Exhibit 10.5
WARRANT AGREEMENT
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON
THEIR EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT
BE TRANSFERRED UNLESS
COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID
ACT, A "NO ACTION"
LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO SUCH
TRANSFER, A TRANSFER MEETING THE
REQUIREMENTS OF RULE 144 OF THE SECURITIES AND
EXCHANGE COMMISSION, OR AN OPINION OF
COUNSEL SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
Securac Corp.
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WARRANT NO. September 101
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Dated: September 30, 2005
Securac Corp., a corporation organized under the laws of the
State of Nevada
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(the "Company"), hereby certifies that, for
value received from Dutchess Private
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Equities Fund, II, L.P., ("Holder"), is entitled, subject to the terms
set
forth below, to purchase from the Company up to a total of One hundred
eighty-one thousand eight hundred and
nineteen (181,819) shares of Common Stock,
$.01 par value per share (the "Common
Stock"), of the Company (each such share,
a "Warrant Share" and all such shares, the "Warrant Shares")
at an exercise
price equal to the Fixed Conversion Price
(as defined in the Debenture Agreement
dated the original issuance date hereof between the Company
and the original
Holder). The Warrant may be exercised on a
cashless basis anytime after issuance
through and including the fifth (5th)
anniversary of its original issuance (the
"Expiration Date"), subject to the following terms and conditions:
1. Registration
of Warrant. The Company shall register this
Warrant,
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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, and the Company
shall not be affected by
notice to the contrary.
2. Registration
of Transfers and Exchanges.
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(a)
The
Company or the transfer agent shall enter or record the
transfer of any portion of this Warrant in
the Warrant Register, upon surrender
of this Warrant to the Company at the
office specified in or pursuant to Section
3(b). 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 of such transferee of all of the
rights and obligations of a holder
of a Warrant.
(b) This
Warrant is exchangeable, upon the surrender hereof by the
Holder to the office of the Company
specified in or pursuant to Section 3(b) for
one or more New Warrants, evidencing
in the aggregate the right to purchase the
number of Warrant Shares which may then be purchased
hereunder. Any such
New
Warrant will be dated the date of such exchange.
3. Duration
and Exercise of Warrants.
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(a) This
Warrant shall be exercisable by the
registered Holder on any
business day before 5:00 P.M., Boston time,
at any time and from time to time on
or after the date hereof to and including the
Expiration Date. At
5:00 P.M.,
Boston time on the Expiration Date, the portion
of this Warrant not exercised
prior thereto shall be and become void and
of no value. Prior to
the Expiration
Date, the Company may not call or otherwise redeem this
Warrant without the
prior written consent of the Holder.
(b) Subject to
Sections 2(b), 6 and 10, upon surrender of this Warrant,
with the Form of Election to Purchase
attached hereto duly completed and signed,
to the Company at its address for notice set forth in Section 12
and upon
payment of the Exercise Price multiplied by the
number of Warrant Shares that
the Holder intends to purchase
hereunder, in the manner provided hereunder, all
as specified by the Holder in the Form of Election to
Purchase, the Company
shall promptly (but in no event later than 5 business
days after the Date of
Exercise (as defined herein)) issue or cause to be issued and cause to be
delivered to or upon the written order of the
Holder and in such name or names
as the Holder may designate, a
certificate for the Warrant Shares issuable upon
such exercise, free of restrictive legends
except (i) either in the event that a
registration statement covering the resale of
the Warrant Shares and naming the
Holder as a selling stockholder
thereunder is not then effective or the Warrant
Shares are not freely transferable
without volume restrictions pursuant to Rule
144(k) promulgated under the Securities Act
of 1933, as amended (the "Securities
Act"), or (ii) if this Warrant shall have been issued
pursuant to a written
agreement between the original Holder and the Company, as required by
such
agreement. In the case of (i) above, the Warrant
Shares will bear a Securities
Act restrictive legend. Any person so designated by the Holder to receive
Warrant Shares shall be deemed to have become
holder of record of such Warrant
Shares as of the Date of Exercise (as defined in this subsection) of
this
Warrant. A "Date of Exercise" means the date on which
the Company shall have
received (i) this Warrant (or any New
Warrant, as applicable), with the Form of
Election to Purchase attached hereto (or attached to such New Warrant)
appropriately completed and duly signed, and
(ii) payment of the Exercise Price
for the number of Warrant Shares so indicated by the holder hereof to be
purchased.
(c) This
Warrant shall be
exercisable, either in its entirety or, from
time to time, for a portion of the number
of Warrant Shares. If
less than all
of the Warrant Shares which may be
purchased under this Warrant are exercised at
any time, the Company shall issue or cause
to be issued, at its expense, a New
Warrant evidencing the right to purchase
the remaining number of Warrant Shares
for which no exercise has been evidenced by this Warrant. In the
event the
Common Stock representing the Warrant Shares is not
delivered per the written
instructions of the Purchaser, within ten (10)
business days after the Notice
of Election and Warrant is received by the
Company (the "Delivery Date"), then
in such event the Company shall pay to
Holder one-half percent (0.5%) in cash,
of the dollar value of the Warrant Shares to be
issued per each day after the
Delivery Date that the Warrant Shares are not delivered. The Company
acknowledges that its failure to deliver
the Warrant Shares by the Delivery Date
will cause the Holder to suffer damages in an
amount that will be difficult to
ascertain. Accordingly, the parties agree that it is
appropriate to include in
this Warrant a provision for liquidated damages.
The parties
acknowledge and
agree that the liquidated damages provision
set forth in this section represents
the parties' good faith effort to quantify
such damages and, as such, agree that
the form and amount of such liquidated damages are reasonable
and will not
constitute a penalty. The payment of liquidated damages
shall not relieve the
Company from its obligations to deliver the
Common Stock pursuant to the terms
of this Warrant. The Company shall make any
payments incurred under this Section
3 in immediately available funds
within ten (10) business days from the date of
issuance of the applicable Warrant Shares.
Nothing herein shall
limit Holder's
right to pursue actual damages or cancel the Notice of Election for the
Company's failure to issue and deliver
Common Stock to the Holder within fifteen
(15) business days following the Delivery Date.
4. Registration
Rights. During the term of this Warrant, the
Company
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agrees to use its best efforts to file,
within thirty (30) calendar days of the
demand by Holder, a registration statement with the Securities and
Exchange
Commission covering the resale of the Warrant
Shares and naming the Holder as a
selling stockholder thereunder (unless the Warrant
Shares are otherwise freely
transferable without volume restrictions pursuant to Rule
144(k) or Rule 144A
promulgated under the Act). The registration rights granted to the Holder
pursuant to this Section shall continue
until all of the Holder's Warrant Shares
have been sold in accordance with an effective
registration statement or upon
the Expiration Date, or as otherwise provided in the
Debenture Registration
Rights Agreement entered into between the
Company and the original Holder as of
the original issuance date hereof. The Company will pay all registration
expenses in connection therewith.
5. Payment of
Taxes. The Company
will pay all documentary stamp taxes
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attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be
required to pay any
tax that 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.
6. Replacement
of Warrant.
If this Warrant is
mutilated, lost, stolen
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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 indemnity, if
requested, satisfactory to it. Applicants for a New Warrant under such
circumstances shall also comply with such other reasonable regulations
and
procedures and pay such other reasonable charges
as the Company may prescribe.
7. Reservation
of Warrant Shares. The Company covenants that it
will
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at all times reserve and keep available
out of the aggregate of its authorized
but unissued 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 actual contingent
purchase rights of persons other than the Holder (taking into account
the
adjustments and restrictions of Section 8). The Company covenants that all
Warrant Shares that shall be 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.
If the Company does not have a sufficient
amount of Common Stock authorized to
reserve for the Warrant Shares, it shall use its
best efforts to place before
shareholder vote a proposal to increase the number
of its authorized shares as
soon as reasonably practicable.
8. Certain
Adjustments.
The Exercise Price and number of Warrant
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Shares issuable upon exercise of this Warrant are subject to
adjustment from
time to time as set forth in this Section
8. Upon each such
adjustment of the
Exercise Price pursuant to this Section 8,
the Holder shall thereafter prior to
the Expiration Date be entitled to purchase, at the
Exercise Price resulting
from such adjustment, the number of Warrant
Shares obtained by multiplying the
Exercise Price in effect immediately prior to
such adjustment by the number of
Warrant Shares issuable upon exercise of
this Warrant immediately prior to such
adjustment and dividing the product thereof
by the Exercise Price resulting from
such adjustment.
(a) If the Company, at any time while
this Warrant is outstanding, (i)
shall pay a stock dividend (except scheduled dividends paid on
outstanding
preferred stock as of the date hereof which
contain a stated dividend rate) or
otherwise make a distribution or
distributions on shares of its Common Stock or
on any other class of capital stock and
not the Common Stock payable in shares
of Common Stock, (ii) subdivide outstanding
shares of Com
