EXHIBIT 99.1
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN
EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT AND APPLICABLE LAWS OR
SOME OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND
APPLICABLE LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
NO. _________ WARRANT TO PURCHASE 306,409
SHARES OF COMMON STOCK
CYBERGUARD CORPORATION
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
Suite 200
Ft. Lauderdale, Florida
COMMON STOCK PURCHASE WARRANT
Dated August 26, 1999
THIS CERTIFIES that, for Ten Dollars ($10.00) and other good and
valuable consideration received, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Revocable Trust (the
"Original Holder"), or its registered and permitted assigns (the Original
Holder or such registered assigns at the time being the registered holder or
holders hereof are hereinafter collectively referred to as the "Holder"), is
entitled, at any time, to subscribe for and purchase from CyberGuard
Corporation, a Florida corporation (the "Company"), 306,409 shares (subject to
adjustment as provided herein) of the fully paid, nonassessable shares of
Common Stock (hereinafter defined) of the Company at a price per share equal to
the Exercise Price (as hereinafter defined).
This Warrant is subject to the following terms and conditions:
SECTION 1.0. Defined Terms. For the purposes of this Warrant, the
following terms shall have the respective meanings set forth below:
"COMMON STOCK" shall mean the Company's Common Stock, par value $.01
per share, authorized as of the date of this Warrant, and shall include also
any capital stock of the Company of any class which shall be authorized at any
time after the date of this Warrant and which shall have the right to
participate in the distribution of earnings and assets of the Company without
limitation as to amount.
"CLOSING PRICE" with respect to a share of Common Stock on any day
means, subject to Section 6.1(g), the last reported sale price on that day or,
in case no such reported sale takes place on such day, the average of the last
reported bid and asked prices, regular way, on that day,
in either case, as reported in the consolidated transaction reporting system
with respect to securities quoted on Nasdaq or, if the shares of Common Stock
are not quoted on Nasdaq, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the shares of Common Stock are listed or admitted
to trading or, if the shares of Common Stock are not quoted on Nasdaq and not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices on such other nationally recognized quotation system then in use, or, if
on any such day the shares of Common Stock are not quoted on any such quotation
system, the average of the closing bid and asked prices as furnished by a
professional market maker selected by the Board of Directors making a market in
the shares of Common Stock. If the shares of Common Stock are not publicly held
or so listed, quoted or publicly traded, the "Closing Price" means the fair
market value of a share of Common Stock, as determined in good faith by the
Board of Directors.
"EXERCISE PRICE" shall mean $2.00 per share, subject to adjustment as
set forth herein.
"INITIAL WARRANT NUMBER" shall mean 306,409 shares of Common Stock.
"LOAN AGREEMENT" shall mean that certain Loan Agreement by and between
the Company and the Original Holder dated as of the date hereof.
"PERSON" means any individual, firm, corporation, company, limited
liability company, association, partnership, joint venture, trust or
unincorporated organization, or a government or any agency or political
subdivision thereof.
"PROMISSORY NOTE" shall mean the Convertible Subordinated Promissory
Note which was executed and delivered by the Company on the date of this
Warrant to the Original Holder.
"ORGANIC CHANGE" means, with respect to any Person, any transaction
(including without limitation any recapitalization, capital reorganization or
reclassification of any class or series of equity securities, any consolidation
of such person with, or merger of such person into, any other person, any
merger of another person into such Person (other than a merger which does not
result in a reclassification, conversion, exchange or cancellation of
outstanding shares of capital stock of such Person), and any sale or transfer
or lease of all or substantially all of the assets of such Person, but not
including any stock split, combination or subdivision which is the subject of
Section 6.1(b)) pursuant to which any class or series of equity securities of
such Person is converted into the right to receive other securities, cash or
other property.
"STRIKE DIFFERENTIAL" shall mean, with respect to any day, the amount
by which the closing price of the Common Stock on such day (or in the event
that such day is not a trading day with respect to the Common Stock, on the
last trading day with respect to the Common Stock preceding such day) exceeds
the Exercise Price on such day.
"WARRANT NUMBER" shall mean the Initial Warrant Number as the same
shall be adjusted from time to time pursuant to Section 6.0 hereof.
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"WARRANT RIGHTS" shall mean rights to obtain shares of Common Stock
pursuant to a Warrant Rights Exercise (as defined below). The number of Warrant
Rights that the Holder is entitled to exercise at any time shall equal the
number of shares of Common Stock that the holder would be entitled to purchase
at such time if a Cash Exercise (as defined below) were effected in accordance
with the terms of this Warrant.
"WARRANT STOCK" shall mean Common Stock issued upon any exercise of
this Warrant.
SECTION 2.0. Exercise of Warrant. The purchase rights represented
by this Warrant may be exercised, in whole or in part, by the registered Holder
hereof, at any time or from time to time, but not later than August 26, 2004
(the "Termination Date"), by the delivery of this Warrant and the Form of
Subscription annexed hereto as Schedule I to the principal office of the
Company at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇. Lauderdale, Florida (or
at such other office of the Company as the Company shall designate by notice in
writing to the Holder hereof at the address of such ▇▇▇▇▇▇ appearing on the
books of the Company), and upon payment to the Company of the Exercise Price
for the shares thereby purchased ("Cash Exercise"). Notwithstanding the
foregoing, at any time and from time to time, the Holder hereof may elect to
exercise this Warrant by delivering to the Company this Warrant and the Form of
Subscription annexed hereto as Schedule I for conversion without payment of
cash or other consideration ("Warrant Rights Exercise"). In the event of a
Warrant Rights Exercise, this Warrant shall be converted into a number of
shares of Common Stock, which number shall equal the quotient of (i) the
product of the Strike Differential on the day of such Warrant Rights Exercise
and the number of Warrant Rights exercised by the Holder and (ii) the closing
price of the Common Stock on the day of such Warrant Rights Exercise (or in the
event that such day is not a trading day with respect to the Common Stock, on
the last trading day with respect to the Common Stock preceding such day). To
the extent that this Warrant is not exercised in full prior to 5:00 p.m.,
eastern standard time on the Termination Date, this Warrant shall be converted
without any action or delivery of any consideration on behalf of the Holder
hereof into a number of shares of Common Stock, which number shall equal the
quotient of (i) the product of the Strike Differential on the Termination Date
and the number of Warrant Rights to which the Holder is then entitled and (ii)
the closing price of the Common Stock on the Termination Date (or in the event
that such day is not a trading day with respect to the Common Stock, on the
last trading day with respect to the Common Stock preceding such day).
The Company covenants that the shares of Common Stock purchased
pursuant to this Section 2.0 shall be and be deemed to be issued to the Holder
hereof as the record owner of such Common Stock as of the close of business of
the Company on the date on which this Warrant shall have been exercised as
aforesaid. The Company further covenants that all shares of Common Stock which
may be issued upon the exercise of this Warrant will, upon exercise of the
rights represented by this Warrant be fully paid and nonassessable and free
from all taxes, liens and charges in respect of the issue thereof.
The certificates for the shares of Common Stock so purchased shall be
delivered to the Holder hereof within a reasonable time, not exceeding ten (10)
days, after the date on which the rights represented by this Warrant shall have
been so exercised.
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Payment of the applicable Exercise Price may be made (a) by cash, or
(b) by certified check, or bank cashier's check, payable to the Company.
In the event of a partial exercise of this Warrant, the Company shall
issue and deliver to Holder, on or within ten (10) days of the date on which
such Warrant was exercised, and in substitution of such Warrant, a new warrant
or warrants (at Holder's option), of even date herewith and with the terms
identical to the terms hereof, except that such new warrant or warrants shall
be exercisable, in the aggregate, for a percentage of all issued and
outstanding Common Stock, subject to the antidilution provisions of Section 6.0
hereof, which represents the number of shares of Common Stock with respect to
which this Warrant has not yet been exercised.
SECTION 3.0. No Fractional Shares or Scrip. No fractional shares
shall be issued upon the exercise of this Warrant. With respect to any fraction
of a share called for upon the exercise of this Warrant, an amount equal to
such fraction multiplied by the closing price of the Common Stock on the day of
such exercise (or in the event that such day is not a trading day with respect
to the Common Stock, on the last trading day with respect to the Common Stock
preceding such day) shall be paid to the Holder hereof in cash by the Company.
SECTION 4.0. Charges, Taxes and Expenses. Issuance of
certificates for shares of Common Stock upon the exercise of this Warrant shall
be made without charge to the Holder hereof for any issue or transfer taxes or
any other incidental expenses in respect of the issuance of such certificates
to and in the name of the registered Holder of this Warrant, all of which
transfer taxes and expenses shall be paid by the Company, and such certificates
shall be issued in the name of the Holder of this Warrant. Certificates will be
issued in a name other than that of the Holder upon the request of the Holder
and payment by the Holder of any applicable transfer taxes.
SECTION 5.0. Certain Obligations of the Company. The Company
covenants that it will at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of issuing upon
exercise of the purchase rights evidenced by this Warrant, the number of shares
of Common Stock purchasable and deliverable hereunder.
The Company will not, by amendment of its Certificate of Incorporation
or through reorganization, consolidation, merger, dissolution, issuance of
capital stock or sale of treasury stock (otherwise than upon exercise of this
Warrant) or sale of assets, or by any other voluntary act or deed, avoid or
seek to avoid the performance or observance of any of the covenants,
stipulations or conditions in this Warrant to be observed or performed by the
Company. The Company will at all times in good faith assist in the carrying out
of all of the provisions of this Warrant and in the taking of all other action
which may be necessary in order to protect the rights of the Holder of this
Warrant against dilution consistent with the provisions of this Warrant.
The Company covenants and agrees to maintain, on a current basis, the
reports, notices and statements required to be filed with the Securities
Exchange Commission.
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The Company will maintain an office where presentations and demands to
or upon the Company in respect of this Warrant may be made. The Company will
give notice in writing to the registered Holder of this Warrant, at the address
of the registered Holder of this Warrant appearing on the books of the Company,
of each change in the locations of such office.
SECTION 6.0. Adjustment of Exercise Price and Number of Shares.
The number of shares of Common Stock purchasable upon the exercise of this
Warrant and the Exercise Price thereof shall be subject to adjustment from time
to time after the date hereof upon the happening of certain events, as follows:
6.1 Adjustments to Exercise Price. The Exercise Price shall be
subject to adjustment as follows:
(a) Stock Dividends. In case the Company after the date
hereof shall pay a dividend or make a distribution to all holders of shares of
Common Stock in shares of Common Stock, then in any such case the Exercise
Price in effect at the opening of business on the day following the record date
for the determination of stockholders entitled to receive such dividend or
distribution shall be reduced to a price obtained by multiplying such Exercise
Price by a fraction of which (x) the numerator shall be the number of shares of
Common Stock outstanding at the close of business on such record date and (y)
the denominator shall be the sum of such number of shares of Common Stock
outstanding and the total number of shares of Common Stock constituting such
dividend or distribution, such reduction to become effective immediately after
the opening of business on the day following such record date. The Company will
not pay any dividend or make any distribution on shares of Common Stock held in
the treasury of the Company.
(b) Stock Splits and Reverse Splits. In case after the
date hereof outstanding shares of Common Stock shall be subdivided into a
greater number of shares of Common Stock, the Exercise Price in effect at the
opening of business on the day following the day upon which such subdivision
becomes effective shall be proportionately reduced, and, conversely, in case
after the date hereof outstanding shares of Common Stock shall be combined into
a smaller number of shares of Common Stock, the Exercise Price in effect at the
opening of business on the day following the day upon which such combination
becomes effective shall be proportionately increased, such reduction or
increase, as the case may be, shall entitle the Holder hereof to receive the
number and kind of shares which the Holder would have owned or have been
entitled to receive if this Warrant had been exercised immediately prior to
such subdivision or combination. Such adjustment shall become effective
immediately prior to the opening of business on the day following the day upon
which such subdivision or combination becomes effective.
(c) Issuances Below Market. In case the Company after
the date hereof shall fix a record date of the issuance of rights or warrants
to all holders of its shares of Common Stock entitling them to subscribe for or
purchase shares of Common Stock at a price per share less than the Closing
Price per share on the record date for the determination of stockholders
entitled to receive such rights or warrants, the Exercise Price in effect at
the opening of business
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on the day following such record date shall be adjusted to a price obtained by
multiplying such Exercise Price by a fraction of which (x) the numerator shall
be the number of shares of Common Stock outstanding at the close of business on
such record date plus the number of shares of Common Stock that the aggregate
offering price of the total number of shares to be offered would purchase at
such Closing Price and (y) the denominator shall be the number of shares of
Common Stock outstanding at the close of business on such record date plus the
number of additional shares of Common Stock to be offered for subscription or
purchase, such adjustment to become effective immediately prior to the opening
of business on the day following such record date; provided, however, that no
adjustment shall be made if the Company issues or distributes to each Holder
the rights or warrants that each Holder would have been entitled to receive had
the Warrants held by such Holder been exercised prior to such record date. The
Company shall not issue any rights or warrants in respect of shares of Common
Stock held in the treasury of the Company.
(d) Special Dividends. In case the Company after the
date hereof shall fix a record date for the making of a distribution to all
holders of shares of Common Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the surviving
corporation) evidences of its indebtedness, securities or assets (excluding any
dividends paid out of retained earnings), or subscription rights or warrants
(excluding those referred to in subsection (c) above), in each such case the
Exercise Price in effect immediately prior to the close of business on the
record date for the determination of stockholders entitled to receive such
distribution shall be adjusted to a price obtained by multiplying such Exercise
Price by a fraction of which (x) the numerator shall be the Closing Price per
share of Common Stock on such record date, less the then-current fair market
value as of such record date (as determined by the Board of Directors in its
good faith judgment) of the portion of assets, evidences of indebtedness,
securities or subscription rights or warrants so distributed applicable to one
share of Common Stock, and (y) the denominator shall be such Closing Price,
such adjustment to become effective immediately prior to the opening of
business on the day following such record date; provided, however, that no
adjustment shall be made (1) if the Company issues or distributes to each
Holder the subscription rights referred to above that each Holder would have
been entitled to receive had the Warrants held by such Holder been exercised
prior to such record date, or (2) if the Company grants to each Holder the
right to receive, upon the exercise of the Warrants held by such Holder at any
time after the distribution of the evidences of indebtedness or assets or
equity securities referred to above, the evidences of indebtedness or assets or
equity securities that such Holder would have been entitled to receive had such
Warrants been exercised prior to such record date. The Company shall provide
any Holder, upon receipt of a written request therefor, with any indenture or
other instrument defining the rights of the holders of any indebtedness,
assets, subscription rights or equity securities referred to in this subsection
(d).
(e) Other Distributions. In case the Company after the
date hereof shall distribute evidences of its indebtedness, assets, equity
securities, rights or warrants to any Person in connection with or as a result
of or related to any pending or future claims, suits, actions or proceedings
against the Company or any of its subsidiaries, then in each such case the
Exercise Price in effect immediately prior to the close of business on the date
of such distribution shall be adjusted to a price obtained by multiplying such
Exercise Price by a fraction of which (x) the
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numerator shall be the Closing Price per share of Common Stock on such date,
less the then-current fair market value as of such date (as determined by the
Board of Directors in its good faith judgment) of the portion of such evidences
of indebtedness, assets, equity securities, rights or warrants so distributed
applicable to one share of Common Stock, and (y) the denominator shall be such
Closing Price, such adjustment to become effective immediately prior to the
opening of business on the day following the date of such distribution. The
intent of this subsection is that if any evidences of indebtedness, securities,
assets, rights or warrants are distributed in connection with or as a result of
or related to any pending or future claims, suits, actions or proceedings
against the Company or any of its subsidiaries, that the Holder of this Warrant
shall be entitled to exercise this Warrant for the same percentage of the
outstanding capital stock of the Company for the same aggregate exercise price
immediately after such distribution as the Holder of this Warrant could acquire
immediately prior to such distribution.
(f) Tender or Exchange Offer. In case a tender or
exchange offer made by the Company or any subsidiary of the Company for all or
any portion of the Common Stock shall be consummated and such tender offer
shall involve an aggregate consideration having a fair market value (as
determined by the Board of Directors in its good faith judgment) at the last
time (the "Offer Time") tenders may be made pursuant to such tender or exchange
offer (as it may be amended) that, together with the aggregate of the cash plus
the fair market value (as determined by the Board of Directors in its good
faith judgment), as of the Offer Time, of consideration payable in respect of
any tender or exchange offer by the Company or any such subsidiary for all or
any portion of the Common Stock consummated preceding the Offer Time and in
respect of which no Exercise Price adjustment pursuant to this subsection (f)
has been made, exceeds 5% of the product of the Closing Price of the Common
Stock at the Offer Time multiplied by the number of shares of Common Stock
outstanding (including any tendered shares) at the Offer Time, the Exercise
Price shall be reduced so that the same shall equal the price determined by
multiplying the Exercise Price in effect immediately prior to the Offer Time by
a fraction of which (x) the numerator shall be (i) the product of the Closing
Price of the Common Stock at the Offer Time multiplied by the number of shares
of Common Stock outstanding (including any tendered shares) at the Offer Time
minus (ii) the fair market value (determined as aforesaid) of the aggregate
consideration payable to stockholders based on the acceptance (up to any
maximum specified in the terms of the tender or exchange offer) of all shares
validly tendered and not withdrawn as of the Offer Time (the shares deemed so
accepted, up to any such maximum, being referred to as the "Purchased Shares")
and (y) the denominator shall be the product of (i) such Closing Price at the
Offer Time multiplied by (ii) such number of outstanding shares at the Offer
Time minus the number of Purchased Shares, such reduction to become effective
immediately prior to the opening of business on the day following the Offer
Time. For purposes of this subsection (f), the number of shares of Common Stock
at any time outstanding shall not include shares held in the treasury of the
Company but shall include shares issuable in respect of scrip certificates
issued in lieu of fractions of shares of Common Stock.
(g) Other Dilutive Events. In case any event shall occur
as to which the provisions of Section 6.1 are not strictly applicable but the
failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles hereof then, in each such case, the Company shall appoint a firm of
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independent certified public accountants of recognized national standing (which
may be the regular auditors of the Company), which shall give its opinion upon
the adjustment, if any, on a basis consistent with the essential intent and
principles established in Section 6.1, necessary to preserve, without dilution,
the purchase rights represented by this Warrant. Upon receipt of such opinion,
the Company will promptly mail a copy thereof to the Holder of this Warrant and
shall make the adjustments described therein. Notwithstanding anything
contained in this subsection (g) to the contrary, this subsection (g) shall not
apply to any issuance of Common Stock by the Company for which the Company has
received consideration equal to the fair market value of such Common Stock on
the date of issuance, as determined by the Board of Directors of the Company in
good faith.
(h) No Dilution or Impairment. The Company will not, by
amendment of its Certificate of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Section 6.1 and in the taking of all such action as may
be necessary or appropriate in order to protect the purchase privilege of the
Holder of this Warrant against dilution or other impairment.
(i) Closing Price Determination. For the purpose of any
computation under subsections (c), (d) and (e) of this Section 6.1, the Closing
Price of Common Stock on any date shall be deemed to be the average of the
Closing Prices for the ten (10) consecutive trading days immediately preceding
such date; provided, however, that (i) if the "ex" date for any event (other
than the issuance or distribution requiring such computation) that requires an
adjustment to the Exercise Price pursuant to this Section 6 occurs on or after
the tenth (10th) trading day prior to the day in question and prior to the "ex"
date for the issuance or distribution requiring such computation, the Closing
Price for each trading day prior to the "ex" date for such other event shall be
adjusted by multiplying such Closing Price by the same fraction which the
Exercise Price is so required to be adjusted as a result of such other event,
(ii) if the "ex" date for any event (other than the issuance or distribution
requiring such computation) that requires an adjustment to the Exercise Price
pursuant to this Section 6 occurs on or after the "ex" date for the issuance or
distribution requiring such computation and on or prior to the day in question,
the Closing Price for each trading day on and after the "ex" date for such
other event shall be adjusted by multiplying such Closing Price by the
reciprocal of the fraction by which the Exercise Price is so required to be
adjusted as a result of such other event, and (iii) if the "ex" date for the
issuance or distribution requiring such computation is on or prior to the day
in question, after taking into account any adjustment required pursuant to
clause (ii) of this proviso, the Closing Price for each trading day on or after
such "ex" date shall be adjusted by adding thereto the fair market value on the
day in question (as determined by the Board of Directors in a manner consistent
with any determination of such value for the purposes of subsection (d) of this
Section 6.1) of the assets, evidences of indebtedness, equity securities or
subscription rights being distributed applicable to one share of Common Stock
as of the close of business on the day before such "ex" date. For the purposes
of any computation under subsection (f) of this Section 6.1, the Closing Price
on any date shall be deemed to be the average of the daily Closing
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Prices for the ten (10) consecutive trading days immediately preceding the
Offer Time; provided, however, that if the "ex" date for any event (other than
the tender or exchange offer requiring such computation) that requires an
adjustment to the Exercise Price pursuant to this Section 6 occurs on or after
the tenth (10th) trading day prior to the Offer Time for the tender or exchange
offer requiring such computation, the Closing Price for each trading day prior
to the "ex" date for such other event shall be adjusted by multiplying such
Closing Price by the same fraction by which the Exercise Price is so required
to be adjusted as a result of such other event. For purposes of this subsection
(g), the term "ex" date, (i) when used with respect to any issuance or
distribution, means the first date on which the Common Stock trades regular way
on the relevant exchange or in the relevant market from which the Closing Price
was obtained without the right to receive such issuance or distribution, (ii)
when used with respect to any subdivision or combination of shares of Common
Stock, means the first date on which the Common Stock trades regular way on
such exchange or in such market after the time at which such subdivision or
combination becomes effective, and (iii) when used with respect to any tender
or exchange offer means the first date on which the Common Stock trades regular
way on such exchange or in such market after the Offer Time of such tender or
exchange offer.
(j) Minimum Adjustment Requirement. No adjustment shall
be required unless such adjustment would result in an increase or decrease of
at least $0.01 in the Exercise Price then subject to adjustment; provided,
however, that any adjustments that are not made by reason of this subsection
(j) shall be carried forward and taken into account in any subsequent
adjustment. In case the Company shall at any time issue shares of Common Stock
by way of dividend on any stock of the Company or subdivide or combine the
outstanding shares of Common Stock, said amount of $0.01 specified in the
preceding sentence (as theretofore increased or decreased, if said amount shall
have been adjusted in accordance with the provisions of this subsection (h))
shall forthwith be proportionately increased in the case of such a combination
or decreased in the case of such a subdivision or stock dividend so as
appropriately to reflect the same.
(k) Calculations. All calculations under this Section
6.1 shall be made to the nearest $0.01.
(l) Certificate. Whenever an adjustment in the Exercise
Price is made as required or permitted by the provisions of this Section 6.1,
the Company shall promptly cause a certificate of its chief financial officer
setting forth (A) the adjusted Exercise Price as provided in this Section 6.1
and a brief statement of the facts requiring such adjustment and the
computation thereof and (B) the number of shares of Common Stock (or portions
thereof) purchasable upon exercise of this Warrant after such adjustment in the
Exercise Price in accordance with Section 6.2 hereof and the record date
therefor to be mailed to the Holder of this Warrant at the address shown on the
registration books of the Company. Such certificate, in the absence of manifest
error, shall be conclusive and final evidence of the correctness of such
adjustment.
(m) Section 305. Anything in this Section 6.1 to the
contrary notwithstanding, Company shall be entitled, but not required, to make
such reductions in the Exercise Price, in addition to those required by this
Section 6.1, as it in its discretion shall determine to be
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advisable, including, without limitation, in order that any dividend in or
distribution of shares of Common Stock or shares of capital stock of any class
other than Common Stock, subdivision, reclassification or combination of shares
of Common Stock, issuance of rights or warrants, or any other transaction
having a similar effect, shall not be treated as a distribution of property by
the Company to its stockholders under Section 305 of the Internal Revenue Code
of 1986, as amended, or any successor provision and shall not be taxable to
them.
(n) When Adjustment Not Required. If the Company shall
take a record of the holders of its Common Stock for purposes of taking any
action that requires an adjustment of the Exercise Price under this Section 6,
and shall, thereafter and before the effective date of such action, legally
abandon its plan to take such action, then thereafter no adjustment shall be
required by reason of the taking of such record and any such adjustment
previously made in respect thereof shall be rescinded and annulled.
6.2 Adjustment to Number of Shares of Stock. Upon each adjustment
of the Exercise Price pursuant to Section 6.1 hereof the number of shares of
Common Stock purchasable upon exercise of this Warrant outstanding prior to the
effectiveness of such adjustment shall be adjusted to the number, calculated to
the nearest one-hundredth of a share, obtained by (x) multiplying the number of
shares of Common Stock purchasable immediately prior to such adjustment upon
the exercise of this Warrant by the Exercise Price in effect prior to such
adjustment and (y) dividing the product so obtained by the Exercise Price in
effect after such adjustment of the Exercise Price.
6.3 Organic Change.
(a) Company Survives. Upon the consummation of an
Organic Change (other than a transaction in which the Company is not the
surviving entity), lawful provision shall be made as part of the terms of such
transaction whereby the terms of this Warrant shall be modified, without
payment of any additional consideration therefor, so as to provide that upon
exercise this Warrant following the consummation of such Organic Change, the
Holders of such Warrant shall have the right to purchase only the kind and
amount of securities, cash and other property receivable upon such Organic
Change by a holder of the number of shares of Common Stock into which such
Warrant might have been exercised immediately prior to such Organic Change,
assuming such holder of Common Stock (i) is not a Person with which the Company
consolidated or into which the Company merged or which merged into the Company
or to which a sale, transfer or lease of all or substantially all of the assets
of the Company was made, as the case may be (a "Constituent Person"), or an
affiliate of a Constituent Person, and (ii) failed to exercise his or her
rights of election, if any, as to the kind and amount of securities, cash and
other property receivable upon such Organic Change (provided that if the kind
and amount of securities, cash and other property receivable upon such Organic
Change is not the same for each share of Common Stock held immediately prior to
such Organic Change by others than a Constituent Person or an affiliate thereof
and in respect of which such rights of election shall not have been exercised
("Non-Electing Shares"), then for the purpose of this subsection (a) the kind
and amount of securities, cash and other property receivable upon such Organic
Change by each Non-Electing Share shall be deemed to be the kind and amount so
receivable per share by a
10
plurality of the Non-Electing Shares); provided, however, that no adjustment
shall be made as a result of such Organic Change to the Exercise Price or the
number of shares of Common Stock notwithstanding any provision of Section 6
hereof unless any event requiring any such adjustment shall have occurred or
shall occur prior to, upon or after such Organic Change. Lawful provision also
shall be made as part of the terms of the Organic Change so that all other
terms of this Warrant shall remain in full force and effect following such an
Organic Change. The provisions of this Section 6.3(a) shall similarly apply to
successive Organic Changes.
(b) Company Does Not Survive. The Company shall not
enter into an Organic Change that is a transaction in which the Company is not
the surviving entity unless lawful provision shall be made as part of the terms
of such transaction whereby the surviving entity shall issue new securities to
each Holder, without payment of any additional consideration therefor, with
terms that provide that upon the exercise of this Warrant, the Holders of such
Warrant shall have the right to purchase only the kind and amount of
securities, cash and other property receivable upon such Organic Change by a
holder of the number of shares of Common Stock into which such Warrant might
have been exercised immediately prior to such Organic Change, assuming such
holder of Common Stock (i) is not a Constituent Person or an affiliate of a
Constituent Person and (ii) failed to exercise his rights of election, if any,
as to the kind and amount of securities, cash and other property receivable
upon such Organic Change (provided that if the kind and amount of securities,
cash and other property receivable upon such Organic Change is not the same for
each Non-Electing Share, then for the purpose of this subsection (b) the kind
and amount of securities, cash and other property receivable upon such Organic
Change by each Non-Electing Share shall be deemed to be the kind and amount so
receivable per share by a plurality of the Non-Electing Shares); provided,
however, that no adjustment shall be made as a result of such Organic Change to
the Exercise Price or the number of shares of Common Stock notwithstanding any
provision of Section 6 hereof unless any event requiring any such adjustment
shall have occurred or shall occur prior to, upon or after such Organic Change.
The certificate or articles of incorporation or other constituent document of
the surviving entity shall provide for such adjustments which, for events
subsequent to the effective date of such certificate or articles of
incorporation or other constituent document, shall be equivalent to the
adjustments provided for in Section 6.1 hereof.
6.4 Statement on Warrants. This Warrant need not be changed
because of any adjustment made pursuant to Section 6.1 or Section 6.2 hereof,
and Warrants issued after such adjustment may state the same Exercise Price and
the same Warrant Number as are stated in this Warrant.
SECTION 7.0. Prior Notice of Certain Events. In the event that:
(a) the Company shall declare any dividend, whether
payable in cash or in any capital stock upon its Common Stock, or authorize any
other issuance or distribution to the holders of its Common Stock; or
11
(b) there shall be any capital reorganization or
reclassification of the capital stock of the Company, or consolidation or
merger of the Company or a sale of all or substantially all its assets; or
(c) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in any of said cases, the Company shall give prior written notice, by
first-class mail, postage prepaid, addressed to the registered Holder of this
Warrant at the address of such registered Holder as shown on the registration
books of the Company, of the date on which (i) the books of the Company shall
close or a record shall be taken for such stock dividend, distribution or
subscription rights, (ii) such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding-up shall be consummated, or
(iii) such other event shall be consummated, as the case may be. Such notice
shall also specify the date as of which the holders of the Common Stock of
record shall receive said dividend, distribution or subscription rights or
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding-up, as the case may be. Such
written notice shall be given at least thirty (30) days prior to the date of
the event in question and the record date or the date on which the Company's
transfer books are closed in respect thereto.
SECTION 8.0. No Rights or Responsibilities as Shareholder. Except
as otherwise agreed in writing by the Holder and the Company, a Holder of this
Warrant, as such, shall not be subject to any responsibilities as a shareholder
of the Company and shall not be entitled to vote or be deemed the Holder of
Common Stock or any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained herein be
construed to confer upon the Holder of this Warrant, as such, the rights of a
shareholder of the Company or the right to vote for the election of directors
or upon any matter submitted to shareholders at any meeting thereof, or to give
or withhold consent to any corporate section (except as provided herein) or to
receive notice of meetings or other actions affecting shareholders (except as
provided herein), or to receive dividends or subscription rights or otherwise
(except as provided herein), until the date of exercise of this Warrant shall
have occurred.
SECTION 9.0. Registration Rights. Upon exercise of this Warrant,
the Holder shall have and be entitled to exercise, together with all other
holders of Common Stock possessing registration rights under the Loan
Agreement, the rights of registration granted under the Loan Agreement with
respect to the shares of Common Stock issued upon exercise of this Warrant.
SECTION 10.0. Loss, Theft, Destruction or Mutilation of Warrant.
Upon receipt by the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant, and, in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to it,
and upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will make and deliver a new warrant of like tenor and date, in lieu of
this Warrant.
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SECTION 11.0. Transfer and Exchange of Warrant. This Warrant and
all rights hereunder are transferable at the office or agency of the Company by
the registered Holder hereof in person or by a duly authorized attorney, upon
surrender of this Warrant together with a properly endorsed assignment in the
form attached hereto as Schedule II. The Company shall be entitled to receive,
as a condition to any transfer of this Warrant, an opinion of counsel
reasonably satisfactory to the Company that such transfer does not violate the
registration requirements of the Securities Act of 1933, as amended, or
applicable state securities laws. Until transfer hereof on the registration
books of the Company, the Company may treat the registered Holder as the owner
hereof for all purposes. This Warrant is exchangeable, upon the surrender
hereof by ▇▇▇▇▇▇, at the principal offices of the Company, together with a
properly endorsed assignment in the form attached hereto as Schedule II, for
new warrants, in such denominations as Holder shall designate at the time of
surrender for exchange, of like tenor and date representing in the aggregate
the right to subscribe for and purchase the number of shares which may be
subscribed for and purchased hereunder, each of such new warrants to represent
the right to subscribe for and purchase not less than one hundred thousand
(100,000) shares of Common Stock (except to the extent necessary to round out
the balance of the number of shares).
SECTION 12.0. Investment Intent. Contemporaneously with the
original issuance of this Warrant to the Holder hereof, the Holder has executed
and delivered to the Company an investment representation letter (in the form
of Schedule III hereto) regarding the Holder's investment intent and imposing a
requirement that any transferee of this Warrant execute and deliver to the
Company a representation letter in form and substance similar to the contents
of such letter.
SECTION 13.0. Communications and Notices. All communications and
notices hereunder must be in writing, either delivered in hand or sent by
first-class mail, postage prepaid, or sent by confirmed facsimile and, if to
the Company, shall be addressed to it at the address set forth on the first
page hereof, Attention: Chief Executive Officer, or at such other address as
the Company may hereafter designate in writing by notice to the registered
Holder of this Warrant, and if to such registered Holder, addressed to such
Holder at the address of such Holder as shown on the books of the Company.
SECTION 14.0. Sundays, Holidays, Etc. If the last or appointed day
for the taking of any action required or the expiration of any right granted
herein shall be a Sunday, or a Saturday or shall be a legal holiday or a day on
which banking institutions in New York, New York, are authorized or required by
law to remain closed, then such action may be taken or right may be exercised
on the next succeeding day which is not a Sunday, a Saturday or a legal holiday
and not a day on which banking institutions in New York, New York, are
authorized or required by law to remain closed.
SECTION 15.0. Remedies. The Company stipulates that the remedies
at law of the Holder of this Warrant in the event of any default or threatened
default by the Company in the performance of or compliance with any of the
terms of this Warrant are not and will not be adequate, and that such terms may
be specifically enforced by a decree for the specific
13
performance of any agreement contained herein or by an injunction against a
violation of any of the terms hereof or otherwise.
SECTION 16.0. Miscellaneous. This Warrant shall be binding upon
the Company's successors. In case any provision of this Warrant shall be
invalid, illegal or unenforceable, or partially invalid, illegal or
unenforceable, the provision shall be unenforced to the extent, if any, that it
may legally be enforced, and the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby. This
Warrant and any term hereof may be changed, waived, discharged or terminated
only by a statement in writing signed by the party against which enforcement of
such change, waiver, discharge or termination is sought. The five (5) year term
of this Warrant shall be stayed during any bankruptcy proceedings involving the
Company. The headings in this Warrant are for purposes of reference only, and
shall not limit or otherwise affect any of the terms hereof. This Warrant shall
take effect as an instrument under seal.
SECTION 17.0. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY THE
LAWS OF THE STATE OF CONNECTICUT, WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.
SECTION 18.0. Conflict. In the event of a conflict of the terms
and conditions hereof and the terms and conditions of the Loan Agreement, the
terms and conditions of this Warrant shall prevail.
SIGNATURE PAGE FOLLOWS
14
IN WITNESS WHEREOF, CyberGuard Corporation has caused this Warrant to
be signed in its corporate name and its corporate seal to be impressed hereon
by its duly authorized officers.
Date: March 28, 2003
--------------------
CYBERGUARD CORPORATION, A FLORIDA
CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------------
Its: Chairman
---------------------------------------
15
SCHEDULE I
FORM OF SUBSCRIPTION
(To be signed only on exercise of
Common Stock Purchase Warrant)
TO: CyberGuard Corporation
The undersigned, the Holder of the within Common Stock Purchase
Warrant, hereby irrevocably elects to exercise this Common Stock Purchase
Warrant for, and to purchase thereunder ___ * shares of Common Stock of
CyberGuard Corporation, and herewith makes payment of $________ therefor, and
requests that the certificates for such shares be issued in the name
of_______________, and delivered to ________________________, whose address is
________________________________ .
Dated:
-------------------------------------------
(Signature must conform in all respects to
name of ▇▇▇▇▇▇ as specified on the face of
the Warrant)
-------------------------------------------
(Address)
---------
* Insert here the number of shares (all shares called for in
the Common Stock Purchase Warrant) as to which the Common Stock Purchase
Warrant is being exercised without making any adjustment for any other stock or
other securities or property or cash which, pursuant to the adjustment
provisions of the Common Stock Purchase Warrant, may be deliverable on
exercise.
SCHEDULE II
FORM OF ASSIGNMENT
(To be signed only on transfer of
Common Stock Purchase Warrant)
For value received, the undersigned hereby sells, assigns and
transfers unto __________________________ of _____________________, the right
represented by the within Common Stock Purchase Warrant to purchase ___ shares
of Common Stock of CyberGuard Corporation, to which the within Common Stock
Purchase Warrant relates, and appoints _____________________ Attorney to
transfer such right on the books of CyberGuard Corporation, with full power of
substitution in the premises.
Dated:
-------------------------------------------
(Signature must conform in all respects to
name of ▇▇▇▇▇▇ as specified on the face of
the Warrant)
-------------------------------------------
(Address)
Signed in the presence of:
-------------------------
Signature guaranteed by*:
-------------------------
[*Signature guarantee by a bank is required for all Holders other than the
Original Holder.]
SCHEDULE III
INVESTMENT REPRESENTATION LETTER
CyberGuard Corporation
Attn: Office of Corporate Secretary
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
Suite 200
Ft. Lauderdale, FL 33309
RE: Common Stock Purchase Warrant
Dated:
-----------------------------
To: CyberGuard Corporation
The Common Stock Purchase Warrant ("Warrant") and the rights to the
underlying shares has been acquired for investment for the Holder's own
account, not as a nominee or agent, and not with a view to the Holder's
distribution of any part thereof, and the Holder has no present intention of
selling, granting any participation in, or otherwise distributing the same. The
Holder does not have any contract, undertaking, agreement or arrangement with
any person to sell, transfer or grant participations to such person or to any
third person, with respect to the Warrant.
The Holder further undertakes to require any transferee of the Warrant
to execute and deliver to the CyberGuard Corporation a representation letter in
form and substance similar to the contents of this letter.
DATED:
By:
---------------------------------------
SCHEDULE OF OMITTED DOCUMENTS
The Common Stock Purchase Warrants described in items 1 through 5 below are
substantially identical in all material respects to the Warrant included as
Exhibit 99.1, except for (i) the name of the holder, (ii) the number of shares
of Common Stock for which the holder is entitled to purchase, and (iii) with
respect to items 3, 4 and 5 below, the exercise price per share of Common Stock.
1. Common Stock Purchase Warrant dated August 26, 1999, in favor of
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ Revocable Trust, to purchase 610,568 shares of
Common Stock at a purchase price of $2.00 per share.
2. Common Stock Purchase Warrant dated August 26, 1999, in favor of
▇▇▇▇▇▇▇ ▇. and ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇ Family Partnership, Ltd., to purchase
306,409 shares of Common Stock at a purchase price of $2.00 per share.
3. Common Stock Purchase Warrant dated December 29, 2000, in favor of
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Revocable Trust, to purchase 72,685 shares of Common
Stock at a purchase price of $2.51 per share.
4. Common Stock Purchase Warrant dated December 29, 2000, in favor of
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Trust, to purchase 144,837 shares of
Common Stock at a purchase price of $2.51 per share.
5. Common Stock Purchase Warrant dated December 29, 2000, in favor of
▇▇▇▇▇▇▇ ▇. and ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇ Family Partnership, Ltd., to purchase
72,685 shares of Common Stock at a purchase price of $2.51 per share.
