SAFEGUARD SECURITY HOLDINGS. INC.
COMMON STOCK WARRANT
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS THERE IS
AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL OR OTHER EVIDENCE SATISFACTORY TO THE COMPANY THAT SUCH SALE
OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS
OF SUCH ACT.
This certifies that, for good and valuable consideration, receipt of
which is hereby acknowledged, Xxxxxxx Xxxxx ("Holder") is entitled to purchase,
subject to the terms and conditions of this Warrant, (the "Warrant") Common
Shares of Safeguard Security Holdings, Inc., a Nevada Corporation (the
"Company") This Warrant entitles Holder to purchase up to 1,000,000 fully paid
and non-assessable shares of the Common Stock ("Common Stock") of the Company,
in accordance with Section 2 of this document during the period commencing
concurrent with the execution by all parties of this Warrant Agreement (the
"Effective Date") and ending on the fifth anniversary of the Effective Date at
5:00 p.m. Dallas, Texas time, (the "Expiration Date"), at which time this
Warrant will expire and become void unless earlier terminated as provided
herein. The shares of Common Stock of the Company for which this Warrant is
exercisable as adjusted from time to time pursuant to the terms hereof, are
hereinafter referred to as the "Shares."
1. EXERCISE PRICE. The purchase price for the shares shall be $2.00
per share. Such price shall be subject to adjustment pursuant to the terms
hereof (such prices, as adjusted from time to time, is hereinafter referred to
as the "Exercise Price").
2. REDUCTION IN NUMBER OF SHARES SUBJECT TO WARRANT.
The number of shares that may be purchased pursuant to this Warrant
may be reduced. The Holder will be entitled to exercise 100% of shares
underlying the Warrant (1,000,000) if 2006 revenues equal or exceed fourteen
million dollars ($14,000,000). If the target revenue is not attained then the
Warrant can be exercised according to the following pro-rata formula:
If 90% of the target is achieved then 81% of the Warrant is exercisable (90% x
90%) If 80% of the target is achieved then 64% of the Warrant is exercisable
(80% x 80%) If 70% of the target is achieved then 49% of the Warrant is
exercisable (70% x 70%) Etc.
3. EXERCISE AND PAYMENT.
(a) CASH EXERCISE. At any time after the Effective Date, this
Warrant may be exercised, in whole or in part, from time to time by the Holder,
during the term hereof, by surrender of this Warrant and the Notice of Exercise
annexed hereto duly completed and executed by the Holder to the Company at the
principal executive offices of the Company, together with payment in the amount
obtained by multiplying the Exercise Price then in effect by the number of
Shares thereby purchased, as designated in the Notice of Exercise. Payment may
be in cash or by check payable to the order of the Company.
(b) NET ISSUANCE. In lieu of payment of the Exercise Price
described in Section 3(a), the Holder may elect to receive, without the payment
by the Holder of any additional consideration, shares equal to the value of this
Warrant or any portion hereof by the surrender of this Warrant or such portion
to the Company, with the net issue election notice annexed hereto (the "Net
Issuance Election Notice") duly executed, at the office of the Company.
Thereupon, the Company shall issue to the Holder such number of fully paid and
nonassessable shares of Common Stock as is computed using the following formula:
where:X = [Y*(A-B)]/A
X = the number of shares to be issued to the Holder pursuant to this
Section 2.
Y = the number of shares covered by this Warrant in respect of which
the net issuance election is made pursuant to this Section 3.
A = the fair market value of one share of Common Stock, as determined
in accordance with the provisions of this Section 3.
B = the Exercise Price in effect under this Warrant at the time the net
issuance election is made pursuant to this Section 3.
For purposes of this Section 3, the "fair market value" per share of the
Company's Common Stock shall mean:
i. If the Common Stock is traded on a national securities exchange
or admitted to unlisted trading privileges on such an exchange, or is listed on
the Nasdaq National Market (the "NNM") or other over-the- counter quotation
system, the fair market value shall be the last reported sale price of the
Common Stock on such exchange or on the NNM or other over-the-counter quotation
system on the last business day before the effective date of exercise of the net
issuance election or if no such sale is made on such day, the mean of the
closing bid and asked prices for such day on such exchange, the NNM or
over-the-counter quotation system; and
ii. If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and ask prices are not reported, the fair market
value shall be the price per share which the Company could obtain from a willing
buyer for shares sold by the Company from authorized but unissued shares, as
such price shall be determined by mutual agreement of the Company and the Holder
of this Warrant. If the Company and the Holder cannot mutually agree on such
price, the fair market value shall be made by an appraiser of recognized
standing selected by the Holder and the Company, or, if they cannot agree on an
appraiser, each of he Company and the Holder shall select an appraiser of
recognized standing and the two appraisers shall designate a third appraiser of
recognized standing, whose appraisal shall be determinative of such value.
4. DELIVERY OF STOCK CERTIFICATES. Within a reasonable time after
exercise, in whole or in part, of this Warrant, the Company shall issue in the
name of and deliver to the Holder, a certificate or certificates for the number
of fully paid and nonassessable shares of Common Stock which the Holder shall
have requested in the Notice of Exercise or Net Issuance Election Notice. If
this Warrant is exercised in part, the Company shall deliver to the Holder a new
Warrant for the unexercised portion of this Warrant at the time of delivery of
such stock certificate or certificates.
5. NO FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares will be issued upon exercise of this Warrant. If upon any
exercise of this Warrant a fraction of a share results, the Company will pay the
Holder the difference between the cash value of the fractional share and the
portion of the Exercise Price allocable to the fractional share.
6. CHARGES, TAXES AND EXPENSES. The Holder shall pay all transfer
taxes or other incidental charges, if any, in connection with the transfer of
the Shares purchased pursuant to the exercise hereof from the Company to the
Holder.
7. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. Upon receipt by
the Company 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 the Company,
and upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will make and deliver a new Warrant of like tenor and dated as of such
cancellation, in lieu of this Warrant.
8. 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 or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding
weekday which is not a legal holiday.
9. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. The number of
and kind of securities purchasable upon exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time as follows:
(a) SUBDIVISIONS, COMBINATIONS AND OTHER ISSUANCES. If the Company
shall at any time after the date hereof but prior to the expiration of this
Warrant subdivide its outstanding securities as to which purchase rights under
this Warrant exist, by split-up or otherwise, or combine its outstanding
securities as to which purchase rights under this Warrant exist, the number of
Shares as to which this Warrant is exercisable as of the date of such
subdivision, split-up or combination shall forthwith be proportionately
increased in the case of a subdivision, or proportionately decreased in the case
of a combination. Appropriate adjustments shall also be made to the purchase
price payable per share, but the aggregate purchase price payable for the total
number of Shares purchasable under this Warrant as of such date shall remain the
same.
(b) STOCK DIVIDEND. If at any time after the date hereof the
Company declares a dividend or other distribution on Common Stock payable in
Common Stock or other securities or rights convertible into Common Stock
("Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon exercise or
conversion thereof), then the number of shares of Common Stock for which this
Warrant may be exercised shall be increased as of the record date (or the date
of such dividend distribution if no record date is set) for determining which
holders of Common Stock shall be entitled to receive such dividend, in
proportion to the increase in the number of outstanding shares (and shares of
Common Stock issuable upon conversion of all such securities convertible into
Common Stock) of Common Stock as a result of such dividend, and the Exercise
Price shall be adjusted so that the aggregate amount payable for the purchase of
all the Shares issuable hereunder immediately after the record date (or on the
date of such distribution, if applicable), for such dividend shall equal the
aggregate amount so payable immediately before such record date (or on the date
of such distribution, if applicable).
(c) OTHER DISTRIBUTIONS. If at any time after the date hereof the
Company distributes to holders of its Common Stock, other than as part of its
dissolution or liquidation or the winding up of its affairs, any shares of its
capital stock, any evidence of indebtedness or any of its assets (other than
cash, Common Stock or securities convertible into Common Stock), then the
Company may, at its option, either (i) decrease the per share Exercise Price of
this Warrant by an appropriate amount based upon the value distributed on each
share of Common Stock as determined in good faith by the Company's Board of
Directors or (ii) provide by resolution of the Company's Board of Directors that
on exercise of this Warrant, the Holder hereof shall thereafter be entitled to
receive, in addition to the shares of Common Stock otherwise receivable on
exercise hereof, the number of shares or other securities or property which
would have been received had this Warrant at the time been exercised.
(d) MERGER. If at any time after the date hereof there shall be a
merger or consolidation of the Company with or into another corporation when the
Company is not the surviving corporation then the Holder shall thereafter be
entitled to receive upon exercise of this Warrant, during the period specified
herein and upon payment of the aggregate Exercise Price then in effect, the
number of shares or other securities or property of the successor corporation
resulting from such merger or consolidation, which would have been received by
Holder for the shares of stock subject to this Warrant had this Warrant at such
time been exercised.
(e) RECLASSIFICATION, ETC. If at any time after the date hereof
there shall be a change or reclassification of the securities as to which
purchase rights under this Warrant exist into the same or a different number of
securities of any other class or classes, then the Holder shall thereafter be
entitled to receive upon exercise of this Warrant, during the period specified
herein and upon payment of the Exercise Price then in effect, the number of
shares or other securities or property resulting from such change or
reclassification, which would have been received by Holder for the shares of
stock subject to this Warrant had this Warrant at such time been exercised.
10. NOTICE OF ADJUSTMENTS; NOTICES. Whenever the Exercise Price or
number of Shares purchasable hereunder shall be adjusted pursuant to Section 9
hereof, the Company shall execute and deliver to the Holder a certificate
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated and
the Exercise Price and number of shares purchasable hereunder after giving
effect to such adjustment, and shall cause a copy of such certificate to be
mailed (by first class mail, postage prepaid) to the Holder.
11. RIGHTS AS SHAREHOLDER. Prior to exercise of this Warrant, the
Holder shall not be entitled to any rights as a shareholder of the Company with
respect to the Shares, including (without limitation) the right to vote such
Shares, receive dividends or other distributions thereon, or be notified of
shareholder meetings, and the Holder shall not be entitled to any notice or
other communication concerning the business or affairs of the Company. However,
in the event of any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend (other than a cash dividend) or other
distribution, any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to receive
any other right, the Company shall mail to each Holder of this Warrant, at least
ten (10) days prior to the date specified therein, a notice specifying the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, and the amount and character of such dividend,
distribution or right.
12. RESTRICTED SECURITIES. The Holder understands that this Warrant
and the Shares purchasable hereunder constitute "restricted securities" under
the federal securities laws inasmuch as they are, or will be, acquired from the
Company in transactions not involving a public offering and accordingly may not,
under such laws and applicable regulations, be resold or transferred without
registration under the Securities Act of 1933, as amended (the "1933 Act") or an
applicable exemption from such registration. In this connection, the Holder
acknowledges that Rule 144 of the Securities and Exchange Commission (the "SEC")
is not now, and may not in the future be, available for resales of the Warrant
and the Shares purchasable hereunder. Unless the Shares are subsequently
registered pursuant to Section 14, the Holder further acknowledges that the
securities legend on Exhibit A to the Notice of Exercise attached hereto shall
be placed on any Shares issued to the Holder upon exercise of this Warrant.
13. CERTIFICATION OF INVESTMENT PURPOSE. Unless a current registration
statement under the 1933 Act shall be in effect with respect to the securities
to be issued upon exercise of this Warrant, the Holder covenants and agrees
that, at the time of exercise hereof, it will deliver to the Company a written
certification executed by the Holder that the securities acquired by him upon
exercise hereof are for the account of such Holder and acquired for investment
purposes only and that such securities are not acquired with a view to, or for
sale in connection with, any distribution thereof.
14. DISPOSITION OF SHARES. Xxxxxx hereby agrees not to make any
disposition of any Xxxxxx purchased hereunder unless and until:
(a) Holder shall have notified the Company of the proposed
disposition and provided a written summary of the terms and conditions of the
proposed disposition;
(b) Holder shall have complied with all requirements of this
Warrant applicable to the disposition of the Shares; and
(c) Holder shall have provided the Company with written assurances,
in form and substance satisfactory to legal counsel of the Company, that (i) the
proposed disposition does not require registration of the Shares under the 1933
Act or (ii) all appropriate action necessary for compliance with the
registration requirements of the 1933 Act or of any exemption from registration
available under the 1933 Act has been taken.
The Company shall NOT be required (i) to transfer on its books any
Shares which have been sold or transferred in violation of the provisions of
this Section 14, or (ii) to treat as the owner of the Shares, or otherwise to
accord voting or dividend rights to, any transferee to whom the Shares have been
transferred in contravention of the terms of this Warrant.
15. REGISTRATION RIGHTS.
(a) PIGGYBACK REGISTRATION. If at any time during the five-year
period commencing on the Effective Date and ending five years hence, the Company
shall determine to register for its own account or the account of others under
the 1933 Act any of its equity securities, other than on Form S-4 or Form S-8 or
their then equivalents relating to equity securities to be issued solely in
connection with any acquisition of any entity or business, or equity securities
issuable in connection with stock option or other employee benefit plans, the
Company shall send to each Holder of Warrants or Shares, who is entitled to
registration rights under this Section 15(a) written notice of such
determination and, if within twenty (20) days after receipt of such notice, such
Holder shall so request in writing (hereafter a "Selling Holder"), the Company
shall include in such Registration Statement all or any part of the Shares
issuable upon exercise of the Warrants (the "Registrable Securities") such
Selling Holder requests to be registered. The obligations of the Company under
this Section 15(a) may be waived by Holders holding a majority in interest of
the Registrable Securities. In the event that the managing underwriter for said
offering advises the Company in writing that the inclusion of such Registrable
Securities in the offering would be materially detrimental to the offering, then
the Company shall be required to include in the offering only that number of
Registrable Securities which the managing underwriter determines in its sole
discretion will not jeopardize the success of the offering (the Registrable
Securities so included to be apportioned pro rata among all Selling Holders
according to the total amount of Registrable Securities entitled to be included
therein owned by each selling holder or in such other proportions as shall
mutually be agreed to by such selling holders); PROVIDED HOWEVER, that in no
event shall any Holder of Registrable Securities have the number of shares of
such securities reduced in such offer unless and until any holders of
non-Registrable Securities intending to participate in such offering (which
selling holders' registration rights, if any, were granted by the Company from
and after the date hereof) first shall have had the number of their shares of
such securities reduced up to the amount of securities the managing underwriter
has determined in its sole discretion shall be excluded from the offering; and
PROVIDED FURTHER, that in no event shall any Shares being sold by a Holder
properly exercising a demand registration granted in Section 14(b) be excluded
from such offering.
(c) OBLIGATIONS OF THE HOLDERS. In connection with the registration
of the Registrable Securities pursuant to either Sections 15(a), or (b), the
Selling Holders shall have the following obligations:
i. It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Agreement with respect to each
Selling Holder that such Selling Holder shall furnish to the Company such
information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as shall
be reasonably required to effect the registration of the Registrable Securities
and shall execute such documents in connection with such registration as the
Company may reasonably request. At least fifteen (15) days prior to the first
anticipated filing date of the Registration Statement, the Company shall notify
each Selling Holder of the information the Company requires from each such
Selling Holder (the "Requested Information") in the case of a Registration
Statement being prepared pursuant to Section 15(b) or if such Selling Holder
elects to have any of such Selling Holder's Registrable Securities included in
the Registration Statement in the case of a Registration Statement being
prepared pursuant to Section 15(a).
ii. Each Selling Holder by such Xxxxxxx Xxxxxx's acceptance of
the Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Xxxxxxx Xxxxxx has notified the
Company in writing of such Selling Holder's election to exclude all of such
Selling Holder's Registrable Securities from the Registration Statement; and
iii. No Selling Holder may participate in any underwritten
registration hereunder unless such Xxxxxxx Xxxxxx (i) agrees to sell such
Selling Xxxxxx's Registrable Securities on the basis provided in any
underwriting arrangements, (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements, and (iii)
agrees to pay its pro rata share of all underwriting discounts and commissions
and other fees and expenses of investment bankers and any manager or managers of
such underwriting, except as provided in Section 15(d) below.
(d) EXPENSES OF REGISTRATION. All expenses, other than underwriting
discounts and commissions and other fees and expenses of investment bankers and
other than brokerage commissions, incurred in connection with registrations,
filings or qualifications pursuant to Section 15(a) or 15(b), including, without
limitation, all registration, listing and qualifications fees, printers for the
Company and the Selling Holders, shall be borne by the Company; the Company
shall not be required to bear the fees and out-of-pocket expenses of legal
counsel and accountants selected by the Selling Holders in connection with each
such registration.
(e) INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
i. To the extent permitted by law, the Company will indemnify
and hold harmless each Selling Holder who holds such Registrable Securities, the
directors, if any, of such Selling Holder, the officers, if any, of such Selling
Holder, each person, if any, who controls any Selling Holder within the meaning
of the 1933 Act, any underwriter (as defined in the 1933 Act) for the Selling
Holders, the directors, if any, of such underwriter and the officers, if any, of
such underwriter, and each person, if any, who controls any such underwriter
within the meaning of the 1933 Act (each, an "Indemnified Person"), against any
losses, claims, damages, expenses or liabilities (joint or several)
(collectively, "Claims") to which any of them may become subject under the 1933
Act or otherwise, insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement when it first became effective, or any related final
prospectus, amendment or supplement thereto, or the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which the
statements therein were made, not misleading (a "Violation"). The Company shall
reimburse the Selling Holders and each such underwriter or controlling person,
promptly as such expenses are incurred and are due and payable, for any legal
fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 15(e)(i) shall not apply in such case to the extent any such Claim
arising out of or based upon a Violation which occurs in reliance upon and in
conformity with information furnished in writing to the Company by any
Indemnified Person or underwriter for such Indemnified Person expressly for use
in connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, and shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably withheld.
ii. In connection with any Registration Statement in which a
Selling Holder is participating, each such Selling Holder agrees to indemnify
and hold harmless, to the same extent and in the same manner set forth in
Section 15(e)(i), the Company, each of its directors, each of its officers who
signs the Registration Statement, each person, if any, who controls the Company
within the meaning of the 1933 Act, any underwriter and any other shareholder
selling securities pursuant to the Registration Statement or any of its
directors or officers or any person who controls such shareholder or underwriter
within the meaning of the 1933 Act (collectively and together with an
Indemnified Person, an "Indemnified Party"), against any Claim to which any of
them may become subject, under the 1933 Act or otherwise, insofar as such Claim
arises out of or is based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished to the Company by such Selling
Holder expressly for use in connection with such Registration Statement, and
such Selling Holder will reimburse any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such Claim;
PROVIDED, HOWEVER, that the indemnity agreement contained in this Section
15(e)(ii) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such Selling Holder,
which consent shall not be unreasonably withheld.
iii. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution to the same extent as provided
above, with respect to information furnished in writing by such persons
expressly for inclusion in the Registration Statement.
iv. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 15(e) of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is made against any
indemnifying party under this Section 15(e), deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying parties; PROVIDED, HOWEVER, that an Indemnified Person or
Indemnified Party shall have the right to retain its own counsel, with the fees
and expenses to be paid by the indemnifying party, if, in the reasonable opinion
of counsel retained by the indemnifying party, the representation by such
counsel of the Indemnified Person or Indemnified Party and the indemnifying
party would be inappropriate due to actual or potential differing interests
between such Indemnified Person or Indemnified Party and any other party
represented by such counsel in such proceeding. The Indemnifying Party shall pay
for only one separate legal counsel for the Indemnified Parties; such legal
counsel shall be selected by the Indemnified Parties holding a majority in
interest of the Registrable Securities. The failure to deliver written notice to
the indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 15(e), except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action. The indemnification required by this Section 15(e) shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as such expense, loss, damage or liability is incurred and is due
and payable.
v. Notwithstanding any of the foregoing, if, in connection with
an underwritten public offering of Registrable Securities, the Company, the
Selling Holders and the underwriter(s) enter into an underwriting or purchase
agreement relating to such offering which contains provisions covering
indemnification and contribution among the parties, the indemnification and
contribution provisions of this Section 15(e) shall be deemed inoperative for
purposes of such offering.
(e) CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 15(e) to the fullest extent permitted by
law; PROVIDED, HOWEVER, that (i) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 15(e), (ii) no seller of
Registrable Securities guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from
any seller of Registrable Securities who was not guilty of such fraudulent
misrepresentation, and (iii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities.
(f) REPORTS UNDER EXCHANGE ACT. With a view to making available to
the Holders the benefits of Rule 144 promulgated under the 1933 Act or any other
similar rule or regulation of the SEC that may at any time permit the Holders to
sell securities of the Company to the public without registration ("Rule 144"),
the Company agrees to:
i. use its best efforts to make and keep public information
available, as those terms are understood and defined in Rule 144; and
ii. use its best efforts to file with the SEC in a timely
manner all reports and other documents required of the Company under the 1933
Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act");
and
iii. furnish to each Holder so long as such Holder owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company with respect to its compliance with the reporting requirements of Rule
144, (ii) a copy of the most recent annual or quarterly report of the Company
and such other reports and documents so filed by the Company, and (iii) such
other information as may be reasonably requested to permit the Holders to sell
such securities without registration pursuant to Rule 144.
(g) ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Holders to transferees or assignees of all or any
portion of such securities only if: (i) the Holder agrees in writing with the
transferee or assignee to assign such rights, (ii) the Company is, within a
reasonable time after such transfer or assignment, furnished with written notice
of the name and address of such transferee or assignee (iii) such assignment is
in accordance with and permitted by law and all other agreements between the
transferor or assignor and the Company, including without limitation,
shareholder's agreements, warrants and subscription agreements, and the
transferor or assignor otherwise is not in material default of any obligation to
the Company under any such other agreement, and (iv) at or before the time the
Company received the written notice contemplated by clause (ii) of this sentence
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions contained herein.
(h) TERMINATION OF REGISTRATION RIGHTS. No Holder of Warrants or
Shares shall be entitled to exercise any right provided for in this Section 14
at such time as such Holder would be able to dispose of all of its Registrable
Securities in any three (3) month period under SEC Rule 144 or any successor
rule thereto.
16. TRANSFERABILITY.
(a) GENERAL. This Warrant shall be transferable only on the
books of the Company maintained at its principal office in
Dallas, Texas or wherever its principal office may then be
located, upon delivery thereof duly endorsed by the Holder
or by its duly authorized attorney or representative,
accompanied by proper evidence of succession, assignment or
authority to transfer. Upon any registration of transfer,
the Company shall execute and deliver new Warrants to the
person entitled thereto.
(b) LIMITATIONS ON TRANSFER. This Warrant shall not be sold,
transferred, assigned or hypothecated by the Holder without
the company's express written consent except to; (i) one or
more persons, each of whom on the date of transfer is an
officer of the Holder; (ii) a general partnership or general
partnerships, the general partners of which are the Holder
and one or more persons, each of whom on the date of
transfer is an officer of the Holder; (iii) a successor to
the Holder in any merger or consolidation; (iv) a purchaser
of all or substantially all of the Holder's assets; or (v)
any person receiving this Warrant from one or more of the
persons listed in this Section 16(b) at such person's or
persons' death pursuant to will, trust or the laws of
intestate succession. This Warrant may be divided or
combined, upon request to the Company by the Holder, into a
certificate or certificates representing the right to
purchase the same aggregate number of Shares.
(c) Any transfer made except in strict compliance with Section
16 above, notwithstanding the fact that such transfers maybe
made to bone fide third party purchasers, shall be null and
void and shall not be recognized by the Company.
17. MISCELLANEOUS.
(a) CONSTRUCTION. Unless the context indicates otherwise, the
term "Holder" shall include any transferee or transferees of this Warrant
pursuant to Section 16(b), and the term "Warrant" shall include any and all
warrants outstanding pursuant to this Agreement, including those evidenced by a
certificate or certificates issued upon division, exchange, substitution or
transfer pursuant to Section 16(b).
(b) RESTRICTIONS. By receipt of this Warrant, the Holder makes
the same representations with respect to the acquisition of this Warrant as the
Holder is required to make upon the exercise of this Warrant and acquisition of
the Shares purchasable hereunder as set forth in the Form of Investment Letter
attached as Exhibit A to the Notice of Exercise attached hereto.
(c) NOTICES. Unless otherwise provided, any notice required or
permitted under this Warrant shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or three
(3) days following deposit with the United States Post Office, by registered or
certified mail, postage prepaid and addressed to the party to be notified (or
one (1) day following timely deposit with a reputable overnight courier with
next day delivery instructions), or upon confirmation of receipt by the sender
of any notice by facsimile transmission, at the address indicated below or at
such other address as such party may designate by ten (10) days' advance written
notice to the other parties.
To Holder:
Xx. Xxxxxxx Xxxxx
President
0000 Xxx Xxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
To the Company:
Safeguard Security Holdings, Inc.
0000 X. Xxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: X. Xxxxx Xxxxx Xx.
(d) GOVERNING LAW. This Warrant shall be governed by and
construed under the laws of the State of Texas as applied to agreements among
Texas residents entered into and to be performed entirely within Texas.
(e) ENTIRE AGREEMENT. This Warrant, the exhibits and schedules
hereto, and the documents referred to herein, constitute the entire agreement
and understanding of the parties hereto with respect to the subject matter
hereof, and supersede all prior and contemporaneous agreements and
understandings, whether oral or written, between the parties hereto with respect
to the subject matter hereof.
(f) BINDING EFFECT. This Warrant and the various rights and
obligations arising hereunder shall inure to the benefit of and be binding upon
the Company and its successors and assigns, and Xxxxxx and its successors and
assigns.
(g) WAIVER; CONSENT. This Warrant may not be changed, amended,
terminated, augmented, rescinded or discharged (other than by performance), in
whole or in part, except by a writing executed by the parties hereto, and no
waiver of any of the provisions or conditions of this Warrant or any of the
rights of a party hereto shall be effective or binding unless such waiver shall
be in writing and signed by the party claimed to have given or consented
thereto.
(h) SEVERABILITY. If one or more provisions of this Warrant are
held to be unenforceable under applicable law, such provision shall be excluded
from this Warrant and the balance of the Warrant shall be interpreted as if such
provision were so excluded and the balance shall be enforceable in accordance
with its terms.
Executed this _____ day of _____, 2005.
THE COMPANY:
Safeguard Security Holdings, Inc.
By: ____________________________________________
Name: ______________________________________
Title: ________________________________________
HOLDER:
Xxxxxxx Xxxxx
By:___________________________________________
NOTICE OF EXERCISE
To: Safeguard Security Holdings, INC.
The undersigned hereby elects to purchase _____________ shares of
Common Stock ("STOCK") of Safeguard Security Holdings, Inc., a Texas corporation
(the "COMPANY") pursuant to the terms of the attached Warrant, and tenders
herewith payment of the purchase price pursuant to the terms of the Warrant.
Attached as Exhibit A is an investment representation letter
addressed to the Company and executed by the undersigned as required by Section
13 of the Warrant.
Please issue certificates representing the shares of Stock
purchased hereunder in the names and in the denominations indicated on Exhibit A
attached hereto.
Please issue a new Warrant for the unexercised portion of the
attached Warrant, if any, in the name of the undersigned.
Dated:
Name:
Title:
NET ISSUANCE ELECTION NOTICE
To: Safeguard Security Holdings, INC.
Date:
The undersigned hereby elects under Section 3 of the attached
Warrant to surrender the right to purchase ___________ shares of Common Stock
pursuant to the attached Warrant. The Certificate(s) for the shares issuable
upon such net issuance election shall be issued in the name of the undersigned
or as otherwise indicated below.
Attached as Exhibit A is an investment representation letter
addressed to the Company and executed by the undersigned as required by Section
13 of the Warrant.
Please issue certificates representing the shares of Stock
purchased hereunder in the names and in the denominations indicated on Exhibit A
attached hereto.
Please issue a new Warrant for the unexercised portion of the
attached Warrant, if any, in the name of the undersigned.
Signature
Name for Registration
Mailing Address
EXHIBIT A
To: Safeguard Security Holdings, INC.
In connection with the purchase by the undersigned of ________ shares
of the Common Stock (the "STOCK") of Safeguard Security Holdings, Inc., a Texas
corporation (the "COMPANY"), upon exercise of that certain Common Stock Warrant
dated as of June ____, 2005, the undersigned hereby represents and warrants as
follows:
The shares of Stock to be received by the undersigned upon
exercise of the Warrant are being acquired for its own account, not as a nominee
or agent, and not with a view to resale or distribution of any part thereof, and
the undersigned has no present intention of selling, granting any participation
in, or otherwise distributing the same. The undersigned further represents that
it does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participation to such person or to any third
person, with respect to the Stock. The undersigned believes it has received all
the information it considers necessary or appropriate for deciding whether to
purchase the Stock.
The undersigned understands that the shares of Stock are
characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in transactions not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act of
1933, as amended (the "ACT"), only in certain limited circumstances. In this
connection, the undersigned represents that it is familiar with SEC Rule 144, as
presently in effect, and understands the resale limitations imposed thereby and
by the Act.
Without in any way limiting the representations set forth above,
the undersigned agrees not to make any disposition of all or any portion of the
Stock unless and until:
There is then in effect a registration statement under the Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement; or
(i) The undersigned shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
requested, the undersigned shall have furnished the Company with an opinion of
counsel, reasonably satisfactory to the Company that such disposition will not
require registration of such shares under the Act. The Company will not require
an opinion of counsel for sales made pursuant to Rule 144 except in unusual
circumstances.
The undersigned understands the instruments evidencing the Stock
may bear the following legend:
THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS THERE IS
AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH SALE OR TRANSFER IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
Dated:
Safeguard Security Holdings, INC.
By:
------------------------------------------
X. Xxxxx Xxxxx Xx. CEO
------------------------------------------
Xxxxxxx Xxxxx
