EXHIBIT 10.3
EXHIBIT A
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED FOR SALE, SOLD OR
TRANSFERRED UNLESS A REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS SHALL BE EFFECTIVE WITH RESPECT THERETO, OR AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER. THIS WARRANT (THIS
"WARRANT") AND THE WARRANTS OF EVEN DATE HEREWITH (TOGETHER WITH THIS WARRANT,
THE "WARRANTS") ARE ISSUED SUBJECT TO THE TERMS OF (A) A SECURITIES PURCHASE
AGREEMENT, DATED JUNE 30, 1998 ("SECURITIES PURCHASE AGREEMENT"), BY AND BETWEEN
SECURE COMPUTING CORPORATION AND THE HOLDER OF THIS WARRANT AND (B) A
REGISTRATION RIGHTS AGREEMENT, DATED JUNE 30, 1998 ("REGISTRATION RIGHTS
AGREEMENT"), BY AND BETWEEN SECURE COMPUTING CORPORATION AND THE HOLDER OF THIS
WARRANT.
WARRANT TO PURCHASE
______________SHARES
WARRANT TO PURCHASE COMMON STOCK
OF
SECURE COMPUTING CORPORATION
THIS CERTIFIES that ________________ or any subsequent holder hereof
(the "Holder"), has the right to purchase from Secure Computing Corporation, a
Delaware corporation (the "Company"), up to _____________ fully paid and
nonassessable shares of the Company's Common Stock, par value $0.01 per share
(the "Common Stock"), subject to adjustment as provided herein, at a price equal
to the Exercise Price (as defined below), at any time beginning on the date on
which this Warrant is issued (the "Issue Date") and ending at 5:00 p.m., eastern
time, on the earlier to occur of (i) June 29, 2001 and (ii) the date on which
the closing of a consolidation, merger or other business combination of the
Company with or into another entity (other than an entity which is an affiliate
of the Company prior to such transaction) occurs, and immediately following such
transaction the Company is not the surviving company; provided, however, that
any such transaction must be effected for a bona fide commercial purpose and not
for the purpose of affecting the terms of this Warrant (the "Expiration Date").
This Warrant is issued, and all rights hereunder shall be, subject to all of the
conditions, limitations and provisions set forth herein and in the Securities
Purchase Agreement.
1. Exercise.
(a) RIGHT TO EXERCISE; EXERCISE PRICE. The Holder shall have the right
to exercise this Warrant at any time and from time to time up to and including
the Expiration Date as to all or any part of the shares of Common Stock covered
hereby (the "Warrant Shares"). The "Exercise Price" payable by the Holder in
connection with the exercise of this Warrant shall be equal to one hundred and
thirty percent (130%) of the average of the Closing Bid Prices (as defined in
the Certificate of Designation) for the Common Stock during the fifteen (15)
Trading Days (as defined in the Certificate of Designation) occurring
immediately prior to (but not including) the Issue Date.
(b) EXERCISE NOTICE. In order to exercise this Warrant, the Holder
shall send by facsimile transmission, at any time prior to 11:59 p.m., eastern
time, on the date on which the Holder wishes to effect such exercise (the
"Exercise Date"), to the Company and to its designated transfer agent for the
Common Stock (the "Transfer Agent") a copy of the notice of exercise in the form
attached hereto as Exhibit A (the "Exercise Notice") stating the number of
Warrant Shares as to which such exercise applies and the calculation therefor.
The Holder shall thereafter deliver to the Company the original Exercise Notice,
the original Warrant and the Exercise Price. In the case of a dispute as to the
calculation of the Exercise Price or the number of Warrant Shares issuable
hereunder, the Company shall promptly issue to the Holder the number of Warrant
Shares that are not disputed and shall submit the disputed calculations to the
Company's independent accountant within one (1) business day following the
Exercise Date. The Company shall cause such accountant to calculate the Exercise
Price and/or the number of Warrant Shares issuable hereunder and to notify the
Company and the Holder of the results in writing no later than five (5) business
days following the day on which it received the disputed calculations. Such
accountant's calculation shall be deemed conclusive absent manifest error. The
fees of any such accountant shall be borne by the party whose calculations were
most at variance with those of such accountant.
(c) CANCELLATION OF WARRANT. This Warrant shall be canceled upon its
exercise and the Holder shall be entitled to receive, as soon as practicable
after the Exercise Date, a new Warrant or Warrants (containing terms identical
to this Warrant) representing any unexercised portion of this Warrant.
2. Delivery of Warrant Shares Upon Exercise. Upon receipt of an
Exercise Notice pursuant to paragraph 1 above, the Company shall, (A) in the
case of a Cashless Exercise (as defined below), no later than the close of
business on the third (3rd) business day following the later to occur of (i) the
Exercise Date set forth in such Exercise Notice and (ii) the date on which the
Company shall have received the original Warrant, (B) in the case of a Cash
Exercise (as defined below) no later than the close of business on the later to
occur of (i) the third (3rd) business day following the Exercise Date set forth
in such Exercise Notice and (ii) the date on which the Company shall have
received payment of the Exercise Price and the original Warrant, and (C) with
respect to Warrant Shares which are disputed as described in paragraph 1(b)
above, and required to be delivered by the Company pursuant to the accountant's
calculations described therein, the third (3rd) business day following the date
on
which notice from such accountants is received regarding such disputed shares
(the "Delivery Date"), issue and deliver or caused to be delivered to the Holder
the number of Warrant Shares as shall be determined as provided herein. Warrant
Shares delivered to the Holder shall not contain any restrictive legend as long
as (A) the resale or transfer (including without limitation a pledge) of such
Warrant Shares is registered pursuant to an effective registration statement and
the Holder thereof has represented to the Company, in a related conversion or
exercise notice or otherwise in writing, that such Holder has resold or
transferred such Warrant Shares in accordance with the terms of the prospectus
relating to such registration statement, (B) such Holder provides the Company
with an opinion of counsel, in form, substance and scope customary for opinions
of counsel in comparable transactions to the effect that such Warrant Shares can
be sold publicly without registration under the Securities Act (provided that
such opinion shall not be required for a sale or transfer of such Warrant Shares
to an affiliate of the Holder), (C) such Warrant Shares can be sold pursuant to
Rule 144 under the Securities Act or any successor provision ("Rule 144") and a
registered broker dealer provides to the Company a customary broker's Rule 144
letter and such Xxxxxx delivers to the Company a customary seller's
representation letter or (D) such Warrant Shares are eligible for resale under
Rule 144(k) or any successor provision, such Warrant Shares shall be issued
without any legend or other restrictive language and, with respect to Warrant
Shares upon which such legend is stamped, the Company shall issue new
certificates without such legend to the Holder upon request.
3. Failure to Deliver Warrant Shares.
(a) EXERCISE DEFAULT. In the event that the Company fails for
any reason (other than by operation of paragraph 4 below) to deliver to a Holder
certificates representing the number of Warrant Shares specified in the
applicable Exercise Notice on or before the seventh (7th) business day following
the Delivery Date therefor (an "Exercise Default"), the Company shall pay to
such Holder payments in the amount of (i) (N/365) multiplied by (ii) the
aggregate Exercise Price for the Warrant Shares which are the subject of such
Exercise Default multiplied by (iii) the lower of twenty-four percent (24%) and
the maximum rate permitted by applicable law, where "N" equals the number of
days elapsed between the original Delivery Date for such Warrant Shares and the
date on which all of such Warrant Shares are issued and delivered to such
Holder. Amounts payable under this subparagraph 3(a) shall be paid to the Holder
in immediately available funds on or before the fifth (5th) business day of the
calendar month immediately following the calendar month in which such amount has
accrued.
(b) REDUCTION OF EXERCISE PRICE. In the event that a Holder
has not received certificates representing the Warrant Shares by the tenth
(10th) Business Day following an Exercise Default, such Holder may, upon written
notice to the Company, regain on such business day the rights of a Holder of
this Warrant, or part thereof, with respect to the Warrant Shares that are the
subject of such Exercise Default, and the Exercise Price for such Warrant Shares
shall be reduced by one percent (1%) for each day beyond such 10th business day
in which the Exercise Default continues. In such event, such Holder shall retain
all of such Xxxxxx's rights and remedies with respect to the Company's failure
to deliver such Warrant Shares (including without limitation the right to
receive the cash
payments specified in subparagraph 3(a) above).
(c) BUY-IN. Nothing herein shall limit a Holder's right to
pursue actual damages for the Company's failure to issue and deliver Warrant
Shares in connection with an exercise on the applicable Delivery Date
(including, without limitation, damages relating to any purchase of shares of
Common Stock by such Holder to make delivery on a sale effected in anticipation
of receiving Warrant Shares upon exercise, such damages to be in an amount equal
to (A) the aggregate amount paid by such Holder for the shares of Common Stock
so purchased minus (B) the aggregate amount of net proceeds, if any, received by
such Holder from the sale of the Warrant Shares issued by the Company pursuant
to such exercise), and such Holder shall have the right to pursue all remedies
available to it at law or in equity (including, without limitation, a decree of
specific performance and/or injunctive relief).
(d) HOLDER OF RECORD. Each Holder shall, for all purposes, be
deemed to have become the holder of record of Warrant Shares on the Exercise
Date of this Warrant, irrespective of the date of delivery of such Warrant
Shares. Nothing in this Warrant shall be construed as conferring upon the Holder
hereof any rights as a stockholder of the Company.
4. Exercise Limitations.
In no event shall a Holder be permitted to exercise this Warrant, or
part thereof, with respect to Warrant Shares in excess of the number of such
shares, upon the issuance of which, (x) the number of shares of Common Stock
beneficially owned by such Holder and its affiliates plus (y) the number of
shares of Common Stock issuable upon such exercise, would be equal to or exceed
(z) 4.99% of the number of shares of Common Stock then issued and outstanding.
As used herein, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules
thereunder. To the extent that the limitation contained in this paragraph 4
applies, the determination of whether this Warrant is exercisable (in relation
to other securities owned by a Holder) shall be in the sole discretion of such
Holder, and the submission of an Exercise Notice shall be deemed to be such
Holder's determination that this Warrant is exercisable pursuant to the terms
hereof, and the Company shall have no obligation whatsoever to verify or confirm
the accuracy of such determination. Nothing contained herein shall be deemed to
restrict the right of a Holder to exercise this Warrant, or part thereof, at
such time as such exercise will not violate the provisions of this Section 4.
5. Payment of the Exercise Price. The Holder may pay the Exercise Price
in either of the following forms or, at the election of Holder, a combination
thereof:
(a) CASH EXERCISE: by delivery of immediately available funds.
(b) CASHLESS EXERCISE: by surrender of this Warrant to the Company
together with a notice of cashless exercise, in which event the Company
shall issue to the Holder the number of Warrant Shares determined as
follows:
X = Y x (A-B)/A where:
X = the number of Warrant Shares to be issued to the Holder.
Y = the number of Warrant Shares with respect to which this Warrant
is being exercised.
A = the average of the Closing Bid Prices of the Common Stock for
the five (5) Trading Days immediately prior to (but not including)
the Exercise Date.
B = the Exercise Price.
For purposes of Rule 144 under the Securities Act of 1933, as amended, it is
intended, understood and acknowledged that the Warrant Shares issued in a
cashless exercise transaction shall be deemed to have been acquired by the
Holder, and the holding period for the Warrant Shares shall be deemed to have
been commenced, on the Closing Date (as defined in the Securities Purchase
Agreement).
6. Anti-Dilution Adjustments.
(a) STOCK DIVIDEND. If the Company shall at any time declare a dividend
payable in shares of Common Stock, then the Holder hereof, upon exercise of this
Warrant after the record date for the determination of Holders of Common Stock
entitled to receive such dividend, shall be entitled to receive, in addition to
the number of shares of Common Stock as to which this Warrant is exercised, such
additional shares of Common Stock as such Holder would have received had this
Warrant been exercised immediately prior to such record date and, in order to
effect such right to additional shares, the Exercise Price will be
proportionately adjusted.
(b) RECAPITALIZATION OR RECLASSIFICATION. If the Company shall at any
time effect a recapitalization, reclassification or other similar transaction of
such character that the shares of Common Stock shall be changed into or become
exchangeable for a larger or smaller number of shares, then upon the effective
date thereof, the number of shares of Common Stock which the Holder hereof shall
be entitled to purchase upon exercise of this Warrant shall be increased or
decreased, as the case may be, in direct proportion to the increase or decrease
in the number of shares of Common Stock by reason of such recapitalization,
reclassification or similar transaction, and , in order to effect such change in
the number of shares to which the Holder shall be entitled, the Exercise Price
shall be, in the case of an increase in the number of shares, proportionally
decreased and, in the case of decrease in the number of shares, proportionally
increased. The Company shall give the Warrant Holder the same notice at the same
time it provides such notice to holders of Common Stock of any transaction
described in this Section 6(b).
(c) DISTRIBUTIONS. If the Company shall at any time distribute to
holders of Common Stock cash, evidences of indebtedness or other securities or
assets (other than cash dividends or distributions payable out of earned surplus
or net profits for the current or a preceding year) then, in any such case, the
Holder of this Warrant shall be entitled to receive, upon exercise of this
Warrant, with respect to each share of Common Stock issuable upon such exercise,
the amount of cash or evidences of indebtedness or other securities or assets
which such Holder would have been entitled to receive with respect to each such
share of Common Stock as a result of the happening of such event had this
Warrant been exercised immediately prior to the record date or other date fixing
shareholders to be affected by such event.
(d) NOTICE OF CONSOLIDATION OR MERGER. In the event of a merger,
consolidation, business combination, tender offer, exchange of shares,
recapitalization, reorganization, redemption or other similar event, as a result
of which shares of Common Stock of the Company shall be changed into or
exchanged for the same or a different number of shares of the same or another
class or classes of stock or securities or other assets of the Company or
another entity or there is a sale of all or substantially all the Company's
assets (a "Corporate Change"), then this Warrant shall be exercisable into such
class and type of securities or other assets as the Holder would have received
had the Holder exercised this Warrant immediately prior to such Corporate
Change; provided, however, that Company may not affect any Corporate Change
unless (i) it first shall have given at least twenty (20) business days' notice
to the Holder hereof of any Corporate Change and makes a public announcement of
such event at the same time that it gives such notice and (ii) it requires the
resulting successor or acquiring entity (if not the Corporation) to assume by
written instrument the obligations of the Corporation hereunder and under the
Securities Purchase Agreement and the Registration Rights Agreement.
(e) EXERCISE PRICE AS ADJUSTED. As used in this Warrant, the term
"Exercise Price" shall mean the purchase price per share specified in paragraph
1 of this Warrant, until the occurrence of an event stated in subsection (a),
(b) or (c) of this paragraph 6, and thereafter shall mean said price as adjusted
from time to time in accordance with the provisions of each such subsection. No
such adjustment under this paragraph 6 shall be made unless such adjustment
would change the Exercise Price at the time by two percent (2%) or more;
provided, however, that all adjustments not so made shall be deferred and made
when the aggregate thereof would change the Exercise Price at the time by $.01
or more. No adjustment made pursuant to any provision of this paragraph 6 shall
have the effect of increasing the total consideration payable upon exercise of
this Warrant in respect of all the Common Stock as to which this Warrant may be
exercised.
(f) ADJUSTMENTS: ADDITIONAL SHARES, SECURITIES OR ASSETS. In the event
that at any time, as a result of an adjustment made pursuant to this Section 6,
the Holder of this Warrant shall, upon exercise of this Warrant, become entitled
to receive shares and/or other securities or assets (other than Common Stock)
then, wherever appropriate, all references herein to shares of Common Stock
shall be deemed to refer to and include such shares and/or other securities or
assets; and thereafter the number of such
shares and/or other securities or assets shall be subject to adjustment from
time to time in a manner and upon terms as nearly equivalent as practicable to
the provisions of this paragraph 6.
7. Fractional Interests. No fractional shares or scrip representing
fractional shares shall be issuable upon the exercise of this Warrant, but on
exercise of this Warrant, the Holder hereof may purchase only a whole number of
shares of Common Stock. If, on exercise of this Warrant, the Holder hereof would
be entitled to a fractional share of Common Stock or a right to acquire a
fractional share of Common Stock, such fractional share shall be disregarded and
the number of shares of Common Stock issuable upon exercise shall be rounded up
or down to the nearest whole number of shares of Common Stock.
8. Transfer of this Warrant. The Holder may sell, transfer, assign,
pledge or otherwise dispose of this Warrant, in whole or in part, as long as (A)
such sale or other disposition is made pursuant to an effective registration
statement or an exemption to the registration requirements of the Securities Act
of 1933, as amended, and applicable state laws and (B) such sale or other
disposition is made to an accredited investor (as such term is defined in
Regulation D under the Securities Act). Upon such transfer or other disposition,
the Holder shall deliver a written notice to Company, substantially in the form
of the Transfer Notice attached hereto as Exhibit B (the "Transfer Notice"),
indicating the person or persons to whom this Warrant shall be transferred and,
if less than all of this Warrant is transferred or this Warrant is transferred
in parts, the number of Warrant Shares to be covered by the part of this Warrant
to be transferred to each such person. Within five (5) business days of
receiving a Transfer Notice and the original of this Warrant, along with
evidence reasonably satisfactory to the Company of compliance with the
requirements for transfer set forth in this Section 8, the Company shall deliver
to the each transferee designated by the Holder a Warrant or Warrants of like
tenor and terms for the appropriate number of Warrant Shares.
9. Benefits of this Warrant.
Nothing in this Warrant shall be construed to confer upon any
person other than the Holder of this Warrant any legal or equitable right,
remedy or claim under this Warrant and this Warrant shall be for the sole and
exclusive benefit of the Holder of this Warrant.
10. Loss, theft, destruction or mutilation of Warrant.
Upon receipt by the Company of evidence of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of indemnity or security reasonably satisfactory to the Company,
and upon surrender of this Warrant, if mutilated, the Company shall execute and
deliver a new Warrant of like tenor and date.
11. Notice or Demands.
Except as otherwise provided herein, any notice, demand or
request required or
permitted to be given pursuant to the terms of this Warrant shall be in writing
and shall be deemed given (i) when delivered personally or by verifiable
facsimile transmission (with an original to follow) on or before 5:00 p.m.,
eastern time, on a business day or, if such day is not a business day, on the
next succeeding business day, (ii) on the next business day after timely
delivery to a nationally-recognized overnight courier and (iii) on the third
business day after deposit in the U.S. mail (certified or registered mail,
return receipt requested, postage prepaid), addressed as follows:
IF TO THE COMPANY:
Secure Computing Corporation
Xxx Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxx Xxxx, Xxxxxxxxxx 00000
Attn: Chief Financial Officer
Tel: (000) 000-0000
Fax: (000) 000-0000
WITH A COPY TO:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-1050
Attn: Xxxxxxx X. Xxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
and if to the Holder, to such address as shall be designated by the Holder in
writing to the Company.
12. Applicable Law.
This Warrant is issued under and shall for all purposes be
governed by and construed in accordance with the laws of the state of New York,
without giving effect to conflict of law provisions thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the
_____ day of June, 1998.
SECURE COMPUTING CORPORATION
By:
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Name:
Title:
EXHIBIT A to WARRANT
EXERCISE NOTICE
The undersigned Holder hereby irrevocably exercises the right to
purchase _____________ of the shares of Common Stock ("Warrant Shares") of
Secure Computing Corporation, a Delaware corporation (the "Company"), evidenced
by the attached Warrant (the "Warrant"). Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Warrant.
1. Form of Exercise Price. The Holder intends that payment of the
Exercise Price shall be made as:
____ a Cash Exercise with respect to ________ Warrant Shares; and/or
____ a Cashless Exercise with respect to ________ Warrant Shares.
2. Payment of Exercise Price. In the event that the Holder has elected
a Cash Exercise with respect to some or all of the Warrant Shares to be issued
pursuant hereto, the Holder shall pay the sum of $________________ to the
Company in accordance with the terms of the Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to the Holder
_____________ Warrant Shares in accordance with the terms of the Warrant.
Date:
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Name of Registered Holder
By:
--------------------------------
Name:
Title:
EXHIBIT B to WARRANT
TRANSFER NOTICE
FOR VALUE RECEIVED, the undersigned Holder of the attached Warrant hereby sells,
assigns and transfers unto the person or persons named below the right to
purchase ____________ shares of the Common Stock of Secure Computing Corporation
evidenced by the attached Warrant.
Date:
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Name of Registered Holder
By:
--------------------------------
Name:
Title:
Transferee Name and Address:
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