier of (i) 5 business days after the date on which the Notice of
Exercise shall have been delivered by facsimile copy or (ii) 3 business dates
from the delivery to the Company of the Notice of Exercise Form by facsimile
copy, surrender of this Warrant and payment of the aggregate Exercise Price as
set forth above (“Warrant Share Delivery Date”); provided, however, in the
event the Warrant is not surrendered or the aggregate Exercise Price
is not received by the Company within 5 business days after the date on which
the Notice of Exercise shall be delivered by facsimile copy, the Warrant Share
Delivery Date shall be extended to the extent such 5 business day period is
exceeded. This Warrant shall be deemed to have been exercised on the later of
the date the Notice of Exercise is delivered to the Company by facsimile copy
and the date the Exercise Price is received by the Company. The Warrant Shares
shall be deemed to have been issued, and Holder or any other person so
designated to be named therein shall be deemed to have become a holder of record
of such shares for all purposes, as of the date the Warrant has been exercised
by payment to the Company of the Exercise Price and all taxes required to be
paid by the Holder, if any, pursuant to Section 5 prior to the issuance of such
shares, have been paid. If the Company fails to deliver to the Holder a
certificate or certificates representing the Warrant Shares pursuant to this
Section 3(a) by the third Trading Day following the Warrant Share Delivery Date,
then the Holder will have the right to rescind such exercise.
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(b) If this
Warrant shall have been exercised in part, the Company shall, at the time of
delivery of the certificate or certificates representing Warrant Shares, deliver
to Holder a new Warrant evidencing the rights of Holder to purchase the
unpurchased Warrant Shares called for by this Warrant, which new Warrant shall
in all other respects be identical with this Warrant.
4. No Fractional Shares or
Scrip. No fractional shares or scrip representing fractional shares shall
be issued upon the exercise of this Warrant. As to any fraction of a share which
Holder would otherwise be entitled to purchase upon such exercise, the Company
shall pay a cash adjustment in respect of such final fraction in an amount equal
to such fraction multiplied by the Exercise Price.
5. Charges, Taxes and
Expenses. Issuance of certificates for Warrant Shares shall be made
without charge to the Holder for any issue or transfer tax or other incidental
expense in respect of the issuance of such certificate, all of which taxes and
expenses shall be paid by the Company, and such certificates shall be issued in
the name of the Holder or in such name or names as may be directed by the
Holder; provided, however, that in the
event certificates for Warrant Shares are to be issued in a name other than the
name of the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the Holder;
and the Company may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any transfer tax incidental thereto.
6. Closing of Books. The
Company will not close its stockholder books or records in any manner which
prevents the timely exercise of this Warrant, pursuant to the terms
hereof.
7. Transfer, Division and
Combination.
(a) Subject to
compliance with any applicable securities laws and the conditions set forth in
Sections 1 and 7(e) hereof, this Warrant and all rights hereunder are
transferable, in whole or in part, upon surrender of this Warrant at the
principal office of the Company, together with a written assignment of this
Warrant substantially in the form attached hereto duly executed by the Holder or
its agent or attorney and funds sufficient to pay any transfer taxes payable
upon the making of such transfer. Upon such surrender and, if required, such
payment, the Company shall execute and deliver a new Warrant or Warrants in the
name of the assignee or assignees and in the denomination or denominations
specified in such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned, and this
Warrant shall promptly be cancelled. A Warrant, if properly assigned, may be
exercised by a new holder for the purchase of Warrant Shares without having a
new Warrant issued.
(b) This Warrant
may be divided or combined with other Warrants upon presentation hereof at the
aforesaid office of the Company, together with a written notice specifying the
names and denominations in which new Warrants are to be issued, signed by the
Holder or its agent or attorney. Subject to compliance with Section 7(a), as to
any transfer which may be involved in such division or combination, the Company
shall
execute and deliver a new Warrant or Warrants in exchange for the Warrant or
Warrants to be divided or combined in accordance with such
notice.
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(c) The Company
shall prepare, issue and deliver at its own expense (other than transfer taxes)
the new Warrant or Warrants under this Section 7.
(d) The Company
agrees to maintain, at its aforesaid office, books for the registration and the
registration of transfer of the Warrants.
(e) If, at the
time of the surrender of this Warrant in connection with any transfer of this
Warrant, the transfer of this Warrant shall not be registered pursuant to an
effective registration statement under the Securities Act and under applicable
state securities or blue sky laws, the Company may require, as a condition of
allowing such transfer (i) that the Holder or transferee of this Warrant, as the
case may be, furnish to the Company a written opinion of counsel (which opinion
shall be in form, substance and scope customary for opinions of counsel in
comparable transactions and reasonably acceptable to the Company) to the effect
that such transfer may be made without registration under the Securities Act and
under applicable state securities or blue sky laws, (ii) that the holder or
transferee execute and deliver to the Company an investment letter in form and
substance acceptable to the Company and (iii) that the transferee be an
"accredited investor" as defined in Rule 501(a) promulgated under the Securities
Act.
8. No Rights as Shareholder
until Exercise. This Warrant does not entitle the Holder to any voting
rights or other rights as a shareholder of the Company prior to the exercise
hereof. Upon the surrender of this Warrant and the payment of the aggregate
Exercise Price (or by means of a cashless exercise), the Warrant Shares so
purchased shall be and be deemed to be issued to such Holder as the record owner
of such shares as of the close of business on the later of the date of such
surrender or payment.
9. Loss, Theft, Destruction or
Mutilation of Warrant. The Company covenants that upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant or any stock certificate relating to
the Warrant Shares, and in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it (which, in the case of the Warrant, shall
not include the posting of any bond), and upon surrender and cancellation of
such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.
10. Saturdays, Sundays,
Holidays, etc. If the last or appointed day for the taking of any action
or the expiration of any right required or granted herein shall be a Saturday,
Sunday or a legal holiday, then such action may be taken or such right may be
exercised on the next succeeding day that is not a Saturday, Sunday or legal
holiday.
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11. Adjustments of Exercise
Price and Number of Warrant Shares; Stock Splits, etc. The number and
kind of securities purchasable upon the exercise of this Warrant and the Exercise Price
shall be subject to adjustment from time to time upon the happening of any of
the following. In case the Company shall (i) pay a dividend in shares of Common
Stock or make a distribution
in shares of Common Stock to holders of its outstanding Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a greater number of
shares, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock, or (iv) issue any shares of its capital stock
in a reclassification of the Common Stock, then the number of Warrant Shares
purchasable upon exercise of this Warrant immediately prior thereto shall be
adjusted so that the Holder shall be entitled to receive the kind and number of
Warrant Shares or other securities of the Company which it would have owned or
have been entitled to receive had such Warrant been exercised in advance
thereof. Upon each such adjustment of the kind and number of Warrant Shares or
other securities of the Company which are purchasable hereunder, the Holder
shall thereafter be entitled to purchase the number of Warrant Shares or other
securities resulting from such adjustment at an Exercise Price per Warrant Share
or other security obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of Warrant Shares purchasable
pursuant hereto immediately prior to such adjustment and dividing by the number
of Warrant Shares or other securities of the Company resulting from such
adjustment. An adjustment made pursuant to this paragraph shall become effective
immediately after the effective date of such event retroactive to the record
date, if any, for such event.
12. Reorganization,
Reclassification, Merger, Consolidation or Disposition of Assets. In case the
Company shall reorganize its capital, reclassify its capital stock,
consolidate or merge with
or into another corporation (where the Company is not the surviving corporation
or where there is a change in or distribution with respect to the Common Stock
of the Company), or sell, transfer or otherwise dispose of any of its property,
assets or business to another corporation (including by way of a spinoff) and,
pursuant to the terms of such reorganization, reclassification, merger,
consolidation or disposition of assets, shares of common stock of the successor
or acquiring corporation, or any cash, shares of stock or other securities or
property of any nature whatsoever (including warrants or other subscription or
purchase rights) in addition to or in lieu of common stock of the successor or
acquiring corporation (“Other Property”), are
to be received by or distributed to the holders of Common Stock of the Company,
then the Holder shall have the right thereafter to receive, at the option of the
Holder upon exercise of this Warrant, the number of shares of Common Stock of
the successor or acquiring corporation or of the Company, if it is the surviving
corporation, and Other Property receivable upon or as a result of such
reorganization, reclassification, merger, consolidation or disposition of assets
to which the holder of the securities deliverable upon the exercise of this
Warrant would have been entitled in such reorganization, reclassification,
merger, consolidation or disposition of assets if this Warrant had been
exercised immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company and all
the obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for adjustments of Warrant Shares
for which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 12. For purposes of
this Section 12, “common stock of the successor or acquiring corporation” shall
include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of
stock or other securities which are convertible into or exchangeable for any
such stock, either immediately or upon the arrival of a specified date or the
happening of a specified event and any warrants or other rights to subscribe for
or purchase any such stock. The foregoing provisions of this Section 12 shall
similarly apply to successive reorganizations, reclassifications, mergers,
consolidations or disposition of assets.
5
13. Voluntary Adjustment by the
Company. The Company may at any time during the term of this Warrant
reduce the then current Exercise Price to any amount and for any period of time
deemed appropriate by the Board of Directors of the Company.
14. Notice of Adjustment.
Whenever the number of Warrant Shares or number or kind of securities or other
property purchasable upon the exercise of this Warrant or the Exercise Price is
adjusted, as herein provided, the Company shall give notice thereof to the
Holder, which notice shall state the number of Warrant Shares (and other
securities or property) purchasable upon the exercise of this Warrant and the
Exercise Price of such Warrant Shares (and other securities or property) after
such adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was
made.
15. Notice of Corporate
Action. If at any time:
(a) the Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend or other distribution, or any right to
subscribe for or purchase any evidences of its indebtedness, any shares of stock
of any class or any other securities or property, or to receive any other right,
or
(b) there shall
be any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any consolidation or
merger of the Company with, or any sale, transfer or other disposition of all or
substantially all the property, assets or business of the Company to, another
corporation or,
(c) there shall
be a voluntary or involuntary dissolution, liquidation or winding up of the
Company;
then, in
any one or more of such cases, the Company shall give to Holder the same notice
given to the record holders of its Common Stock. Each such written notice shall
be sufficiently given if addressed to Holder at the last address of ▇▇▇▇▇▇
appearing on the books of the Company and delivered in accordance with Section
17(d).
16. Authorized Shares.
The Company covenants that during the period the Warrant is outstanding, it will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of the Warrant Shares upon the exercise of
any purchase rights under this Warrant. The Company further covenants that its
issuance of this Warrant shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for the Warrant Shares upon the exercise of the purchase
rights under this Warrant. The Company will take all such reasonable action as
may be necessary to assure that such Warrant Shares may be issued as
provided
herein without violation of any applicable law or regulation, or of any
requirements of the trading market upon which the Common Stock may be
listed.
6
Except
and to the extent as waived or consented to by the Holder, the Company shall not
by any action, including, without limitation, amending its certificate of
incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of Holder as set forth in this Warrant against
impairment. Without limiting the generality of the foregoing, the Company will
(a) not increase the par value of any Warrant Shares above the amount payable
therefor upon such exercise immediately prior to such increase in par value,
(b) take
all such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable Warrant Shares upon the
exercise of this Warrant, and (c) use commercially reasonable efforts to obtain
all such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under this Warrant.
Before
taking any action which would result in an adjustment in the number of Warrant
Shares for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.
17. Miscellaneous.
(a) Jurisdiction. All
questions concerning the construction, validity, enforcement and interpretation
of this Warrant shall be governed by and construed and enforced in accordance
with the internal laws of the Commonwealth of Virginia, without regard to the
principles of conflicts of law thereof.
(b) Restrictions. The
Holder acknowledges that the Warrant Shares acquired upon the exercise of this
Warrant, if not registered, will have restrictions upon resale imposed by state
and federal securities laws.
(c) Nonwaiver. No course
of dealing or any delay or failure to exercise any right hereunder on the part
of Holder shall operate as a waiver of such right or otherwise prejudice
Holder’s rights, powers or remedies, notwithstanding all rights hereunder
terminate on the Termination Date.
(d) Notices. Any notice,
request or other document required or permitted to be given or delivered to the
Holder by the Company shall be delivered in accordance with the
following:
If to the
Company:
SteelCloud,
Inc.
▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ashburn,
VA 20147
Attention:
▇▇▇▇▇▇ ▇▇▇▇▇▇, Chief Financial Officer
7
If to the
Holder:
Caledonia
Capital Corporation
▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
Suite
360
Leesburg,
VA 20176
Attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
(e) Limitation of
Liability. No provision hereof, in the absence of any affirmative action
by Holder to exercise this Warrant or purchase Warrant Shares, and no
enumeration herein of the rights or privileges of Holder, shall give rise to any
liability of Holder for the purchase price of any Common Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
(f) Remedies. Holder, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Warrant. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Warrant and hereby agrees to waive the defense in any action
for specific performance that a remedy at law would be adequate.
(g) Successors and
Assigns. Subject to applicable securities laws, this Warrant and the
rights and obligations evidenced hereby shall inure to the benefit of and be
binding upon the successors of the Company and the successors and permitted
assigns of Holder. The provisions of this Warrant are intended to be for the
benefit of all Holders from time to time of this Warrant and shall be
enforceable by any such Holder or holder of Warrant Shares.
(h) Amendment. This
Warrant may be modified or amended or the provisions hereof waived with the
written consent of the Company and the Holder.
(i) Severability.
Wherever possible, each provision of this Warrant shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Warrant shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provisions or the remaining
provisions of this Warrant.
(j) Headings. The
headings used in this Warrant are for the convenience of reference only and
shall not, for any purpose, be deemed a part of this Warrant.
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18. Registration
Rights. Commencing on or about August 31, 2009, the Company shall
prepare and file a registration statement with respect to the issuance and the
resale of the Warrant Shares on an appropriate form for an offering to be made
on a continuous basis pursuant to Rule 415 under the Securities Act (the “Registration
Statement”) and shall use its best efforts to cause the Registration
Statement to be declared effective on or as soon as practicable
thereafter, and to keep such Registration Statement continuously effective for a
period ending upon all Warrant Shares having been otherwise transferred in a
transaction that would constitute a sale thereof under the Securities Act, the
Company has delivered a new certificate or other evidence of ownership for
Warrant Shares not bearing the Securities Act restricted stock legend and such
Warrant Shares may be resold without restriction under the Securities
Act.
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized.
Dated: March
31, 2010
|
STEELCLOUD,
INC.
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|
By:
|
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ | ||
|
Name:
▇▇▇▇▇▇ ▇▇▇▇▇▇
|
|||
|
Title: Chief
Financial Officer
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|||
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NOTICE
OF EXERCISE/EXCHANGE
To: SteelCloud,
Inc.
(1) The
undersigned hereby elects to purchase ________ Warrant Shares of SteelCloud,
Inc. pursuant to the terms of the attached Warrant (only if exercised in full),
and tenders herewith payment of the exercise price in full, together with all
applicable transfer taxes, if any.
(2)
Payment shall take the form of (check applicable box):
o in lawful money of the
United States; or
o the cancellation of
such number of Warrant Shares as is necessary, in accordance with the formula
set forth in subsection 3(c), to exercise this Warrant with respect to the
maximum number of Warrant Shares purchasable pursuant to the cashless exercise
procedure set forth in subsection 3(c).
(3)
Please issue a certificate or certificates representing said Warrant Shares in
the name of the undersigned or in such other name as is specified
below:
_______________________________
The
Warrant Shares shall be delivered to the following:
_______________________________
_______________________________
(4) Accredited Investor.
The undersigned is an “accredited investor” as defined in Regulation D
promulgated under the Securities Act of 1933, as amended.
|
[PURCHASER]
|
||
|
By:
|
||
|
Name:
|
||
|
Title:
|
||
Dated: ________________________
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ASSIGNMENT
FORM
(To
assign the foregoing warrant, execute
this form
and supply required information.
Do not
use this form to exercise the warrant.)
FOR VALUE
RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby
assigned to
_______________________________________________
whose address is
_______________________________________________________________.
_______________________________________________________________
Dated: ______________,
_______
|
Holder's Signature:
|
_____________________________
|
|
Holder's Address:
|
_____________________________
|
|
| _____________________________ |
Signature
Guaranteed: ___________________________________________
NOTE: The
signature to this Assignment Form must correspond with the name as it appears on
the face of the Warrant, without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank or trust company. Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing
Warrant.
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