EXHIBIT 10.5
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR
DISPOSITION MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO, (ii) AN OPINION OF
COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE
COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED, (iii) RECEIPT
OF A NO-ACTION LETTER(S) FROM THE APPROPRIATE GOVERNMENTAL
AUTHORITY(IES), OR (iv) OTHERWISE COMPLYING WITH THE
PROVISIONS OF SECTION 8 OF THIS WARRANT.
DIGITAL FUSION, INC.
--------------------
WARRANT TO PURCHASE UP TO 516,893 SHARES
OF COMMON STOCK (this "Warrant")
Warrant No.: 001
Digital Fusion, Inc., a Delaware corporation (the "Company"), hereby
certifies that, for value received, Madison Run LLC (Madison Run LLC or its
assignees are referred to herein as the "Holder") is the registered Holder of a
warrant (the "Warrant") to subscribe for and purchase 304,054 shares of the
fully paid and nonassessable Common Stock of the Company, at a purchase price of
$0.89 per share and 212,839 shares of Common Stock of the Company (each such
number of shares, as adjusted from time to time, pursuant to Section 4 hereof,
is, with respect to any specific exercise of the Warrant, referred to herein as
the "Warrant Shares") at a price of $0.94 per share (each such price, as
adjusted from time to time, pursuant to Section 4 hereof, is, with respect to
any specific exercise of the Warrant, referred to herein as the "Warrant
Price"), subject to the provisions and upon the terms and conditions hereinafter
set forth. As used herein, (a) the term "Common Stock" shall mean the Company's
presently authorized Common Stock, par value $.001 per share, and any stock into
or for which such Common Stock may hereafter be converted or exchanged, (b) the
term "Date of Grant" shall mean May ___, 2004, and (c) the term "Other Warrants"
shall mean any warrant issued upon transfer or partial exercise of this Warrant.
The term "Warrant" as used herein shall be deemed to include Other Warrants
unless the context hereof or thereof clearly requires otherwise.
1. Term. The purchase right represented by this Warrant is exercisable, in
whole or in part, at any time after the Date of Grant (the "Initial Exercise
Date"). This Warrant shall expire on May __, 2009.
2. Exercise. Subject to Section 1 hereof, the purchase right represented by
this Warrant may be exercised by the Holder hereof, in whole or in part and from
time to time after the Initial Exercise Date, by the surrender of this Warrant
(with the notice of exercise form attached hereto as Exhibit A duly executed) at
the principal office of the Company and by the payment to the Company of an
amount equal to the then applicable Warrant Price multiplied by the number of
Warrant Shares then being purchased. The person or persons in whose name(s) any
certificate(s) representing shares of Common Stock shall be issuable upon
exercise of this Warrant shall be deemed to have become the Holder(s) of record
of, and shall be treated for all purposes as the record Holder(s) of, the shares
represented thereby (and such shares shall be deemed to have been issued)
immediately prior to the close of business on the date or dates upon which this
Warrant is exercised. In the event of any exercise of the rights represented by
this Warrant, certificates for the shares of stock so purchased shall be
delivered to the Holder hereof as soon as possible and in any event within 30
days after such exercise and, unless this Warrant has been fully exercised, a
new Warrant representing the portion of the Warrant Shares, if any, with respect
to which this Warrant shall not then have been exercised shall also be issued to
the Holder hereof as soon as possible and in any event within such 30-day
period.
3. Stock Fully Paid; Reservation of Shares. All Warrant Shares that may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance pursuant to the terms and conditions herein, be fully paid and
nonassessable, and free from all taxes (other than any taxes determined with
respect to, or based upon, the income of the person to whom such shares are
issued), liens and charges (other than liens or charges created by actions of
the Holder of this Warrant or the person to whom such shares are issued), and
pre-emptive rights with respect to the issue thereof. During the period within
which the rights represented by this Warrant may be exercised, the Company will
at all times have authorized, and reserved for the purpose of the issue upon
exercise of the purchase rights evidenced by this Warrant, a sufficient number
of shares of its Common Stock to provide for the exercise of the rights
represented by this Warrant.
4. Adjustment of Warrant Price and Number of Shares. The number and kind of
securities purchasable upon the exercise of this Warrant and the Warrant Price
shall be subject to adjustment from time to time upon the occurrence of certain
events, as follows:
a. Reclassification or Merger. In case of any reclassification, change
or conversion of securities of the class issuable upon exercise of this Warrant
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination), or in
case of any merger of the Company with or into another corporation (other than a
merger with another corporation in which the Company is the acquiring and the
surviving corporation and which does not result in any reclassification or
change of outstanding securities issuable upon exercise of this Warrant), or in
case of any sale of all or substantially all of the assets of the Company, the
Company, or such successor or purchasing corporation, as the case may be, shall
duly execute and deliver to the Holder of this Warrant a new Warrant (in form
and substance satisfactory to the Holder of this Warrant), so that the Holder of
this Warrant shall have the right to receive, at a total purchase price not to
exceed that payable upon the exercise of the unexercised portion of this
Warrant, and in lieu of the shares of Common Stock theretofore issuable upon
exercise of this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification, change or
merger by a Holder of the number of shares of Common Stock (or similar security)
then purchasable under this Warrant. Such new Warrant shall provide for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 4. The provisions of this Section 4(a)
shall similarly apply to successive reclassifications, changes, mergers and
transfers.
b. Subdivision or Combination of Shares. If at any time while this
Warrant remains outstanding and unexpired the Company shall subdivide or combine
its outstanding shares of common stock, the Warrant Price shall be
proportionately decreased and the number of Warrant Shares issuable hereunder
shall be proportionately increased in the case of a subdivision and the Warrant
Price shall be proportionately increased in the case of a combination and the
number of Warrant Shares issuable hereunder shall be proportionately decreased,
effective at the close of business on the date the subdivision or combination
becomes effective.
c. Stock Dividends. If at any time while this Warrant is outstanding
and unexpired the Company shall (i) pay a dividend with respect to Common Stock
payable in Common Stock, then the Warrant Price shall be adjusted, from and
after the date of determination of stockholders entitled to receive such
dividend or distribution, to that price determined by multiplying the Warrant
Price in effect immediately prior to such date of determination by a fraction
(A) the numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend, and (B) the denominator of which
shall be the total number of shares of Common Stock outstanding immediately
after such dividend or (ii) make any other dividend or distribution with respect
to Common Stock (except any distribution specifically provided for in Sections
4.a. and 4.b.), then, the Company will provide notice to the Investor of such
dividend or distribution with respect to the Common Stock and, if the Warrant is
exercised in whole or in part within five days of actual receipt by the Investor
of the notice of such dividend or distribution, the Holder of the shares of
Common Stock acquired pursuant to such exercise shall be entitled to receive the
dividend or distribution with respect to the Warrant Shares acquired by the
Investor upon such exercise of the Warrant.
5. Notice of Adjustments. Whenever the Warrant Price or the number of
Warrant Shares purchasable hereunder shall be adjusted pursuant to Section 4
hereof, the Company shall deliver to the Holder of this Warrant a certificate
signed by a duly designated officer of the Company 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 Warrant Price and the
number of Warrant Shares purchasable hereunder after giving effect to such
adjustment.
6. Dividends. In the event that the Company shall fix a record date for the
making of any stock dividend to Holders of shares of its common stock, the
Company shall notify the Holder of the Warrants, in writing, at least 30 days in
advance of the record date for the proposed dividend or distribution.
7. Fractional Shares. No fractional shares of Common Stock will be issued
in connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall round up the shares to which the recipient is entitled to the
nearest whole share.
8. Disposition of Warrant or Warrant Shares.
a. Exchange. This Warrant may be exchanged, without payment of any
service charge, for one (1) or more new Warrants of like tenor exercisable for
the same aggregate number of shares of Common Stock upon surrender to the
Company by the registered Holder hereof in person or by legal representative or
by attorney duly authorized in writing and, upon issuance of the new Warrant or
Warrants, the surrendered Warrant shall be cancelled and disposed of by the
Company.
b. Applicability of Restrictions. Neither any restrictions of any
legend applicable to the Warrant or the Warrant Shares nor any restrictions on
transfer set forth herein or in the Subscription Agreement between Holder and
the Company dated as of the date of this Warrant shall apply to any transfer of,
or grant of a security interest in, this Warrant (or the Common Stock obtainable
upon exercise thereof) or any part hereof (i) to a partner of the Holder if the
Holder is a partnership or to a member of the Holder if the Holder is a limited
liability company, (ii) to a partnership of which the Holder is a partner or to
a limited liability company of which the Holder is a member, or (iii) to any
affiliate of the Holder if the Holder is a corporation; provided, however, in
any such transfer, if applicable, the transferee shall agree in writing to be
bound by the terms of this Warrant as if an original Holder hereof.
9. Rights as Stockholders; Information. Except as otherwise set forth in
this Agreement, no Holder of this Warrant, as such, shall be entitled to vote or
be deemed the Holder of Common Stock or any other securities of the Company
which may at any time be issuable on the exercise hereof for any purpose, nor
shall anything contained herein be construed to confer upon the Holder of this
Warrant, as such, any of the rights of a stockholder of the Company or any right
to vote for the election of the directors or upon any matter submitted to
stockholders at any meeting thereof, or to receive notice of meetings, until
this Warrant shall have been exercised and the Warrant Shares purchasable upon
the exercise hereof shall have become deliverable, as provided herein. The
foregoing notwithstanding, the Company will transmit to the Holder of this
Warrant such information, documents and reports as are generally distributed to
the holders of any class or series of the securities of the Company concurrently
with the distribution thereof to the stockholders.
10. Additional Rights on Transfer of Business.
a. Transfer of Business. In the event that the Company undertakes to
(i) sell, lease, exchange, convey or otherwise dispose of all or substantially
all of its property or business, or (ii) merge into or consolidate with any
other corporation (other than a wholly-owned Subsidiary), or effect any
transaction (including a merger or other reorganization) or series of related
transactions, in which more than 50% of the voting power of the Company is
disposed of, the Company will provide at least 30 days notice prior to closing
of the terms and conditions of the proposed transaction. The Company shall
cooperate with the Holder in consummating the sale of this Warrant in connection
with any such transaction.
11. Modification and Waiver. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
12. Notices. Unless otherwise specifically provided herein, all
communications under this Warrant shall be in writing and shall be deemed to
have been duly given (i) on the date of service if served personally on the
party to whom notice is to be given, (ii) on the day of transmission if sent by
facsimile transmission to the number shown on the books of the Company, and
telephonic confirmation of receipt is obtained promptly after completion of
transmission, (iii) on the day after delivery to Federal Express or similar
overnight courier, or (iv) on the fifth day after mailing, if mailed to the
party to whom notice is to be given, by first class mail, registered or
certified, postage prepaid, and properly addressed, return receipt requested, to
each such Holder at its address as shown on the books of the Company or to the
Company at the address indicated therefor on the signature page of this Warrant.
Any party hereto may change its address for purposes of this Section 12 by
giving the other party written notice of the new address in the manner set forth
herein.
13. Assignment; Binding Effect on Successors. This Warrant may be assigned,
transferred, or pledged by Holder only in accordance with the terms of this
Warrant. This Warrant shall be binding upon any corporation succeeding the
Company by merger, consolidation or acquisition of all or substantially all of
the Company's assets, and all of the covenants and agreements of the Company
shall inure to the benefit of the successors and assigns of the Holder hereof.
14. Lost Warrants or Stock Certificates. The Company covenants to the
Holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any loss, theft or destruction, upon
receipt of an executed lost securities bond or indemnity reasonably satisfactory
to the Company, or in the case of any such mutilation upon surrender and
cancellation of such Warrant or stock certificate, the Company will make and
deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost,
stolen, destroyed or mutilated Warrant or stock certificate.
15. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
16. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of Delaware (without giving effect to principles of conflicts of
laws).
17. Survival of Representations, Warranties and Agreements. All
representations and warranties of the Company and the Holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) and the termination or expiration of rights
hereunder and shall terminate three years after the date of this Agreement. All
agreements of the Company and the Holder hereof contained herein shall survive
indefinitely until, by their respective terms, they are no longer operative.
18. Remedies. In case any one or more of the covenants and agreements
contained in this Warrant shall have been breached, the Holders hereof (in the
case of a breach by the Company), or the Company (in the case of a breach by a
Holder), may proceed to protect and enforce their or its rights either by suit
in equity and/or by action at law, including, but not limited to, an action for
damages as a result of any such breach and/or an action for specific performance
of any such covenant or agreement contained in this Warrant.
19. Acceptance. Receipt of this Warrant by the Holder hereof shall
constitute acceptance of and agreement to the foregoing terms and conditions.
20. No Impairment of Rights. The Company will not, by amendment of its
Certificate of Incorporation or through any other means, 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 action as may be necessary or appropriate in order to protect
the rights of the Holder of this Warrant against impairment.
21. Severability. The invalidity or unenforceability of any provision of
this Warrant in any jurisdiction shall not affect the validity or enforceability
of such provision in any other jurisdiction, or affect any other provision of
this Warrant, which shall remain in full force and effect.
[Signature page follows.]
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
on its behalf by one of its officers thereunto duly authorized.
DIGITAL FUSION, INC.,
a Delaware corporation
By: /s/ Xxx X. Xxxxxxx, III
----------------------------------------
Name: Xxx X. Xxxxxxx, III
------------------------------------
Its: President
-------------------------------------
Address:
0000-X Xxxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Dated: May 11, 2004.
EXHIBIT A
NOTICE OF EXERCISE
To: DIGITAL FUSION, INC.
1. The undersigned hereby elects to purchase shares of Common Stock of
DIGITAL FUSION, INC. at a purchase price of $_________ pursuant to the terms of
the attached Warrant, and tenders herewith payment of the purchase price of such
shares in full.
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name or names as are specified
below:
-------------------------------
(Name)
-------------------------------
-------------------------------
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
In support thereof, the undersigned has executed an Investment Representation
Statement attached hereto as Schedule 1.
----------------------------------
(Signature)
---------------------
(Date)
SCHEDULE 1
----------
INVESTMENT REPRESENTATION STATEMENT
Purchaser:
Company: DIGITAL FUSION, INC.
Security: Common Stock
Amount:
Date:
In connection with the purchase of the above-listed securities (the
"Securities"), the undersigned (the "Purchaser") represents to the Company as
follows:
(a) The Purchaser is aware of the Company's business affairs and financial
condition, and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. The Purchaser is
purchasing the Securities for its own account for investment purposes only and
not with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Securities Act of 1933, as amended (the "Act").
(b) The Purchaser understands that the Securities have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of the
Purchaser's investment intent as expressed herein. In this connection, the
Purchaser understands that, in the view of the Securities and Exchange
Commission ("SEC"), the statutory basis for such exemption may be unavailable if
the Purchaser's representation was predicated solely upon a present intention to
hold these Securities for the minimum capital gains period specified under
applicable tax laws, for a deferred sale, for or until an increase or decrease
in the market price of the Securities, or for a period of one year or any other
fixed period in the future.
(c) The Purchaser further understands that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from registration is otherwise available. In addition, the
Purchaser understands that the certificate evidencing the Securities will be
imprinted with the legend referred to in the Warrant under which the Securities
are being purchased.
(d) The Purchaser is aware of the provisions of Rule 144 and 144A,
promulgated under the Securities Act, which, in substance, permit limited public
resale of "restricted securities" acquired, directly or indirectly, from the
issuer thereof (or from an affiliate of such issuer), in a non-public offering
subject to the satisfaction of certain conditions, if applicable, including,
among other things: The availability of certain public information about the
Company, the resale occurring not less than one (1) year after the party has
purchased and paid for the securities to be sold; the sale being made through a
broker in an unsolicited "broker's transaction" or in transactions directly with
a market maker (as said term is defined under the Securities Exchange Act of
1934, as amended) and the amount of securities being sold during any three-month
period not exceeding the specified limitations stated therein.
(e) The Purchaser further understands that at the time it wishes to sell
the Securities there may be no public market upon which to make such a sale, and
that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 and 144A, and
that, in such event, the Purchaser may be precluded from selling the Securities
under Rule 144 and 144A even if the one-year minimum holding period had been
satisfied.
(f) The Purchaser further understands that in the event all of the
requirements of Rule 144 and 144A are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rule 144 is
not exclusive, the Staff of the SEC has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 will have a substantial burden
of proof in establishing that an exemption from registration is available for
such offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk.
Purchaser:
--------------------------------
Date:
------------------------------------
