WARRANT
THIS WARRANT
(THE "WARRANT") IS ISSUED PURSUANT TO THE TERMS OF THE PROVISIONS
OF A WARRANT PURCHASE AGREEMENT (THE "AGREEMENT") BETWEEN ST.
BERNARD SOFTWARE, INC. (THE "COMPANY") AND THE INITIAL WARRANT
HOLDER. A COPY OF SUCH AGREEMENT IS ON FILE AT THE OFFICE OF THE
CORPORATE SECRETARY OF THE COMPANY. THIS SECURITY WAS SOLD IN A
PRIVATE TRANSACTION, WITHOUT REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT") OR THE SECURITIES LAWS
OF ANY STATE, AND MAY BE OFFERED OR SOLD ONLY IF REGISTERED UNDER
THE SECURITIES ACT AND SUCH LAWS OR IF AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND SUCH LAWS IS
AVAILABLE.
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Company:
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St. Bernard
Software, Inc., a Delaware corporation
450,000, as
adjusted
Common Shares,
par value $0.01 per share
$0.46 per
share
July 21,
2008
July 20,
2013
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The term "Holder" shall initially refer to
Partners for Growth II, L.P., a Delaware limited partnership, which
is the initial holder of this Warrant and shall further refer to
any subsequent permitted holder of this Warrant from time to
time.
The Holder is
subject to certain restrictions as set forth in the
Agreement.
The Company does hereby certify and agree that,
for good and valuable consideration for the Warrant, the Holder, or
its permitted successors and assigns, hereby is entitled to
exchange this Warrant in St. Bernard Software, Inc. (the "Company")
for Four Hundred Fifty Thousand (450,000) duly authorized, validly
issued, fully paid and non-assessable shares of its Common Stock,
par value $0.01 each, upon the terms and subject to the provisions
of this Warrant. The shares of Common Stock issuable upon exchange
of this Warrant are referred to herein as the "Warrant Stock," and
the Warrant and the Warrant Stock are sometimes together referred
to as the "Securities."
Section 1
Term, Price
and Exchange of Warrant.
1.1 Term of Warrant.
This Warrant shall be exchangeable for a period of five (5) years
from the Issue Date (hereinafter referred to as the "Expiration
Date").
1.2 Exchange Price.
The price per share at which the Warrant Stock is issuable upon
exchange of this Warrant shall be $0.46, subject to Section 1.3 (a)
hereof and subject to adjustment from time to time as set forth
herein (the "Exchange Price").
1.3 Exercise of Warrant;
Exchange of Warrant.
(a) This Warrant may be
exercised, in whole or in part, upon surrender to the Company at
its then principal offices in the United States of this Warrant to
be exchanged, together with the Ruin of election to exchange
attached hereto as Exhibit A duly completed and executed, and upon
payment to the Company of the Exercise Price for the number of
shares of Warrant Stock in respect of which this Warrant is then
being exercised (an "Exercise"). In whole or in part in lieu of an
Exercise, Holder may exchange this Warrant as set forth in the
remainder of this Section 1.3 (an "Exchange").
(b) Upon an Exchange, the
Holder shall receive Warrant Stock such that, without the payment
of any funds, the Holder shall surrender this Warrant in exchange
for the number of shares of Warrant Stock equal to "X" (as defined
below), computed using the following formula:
X = Y * (A-B)
A
Where
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X
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=
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the number of
shares of Warrant Stock to be issued to
Holder
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Y
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=
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the number of
shares of Warrant Stock to be exchanged under this
Warrant
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A
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=
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the Fair Market
Value of one share of Warrant Stock
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B
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=
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the Exchange
Price (as adjusted to the date of such
calculations)
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*
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=
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multiplied
by
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(c) For purposes of this
Warrant, the "Fair Market Value" of one share of Warrant Stock
shall be (i) if the Company's common stock (the "Common Stock") is
or becomes listed on a national stock exchange, the closing price
of a share of Common Stock on the trading day immediately prior to
the day Holder delivers its Election of Exchange to the Company, or
(ii) if the Common Stock is traded over-the-counter, the closing
bid price for the Common Stock on the trading day immediately prior
to the day Holder delivers its Election of Exchange to the Company.
If the Common Stock is not traded as contemplated in clauses (i) or
(ii) above, then the Fair Market Value of the Company's Warrant
Stock shall be the price per share which the Company could obtain
from a willing buyer for shares of Common Stock sold by the Company
from its authorized but unissued shares, as the Board of Directors
of the Company ("Board") shall determine in its reasonable good
faith judgment, but in no event less than the price at which
qualified employee stock options issued at such time are
exercisable. In the event that Holder elects to convert the Warrant
Stock through Exchange in connection with a transaction in which
the Warrant Stock is converted into or exchanged for another
security, Holder may effect a Exchange directly into such other
security.
(d) Upon Amender of this
Warrant, and the duly completed and executed form of election to
exchange, and payment of the Exchange Price or conversion of this
Warrant through Exchange, the Company shall issue and deliver
within 3 business days to the Holder or such other person as the
Holder may designate in writing a certificate or certificates for
the number of shares of Warrant Stock so purchased upon the
Exchange or exercise of this Warrant. Such certificate or
certificates shall be deemed to have been issued and any person so
designated to be named therein shall be deemed to have become a
holder of record of such Warrant Stock as of the date of the
surrender of this Warrant, and the duly completed and executed form
of election to exchange, and payment of the Exchange Price or
conversion of this Warrant through Exchange; provided, that if the
date of surrender of this Warrant and payment of the Exchange Price
is not a business day, the certificates for the Warrant Stock shall
be deemed to have been issued as of the next business day (whether
before or after the Expiration Date). If this Warrant is exchanged
or exercised in part, a new warrant of the same tenor and for the
number of shares of Warrant Stock not exchanged or exercised shall
be executed by the Company.
1.4 Fractional
Interests. The Company shall not be required to issue fractions
of shares of Warrant Stock upon the exchange of this Warrant. If
any fraction of a share of Common Stock would be issuable upon the
exchange of this Warrant (or any portion thereof), the Company
shall purchase such fraction for an amount in cash equal to the
same fraction of the last reported sale price of the Common Stock
on the NASDAQ National Market System or any other national
securities exchange or market on which the Common Stock is then
listed or traded.
1.5 Automatic Conversion
upon Expiration. In the event that, upon the Expiration
Date, the Fair Market Value of one share of Common Stock (or other
security issuable upon the exchange hereof) as determined in
accordance with Section 1.3(c) is greater than the Exchange Price
in effect on such date, then this Warrant shall automatically be
deemed on and as of such date to be converted pursuant to Section
1.3 as to all Warrant Stock (or such other securities) for which it
shall not previously have been exchanged or converted, and the
Company shall promptly deliver a certificate representing the
Warrant Stock (or such other securities) issued upon such
conversion to the Holder.
1.6 Treatment of Warrant
Upon Acquisition of Company.
(a) "Acquisition".
For the purpose of this Warrant, "Acquisition" means (i) any sale
or other disposition of all or substantially all of the assets of
the Company in whatever form, or any reorganization, consolidation,
or merger of the Company (whether in a single transaction or
multiple related transactions) where the holders of the Company's
securities before the transaction beneficially own less than 50% of
the outstanding voting securities of the surviving entity after the
transaction(s).
(b) Treatment of Warrant
at Acquisition. Prior to the closing of any Acquisition,
the Company shall use its commercially reasonable efforts to cause
the successor entity (if applicable in such Acquisition) to assume
the obligations of this Warrant, and, if assumed, this Warrant
shall be exercisable for the same securities, cash, and property as
would be payable for the Warrant Stock issuable upon exchange of
the unexchanged portion of this Warrant as if such Warrant Stock
were outstanding on the record date for the Acquisition and
subsequent closing. The Warrant Price and/or number of shares of
Warrant Stock shall be adjusted accordingly.
(c) Optional Purchase at
Fair Value. If the successor entity (if applicable in such
Acquisition) does not assume the obligations of the Company under
this Warrant as set forth in subsection (b) above, the Company may,
at its option, elect to purchase and Holder may, at its option,
require the Company to purchase this Warrant at its "Fair Value."
For purposes of this Warrant, "Fair Value" shall mean that value
determined by the parties using a Black-Scholes Option-Pricing
Model with the following assumptions: (A) a risk-free interest rate
equal to the risk-free interest rate at the time of the closing of
the Acquisition (or as close thereto as practicable), (B) a
contractual life of the Warrant equal to the remaining term of this
Warrant as of the date of the Acquisition, (C) an annual dividend
yield equal to dividends declared on the underlying Common Stock
during the term of this Warrant (calculated on an annual basis),
and (D) a volatility factor of the expected market price of the
Company's Common Stock of (1) in the case of an Acquisition in
which the acquirer is publicly traded on a national securities
exchange, the implied volatility of the common stock of such
acquirer over the one-year period prior to the Acquisition, (2) in
the case of an Acquisition in which the acquirer is a non-public
company, the implied volatility of an average of not less than
three publicly-traded companies in the same or similar industry to
the Company with such companies having similar revenues. The
purchase price determined in accordance with the above shall be
paid upon the initial closing of the Acquisition and shall not be
subject to any post-Acquisition closing contingencies or
adjustments, but the parties may take such contingencies and
adjustments into account in determining the purchase price. This
subsection shall apply to the non-cash portion of an Acquisition
subject to subsection (b) above, in the case of such an Acquisition
which is partly cash and partly other property.
Section 2.
Exchange and
Transfer of Warrant.
(a) This Warrant may be
transferred, in whole or in part, without restriction, subject to
(i) Holder's compliance with applicable securities laws and
delivery of an opinion of competent counsel as to the same, if so
requested by the Company, and (ii) the transferee holder of the new
Warrant assuming in writing the obligations of the Holder set forth
in this Warrant and the Agreement. A transfer may be registered
with the Company by submission to it of this Warrant, together with
the annexed Assignment Form attached hereto as Exhibit B duly
completed and executed. After the Company's receipt of this Warrant
and the Assignment Form so completed and executed, the Company will
issue and deliver to the transferee a new warrant (representing the
portion of this Warrant so transferred) at the same Exchange Price
per share and otherwise having the same terms and provisions as
this Warrant, which the Company will register in the new holder's
name. In the event of a partial transfer of this Warrant, the
Company shall concurrently issue an
