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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
Warrant
No.:
Number
of Shares of Common Stock:
Date
of Issuance: July 7, 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 July 3, 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 (1st) 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 (3rd) 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 $1.61, 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 (3rd) 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 (3rd) 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:
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Net
Number =
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(A x B) - (A x
C)
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B
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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 Securities are issued to the owners of
the non-survivin
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