COMMON STOCK PURCHASE WARRANT To Purchase 625,000 Shares of Common Stock of SteelCloud, Inc.
Exhibit
10.3
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 625,000 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 July 1, 2009 (the
"Initial Exercise
Date") and on or prior to the fourth anniversary of the Initial Exercise
Date (the "Tennination
Date") but not thereafter, to subscribe for and purchase from SteelCloud,
Inc., a corporation incorporated in the Commonwealth of Virginia (the "Company"), up to
625,000 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. 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.
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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.
(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.
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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.
(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.
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(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.
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.
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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.
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13. Voluntar
Adjustment b the Corn an . 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.
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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
▇▇▇▇▇▇'s rights, powers or remedies, notwithstanding all rights hereunder
terminate on the Teunination 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.
▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
Herndon,
VA 20171
Attention:
▇▇▇▇▇ ▇▇▇▇▇▇, Chief Financial Officer
If to the
Holder:
Caledonia
Capital Corporation
▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
Suite
360
Leesburg,
VA 20176
Attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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(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.
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.
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IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized.
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Dated:
July 1, 2009
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STEELCLOUD,
INC.
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By:
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/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
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Name:
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▇▇▇▇▇
▇▇▇▇▇▇
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Title:
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Chief
Financial Officer
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9
NOTICE OF
EXERCISEIEXCHANGE
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To:
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SteelCloud,
Inc.
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(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:
________________________________
________________________________
________________________________
(5) Accredited Investor.
The undersigned is an "accredited investor" as defined in Regulation D
promulgated under the Securities Act of 1933, as amended.
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[PURCHASER]
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By:
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Name:
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Title:
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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.
r.