EXHIBIT 10.9
THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUED UPON EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE AFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL THAT
SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
PATRON SYSTEMS, INC.
WARRANT TO PURCHASE
____________ SHARES
OF COMMON STOCK
(SUBJECT TO ADJUSTMENT)
(Void after February 24, 2010)
NO: ____
This certifies that for value, _______________________________, or
registered assigns (the "HOLDER"), is entitled, subject to the terms set forth
below, at any time from and after February 25, 2005 (the "ORIGINAL ISSUANCE
DATE") and before 5:00 p.m., Eastern Time, on February 24, 2010 (the "EXPIRATION
DATE"), to purchase from PATRON SYSTEMS, INC., a Delaware corporation (the
"COMPANY"), __________________________ (______) shares (subject to adjustment as
described herein), of common stock, par value $0.01 per share, of the Company
(the "COMMON STOCK"), upon surrender hereof, at the principal office of the
Company referred to below, with a duly executed subscription form in the form
attached hereto as EXHIBIT A and simultaneous payment therefor in lawful,
immediately available money of the United States or otherwise as hereinafter
provided, at an initial exercise price per share of $0.70 (the "PURCHASE
PRICE"). The Purchase Price is subject to further adjustment as provided below,
and the term "COMMON STOCK" shall include, unless the context otherwise
requires, the stock and other securities and property at the time receivable
upon the exercise of this Warrant. The term "WARRANTS," as used herein, shall
mean this Warrant and any other Warrants delivered in substitution or exchange
therefor as provided herein.
This Warrant was issued to the Holder pursuant to the terms and
conditions of that certain Supplemental Agreement and that certain Merger
Agreement, each dated as of the date hereof, each among the Company, CSSI
Acquisition Co. I, Inc., a Delaware corporation and wholly-owned subsidiary of
the Company ("MERGERCO"), and Complete Security Solutions, Inc., a Delaware
corporation ("CSSI"), pursuant to which Mergerco will merge with and into CSSI.
1. EXERCISE. This Warrant may be exercised at any time or from time to
time from and after the Original Issuance Date and before 5:00 p.m., Eastern
Time, on the Expiration Date, on any business day, for the full number of shares
of Common Stock called for hereby, by surrendering it at the principal office of
the Company, at 000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxx 00000,
with the subscription form duly executed, together with payment in an amount
equal to (a) the number of shares of Common Stock called for on the face of this
Warrant, as adjusted in accordance with the preceding paragraph of this Warrant
(without giving effect to any further adjustment herein), multiplied (b) by the
Purchase Price. Payment of the Purchase Price shall be made by payment in
immediately available funds. This Warrant may be exercised for less than the
full number of shares of Common Stock at the time called for hereby, except that
the number of shares of Common Stock receivable upon the exercise of this
Warrant as a whole, and the sum payable upon the exercise of this Warrant as a
whole, shall be proportionately reduced. Upon a partial exercise of this Warrant
in accordance with the terms hereof, this Warrant shall be surrendered, and a
new Warrant of the same tenor and for the purchase of the number of such shares
not purchased upon such exercise shall be issued by the Company to Holder
without any charge therefor. A Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date of its surrender for
exercise as provided above, and the person entitled to receive the shares of
Common Stock issuable upon such exercise shall be treated for all purposes as
the holder of such shares of record as of the close of business on such date.
Within two (2) business days after such date, the Company shall issue and
deliver to the person or persons entitled to receive the same a certificate or
certificates for the number of full shares of Common Stock issuable upon such
exercise, together with cash, in lieu of any fraction of a share, equal to such
fraction of the then Fair Market Value on the date of exercise of one full share
of Common Stock.
"FAIR MARKET VALUE" shall mean, as of any date: (i) if shares of the
Common Stock are listed on a national securities exchange, the average of the
closing prices as reported for composite transactions during the five (5)
consecutive trading days preceding the trading day immediately prior to such
date or, if no sale occurred on a trading day, then the mean between the closing
bid and asked prices on such exchange on such trading day; (ii) if shares of the
Common Stock are not so listed but are traded on the Nasdaq SmallCap Market
("NSCM"), the average of the closing prices as reported on the NSCM during the
five (5) consecutive trading days preceding the trading day immediately prior to
such date or, if no sale occurred on a trading day, then the mean between the
highest bid and lowest asked prices as of the close of business on such trading
day, as reported on the NSCM; or if applicable, the Nasdaq National Market
("NNM"), or if not then included for quotation on the NNM or NSCM, the average
of the highest reported bid and lowest reported asked prices as reported by the
OTC Bulletin Board or the National Quotations Bureau, as the case may be; or
(iii) if the shares of the Common Stock are not then publicly traded, the fair
market price of the Common Stock as determined in good faith by at least a
majority of the Board of Directors of the Company.
2. SHARES FULLY PAID; PAYMENT OF TAXES. All shares of Common Stock issued
upon the exercise of a Warrant shall be validly issued, fully paid and
non-assessable, and the Company shall pay all taxes and other governmental
charges (other than income taxes to the holder) that may be imposed in respect
of the issue or delivery thereof.
2
3. TRANSFER AND EXCHANGE. This Warrant and all rights hereunder are
transferable, in whole or in part, on the books of the Company maintained for
such purpose at its principal office referred to above by Holder in person or by
duly authorized attorney, upon surrender of this Warrant together with a
completed and executed assignment form in the form attached as EXHIBIT B,
payment of any necessary transfer tax or other governmental charge imposed upon
such transfer and an opinion of counsel reasonably acceptable the Company
stating that such transfer is exempt from the registration requirements of the
Securities Act of 1933, as amended (the "1933 ACT"). Upon any partial transfer,
the Company will issue and deliver to Holder a new Warrant or Warrants with
respect to the shares of Common Stock not so transferred. Each taker and holder
of this Warrant, by taking or holding the same, consents and agrees that this
Warrant when endorsed in blank shall be deemed negotiable and that when this
Warrant shall have been so endorsed, the holder hereof may be treated by the
Company and all other persons dealing with this Warrant as the absolute owner
hereof for any purpose and as the person entitled to exercise the rights
represented hereby, or to the transfer hereof on the books of the Company, any
notice to the contrary notwithstanding; but until such transfer on such books,
the Company may treat the registered Holder hereof as the owner for all
purposes.
This Warrant is exchangeable at such office for Warrants for the same
aggregate number of shares of Common Stock, each new Warrant to represent the
right to purchase such number of shares as the Holder shall designate at the
time of such exchange.
4. ANTI-DILUTION PROVISIONS.
A. ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK AND PROPERTY
RECLASSIFICATIONS. In case at any time or from time to time the holders of the
Common Stock (or any shares of stock or other securities at the time receivable
upon the exercise of this Warrant) shall have received, or, on or after the
record date fixed for the determination of eligible shareholders, shall have
become entitled to receive, without payment therefor,
(1) other or additional stock or other securities or
property (other than cash) by way of dividend,
(2) any cash or other property paid or payable out of any
source other than retained earnings (determined in accordance with generally
accepted accounting principles), or
(3) other or additional stock or other securities or
property (including cash) by way of stock-split, spin-off, reclassification,
combination of shares or similar corporate rearrangement (other than (x)
additional shares of Common Stock or any other stock or securities into which
such Common Stock shall have been changed, (y) any other stock or securities
convertible into or exchangeable for such Common Stock or such other stock or
securities or (z) any stock purchase rights, issued as a stock dividend or
stock-split), adjustments in respect of which shall be covered by the terms of
SECTION 4.C, SECTION 4.D OR SECTION 4.E, then and in each such case, Holder,
upon the exercise hereof as provided in SECTION 1, shall be entitled to receive
the amount of stock and other securities and property (including cash in the
cases referred to in clauses (2) and (3) above) which such Holder would hold on
the date of such exercise if on the Original Issuance Date Holder had been the
holder of record of the number of
3
shares of Common Stock called for on the face of this Warrant, as adjusted in
accordance with the first paragraph of this Warrant, and had thereafter, during
the period from the Original Issuance Date to and including the date of such
exercise, retained such shares and/or all other or additional stock and other
securities and property (including cash in the cases referred to in clause (2)
and (3) above) receivable by it as aforesaid during such period, giving effect
to all adjustments called for during such period by SECTION 4.A and SECTION 4.B.
B. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION AND MERGER. In
case of any reorganization of the Company (or any other corporation the stock or
other securities of which are at the time receivable on the exercise of this
Warrant) after the Original Issuance Date, or in case, after such date, the
Company (or any such other corporation) shall consolidate with or merge into
another corporation or entity or convey all or substantially all its assets to
another corporation or entity, then and in each such case Holder, upon the
exercise hereof as provided in SECTION 1 at any time after the consummation of
such reorganization, consolidation, merger or conveyance, shall be entitled to
receive, in lieu of the stock or other securities and property receivable upon
the exercise of this Warrant prior to such consummation, the stock or other
securities or property to which such Holder would have been entitled upon such
consummation if Holder had exercised this Warrant immediately prior thereto, all
subject to further adjustment as provided in SECTIONS 4.A, SECTION 4.B, SECTION
4.C, SECTION 4.D and SECTION 4.E; in each such case, the terms of this Warrant
shall be applicable to the shares of stock or other securities or property
receivable upon the exercise of this Warrant after such consummation.
C. SALE OF SHARES BELOW PURCHASE PRICE.
(1) Subject to the exceptions set forth in SECTION
4.C(5), if the Company issues or sells, or is deemed by the express provisions
of this SECTION 4.C to have issued or sold, Additional Shares of Common Stock
(as hereinafter defined), other than as a dividend or other distribution on any
class of stock as provided in SECTION 4.D and other than upon a subdivision or
combination of shares of Common Stock as provided in SECTION 4.E, for an
Effective Price (as hereinafter defined) less than the then existing Purchase
Price, then and in each such case:
(A) the then existing Purchase Price shall be
reduced, as of the opening of business on the date of such issue or sale, as
follows: the Purchase Price shall be reduced to a price determined by
multiplying that Purchase Price by a fraction (i) the numerator of which shall
be (a) the number of shares of Common Stock outstanding at the close of business
on the day next preceding the date of such issue or sale, plus (b) the number of
shares of Common Stock which the aggregate consideration received (or by the
express provisions hereof deemed to have been received) by the Company for the
total number of Additional Shares of Common Stock so issued would purchase at
the Effective Price, plus (c) the number of shares of Common Stock for which all
Warrants, and all other options and warrants outstanding as of the Original
Issuance Date that are exercisable for shares of Common Stock are exercisable at
the Purchase Price in effect at the close of business on the date next preceding
the date of such issue or sale, plus (d) the number of shares of Common Stock
underlying all Other Securities (as hereinafter defined) at the close of
business on the date next preceding the date of such issue or sale, and (ii) the
denominator of which shall be (a) the number of shares of Common Stock
outstanding at the close of business on the date of such issue or sale after
giving effect to such issue of Additional Shares of Common Stock, plus (b) the
number of shares of Common Stock
4
for which all Warrants and all other options and warrants outstanding on the
Original Issuance Date that are exercisable for shares of Common Stock are
exercisable at the Purchase Price in effect at the close of business on the date
next preceding the date of such issue or sale, plus (c) the number of shares of
Common Stock underlying the Other Securities at the close of business on the
date next preceding the date of such issue or sale; and
(2) For the purpose of making any adjustment required
under this SECTION 4.C, the consideration received by the Company for any issue
or sale of securities shall (i) to the extent it consists of cash be computed at
the amount of cash received by the Company, (ii) to the extent it consists of
property other than cash, be computed at the fair value of that property as
determined in good faith by the Board, (iii) if Additional Shares of Common
Stock, Convertible Securities (as hereinafter defined) or rights or options to
purchase either Additional Shares of Common Stock or Convertible Securities are
issued or sold together with other stock or securities or other assets of the
Company for a consideration which covers both, be computed as the portion of the
consideration so received that may be reasonably determined in good faith by the
Board to be allocable to such Additional Shares of Common Stock, Convertible
Securities or rights or options, and (iv) be computed after reduction for all
expenses payable by the Company in connection with such issue or sale.
(3) For the purpose of the adjustment required under this
SECTION 4.C, if the Company issues or sells any rights or options for the
purchase of, or stock or other securities convertible into or exchangeable for,
Additional Shares of Common Stock (such convertible or exchangeable stock or
securities being hereinafter referred to as "CONVERTIBLE SECURITIES") and if the
Effective Price of such Additional Shares of Common Stock is less than the
Purchase Price then in effect, then the Company shall be deemed to have issued
at the time of the issuance of such rights or options or Convertible Securities
the maximum number of Additional Shares of Common Stock issuable upon exercise,
conversion or exchange thereof and to have received as consideration for the
issuance of such shares an amount equal to the total amount of the
consideration, if any, received by the Company for the issuance of such rights
or options or Convertible Securities, plus, in the case of such rights or
options, the minimum amounts of consideration, if any, payable to the Company
upon the exercise of such rights or options, plus, in the case of Convertible
Securities, the minimum amounts of consideration, if any, payable to the Company
(other than by cancellation of liabilities or obligations evidenced by such
Convertible Securities) upon the conversion or exchange thereof. No further
adjustment of the Purchase Price, adjusted upon the issuance of such rights,
options or Convertible Securities, shall be made as a result of the actual
issuance of Additional Shares of Common Stock on the exercise of any such rights
or options or the conversion or exchange of any such Convertible Securities. If
any such rights or options or the conversion or exchange privilege represented
by any such Convertible Securities shall expire without having been exercised,
the Purchase Price adjusted upon the issuance of such rights, options or
Convertible Securities shall be readjusted to the Purchase Price which would
have been in effect had an adjustment been made on the basis that the only
Additional Shares of Common Stock so issued were the Additional Shares of Common
Stock, if any, actually issued or sold on the exercise of such rights or options
or rights of conversion or exchange of such Convertible Securities, and such
Additional Shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise, plus the
consideration, if any, actually received by the Company for the granting of all
such rights or options, whether or not exercised, plus the consideration
received for issuing
5
or selling the Convertible Securities actually converted or exchanged, plus the
consideration, if any, actually received by the Company (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) on the conversion or exchange of such Convertible Securities.
(4) For the purpose of the adjustment required under this
SECTION 4.C, if the Company issues or sells, or is deemed by the express
provisions of this subsection to have issued or sold, any rights or options for
the purchase of Convertible Securities and if the Effective Price of the
Additional Shares of Common Stock underlying such Convertible Securities is less
than the Purchase Price then in effect, then in each such case the Company shall
be deemed to have issued at the time of the issuance of such rights or options
the maximum number of Additional Shares of Common Stock issuable upon conversion
or exchange of the total amount of Convertible Securities covered by such rights
or options and to have received as consideration for the issuance of such
Additional Shares of Common Stock an amount equal to the amount of
consideration, if any, received by the Company for the issuance of such rights
or options, plus the minimum amounts of consideration, if any, payable to the
Company upon the exercise of such rights or options and plus the minimum amount
of consideration, if any, payable to the Company (other than by cancellation of
liabilities or obligations evidenced by such Convertible Securities) upon the
conversion or exchange of such Convertible Securities. No further adjustment of
the Purchase Price, adjusted upon the issuance of such rights or options, shall
be made as a result of the actual issuance of the Convertible Securities upon
the exercise of such rights or options or upon the actual issuance of Additional
Shares of Common Stock upon the conversion or exchange of such Convertible
Securities. The provisions of paragraph (3) above for the readjustment of the
Purchase Price upon the expiration of rights or options or the rights of
conversion or exchange of Convertible Securities shall apply MUTATIS MUTANDIS to
the rights, options and Convertible Securities referred to in this paragraph
(4).
(5) "ADDITIONAL SHARES OF COMMON STOCK" shall mean all
shares of Common Stock issued by the Company on or after the Original Issuance
Date, whether or not subsequently reacquired or retired by the Company other
than (i) shares of Common Stock issuable upon exercise of the Warrants, (ii)
shares of Common Stock issuable upon exercise of warrants and options to
purchase Common Stock issued and outstanding as of the Original Issuance Date,
(iii) shares of Common Stock issued to non-affiliated third parties in
connection with any bona fide mergers, acquisitions, business combinations,
strategic ventures and product and intellectual property acquisitions, (iv)
shares of Common Stock or options issued to employees, officers, directors,
consultants, vendors or agents of the Company (except that, if to consultants,
vendors or agents, only up to a maximum of 1,000,000 shares of Common Stock in
any 12 month period) pursuant to any stock or option plan duly adopted by a
majority of the non-employee members of the Board of Directors of the Company or
a majority of the members of a committee of non-employee directors established
for such purpose, and in either case also approved by the Company's
stockholders, (v) shares of Common Stock issued as dividends and/or interest
payments in lieu of cash payments, (vi) shares of Common Stock issued in
connection with public offerings of the Company's securities and private
placements conducted through the Xxxxxxx & Company (UK) Ltd. ("XXXXXXX") and/or
its affiliates (including, but not limited to, upon exercise of warrants issued
to Xxxxxxx and warrants issued to investors), (vii) shares of Common Stock
issued in connection with the Company's acquisition of Entelagent Software
Corp., a California corporation ("ENTELAGENT"), pursuant to the terms and
conditions of
6
that certain Amended and Restated Supplemental Agreement, dated as of the date
hereof, among the Company, ESC Acquisition, Inc., a California corporation and
wholly-owned subsidiary of the Company, and Entelagent, and (viii) shares of
Common Stock issued in connection with the Company's acquisition of LucidLine,
Inc., an Illinois corporation ("LUCIDLINE"), pursuant to the terms and
conditions of that certain Supplemental Agreement, dated as of the date hereof,
among the Company, LL Acquisition I Corp., a Delaware corporation and
wholly-owned subsidiary of the Company, and LucidLine. The "EFFECTIVE PRICE" of
Additional Shares of Common Stock shall mean the quotient determined by dividing
the total number of Additional Shares of Common Stock issued or sold, or deemed
to have been issued or sold by the Company under this SECTION 4.C, into the
aggregate consideration received, or deemed to have been received, by the
Company for such issue under this SECTION 4.C, for such Additional Shares of
Common Stock. "OTHER SECURITIES" with respect to an issue or sale of Additional
Shares of Common Stock shall mean Convertible Securities; "THE NUMBER OF SHARES
OF COMMON STOCK UNDERLYING OTHER SECURITIES" on a particular date shall mean the
number of shares of Common Stock issuable upon the exercise, conversion or
exchange, as the case may be, of such Other Securities at the close of business
on such date.
(6) Other than a reduction pursuant to its applicable
anti-dilution provisions, any reduction in the conversion price of any
Convertible Security, whether outstanding on the Original Issuance Date or
thereafter, or the subscription price of any option, warrant or right to
purchase Common Stock or any Convertible Security (whether such option, warrant
or right is outstanding on the Original Issuance Date or thereafter), to an
Effective Price less than the Fair Market Value or the then Purchase Price shall
be deemed to be an issuance of such Convertible Security and the issuance of all
such options, warrants or subscription rights, and the provisions of SECTIONS
4.C.(3), (4) AND (5) shall apply thereto MUTATIS MUTANDIS.
(7) In case any shares of stock or other securities,
other than Common Stock, shall at the time be receivable upon the exercise of
this Warrant, and in case any additional shares of such stock or any additional
such securities (or any stock or other securities convertible into or
exchangeable for any such stock or securities) shall be issued or sold for a
consideration per share such as to dilute the purchase rights evidenced by this
Warrant, then and in each such case the Purchase Price shall forthwith be
adjusted, substantially in the manner provided for above in this SECTION 4.C, so
as to protect the Holder of this Warrant against the effect of such dilution.
(8) In case the Company shall take a record of the
holders of shares of its stock of any class for the purpose of entitling them
(a) to receive a dividend or a distribution payable in Common Stock or in
Convertible Securities, or (b) to subscribe for, purchase or otherwise acquire
Common Stock or Convertible Securities, then such record date shall be deemed to
be the date of the issue or sale of the Additional Shares of Common Stock issued
or sold or deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution, or the date of the granting
of such rights of subscription, purchase or other acquisition, as the case may
be.
(9) No adjustment in the Purchase Price shall be required
unless such adjustment would require an increase or decrease of at least one
cent ($0.01) in such price; PROVIDED, HOWEVER, that any adjustments which by
reason of this SECTION 4 are not required to be
7
made shall be carried forward and taken into account in any subsequent
adjustment required to be made hereunder. All calculations under this SECTION 4
shall be made to the nearest cent or to the nearest one-hundredth of a share, as
the case may be.
D. ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. If the
Company at any time or from time to time makes, or fixes a record date for the
determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in additional shares of Common Stock, then and in
each such event:
(1) the Purchase Price then in effect shall be decreased
as of the time of such issuance or, in the event such record date is fixed, as
of the close of business on such record date, by multiplying the Purchase Price
then in effect by a fraction (A) the numerator of which is the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date, and (B) the
denominator of which shall be the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close of
business on such record date as the case may be, plus the number of shares of
Common Stock issuable in payment of such dividend or distribution; PROVIDED,
however, that if such record date is fixed and such dividend is not fully paid
or if such distribution is not fully made on the date fixed therefor, the
Purchase Price shall be recomputed accordingly as of the close of business on
such record date, and thereafter the Purchase Price shall be adjusted pursuant
to this SECTION 4.D as of the time of actual payment of such dividends or
distributions; and
(2) the number of shares of Common Stock theretofore
receivable upon the exercise of this Warrant shall be increased, as of the time
of such issuance or, in the event such record date is fixed, as of the close of
business on such record date, in inverse proportion to the decrease in the
Purchase Price.
E. STOCK SPLIT AND REVERSE STOCK SPLIT. If the Company at any
time or from time to time effects a stock split or subdivision of the
outstanding Common Stock, the Purchase Price then in effect immediately before
that stock split or subdivision shall be proportionately decreased and the
number of shares of Common Stock theretofore receivable upon the exercise of
this Warrant shall be proportionately increased. If the Company at any time or
from time to time effects a reverse stock split or combines the outstanding
shares of Common Stock into a smaller number of shares, the Purchase Price then
in effect immediately before that reverse stock split or combination shall be
proportionately increased and the number of shares of Common Stock theretofore
receivable upon the exercise of this Warrant shall be proportionately decreased.
Each adjustment under this SECTION 4.E shall become effective at the close of
business on the date the stock split, subdivision, reverse stock split or
combination becomes effective.
F. CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this SECTION 4,
the Company at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of a
Warrant a certificate setting forth such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is based. The
Company shall, upon the written request at any time of any holder of a Warrant,
furnish or cause
8
to be furnished to such holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) Purchase Price at the time in effect, and
(iii) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the exercise of the Warrant.
5. NOTICES OF RECORD DATE. In case:
A. the Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time receivable upon the exercise of
the Warrants) for the purpose of entitling them to receive any dividend or other
distribution, or any right to subscribe for or purchase any shares of stock of
any class or any other securities, or to receive any other right, or
B. of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation, or any conveyance of all
or substantially all of the assets of the Company to another corporation, or
C. of any voluntary dissolution, liquidation or winding-up of the
Company, then, and in each such case, the Company will mail or cause to be
mailed to each holder of a Warrant at the time outstanding a notice specifying,
as the case may be, (a) the date on which a record is to be taken for the
purpose of such dividend, distribution or right, and stating the amount and
character of such dividend, distribution or right, or (b) the date on which such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up is expected to take place, and the time,
if any is to be fixed, as of which the holders of record of Common Stock (or
such stock or securities at the time receivable upon the exercise of the
Warrants) shall be entitled to exchange their shares of Common Stock (or such
other stock or securities) for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up, such notice shall be mailed at least ten
(10) days prior to the date therein specified.
6. LOSS OR MUTILATION. Upon receipt by the Company of evidence
satisfactory to it (in the exercise of reasonable discretion) of the ownership
of and the loss, theft, destruction or mutilation of any Warrant and (in the
case of loss, theft or destruction) of indemnity satisfactory to it (in the
exercise of reasonable discretion), and (in the case of mutilation) upon
surrender and cancellation thereof, the Company will execute and deliver in lieu
thereof a new Warrant of like tenor.
7. RESERVATION OF COMMON STOCK. The Company shall at all times reserve and
keep available for issue upon the exercise of Warrants such number of its
authorized but unissued shares of Common Stock as will be sufficient to permit
the exercise in full of all outstanding Warrants. All of the shares of Commons
Stock issuable upon the exercise of the rights represented by this Warrant will,
upon issuance and receipt of the Purchase Price therefor, be fully paid and
nonassessable, and free from all preemptive rights, rights of first refusal or
first offer, taxes, liens and charges of whatever nature, with respect to the
issuance thereof.
8. REGISTRATION RIGHTS. The Holder of this Warrant is entitled to have the
shares of Common Stock issuable upon exercise of this Warrant registered for
resale under the 1933 Act,
9
at such time as the Company files a registration statement with the Securities
and Exchange Commission to register the shares of Common Stock issuable in
connection with the Follow-On Financing (as such term is defined in that certain
Amended Confidential Information Memorandum, dated as of February 16, 2005, and
entitled "$3,000,000 Patron Systems, Inc. Interim Bridge Loan Financing"). In
the event that there is no Follow-On Financing the issuer will use its best
efforts to commence the process of registering the shares of Common Stock
issuable upon exercise of this Warrant with the Securities and Exchange
Commission in the second quarter of fiscal year 2005.
9. NOTICES. All notices and other communications from the Company to the
Holder of this Warrant shall be mailed by first class, registered or certified
mail, postage prepaid, to the address furnished to the Company in writing by the
Holder.
10. CHANGE; MODIFICATIONS; WAIVER. No terms of this Warrant may be amended,
waived or modified except by the express written consent of the Company and the
holders of not less than 50.1% of the then outstanding Warrants.
11. HEADINGS. The headings in this Warrant are for purposes of convenience
in reference only, and shall not be deemed to constitute a part hereof.
12. GOVERNING LAW, ETC. This Warrant shall be governed by and construed in
accordance with the internal laws of the State of Delaware with respect to
contracts made and to be fully performed therein, without regard to the
conflicts of laws principles thereof. By the Company's execution hereof and the
Holder acceptance of this Warrant, the parties hereby expressly and irrevocably
(i) agree that any suit or proceeding arising directly and/or indirectly
pursuant to or under this Warrant, shall be brought solely in a federal or state
court located in the County of Xxxx, State of Illinois, (ii) submit to the IN
PERSONAM jurisdiction of the federal and state courts located in the County of
Xxxx, State of Illinois and agree that any process in any such action may be
served upon any of them personally, or by certified mail or registered mail upon
them or their agent, return receipt requested, with the same full force and
effect as if personally served upon them in the County of Xxxx, State of
Illinois, and (iii) waive any claim that any such jurisdiction is not a
convenient forum for any such suit or proceeding and any defense or lack of IN
PERSONAM jurisdiction with respect thereto. In the event of any such action or
proceeding, the party prevailing therein shall be entitled to payment from the
other party hereto of all of its reasonable legal fees and expenses.
Dated: February 25, 2005
PATRON SYSTEMS, INC.
By:
-------------------------------------------------
Name: Xxxxxx X. Xxx, XX
Title: Chairman of the Board
10
EXHIBIT A
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant and purchases _______ of the number of shares of Common Stock of
Patron Systems, Inc., purchasable with this Warrant, and herewith makes payment
therefor, all at the price and on the terms and conditions specified in this
Warrant.
Dated:
---------------------
-----------------------------------------------------
(Signature of Registered Owner
-----------------------------------------------------
(Street Address)
-----------------------------------------------------
(City / State / Zip Code)
EXHIBIT B
FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under the within Warrant, with respect to the number
of shares of Common Stock set forth below:
NAME OF ASSIGNEE ADDRESS NUMBER OF SHARES
---------------- ------- ----------------
and does hereby irrevocably constitute and appoint __________________________
Attorney to make such transfer on the books of Patron Systems, Inc., maintained
for the purpose, with full power of substitution in the premises.
Dated:
---------------------
-----------------------------------------------------
(Signature)
-----------------------------------------------------
(Witness)
The undersigned Assignee of the Warrant hereby makes to Patron Systems,
Inc., as of the date hereof, with respect to the Assignee, all of the
representations and warranties made by the Holder, and the undersigned Assignee
agrees to be bound by all the terms and conditions of the Warrant and the Patron
Systems, Inc. Registration Rights Agreement, dated as of ______ __, 2005, by and
between Patron Systems, Inc. and the Holder.
Dated:
---------------------
-----------------------------------------------------
(Signature)
