EXHIBIT 4.40
NEITHER THESE WARRANTS NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF THESE
WARRANTS HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER THE ACT OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
400,000 WARRANTS December 7, 2004
MARKLAND TECHNOLOGIES, INC.
WARRANTS
Markland Technologies, Inc., a Florida corporation ("MRKL"), certifies
that, for value received, Michael S. Rosenblum ("ROSENBLUM"), or registered
assigns (the "HOLDER"), is the owner of Four Hundred Thousand (400,000) Warrants
of MRKL (the "WARRANTS"). Each Warrant entitles the Holder to purchase from MRKL
at any time prior to the Expiration Date (as defined below) one share of the
common stock of MRKL (the "COMMON STOCK") for $0.60 (the "EXERCISE PRICE"), on
the terms and conditions hereinafter provided. The Exercise Price and the number
of shares of Common Stock purchasable upon exercise of each Warrant are subject
to adjustment as provided in this Certificate.
1. VESTING; EXPIRATION DATE; EXERCISE
1.1 VESTING. The Warrants shall vest and become exercisable as follows:
(i) 100,000 Warrants shall vest and be fully exercisable as of the date of this
Certificate; (ii) 100,000 Warrants shall vest and become exercisable on January
6, 2005; (iii) 100,000 Warrants shall vest and become exercisable on January 21,
2005; and (iv) the remaining 100,000 Warrants shall vest and become exercisable
on February 5, 2005.
1.2 EXPIRATION DATE. The Warrants shall expire on November 30, 2007
(the "EXPIRATION DATE").
1.3 MANNER OF EXERCISE. The Warrants are exercisable by delivery to
MRKL of the following (the "EXERCISE DOCUMENTS"): (a) this Certificate (b) a
written notice of election to exercise the Warrants; and (c) payment of the
Exercise Price in cash, by check or by "net" exercise as contemplated by Section
1.4 of this Certificate; provided that the Holder may only pay by "net" exercise
for those shares covered by the Subsequent Registration Statement (as defined in
Section 9 of this Certificate). Within three business days following receipt of
the foregoing, MRKL shall execute and deliver to the Holder: (a) a certificate
or certificates representing the aggregate number of shares of Common Stock
purchased by the Holder, and (b) if less than all of the Warrants evidenced by
this Certificate are exercised, a new certificate evidencing the Warrants not so
exercised.
1.4 NET EXERCISE. In lieu of the payment methods set forth in Section
1.3 above, the Holder may elect to exchange all or some of the Warrant for the
number of shares of Common Stock computed using the following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Common Stock to be issued to
Holder.
Y = the number of shares of Common Stock purchasable under the
Warrants being exchanged (as adjusted to the date of such
calculation).
A = the Market Price on the date of receipt by MRKL of the
exercise documents.
B = the Exercise Price of the Warrants being exchanged (as
adjusted in accordance with the terms of Section 2 hereof).
The "DAILY MARKET PRICE" on any trading day shall be deemed to be the
last reported sale price of the Common Stock on such day, or, in the case no
such reported sales take place on such day, the last reported sale price on the
preceding trading day on which there was a last reported sales price, as
officially reported by the principal securities exchange in which the shares of
Common Stock are listed or admitted to trading or by the Nasdaq Stock Market, or
if the Common Stock is not listed or admitted to trading on any national
securities exchange or the Nasdaq Stock Market, the last sale price, or if there
is no last sale price, the closing bid price, as furnished by the National
Association of Securities Dealers, Inc. (such as through the OTC Bulletin Board)
or a similar organization or if Nasdaq is no longer reporting such information.
1.5 WARRANT EXERCISE LIMITATION. Notwithstanding any other provision of
this Certificate, if as of the date of exercise MRKL has a class of securities
registered under Section 12 of the Securities Exchange Act of 1934, as amended,
Holder may not exercise Warrants under this Section 1 to the extent that
immediately following such exercise Holder would beneficially own 5% or more of
the outstanding Common Stock of MRKL. For this purpose, a representation of the
Holder that following such exercise it would not beneficially own 5% or more of
the outstanding Common Stock of MRKL shall be conclusive and binding upon MRKL.
2. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER AND KIND OF CONVERSION SHARES
2.1 In the event that MRKL shall at any time hereafter (a) pay a
dividend in Common Stock or securities convertible into Common Stock; (b)
subdivide or split its outstanding Common Stock; (c) combine its outstanding
Common Stock into a smaller number of shares; then the number of shares to be
issued immediately after the occurrence of any such event shall be adjusted so
that the Holder thereafter may receive the number of shares of Common Stock it
would have owned immediately following such action if it had exercised the
Warrants immediately prior to such action and the Exercise Price shall be
adjusted to reflect such proportionate increases or decreases in the number of
shares.
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2.2 In case of any reclassification of the outstanding shares of Common
Stock (other than a change covered by Section 2.1 hereof or a change which
solely affects the par value of such shares) or in the case of any merger or
consolidation or merger in which MRKL is not the continuing corporation and
which results in any reclassification or capital reorganization of the
outstanding shares), the Holder shall have the right thereafter (until the
Expiration Date) to receive upon the exercise hereof, for the same aggregate
Exercise Price payable hereunder immediately prior to such event, the kind and
amount of shares of stock or other securities or property receivable upon such
reclassification, capital reorganization, merger or consolidation, by a Holder
of the number of shares of Common Stock obtainable upon the exercise of the
Warrants immediately prior to such event; and if any reclassification also
results in a change in shares covered by Section 2.1, then such adjustment shall
be made pursuant to both this Section 2.2 and Section 2.1 (without duplication).
The provisions of this Section 2.2 shall similarly apply to successive
reclassifications, capital reorganizations and mergers or consolidations, sales
or other transfers.
3. RESERVATION OF SHARES. MRKL shall at all times reserve and keep available out
of its authorized but unissued shares of Common Stock, such number of shares of
Common Stock as shall from time to time be issuable upon exercise of the
Warrants. If at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to permit the exercise of the Warrants, MRKL shall
promptly seek such corporate action as may necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as shall be
sufficient for such purpose.
4. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment in the Exercise
Price, or number or type of shares issuable upon exercise of these Warrants, the
Chief Financial Officer of MRKL shall compute such adjustment in accordance with
the terms of these Warrants and prepare a certificate setting forth such
adjustment and showing in detail the facts upon which such adjustment is based,
including a statement of the adjusted Exercise Price. MRKL shall promptly send
(by facsimile and by either first class mail, postage prepaid or overnight
delivery) a copy of each such certificate to the Holder.
5. LOSS OR MUTILATION. Upon receipt of evidence reasonably satisfactory to MRKL
of the ownership of and the loss, theft, destruction or mutilation of this
Certificate, and of indemnity reasonably satisfactory to it, and (in the case of
mutilation) upon surrender and cancellation of these Warrants, MRKL will execute
and deliver in lieu thereof a new Certificate of like tenor as the lost, stolen,
destroyed or mutilated Certificate.
6. REPRESENTATIONS AND WARRANTIES OF MRKL. MRKL hereby represents and warrants
to Holder that:
6.1 DUE AUTHORIZATION. All corporate action on the part of MRKL, its
officers, directors and shareholders necessary for (a) the authorization,
execution and delivery of, and the performance of all obligations of MRKL under,
these Warrants, and (b) the authorization, issuance, reservation for issuance
and delivery of all of the Common Stock issuable upon exercise of these
Warrants, has been duly taken. These Warrants constitute a valid and binding
obligation of MRKL enforceable in accordance with their terms, subject, as to
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enforcement of remedies, to applicable bankruptcy, insolvency, moratorium,
reorganization and similar laws affecting creditors' rights generally and to
general equitable principles.
6.2 ORGANIZATION. MRKL is a corporation duly organized, validly
existing and in good standing under the laws of the State referenced in the
first paragraph of this Certificate and has all requisite corporate power to
own, lease and operate its property and to carry on its business as now being
conducted and as currently proposed to be conducted.
6.3 VALID ISSUANCE OF STOCK. Any shares of Common Stock issued upon
exercise of these Warrants will be duly and validly issued, fully paid and
non-assessable.
6.4 GOVERNMENTAL CONSENTS. All consents, approvals, orders,
authorizations or registrations, qualifications, declarations or filings with
any federal or state governmental authority on the part of MRKL required in
connection with the consummation of the transactions contemplated herein have
been obtained.
7. REPRESENTATIONS AND WARRANTIES OF ROSENBLUM. Rosenblum hereby represents and
warrants to MRKL that:
7.1 Rosenblum is acquiring the Warrants for its own account, for
investment purposes only.
7.2 Rosenblum understands that an investment in the Warrants involves a
high degree of risk, and Rosenblum has the financial ability to bear the
economic risk of this investment in the Warrants, including a complete loss of
such investment. Rosenblum has adequate means for providing for its current
financial needs and has no need for liquidity with respect to this investment.
7.3 Rosenblum has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of an
investment in the Warrants and in protecting its own interest in connection with
this transaction.
7.4 Rosenblum understands that the Warrants have not been registered
under the Securities Act of 1933, as amended (the "SECURITIES ACT") or under any
state securities laws. Rosenblum is familiar with the provisions of the
Securities Act and Rule 144 thereunder and understands that the restrictions on
transfer on the Warrants may result in Rosenblum being required to hold the
Warrants for an indefinite period of time.
7.5 Rosenblum agrees not to sell, transfer, assign, gift, create a
security interest in, or otherwise dispose of, with or without consideration
(collectively, "TRANSFER") any of the Warrants except pursuant to an effective
registration statement under the Securities Act or an exemption from
registration. As a further condition to any such Transfer, except in the event
that such Transfer is made pursuant to an effective registration statement under
the Securities Act, if in the reasonable opinion of counsel to MRKL any Transfer
of the Warrants by the contemplated transferee thereof would not be exempt from
the registration and prospectus delivery requirements of the Securities Act,
MRKL may require the contemplated transferee to furnish MRKL with an investment
letter setting forth such information and agreements as may be reasonably
requested by MRKL to ensure compliance by such transferee with the Securities
Act.
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8. NOTICES OF RECORD DATE
In the event:
8.1 MRKL shall take a record of the holders of its Common Stock (or
other stock or securities at the time receivable upon the exercise of these
Warrants), for the purpose of entitling them to receive any dividend or other
distribution, or any right to subscribe for or purchase any shares of stock of
any class or any other securities or to receive any other right; or
8.2 of any consolidation or merger of MRKL with or into another
corporation, any capital reorganization of MRKL, any reclassification of the
capital stock of MRKL, or any conveyance of all or substantially all of the
assets of MRKL to another corporation in which holders of MRKL's stock are to
receive stock, securities or property of another corporation; or
8.3 of any voluntary dissolution, liquidation or winding-up of MRKL; or
8.4 of any redemption or conversion of all outstanding Common Stock;
then, and in each such case, MRKL will mail or cause to be mailed to the Holder
a notice specifying, as the case may be, (a) the date on which a record is to be
taken for the purpose of such dividend, distribution or right, or (b) the date
on which such reorganization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation, winding-up, redemption or conversion is to
take place, and the time, if any is to be fixed, as of which the holders of
record of Common Stock (or such stock or securities as at the time are
receivable upon the exercise of these Warrants), shall be entitled to exchange
their shares of Common Stock (or such other stock or securities), for securities
or other property deliverable upon such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding-up. MRKL
shall use all reasonable efforts to ensure such notice shall be delivered at
least 15 days prior to the date therein specified.
9. REGISTRATION RIGHTS
9.1 DEFINITIONS. For purposes of this Section 9, the following terms
shall have the meanings set forth below:
9.1.1 A "BLACKOUT EVENT" means any of the following: (a) the
possession by MRKL of material information that is not ripe for disclosure in a
registration statement or prospectus, as determined reasonably and in good faith
by the Chief Executive Officer or the Board of Directors of MRKL or that
disclosure of such information in the Registration Statement or the prospectus
constituting a part thereof would be materially detrimental to the business and
affairs of MRKL; or (b) any material engagement or activity by MRKL which would,
in the reasonable and good faith determination of the Chief Executive Officer or
the Board of Directors of MRKL, be materially adversely affected by disclosure
in a registration statement or prospectus at such time.
9.1.2 "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended.
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9.1.3 "INCLUDED SHARES" shall mean any Registrable Shares
included in a Registration.
9.1.4 "REGISTRABLE SHARES" shall mean the shares of Common
Stock (or such stock or securities as at the time are receivable upon the
exercise of these Warrants) issuable upon exercise of the Warrants and any other
warrants and or other securities issued to Rosenblum in connection with
performing investor relations services for MRKL, and shares or securities issued
as a result of stock split, stock dividend or reclassification of such shares.
9.1.5 "REGISTRATION" shall mean a registration of securities
under the Securities Act pursuant to Section 9.2 or 9.3 of this Agreement.
9.1.6 "REGISTRATION PERIOD" with respect to any Registration
Statement the period commencing the effective date of the Registration Statement
and ending upon withdrawal or termination of the Registration Statement.
9.1.7 "REGISTRATION STATEMENT" shall mean the registration
statement, as amended from time to time, filed with the SEC in connection with a
Registration.
9.1.8 "SEC" shall mean the Securities and Exchange Commission.
9.1.9 "TRILOGY REGISTRATION STATEMENT" shall mean that
Registration Statement which MRKL is obligated to file with the SEC pursuant to
Section 9.2 of those certain warrants of MRKL issued to Trilogy Capital
Partners, Inc., on December 7, 2004, and attached hereto as EXHIBIT A.
9.1.10 "SUBSEQUENT REGISTRATION STATEMENT" shall mean the
first Registration Statement filed by MRKL with the SEC following the filing of
the Trilogy Registration Statement.
9.2 DEMAND REGISTRATION. Fifty (50) percent of the Registrable Shares
shall be included in the Trilogy Registration Statement. The remaining
Registrable Shares shall be included in the Subsequent Registration Statement.
Once effective, MRKL shall prepare and file with the SEC such amendments and
supplements to the Registration Statement and the prospectus forming a part
thereof as may be necessary to keep the Registration Statement effective until
the earliest date on which (i) all the Included Shares have been disposed of
pursuant to the Registration Statement, or (ii) all of the Included Shares then
held by Holder may be sold under the provisions of Rule 144 without limitation
as to volume, whether pursuant to Rule 144(k) or otherwise.
9.3 PIGGYBACK REGISTRATION. Unless the Registrable Shares are then
included in a Registration Statement or can be sold under the provisions of Rule
144 without limitation as to volume, whether pursuant to Rule 144(k) or
otherwise, if MRKL shall determine to register any Common Stock under the
Securities Act for sale in connection with a public offering of Common Stock
(other than pursuant to an employee benefit plan or a merger, acquisition or
similar transaction), MRKL will give written notice thereof to Holder and will
include in such Registration Statement any of the Registrable Shares which
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Holder may request be included ("INCLUDED SHARES") by a writing delivered to
MRKL within 15 days after the notice given by MRKL to Holder; PROVIDED, HOWEVER,
that if the offering is to be firmly underwritten, and the representative of the
underwriters of the offering refuse in writing to include in the offering all of
the shares of Common Stock requested by MRKL and others, the shares to be
included shall be allocated first to MRKL and any shareholder who initiated such
Registration and then among the others based on the respective number of shares
of Common Stock held by such persons. If MRKL decides not to, and does not, file
a Registration Statement with respect to such Registration, or after filing
determines to withdraw the same before the effective date thereof, MRKL will
promptly so inform Holder, and MRKL will not be obligated to complete the
registration of the Included Shares included therein.
9.4 CERTAIN COVENANTS. In connection with any Registration:
9.4.1 MRKL shall take all lawful action such that the
Registration Statement, any amendment thereto and the prospectus forming a part
thereof does not contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading. Upon becoming aware of the occurrence of any event or the discovery
of any facts during the Registration Period that make any statement of a
material fact made in the Registration Statement or the related prospectus
untrue in any material respect or which material fact is omitted from the
Registration Statement or related prospectus that requires the making of any
changes in the Registration Statement or related prospectus so that it will not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading (taking into account any prior amendments or
supplements), MRKL shall promptly notify Holder, and, subject to the provisions
of Section 9.5, as soon as reasonably practicable prepare (but, subject to
Section 9.5, in no event more than five business days in the case of a
supplement or seven business days in the case of a post-effective amendment) and
file with the SEC a supplement or post-effective amendment to the Registration
Statement or the related prospectus or file any other required document so that,
as thereafter delivered to a purchaser of Shares from Holder, such prospectus
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
9.4.2 At least three business days prior to the filing with
the SEC of the Registration Statement (or any amendment thereto) or the
prospectus forming a part thereof (or any supplement thereto), MRKL shall
provide draft copies thereof to Holder and shall consider incorporating into
such documents such comments as Holder (and its counsel) may propose to be
incorporated therein. Notwithstanding the foregoing, no prospectus supplement,
the form of which has previously been provided to Holder, need be delivered in
draft form to Holder.
9.4.3 MRKL shall promptly notify Holder upon the occurrence of
any of the following events in respect of the Registration Statement or the
prospectus forming a part thereof: (i) the receipt of any request for additional
information from the SEC or any other federal or state governmental authority,
the response to which would require any amendments or supplements to the
Registration Statement or related prospectus; (ii) the issuance by the SEC or
any other federal or state governmental authority of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
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proceedings for that purpose; or (iii) the receipt of any notification with
respect to the suspension of the qualification or exemption from qualification
of any of the Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose.
9.4.4 MRKL shall furnish to Holder with respect to the
Included Shares registered under the Registration Statement (and to each
underwriter, if any, of such Shares) such number of copies of prospectuses and
such other documents as Holder may reasonably request, in order to facilitate
the public sale or other disposition of all or any of the Included Shares by
Holder pursuant to the Registration Statement.
9.4.5 In connection with any registration pursuant to Section
9.2, MRKL shall file or cause to be filed such documents as are required to be
filed by MRKL for normal Blue Sky clearance in states specified in writing by
Holder; PROVIDED, HOWEVER, that MRKL shall not be required to qualify to do
business or consent to service of process in any jurisdiction in which it is not
now so qualified or has not so consented.
9.4.6 MRKL shall bear and pay all expenses incurred by it and
Holder (other than underwriting discounts, brokerage fees and commissions and
fees and expenses of more than one law firm) in connection with the registration
of the Shares pursuant to the Registration Statement.
9.4.7 As a condition to including Registrable Shares in a
Registration Statement, Holder must provide to MRKL such information regarding
itself, the Registrable Shares held by it and the intended method of
distribution of such Shares as shall be required to effect the registration of
the Registrable Shares and, if the offering is being underwritten, Holder must
provide such powers of attorney, indemnities and other documents as may be
reasonably requested by the managing underwriter.
9.4.8 Following the effectiveness of the Registration
Statement, upon receipt from MRKL of a notice that the Registration Statement
contains an untrue statement of material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances under which they were made, Holder
will immediately discontinue disposition of Included Shares pursuant to the
Registration Statement until MRKL notifies Holder that it may resume sales of
Included Shares and, if necessary, provides to Holder copies of the supplemental
or amended prospectus.
9.5 BLACKOUT EVENT. MRKL shall not be obligated to file a
post-effective amendment or supplement to the Registration Statement or the
prospectus constituting a part thereof during the continuance of a Blackout
Event; provided, however, that no Blackout Event may be deemed to exist for more
than 60 days. Without the express written consent of Holder, if required to
permit the continued sale of Shares by Holder, a post-effective amendment or
supplement to Registration Statement or the prospectus constituting a part
thereof must be filed no later than the 61st day following commencement of a
Blackout Event.
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9.6 RULE 144. With a view to making available to Holder the benefits of
Rule 144, MRKL agrees, until Holder can sell all remaining Registrable Shares
under the provisions Rule 144(k), to:
(i) comply with the provisions of paragraph (c)(1) of Rule
144; and
(ii) file with the SEC in a timely manner all reports and
other documents required to be filed by MRKL pursuant to Section 13 or 15(d)
under the Exchange Act; and, if at any time it is not required to file such
reports but in the past had been required to or did file such reports, it will,
upon the request of a Purchaser, make available other information as required
by, and so long as necessary to permit sales of its Shares pursuant to, Rule
144.
9.7 MRKL INDEMNIFICATION. MRKL agrees to indemnify and hold harmless
Holder, and its officers, directors and agents, and each person, if any, who
controls Holder within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act from and against any and all losses, claims,
damages and liabilities caused by (i) any violation or alleged violation by MRKL
of the Securities Act, Exchange Act, any state securities laws or any rule or
regulation promulgated under the Securities Act, Exchange Act or any state
securities laws, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any registration statement or prospectus relating to
the Included Shares (as amended or supplemented if MRKL shall have furnished any
amendments or supplements thereto) or any preliminary prospectus, or (iii)
caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made, except
insofar as such losses, claims, damages or liabilities are caused by any such
untrue statement or omission or alleged untrue statement or omission based upon
information furnished in writing to MRKL by Holder or on Holder's behalf
expressly for use therein.
9.8 HOLDER INDEMNIFICATION. Holder agrees to indemnify and hold
harmless MRKL, its officers, directors and agents and each person, if any, who
controls MRKL within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from MRKL to Holder, but only with respect to information furnished in writing
by Holder or on Holder's behalf expressly for use in any registration statement
or prospectus relating to the Registrable Shares, or any amendment or supplement
thereto, or any preliminary prospectus.
9.9 INDEMNIFICATION PROCEDURES. In case any proceeding (including any
governmental investigation) shall be instituted involving any person in respect
of which indemnity may be sought pursuant to this Section 10, such person (an
"INDEMNIFIED PARTY") shall promptly notify the person against whom such
indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to such Indemnified Party, and shall assume the
payment of all fees and expenses; provided that the failure of any Indemnified
Party so to notify the Indemnifying Party shall not relieve the Indemnifying
Party of its obligations hereunder except to the extent (and only to the extent
that) that the Indemnifying Party is materially prejudiced by such failure to
notify. In any such proceeding, any Indemnified Party shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall be at
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the expense of such Indemnified Party unless (i) the Indemnifying Party and the
Indemnified Party shall have mutually agreed to the retention of such counsel or
(ii) in the reasonable judgment of such Indemnified Party representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the Indemnifying Party
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel) at any time for
all such Indemnified Parties (including in the case of Holder, all of its
officers, directors and controlling persons) and that all such fees and expenses
shall be reimbursed as they are incurred. In the case of any such separate firm
for the Indemnified Parties, the Indemnified Parties shall designate such firm
in writing to the Indemnifying Party. The Indemnifying Party shall not be liable
for any settlement of any proceeding effected without its written consent (which
consent shall not be unreasonably withheld or delayed), but if settled with such
consent, or if there be a final judgment for the plaintiff, the Indemnifying
Party shall indemnify and hold harmless such Indemnified Parties from and
against any loss or liability (to the extent stated above) by reason of such
settlement or judgment. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Party is or could have
been a party and indemnity could have been sought hereunder by such Indemnified
Party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability arising out of such proceeding.
9.10 CONTRIBUTION. To the extent any indemnification by an Indemnifying Party is
prohibited or limited by law, the Indemnifying Party agrees to make the maximum
contribution with respect to any amounts for which, he, she or it would
otherwise be liable under this Section 10.6 to the fullest extent permitted by
law; provided, however, that (i) no contribution shall be made under
circumstances where a party would not have been liable for indemnification under
this Section 10.6 and (ii) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning used in the Securities Act)
shall be entitled to contribution from any party who was not guilty of such
fraudulent misrepresentation. If MRKL shall determine to register any Common
Stock under the Securities Act for sale in connection with a public offering of
Common Stock (other than pursuant to an employee benefit plan or a merger,
acquisition or similar transaction), MRKL will give written notice thereof to
Holder and will include in such registration any of the Registrable Shares which
Holder may request be included ("INCLUDED SHARES") by a writing delivered to
MRKL within 15 days after the notice given by MRKL to Holder; provided, however,
that if the offering is to be firmly underwritten, and the representative of the
underwriters of the offering refuse in writing to include in the offering all of
the shares of Common Stock requested by MRKL and others, the shares to be
included shall be allocated first to MRKL and any shareholder who initiated such
registration and then among the others based on the respective number of shares
of Common Stock held by such persons. If MRKL decides not to, and does not, file
a registration statement with respect to such registration, or after filing
determines to withdraw the same before the effective date thereof, MRKL will
promptly so inform Holder, and MRKL will not be obligated to complete the
registration of the Included Shares included therein. MRKL will pay all costs
and expenses of such registration other than underwriting discounts or brokerage
fees or commissions in connection with the sale of the Included Shares and fees
and costs of accountants, attorneys or others retained by Holder. For purposes
of this Agreement, "REGISTRABLE SHARES" shall mean the shares of Common Stock
(or such stock or securities as at the time are receivable upon the exercise of
these Warrants) issuable upon exercise of the Warrants and any shares issued as
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a result of stock split, stock dividend or reclassification of such shares;
PROVIDED, HOWEVER, that any share shall cease to be a Registrable Share if and
when (a) it has been effectively registered under the Securities Act and
disposed of pursuant thereto, or (b) the holder may sell such share (or in the
case of a share not yet issued under this Warrant, the holder may exercise this
Warrant, including pursuant to Section 1.4, and sell such share issued upon such
exercise) in the market on which MRKL common stock is then traded without
registration under the Securities Act.
9.11 In connection with any registration under this Section 9, MRKL
will:
9.11.1 furnish to Holder a copy of the registration statement
and each amendment to the registration statement and such number of copies of
the final prospectus included in the registration statement as Holder may
reasonably request in order to facilitate the distribution of the Included
Shares owned by Holders; and
9.11.2 notify Holder of the issuance of any stop order by the
Securities and Exchange Commission in connection with the registration
statement.
9.12 As a condition to including Registrable Shares in the registration
statement, Holder must provide to MRKL such information regarding itself, the
Registrable Shares held by it and the intended method of distribution of such
Shares as shall be required to effect the registration of the Registrable Shares
and, if the offering is being underwritten, Holder must provide such powers of
attorney, indemnities and other documents as may be reasonably requested by the
managing underwriter.
9.13 Following the effectiveness of the registration statement, upon
receipt from MRKL of a notice that the registration statement contains an untrue
statement of material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made, Holder will immediately
discontinue disposition of Included Shares pursuant to the registration
statement until MRKL notifies Holder that it may resume sales of Included Shares
and, if necessary, provides to Holder copies of the supplemental or amended
prospectus. In such event, Holder will deliver to MRKL all copies, other than
permanent file copies then in Holder's possession, of the most recent prospectus
covering the Included Shares.
9.14 MRKL agrees to indemnify and hold harmless Holder, and its
officers, directors and agents, and each person, if any, who controls Holder
within the meaning of Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") from and
against any and all losses, claims, damages and liabilities caused by (i) any
violation or alleged violation by MRKL of the Securities Act, Exchange Act, any
state securities laws or any rule or regulation promulgated under the Securities
Act, Exchange Act or any state securities laws, (ii) any untrue statement or
alleged untrue statement of a material fact contained in any registration
statement or prospectus relating to the Included Shares (as amended or
supplemented if MRKL shall have furnished any amendments or supplements thereto)
or any preliminary prospectus, or (iii) caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
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circumstances under which they were made, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information furnished in writing
to MRKL by Holder or on Holder's behalf expressly for use therein.
9.15 Holder agrees to indemnify and hold harmless MRKL, its officers,
directors and agents and each person, if any, who controls MRKL within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act to the same extent as the foregoing indemnity from MRKL to Holder, but only
with respect to information furnished in writing by Holder or on Holder's behalf
expressly for use in any registration statement or prospectus relating to the
Registrable Shares, or any amendment or supplement thereto, or any preliminary
prospectus.
9.16 In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 10, such person (an "INDEMNIFIED Party") shall
promptly notify the person against whom such indemnity may be sought (the
"INDEMNIFYING PARTY") in writing and the Indemnifying Party shall assume the
defense thereof, including the employment of counsel reasonably satisfactory to
such Indemnified Party, and shall assume the payment of all fees and expenses;
provided that the failure of any Indemnified Party so to notify the Indemnifying
Party shall not relieve the Indemnifying Party of its obligations hereunder
except to the extent (and only to the extent that) that the Indemnifying Party
is materially prejudiced by such failure to notify. In any such proceeding, any
Indemnified Party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
unless (i) the Indemnifying Party and the Indemnified Party shall have mutually
agreed to the retention of such counsel or (ii) in the reasonable judgment of
such Indemnified Party representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them. It
is understood that the Indemnifying Party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) at any time for all such Indemnified Parties
(including in the case of Holder, all of its officers, directors and controlling
persons) and that all such fees and expenses shall be reimbursed as they are
incurred. In the case of any such separate firm for the Indemnified Parties, the
Indemnified Parties shall designate such firm in writing to the Indemnifying
Party. The Indemnifying Party shall not be liable for any settlement of any
proceeding effected without its written consent (which consent shall not be
unreasonably withheld or delayed), but if settled with such consent, or if there
be a final judgment for the plaintiff, the Indemnifying Party shall indemnify
and hold harmless such Indemnified Parties from and against any loss or
liability (to the extent stated above) by reason of such settlement or judgment.
No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending or threatened proceeding
in respect of which any Indemnified Party is or could have been a party and
indemnity could have been sought hereunder by such Indemnified Party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability arising out of such proceeding.
10. NONTRANSFERABILITY. Rosenblum may not sell or transfer any Warrants to any
person other than an affiliate of Rosenblum without the written consent of MRKL.
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11. SEVERABILITY. If any term, provision, covenant or restriction of these
Warrants is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of these Warrants shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
12. NOTICES. All notices, requests, consents and other communications required
hereunder shall be in writing and shall be effective when delivered or, if
delivered by registered or certified mail, postage prepaid, return receipt
requested, shall be effective on the third day following deposit in United
States mail: to the Holder, at Law Offices of Michael S. Rosenblum, 1875 Centruy
Park East, Suite 700, Los Angeles, California, 90067; and if addressed to MRKL,
at Markland Technologies, Inc., Attn: Robert Tarini, Chairman and CEO, 54
Danbury Road, Suite 207, Connecticut, 06877, or such other address as Holder or
MRKL may designate in writing.
13. NO RIGHTS AS SHAREHOLDER. The Holder shall have no rights as a shareholder
of MRKL with respect to the shares issuable upon exercise of the Warrants until
the receipt by MRKL of all of the Exercise Documents.
MARKLAND TECHNOLOGIES, INC.
By: _______________________________
Its: ______________________________
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EXHIBIT "A"
NOTICE OF EXERCISE
(TO BE SIGNED ONLY UPON EXERCISE OF THE WARRANTS)
To: Markland Technologies, Inc.
The undersigned hereby elects to purchase shares of Common Stock (the
"WARRANT SHARES") of Markland Technologies, Inc. ("MRKL"), pursuant to the terms
of the enclosed warrant certificate (the "CERTIFICATE"). The undersigned tenders
herewith payment of the exercise price pursuant to the terms of the Certificate.
The undersigned hereby represents and warrants to, and agrees with,
MRKL as follows:
1. Holder is acquiring the Warrant Shares for its own account, for
investment purposes only.
2. Holder understands that an investment in the Warrant Shares involves
a high degree of risk, and Holder has the financial ability to bear the economic
risk of this investment in the Warrant Shares, including a complete loss of such
investment. Holder has adequate means for providing for its current financial
needs and has no need for liquidity with respect to this investment.
3. Holder has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of an investment
in the Warrant Shares and in protecting its own interest in connection with this
transaction.
4. Holder understands that the Warrant Shares have not been registered
under the Securities Act of 1933, as amended (the "SECURITIES ACT") or under any
state securities laws. Holder is familiar with the provisions of the Securities
Act and Rule 144 thereunder and understands that the restrictions on transfer on
the Warrant Shares may result in Holder being required to hold the Warrant
Shares for an indefinite period of time.
5. Holder agrees not to sell, transfer, assign, gift, create a security
interest in, or otherwise dispose of, with or without consideration
(collectively, "TRANSFER") any of the Warrant Shares except pursuant to an
effective registration statement under the Securities Act or an exemption from
registration. As a further condition to any such Transfer, except in the event
that such Transfer is made pursuant to an effective registration statement under
the Securities Act, if in the reasonable opinion of counsel to MRKL any Transfer
of the Warrant Shares by the contemplated transferee thereof would not be exempt
from the registration and prospectus delivery requirements of the Securities
Act, MRKL may require the contemplated transferee to furnish MRKL with an
investment letter setting forth such information and agreements as may be
reasonably requested by MRKL to ensure compliance by such transferee with the
Securities Act.
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Each certificate evidencing the Warrant Shares will bear the following
legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY APPLICABLE STATE SECURITIES LAWS
AND MAY NOT BE EXERCISED, SOLD, PLEDGED OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE ACT OR UNLESS AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
6. The Holder is either an "accredited investor" as defined under
Regulation D of the Securities and Exchange Commission under the Securities Act
or has reviewed the most recent Form 10-K filed by MRKL under the Securities
Exchange Act of 1934, as amended, and each other filing by MRKL under such Act
filed thereafter.
7. Immediately following this exercise of Warrants, if as of the date
of exercise MRKL has a class of securities registered under Section 12 of the
Securities Exchange Act of 1934, as amended, the undersigned will not
beneficially own five percent (5%) or more of the then outstanding Common Stock
of MRKL (based on the number of shares outstanding set forth in the most recent
periodic report filed by MRKL with the Securities and Exchange Commission and
any additional shares which have been issued since that date of which Holder is
aware have been issued).
Number of Warrants Exercised: ______________
Net Exercise ____ Yes ____ No
Dated: ____________________
______________________________________________
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