Exhibit 10.3
NEITHER THE
ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A)
AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO
THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY
ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO
RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA
FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE SECURITIES.
VALLEY FORGE COMPOSITE
TECHNOLOGIES, INC.
Warrant
To Purchase Common Stock
Number of
Shares of Common Stock:
Date of
Issuance: September 29, 2008 (“ Issuance Date
”)
Valley Forge Composite Technologies, Inc., a
Florida corporation (the “ Company ”), hereby
certifies that, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged,
[__________________________], the registered holder hereof or its
permitted assigns (the “ Holder ”), is entitled,
subject to the terms set forth below, to purchase from the Company,
at the Exercise Price (as defined below) then in effect, upon
exercise of this Warrant to Purchase Common Stock (including any
Warrants to Purchase Common Stock issued in exchange, transfer or
replacement hereof, the “ Warrant ”), at any
time or times on or after the Issuance Date, but not after 11:59
p.m., New York time, on the Expiration Date (as defined below),
[__________________] fully paid and non-assessable shares of Common
Stock (as defined below) (the “ Warrant
Shares ”). Except as otherwise defined herein,
capitalized terms in this Warrant shall have the meanings set forth
in Section 16. This Warrant is one of the Warrants to purchase
Common Stock (the “ SPA Warrants ”) issued
pursuant to Section 1 of that certain Securities Purchase
Agreement, dated as of September 29, 2008, by and among the Company
and the investors (the “ Buyers ”) referred to
therein (the “ Securities Purchase Agreement
”).
(a) Mechanics of
Exercise . Subject to the terms and conditions hereof
(including, without limitation, the limitations set forth in
Section 1(f), this Warrant may be exercised by the Holder on any
day on or after the Issuance Date, in whole or in part, by
(i) delivery of a written notice, in the form attached hereto
as Exhibit A (the “ Exercise Notice ”),
of the Holder’s election to exercise this Warrant and
(ii) (A) payment to the Company of an amount equal to the
then-applicable Exercise Price multiplied by the number of Warrant
Shares as to which this Warrant is being exercised (the “
Aggregate Exercise Price ”) in cash or wire transfer
of immediately available funds or (B) by notifying the Company that
this Warrant is being exercised pursuant to a Cashless Exercise (as
defined in Section 1(d)). The Holder shall not be
required to deliver the original of this Warrant in order to effect
an exercise hereunder. Execution and delivery of the Exercise
Notice with respect to less than all of the Warrant Shares shall
have the same effect as cancellation of the original of this
Warrant and issuance of a new Warrant evidencing the right to
purchase the remaining number of Warrant Shares. Execution and
delivery of the Exercise Notice for all of the Warrant Shares shall
have the same effect as cancellation of the original of this
Warrant after delivery of the Warrant Shares in accordance with the
terms hereof. On or before the first (1 st )
Trading Day following the date on which the Company has received
each of the Exercise Notice and the Aggregate Exercise Price (or
notice of a Cashless Exercise) (the “ Exercise Delivery
Documents ”), the Company shall transmit by facsimile an
acknowledgment of confirmation of receipt of the Exercise Delivery
Documents to the Holder and the Company’s transfer agent (the
“ Transfer Agent ”). On or before the third
(3 rd
) Trading Day following the date on
which the Company has received all of the Exercise Delivery
Documents (the “ Share Delivery Date ”), the
Company shall (X) provided that the Transfer Agent is participating
in The Depository Trust Company (“ DTC ”) Fast
Automated Securities Transfer Program, upon the request of the
Holder, credit such aggregate number of shares of Common Stock to
which the Holder is entitled pursuant to such exercise to the
Holder’s or its designee’s balance account with DTC
through its Deposit Withdrawal Agent Commission system, or (Y) if
the Transfer Agent is not participating in the DTC Fast Automated
Securities Transfer Program, issue and deliver to the Holder or, at
Holder’s instruction pursuant to the Exercise Notice,
Holder’s agent or designee, in each case, sent by reputable
overnight courier to the address as specified in the Exercise
Notice, a certificate, registered in the Company’s share
register in the name of the Holder or its designee (as indicated in
the Exercise Notice), for the number of shares of Common Stock to
which the Holder is entitled pursuant to such
exercise. Upon delivery of the Exercise Delivery
Documents, the Holder shall be deemed for all corporate purposes to
have become the holder of record of the Warrant Shares with respect
to which this Warrant has been exercised, irrespective of the date
such Warrant Shares are credited to the Holder’s DTC account
or the date of delivery of the certificates evidencing such Warrant
Shares (as the case may be). If this Warrant is
submitted in connection with any exercise pursuant to this Section
1(a) and the number of Warrant Shares represented by this Warrant
submitted for exercise is greater than the number of Warrant Shares
being acquired upon an exercise, then the Company shall as soon as
practicable and in no event later than three (3) Business Days
after any exercise and at its own expense, issue and deliver to the
Holder (or its designee) a new Warrant (in accordance with Section
7(d)) representing the right to purchase the number of Warrant
Shares purchasable immediately prior to such exercise under this
Warrant, less the number of Warrant Shares with respect to which
this Warrant is exercised. No fractional shares of
Common Stock are to be issued upon the exercise of this Warrant,
but rather the number of shares of Common Stock to be issued shall
be rounded up to the nearest whole number. The Company shall pay
any and all taxes which may be payable with respect to the issuance
and delivery of Warrant Shares upon exercise of this
Warrant.
(b) Exercise
Price . For purposes of this Warrant, “ Exercise
Price ” means $0.75, subject to adjustment as provided
herein.
(c) Company’s
Failure to Timely Deliver Securities . If the
Company shall fail, for any reason or for no reason, to issue to
the Holder within three (3) Trading Days of receipt of the Exercise
Delivery Documents, a certificate for the number of shares of
Common Stock to which the Holder is entitled and register such
shares of Common Stock on the Company’s share register or to
credit the Holder’s balance account with DTC for such number
of shares of Common Stock to which the Holder is entitled upon the
Holder’s exercise of this Warrant (as the case may be), then,
in addition to all other remedies available to the Holder, the
Company shall pay in cash to the Holder on each day after such
third (3 rd
) Trading Day that the issuance of
such shares of Common Stock is not timely effected an amount equal
to 2% of the product of (A) the sum of the number of shares of
Common Stock not issued to the Holder on a timely basis and to
which the Holder is entitled and (B) the Closing Sale Price of the
Common Stock on the Trading Day immediately preceding the last
possible date which the Company could have issued such shares of
Common Stock to the Holder without violating Section 1(a). In
addition to the foregoing, if within three (3) Trading Days after
the Company’s receipt of the facsimile copy of an Exercise
Notice, the Company shall fail to issue and deliver a certificate
to the Holder and register such shares of Common Stock on the
Company’s share register or credit the Holder’s balance
account with DTC for the number of shares of Common Stock to which
the Holder is entitled upon such Holder’s exercise hereunder
(as the case may be), and if on or after such third (3
rd ) Trading Day the Holder purchases (in an open
market transaction or otherwise) shares of Common Stock to deliver
in satisfaction of a sale by the Holder of shares of Common Stock
issuable upon such exercise that the Holder anticipated receiving
from the Company (a “ Buy-In ”), then the
Company shall, within three (3) Business Days after the
Holder’s request and in the Holder’s discretion, either
(i) pay cash to the Holder in an amount equal to the Holder’s
total purchase price (including brokerage commissions, if any) for
the shares of Common Stock so purchased (the “ Buy-In
Price ”), at which point the Company’s obligation
to deliver such certificate (and to issue such shares of Common
Stock) shall terminate, or (ii) promptly honor its obligation to
deliver to the Holder a certificate or certificates representing
such shares of Common Stock or credit the Holder’s balance
account with DTC for the number of shares of Common Stock to which
the Holder is entitled upon such Holder’s exercise hereunder
(as the case may be) and pay cash to the Holder in an amount equal
to the excess (if any) of the Buy-In Price over the product of (A)
such number of shares of Common Stock times (B) the Closing Sale
Price of the Common Stock on the Trading Day immediately preceding
the date of the Exercise Notice.
(d) Cashless
Exercise . Notwithstanding anything contained herein to the
contrary (other than Section 1(f) below), the Holder may, in its
sole discretion, exercise this Warrant in whole or in part and, in
lieu of making the cash payment otherwise contemplated to be made
to the Company upon such exercise in payment of the Aggregate
Exercise Price, elect instead to receive upon such exercise the
“Net Number” of shares of Common Stock determined
according to the following formula (a “ Cashless
Exercise ”) but only so long as the Warrant Shares are
not covered by an existing and effective registration statement at
any time after the six (6) month anniversary date of the Issuance
Date:
Net Number = (A x B) - (A x C)
For purposes of the foregoing
formula:
A= the total number of shares with respect to
which this Warrant is then being exercised.
B= the average VWAP for the Common Stock for the
five (5) consecutive Trading Days immediately preceding the date of
the Exercise Notice.
C= the Exercise Price then in effect for the
applicable Warrant Shares at the time of such exercise.
(e) Disputes
. In the case of a dispute as to the determination of
the Exercise Price or the arithmetic calculation of the number of
Warrant Shares to be issued pursuant to the terms hereof, the
Company shall promptly issue to the Holder the number of Warrant
Shares that are not disputed and resolve such dispute in accordance
with Section 13.
(f) Limitations on
Exercises .
(i) Beneficial
Ownership . Notwithstanding anything to the contrary contained
in this Warrant, this Warrant shall not be exercisable by the
Holder hereof to the extent (but only to the extent) that, if
exercisable by the Holder, the Holder or any of its affiliates
would beneficially own in excess of 9.99% (the “ Maximum
Percentage ”) of the outstanding shares
of Common Stock. To the extent the above limitation
applies, the determination of whether this Warrant shall be
exercisable (vis-à-vis other convertible, exercisable or
exchangeable securities owned by the Holder) and of which warrants
shall be exercisable (as among all warrants owned by the Holder)
shall, subject to such Maximum Percentage limitation, be determined
on the basis of the first submission to the Company for conversion,
exercise or exchange (as the case may be). No prior inability to
exercise this Warrant pursuant to this paragraph shall have any
effect on the applicability of the provisions of this
paragraph with respect to any subsequent determination of
exercisability. For the purposes of this paragraph, beneficial
ownership and all determinations and calculations (including,
without limitation, with respect to calculations of percentage
ownership) shall be determined by the Holder in accordance with
Section 13(d) of the 1934 Act (as defined in the Securities
Purchase Agreement) and the rules and regulations promulgated
thereunder. The provisions of this paragraph shall be implemented
in a manner otherwise than in strict conformity with the terms of
this paragraph to correct this paragraph (or any portion hereof)
which may be defective or inconsistent with the intended Maximum
Percentage beneficial ownership limitation herein contained or to
make changes or supplements necessary or desirable to properly give
effect to such Maximum Percentage limitation. The limitations
contained in this paragraph shall apply to a successor Holder of
this Warrant. For any reason at any time, upon the written or oral
request of the Holder, the Company shall within one (1) Business
Day confirm orally and in writing to the Holder the number of
shares of Common Stock then outstanding, including by virtue of any
prior conversion or exercise of convertible or exercisable
securities into Common Stock, including, without limitation,
pursuant to this Warrant or securities issued pursuant to the
Securities Purchase Agreement. Each delivery of an
Exercise Notice by the Holder will constitute a representation by
the Holder that it has evaluated the limitation set forth in this
paragraph and determined that issuance of the full number of
Warrant Shares requested by the Holder in such Exercise Notice is
permitted under this paragraph.
(g) Insufficient
Authorized Shares . The Company shall at all times keep
reserved for issuance under this Warrant a number of shares of
Common Stock as shall be necessary to satisfy the Company’s
obligation to issue shares of Common Stock hereunder (without
regard to any limitation otherwise contained herein with respect to
the number of shares of Common Stock that may be acquirable upon
exercise of this Warrant). If, notwithstanding the foregoing, and
not in limitation thereof, at any time while any of the SPA
Warrants remain outstanding the Company does not have a sufficient
number of authorized and unreserved shares of Common Stock to
satisfy its obligation to reserve for issuance upon exercise of the
SPA Warrants at least a number of shares of Common Stock equal to
the number of shares of Common Stock as shall from time to time be
necessary to effect the exercise of all of the SPA Warrants then
outstanding (the “ Required Reserve Amount ”)
(an “ Authorized Share Failure ”), then the
Company shall immediately take all action necessary to increase the
Company’s authorized shares of Common Stock to an amount
sufficient to allow the Company to reserve the Required Reserve
Amount for all the SPA Warrants then outstanding. Without limiting
the generality of the foregoing sentence, as soon as practicable
after the date of the occurrence of an Authorized Share Failure,
but in no event later than sixty (60) days after the occurrence of
such Authorized Share Failure, the Company shall hold a meeting of
its stockholders for the approval of an increase in the number of
authorized shares of Common Stock. In connection with such meeting,
the Company shall provide each stockholder with a proxy statement
and shall use its best efforts to solicit its stockholders’
approval of such increase in authorized shares of Common Stock and
to cause its board of directors to recommend to the stockholders
that they approve such proposal.
2. ADJUSTMENT OF
EXERCISE PRICE AND NUMBER OF WARRANT SHARES . The Exercise
Price and number of Warrant Shares issuable upon exercise of this
Warrant are subject to adjustment from time to time as set forth in
this Section 2.
(a) Stock Dividends
and Splits . If the Company, at any time on or after
the date of the Securities Purchase Agreement, (i) pays a stock
dividend on one or more classes of its then outstanding shares of
Common Stock or otherwise makes a distribution on any class of
capital stock that is payable in shares of Common Stock, (ii)
subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its then outstanding shares of
Common Stock into a larger number of shares or (iii) combines (by
combination, reverse stock split or otherwise) one or more classes
of its then outstanding shares of Common Stock into a smaller
number of shares, then in each such case the Exercise Price shall
be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding immediately before
such event and of which the denominator shall be the number of
shares of Common Stock outstanding immediately after such
event. Any adjustment made pursuant to clause (i) of
this paragraph shall become effective immediately after the record
date for the determination of stockholders entitled to receive such
dividend or distribution, and any adjustment pursuant to clause
(ii) or (iii) of this paragraph shall become effective immediately
after the effective date of such subdivision or combination. If any
event requiring an adjustment under this paragraph occurs during
the period that an Exercise Price is calculated hereunder, then the
calculation of such Exercise Price shall be adjusted appropriately
to reflect such event.
(b) Adjustment Upon
Issuance of Shares of Common Stock . If and whenever from and
after the date of the Securities Purchase Agreement and to and
through the date that is two (2) years after the date of the
Securities Purchase Agreement, the Company issues or sells, or in
accordance with this Section 2 is deemed to have issued or sold,
any shares of Common Stock (including the issuance or sale of
shares of Common Stock owned or held by or for the account of the
Company, but excluding any Excluded Securities (as defined in the
Securities Purchase Agreement) issued or sold or deemed to have
been issued or sold) for a consideration per share (the “
New Issuance Price ”) less than a price equal to the
Exercise Price in effect immediately prior to such issue or sale or
deemed issuance or sale (such lesser price being referred to as the
“ Applicable Price ”) (the foregoing a “
Dilutive Issuance ”), then immediately after such
Dilutive Issuance, the Exercise Price then in effect shall be
reduced to an amount equal to the New Issuance Price. For purposes
of determining the adjusted Exercise Price under this Section 2(b),
the following shall be applicable:
(i) Issuance of
Options . If the Company in any manner grants or
sells any Options and the lowest price per share for which one
share of Common Stock is issuable upon the exercise of any such
Option or upon conversion, exercise or exchange of any Convertible
Securities issuable upon exercise of any such Option is less than
the Applicable Price, then such share of Common Stock shall be
deemed to be outstanding and to have been issued and sold by the
Company at the time of the granting or sale of such Option for such
price per share. For purposes of this Section 2(b)(i), the
“lowest price per share for which one share of Common Stock
is issuable upon the exercise of any such Options or upon
conversion, exercise or exchange of any Convertible Securities
issuable upon exercise of any such Option” shall be equal to
the sum of the lowest amounts of consideration (if any) received or
receivable by the Company with respect to any one share of Common
Stock upon the granting or sale of the Option, upon exercise of the
Option and upon conversion, exercise or exchange of any Convertible
Security issuable upon exercise of such Option. Except as
contemplated below, no further adjustment of the Exercise Price
shall be made upon the actual issuance of such shares of Common
Stock or of such Convertible Securities upon the exercise of such
Options or upon the actual issuance of such shares of Common Stock
upon conversion, exercise or exchange of such Convertible
Securities.
(ii) Issuance of
Convertible Securities . If the Company in any
manner issues or sells any Convertible Securities and the lowest
price per share for which one share of Common Stock is issuable
upon the conversion, exercise or exchange thereof is less than the
Applicable Price, then such share of Common Stock shall be deemed
to be outstanding and to have been issued and sold by the Company
at the time of the issuance or sale of such Convertible Securities
for such price per share. For the purposes of this
Section 2(b)(ii), the “lowest price per share for which one
share of Common Stock is issuable upon the conversion, exercise or
exchange thereof” shall be equal to the sum of the lowest
amounts of consideration (if any) received or receivable by the
Company with respect to one share of Common Stock upon the issuance
or sale of the Convertible Security and upon conversion, exercise
or exchange of such Convertible Security. Except as contemplated
below, no further adjustment of the Exercise Price shall be made
upon the actual issuance of such shares of Common Stock upon
conversion, exercise or exchange of such Convertible Securities,
and if any such issue or sale of such Convertible Securities is
made upon exercise of any Options for which adjustment of this
Warrant has been or is to be made pursuant to other provisions of
this Section 2(b), except as contemplated below, no further
adjustment of the Exercise Price shall be made by reason of such
issue or sale.
(iii) Change in
Option Price or Rate of Conversion . If the purchase or
exercise price provided for in any Options, the additional
consideration, if any, payable upon the issue, conversion, exercise
or exchange of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exercisable or
exchangeable for shares of Common Stock increases or decreases at
any time, the Exercise Price in effect at the time of such increase
or decrease shall be adjusted to the Exercise Price which would
have been in effect at such time had such Options or Convertible
Securities provided for such increased or decreased purchase price,
additional consideration or increased or decreased conversion rate,
as the case may be, at the time initially granted, issued or sold.
For purposes of this Section 2(b)(iii), if the terms of any Option
or Convertible Security that was outstanding as of the date of
issuance of this Warrant are increased or decreased in the manner
described in the immediately preceding sentence, then such Option
or Convertible Security and the shares of Common Stock deemed
issuable upon exercise, conversion or exchange thereof shall be
deemed to have been issued as of the date of such increase or
decrease. No adjustment pursuant to this Section 2(b) shall be made
if such adjustment would result in an increase of the Exercise
Price then in effect.
(iv) Calculation of
Consideration Received . In case any Option is issued in
connection with the issue or sale of other securities of the
Company, together comprising one integrated transaction in which no
specific consideration is allocated to such Options by the parties
thereto, the Options will be deemed to have been issued for the
difference of (i) the aggregate fair market value of such Options
and other securities issued or sold in such integrated transaction,
less (ii) the fair market value of the securities other than such
Option, issued or sold in such transaction and the other securities
issued or sold in such integrated transaction will be deemed to
have been issued or sold for the balance of the consideration
received by the Company. If any shares of Common Stock,
Options or Convertible Securities are issued or sold or deemed to
have been issued or sold for cash, the consideration received
therefor will be deemed to be the net amount received by the
Company therefor. If any shares of Common Stock, Options or
Convertible Securities are issued or sold for a consideration other
than cash, the amount of such consideration received by the Company
will be the fair value of such consideration, except where such
consideration consists of publicly traded securities, in which case
the amount of consideration received by the Company for such
securities will be the average VWAP of such security for the five
(5) Trading Day period immediately preceding the date of receipt.
If any shares of Common Stock, Options or Convertible
Securitie
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