COMMON STOCK PURCHASE WARRANT To Purchase 150,000 Shares of Common Stock of SteelCloud, Inc.
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 150,000 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
150,000 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 $0.25 per
share, 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.
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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 non-assessable 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.
▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
Herndon,
VA 20171
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 December 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.
Dated: November
4, 2009
|
STEELCLOUD,
INC.
|
|
|
By:
|
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
|
| Name: ▇▇▇▇▇ ▇▇▇▇▇▇ | |
| Title: Chief Financial Officer | |
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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):
[ ]
in lawful money of the United States; or
[ ] 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.
|
Caledonia
Capital Corporation
|
||
|
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: ______________,
_______
|
|||
|
▇▇▇▇▇▇'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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