Exhibit 10.3
NEITHER THESE SECURITIES NOR THE SECURITIES
ISSUABLE UPON EXERCISE OF THESE SECURITIES HAVE BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE
OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE
SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT SECURED BY SUCH SECURITIES.
EMRISE CORPORATION
SECOND AMENDED AND RESTATED
WARRANT
Warrant No. PEM-1B
Original Issue Date:
November 30, 2007
This Second Amended and Restated
Warrant (“ Warrant ”), dated as of
February 12, 2009, amends, restates and supersedes that
certain Amended and Restated Warrant, dated as of August 20,
2008 (the “First Amended Warrant”), granted to Private
Equity Management Group, LLC by EMRISE Corporation, a Delaware
corporation (the “ Company ”). In
consideration of the surrender and cancellation of the First
Amended Warrant, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
Company hereby certifies that, pursuant to the terms of the
Commitment Letter dated November 7, 2007 by and between the
Company and Private Equity Management Group, Inc., Holder is
entitled to purchase from the Company up to a total of 387,879
shares of Common Stock (each such share, a “ Warrant
Share ” and all such shares, the “ Warrant
Shares ”), at any time and from time to time from and
after the Original Issue Date and through and including
November 30, 2014 (the “ Expiration Date
”), and subject to the following terms and
conditions:
1.
Definitions
. As used in this Warrant, the
following terms shall have the respective definitions set forth in
this Section 1 .
“ Alternate
Consideration ” shall have the meaning set forth in
Section 9(b) .
“ Anti-Dilution Excluded
Securities ” shall mean any of the following securities:
(i) securities issued to employees, consultants, officers or
directors of the Company or Options granted by the Company to
employees, consultants, officers or directors of the Company
pursuant to any option plan, agreement or other arrangement duly
adopted by the Company and the grant of which is approved by the
compensation committee of the Board of Directors; (ii) for the
avoidance of doubt, securities issued on the conversion of any
Convertible Securities or the exercise of any Options, in each
case, outstanding on the Original Issue Date; and (iii) for
the
avoidance of doubt, securities issued in
connection with a stock split, stock dividend, combination,
reorganization, recapitalization or other similar event for which
adjustment is made in accordance with the provisions of this
Warrant.
“ Business Day ”
shall mean any day other than Saturday, Sunday or other day on
which commercial banks in the State of California are authorized or
required by law to remain closed.
“ Common Stock ”
shall mean the Company’s common stock, $0.0033 par value per
share.
“ Common Stock
Equivalents ” shall mean Options and Convertible
Securities.
“ Convertible
Securities ” shall mean any stock or securities (other
than Options) convertible into or exchangeable for Common
Stock.
“ Date of Exercise
” shall have the meaning set forth in
Section 5(a) .
“ Exchange Act ”
shall mean the Securities Exchange Act of 1934, as amended, or any
successor law, and regulations and rules issued pursuant to
that Act or any successor law.
“ Exercise Price
” shall mean $1.80 per share, subject to adjustment in
accordance with Section 9 .
“ Fundamental
Transaction ” shall mean any of the following:
(i) the Company effects any merger or consolidation of the
Company with or into another Person pursuant to which the Company
is not the surviving entity (other than a migratory merger
conducted for the purpose of changing the Company’s state of
incorporation), (ii) the Company effects any sale of all or
substantially all of its assets in one or a series of related
transactions, (iii) any tender offer or exchange offer
(whether by the Company or another Person) is completed pursuant to
which holders of Common Stock are permitted to tender or exchange
their shares for other securities, cash or property, or
(iv) the Company effects any reclassification of the Common
Stock or any compulsory share exchange pursuant to which the Common
Stock is effectively converted into or exchanged for other
securities, cash or property.
“ Holder ” or
“ Holders ” shall mean the holder or holders, as
the case may be, from time to time, whether direct or beneficially,
of Registrable Securities pursuant to this Warrant, including,
without limitation, Private Equity Management Group LLC and any of
its permitted transferees.
“ Indemnified Party
” shall have the meaning set forth in
Section 12(c)(iii) .
“ Indemnifying Party
” shall have the meaning set forth in
Section 12(c)(iii) .
“ Losses ” shall
have the meaning set forth in Section 12(c)(i)
.
“ Person ” shall
mean an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
political subdivision thereof) or other entity of any
kind.
“ New Warrant ”
shall have the meaning set forth in Section 3
.
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“ Options ” shall
mean any outstanding rights, warrants or options to subscribe for
or purchase Common Stock or Convertible Securities.
“ Original Issue Date
” shall mean the Original Issue Date first set forth on the
first page of this Warrant.
“ Proceeding ”
shall mean an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or
threatened.
“ Prospectus ”
shall mean the final prospectus filed with respect to the
Registration Statement (including, without limitation, a prospectus
that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance
upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect
to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other
amendments and supplements to the Prospectus, including one or more
other final prospectuses filed with respect to post-effective
amendments, and all material incorporated by reference in such
Prospectus.
“ Registrable
Securities ” shall mean: (i) the Warrant Shares; and
(ii) any securities issued or issuable with respect to such
Warrant Shares by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization with respect to any of the
securities referenced above.
“ Registration
Statement ” shall mean the registration statements
contemplated by Section 12 , including the Prospectus,
amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference in
such registration statement.
“ Rule 144 ”
shall mean Rule 144 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the SEC
having substantially the same effect as such Rule.
“ SEC ” shall
mean the United States Securities and Exchange
Commission.
“ Securities Act
” shall mean the Securities Act of 1933, as amended, or any
successor law, and regulations and rules issued pursuant to
that Act or any successor law.
“ Subsidiary ”
shall mean any direct or indirect subsidiary of the
Company.
“ Trading Day ”
means (i) a day on which the Common Stock is traded on a
Trading Market, or (ii) if the Common Stock is not quoted on
any Trading Market, a day on which the Common Stock is quoted in
the over the counter market as reported by the Pink Sheets, LLC (or
any similar organization or agency succeeding to its functions of
reporting prices); provided, that in the event that the Common
Stock is not listed or quoted as set forth in (i) and
(ii) hereof, then Trading Day shall mean a Business
Day.
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“ Trading Market
” means whichever of NYSE Arca, the New York Stock Exchange,
the American Stock Exchange, the NASDAQ Global Market, the NASDAQ
Capital Market or OTC Bulletin Board on which the Common Stock is
listed or quoted for trading on the date in question.
“ Warrant Register
” shall have the meaning set forth in Section 2
.
2.
Registration of
Warrant . The
Company shall register this Warrant upon records to be maintained
by the Company for that purpose (the “ Warrant
Register ”), in the name of the record Holder hereof from
time to time. The Company may deem and treat the registered
Holder of this Warrant as the absolute owner hereof for the purpose
of any exercise hereof or any distribution to the Holder, and for
all other purposes, absent actual notice to the
contrary.
3.
Registration of
Transfers . The
Company shall register the transfer of any portion of this Warrant
in the Warrant Register, upon surrender of this Warrant, with the
Form of Assignment attached hereto duly completed and signed,
to the Company at its address specified herein. Upon any such
registration or transfer, a new Warrant to purchase Common Stock,
in substantially the form of this Warrant (any such new Warrant, a
“ New Warrant ”), evidencing the portion of this
Warrant so transferred shall be issued to the transferee and a New
Warrant evidencing the remaining portion of this Warrant not so
transferred, if any, shall be issued to the transferring Holder.
The acceptance of the New Warrant by the transferee thereof shall
be deemed the acceptance by such transferee of all of the rights
and obligations of a holder of a Warrant.
4.
Exercise and Duration of
Warrants .
(a)
This Warrant shall be exercisable by
the registered Holder at any time and from time to time on or after
the Original Issue Date through and including the Expiration
Date. At 5:00 p.m., California time on the Expiration
Date, the portion of this Warrant not exercised prior thereto shall
be and become void and of no value. The Company may not call
or redeem any portion of this Warrant without the prior written
consent of the affected Holder.
(b)
If at any time after
November 30, 2008 there is no effective Registration Statement
registering, or no current prospectus available for, the resale of
the Warrant Shares by the Holder, then this Warrant may also be
exercised at such time by means of a “cashless
exercise” in which event the Company shall issue to the
Holder the number of Warrant Shares determined as
follows:
X = Y [(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.
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A = the average of the closing sale
prices for the five Business Days immediately prior to (but not
including) the Exercise Date.
B = the applicable Exercise
Price.
5.
Delivery of Warrant
Shares .
(a)
To effect exercises hereunder, the
Holder shall not be required to physically surrender this Warrant
unless the aggregate Warrant Shares represented by this Warrant is
being exercised. Upon delivery of the Exercise Notice (in the
form attached hereto) to the Company (with the attached Warrant
Shares Exercise Log) at its address for notice set forth herein and
upon payment of the applicable Exercise Price multiplied by the
number of Warrant Shares that the Holder intends to purchase
hereunder, the Company shall promptly (but in no event later than
three (3) Business Days after the Date of Exercise) issue and
deliver to the Holder, a certificate for the Warrant Shares
issuable upon such exercise, which, shall contain the following
restrictive securities legend:
THESE SECURITIES HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“ SECURITIES ACT ”), OR ANY APPLICABLE STATE
SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES
LAWS OR BLUE SKY LAWS.
The Company shall, upon request of
the Holder and subsequent to the date on which the Registration
Statement covering the resale of the Warrant Shares has been
declared effective by the SEC, use its reasonable best efforts to
deliver Warrant Shares hereunder electronically through the
Depository Trust Corporation or another established clearing
corporation performing similar functions, if available, provided,
that, the Company may, but will not be required to change its
transfer agent if its current transfer agent cannot deliver Warrant
Shares electronically through the Depository Trust
Corporation. A “ Date of Exercise ” means
the date on which the Holder shall have delivered to the Company:
(i) the Exercise Notice (with the Warrant Exercise Log
attached to it), appropriately completed and duly signed and
(ii) if the Holder is not utilizing the cashless exercise
provisions set forth in Section 10(b) , payment of the
applicable Exercise Price for the number of Warrant Shares so
indicated by the Holder to be purchased.
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(b)
If by the third (3
rd ) Business Day after a Date of Exercise the
Company fails to deliver the required number of Warrant Shares in
the manner required pursuant to Section 5(a) , then the
Holder will have the right to rescind such exercise.
(c)
The Company’s obligations to
issue and deliver Warrant Shares in accordance with the terms
hereof are absolute and unconditional, irrespective of any action
or inaction by the Holder to enforce the same, any waiver or
consent with respect to any provision hereof, the recovery of any
judgment against any Person or any action to enforce the same, or
any setoff, counterclaim, recoupment, limitation or termination, or
any breach or alleged breach by the Holder or any other Person of
any obligation to the Company or any violation or alleged violation
of law by the Holder or any other Person, and irrespective of any
other circumstance which might otherwise limit such obligation of
the Company to the Holder in connection with the issuance of
Warrant Shares. Nothing herein shall limit a Holder’s
right to pursue any other remedies available to it hereunder, at
law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the
Company’s failure to timely deliver certificates representing
Warrant Shares upon exercise of the Warrant as required pursuant to
the terms hereof.
6.
Charges, Taxes and
Expenses .
Issuance and delivery of Warrant Shares upon exercise of this
Warrant shall be made without charge to the Holder for any issue or
transfer tax, withholding tax, transfer agent fee or other
incidental tax or expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the
Company; provided , however , that the Company shall
not be required to pay any tax which may be payable in respect of
any transfer involved in the registration of any certificates for
Warrant Shares or Warrants in a name other than that of the
Holder. The Holder shall be responsible for all other tax
liability that may arise as a result of holding or transferring
this Warrant or receiving Warrant Shares upon exercise
hereof.
7.
Replacement of
Warrant . If
this Warrant is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for
and upon cancellation hereof, or in lieu of and substitution for
this Warrant, a New Warrant, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or
destruction and customary and reasonable indemnity (which shall not
include a surety bond), if requested. Applicants for a New
Warrant under such circumstances shall also comply with such other
reasonable regulations and procedures and pay such other reasonable
third-party costs as the Company may prescribe. If a New
Warrant is requested as a result of a mutilation of this Warrant,
then the Holder shall deliver such mutilated Warrant to the Company
as a condition precedent to the Company’s obligation to issue
the New Warrant.
8.
Reservation of Warrant
Shares . The
Company covenants that it will at all times reserve and keep
available out of the aggregate of its authorized but unissued and
otherwise unreserved Common Stock, solely for the purpose of
enabling it to issue Warrant Shares upon exercise of this Warrant
as herein provided, the number of Warrant Shares which are then
issuable and deliverable upon the exercise of this entire Warrant,
free from preemptive rights or any other contingent purchase rights
of Persons other than the Holder (taking into account the
adjustments and restrictions of Section 9 ). The
Company covenants that all Warrant
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Shares so issuable and deliverable shall, upon
issuance and the payment of the applicable Exercise Price in
accordance with the terms hereof, be duly and validly authorized,
issued and fully paid and nonassessable.
9.
Certain
Adjustments .
The Exercise Prices and number o
