Document:

Unassociated Document

    
      FORBEARANCE
AND FIRST AMENDMENT

       

      TO

       

      AMENDED
AND RESTATED LOAN AND SECURITY AGREEMENT

       

      This
FORBEARANCE AND FIRST
AMENDMENT to Amended and Restated Loan and Security Agreement (this
“Amendment”) is entered
into as of February 8, 2011 by and between SILICON VALLEY BANK (“Bank”) and US DATAWORKS, INC.,
a Nevada corporation (“Borrower”) whose address is
One Sugar Creek Center Blvd., 5th Floor, Sugarland, TX 77478.

       

      Recitals

       

      A. Bank and
Borrower have entered into that certain Amended and Restated Loan and Security
Agreement dated effective as of October 27, 2010 (as the same may from time to
time be amended, modified, supplemented or restated, the “Loan
Agreement”).  Bank has extended credit to Borrower for the
purposes permitted in the Loan Agreement.

       

      B. Borrower
is currently in default of the Loan Agreement for failing to comply with the
covenant set forth in Section 6.7(a) of the Loan Agreement as in effect prior to
the date hereof for the three month period ending December 31, 2010 (the “Existing
Default”).

       

      C. Borrower
has requested that Bank forbear from exercising its rights and remedies against
Borrower from the date hereof through April 30, 2011 (the “Forbearance
Period”).  Although Bank is under no obligation to do so, Bank
is willing to forbear from exercising its rights and remedies against Borrower
through the Forbearance Period on the terms and conditions set forth in this
Amendment, so long as Borrower complies with the terms, covenants and conditions
set forth in this Amendment in a timely manner.

       

      D. Borrower
has further requested that Bank amend the Loan Agreement to (i) extend the
Maturity Date and (ii) make certain other revisions to the Loan Agreement as
more fully set forth herein.  Bank has agreed to so amend certain
provisions of the Loan Agreement, but only to the extent, in accordance with the
terms, subject to the conditions and in reliance upon the representations and
warranties set forth below.

       

      Agreement

       

      Now,
Therefore, in
consideration of the foregoing recitals and other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, and
intending to be legally bound, the parties hereto agree as follows:

       

      1. Definitions.  Capitalized
terms used but not defined in this Amendment shall have the meanings given to
them in the Loan Agreement.

       

      2. Forbearance.

       

      2.1 Forbearance
Period.  So long as no Event of Default, other than the
Existing Default, occurs, subject to the terms and conditions set forth herein,
Bank shall forbear from filing any legal action or instituting or enforcing any
rights and remedies it may have against Borrower through the Forbearance
Period.  Except as expressly provided herein, this Amendment does not
constitute a waiver or release by Bank of any Obligations or of any existing
Event of Default other than the Existing Default or Event of Default which may
arise in the future after the date of execution of this Amendment.  If
Borrower does not comply with the terms of this Amendment, Bank shall have no
further obligations under this Amendment and shall be permitted to exercise at
such time any rights and remedies against Borrower as it deems appropriate in
its sole and absolute discretion.  Borrower understands that Bank has
made no commitment and is under no obligation whatsoever to grant any additional
extensions of time at the end of the Forbearance Period.

       

      2.2 Forbearance
Terms.  Repayment and performance of all obligations of
Borrower to Bank under the Loan Agreement and this Amendment shall be secured by
the Collateral.

       

       

      
        
           

        

        
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      3. Amendments
to Loan Agreement.

       

      3.1 Section 6.2 (Financial Statements,
Reports, Certificates).  Section 6.2(e) is amended in its
entirety and replaced with the following:

       

      “(e)           Provide
Bank with, as soon as available, but no later than thirty (30) days following each
Reconciliation Period, an aged listing of accounts receivable and accounts
payable by invoice date, in form acceptable to Bank.”

       

      3.2 Section 6.7 (Financial
Covenant). Section 6.7(a) is amended in its entirety and replaced with
the following:

       

      “(a)           EBITDA Performance to
Plan.  As of January 31, 2011, Borrower’s EBITDA for the three
(3) months ending on such measurement date shall be at least Two Hundred Fifty
Thousand Dollars ($250,000).  As of February 28, 2011, Borrower’s
EBITDA for the three (3) months ending on such measurement date shall be at
least Two Hundred Forty One Thousand Dollars ($241,000).  As of March
31, 2011, Borrower’s EBITDA for the three (3) months ending on such measurement
date shall be at least Two Hundred Twenty Three Thousand Dollars
($223,000).  As of the last day of each month beginning with the month
ending April 30, 2011, Borrower’s EBITDA for the three (3) months ending on such
measurement date shall be at least an amount mutually agreed upon between
Borrower and Bank on or prior to such date.

       

      3.3 Section 13
(Definitions).  The following term and its respective
definition set forth in Section 13.1 is amended in its entirety and replaced
with the following:

       

      “Maturity Date” is May 9,
2011.

       

      3.4 Section 13
(Definitions).  Subsection (o) in the definition of the term
“Eligible Accounts” set forth in Section 13.1 is hereby amended in its entirety
and replaced with the following:

       

      “(o)           Accounts
owing from an Account Debtor with respect to which Borrower has recognized
Deferred Revenue (but only to the extent of such Deferred Revenue), unless
otherwise consented to by Bank in writing, it being understood that when
Borrower is able to record such Deferred Revenue as actual revenue, the amount
of such recordable actual revenue shall become an Eligible
Account;”

       

      3.5 Exhibit B
is hereby replaced with Exhibit B attached hereto.

       

      3.6 Notwithstanding
anything to the contrary contained in the Loan Agreement or the Amended and
Restated Subordination Agreement by and between Bank and the creditors a party
thereto and approved by Borrower, made as of October 27, 2010, Bank hereby
consents to Borrower making the interest payment on the Subordinated Debt due in
January 2011 provided that the amount of such interest payment shall not exceed
Thirty Thousand One Hundred Dollars ($30,100).

       

      3.7 Notwithstanding
anything to the contrary contained in the Loan Agreement, the existence of the
Existing Default, in and of itself, will not prevent Bank from receiving
Advances during the Forbearance Period.

       

      4. Limitation
of Amendments.

       

      4.1 The
amendments set forth in Section
3, above, are effective for the purposes set forth herein and shall be
limited precisely as written and shall not be deemed to (a) be a consent to any
amendment, waiver or modification of any other term or condition of any Loan
Document, or (b) otherwise prejudice any right or remedy which Bank may now have
or may have in the future under or in connection with any Loan
Document.

       

       

      
        
           

        

        
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      4.2 This
Amendment shall be construed in connection with and as part of the Loan
Documents and all terms, conditions, representations, warranties, covenants and
agreements set forth in the Loan Documents, except as herein amended, are hereby
ratified and confirmed and shall remain in full force and effect.

       

      5. Representations and
Warranties.  To induce Bank to enter into this Amendment,
Borrower hereby represents and warrants to Bank as follows:

       

      5.1 Immediately
after giving effect to this Amendment (a) the representations and warranties
contained in the Loan Documents are true, accurate and complete in all material
respects as of the date hereof (except to the extent such representations and
warranties relate to an earlier date, in which case they are true and correct as
of such date), and (b) no Event of Default other than the Existing Default has
occurred and is continuing;

       

      5.2 Borrower
has the power and authority to execute and deliver this Amendment and to perform
its obligations under the Loan Agreement, as amended by this
Amendment;

       

      5.3 The
organizational documents of Borrower delivered to Bank on the Effective Date
remain true, accurate and complete and have not been amended, supplemented or
restated and are and continue to be in full force and effect;

       

      5.4 The
execution and delivery by Borrower of this Amendment and the performance by
Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, have been duly authorized by all necessary action on the part of
Borrower;

       

      5.5 The
execution and delivery by Borrower of this Amendment and the performance by
Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, do not and will not contravene (a) any law or regulation binding on
or affecting Borrower, (b) any contractual restriction with a Person binding on
Borrower, (c) any order, judgment or decree of any court or other governmental
or public body or authority, or subdivision thereof, binding on Borrower, or (d)
the organizational documents of Borrower;

       

      5.6 The
execution and delivery by Borrower of this Amendment and the performance by
Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, do not require any order, consent, approval, license, authorization
or validation of, or filing, recording or registration with, or exemption by any
governmental or public body or authority, or subdivision thereof, binding on
either Borrower, except as already has been obtained or made; and

       

      5.7 This
Amendment has been duly executed and delivered by Borrower and is the binding
obligation of Borrower, enforceable against Borrower in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, liquidation, moratorium or other similar laws of general
application and equitable principles relating to or affecting creditors’
rights.

       

      6. Prior
Agreement.  Except as expressly provided for in this Amendment,
the Loan Documents, as amended by this Amendment, are hereby ratified and
reaffirmed and shall remain in full force and effect.  This Amendment
is not a novation and the terms and conditions of this Amendment shall be in
addition to and supplemental to all terms and conditions set forth in the Loan
Documents.  In the event of any conflict or inconsistency between this
Amendment and the terms of such documents, the terms of this Amendment shall be
controlling, but such document shall not otherwise be affected or the rights
therein impaired.

       

      7. Release
by Borrower.

       

      7.1 FOR GOOD AND VALUABLE
CONSIDERATION, Borrower hereby forever relieves, releases, and discharges
Bank and its present or former employees, officers, directors, agents,
representatives, attorneys, and each of them, from any and all claims, debts,
liabilities, demands, obligations, promises, acts, agreements, costs and
expenses, actions and causes of action, of every type, kind, nature, description
or character whatsoever, whether known or unknown, suspected or unsuspected,
absolute or contingent, arising out of or in any manner whatsoever connected
with or related to facts, circumstances, issues, controversies or claims
existing or arising from the beginning of time through and including the date of
execution of this Amendment (collectively “Released
Claims”).  Without limiting the foregoing, the Released Claims
shall include any and all liabilities or claims arising out of or in any manner
whatsoever connected with or related to the Loan Documents, the Recitals hereto,
any instruments, agreements or documents executed in connection with any of the
foregoing or the origination, negotiation, administration, servicing and/or
enforcement of any of the foregoing.

       

      7.2 In
furtherance of this release, Borrower expressly acknowledges and waives any and
all rights under Section 1542 of the California Civil Code, which provides as
follows:

       

      “A general release does not
extend to claims which the creditor does not know or expect to exist in his
favor at the time of executing the release, which if known by him must have
materially affected his settlement with the debtor.” (Emphasis
added.)

       

      7.3 By
entering into this release, Borrower recognizes that no facts or representations
are ever absolutely certain and it may hereafter discover facts in addition to
or different from those which it presently knows or believes to be true, but
that it is the intention of Borrower hereby to fully, finally and forever settle
and release all matters, disputes and differences, known or unknown, suspected
or unsuspected; accordingly, if Borrower should subsequently discover that any
fact that it relied upon in entering into this release was untrue, or that any
understanding of the facts was incorrect, Borrower shall not be entitled to set
aside this release by reason thereof, regardless of any claim of mistake of fact
or law or any other circumstances whatsoever.  Borrower acknowledges
that it is not relying upon and has not relied upon any representation or
statement made by Bank with respect to the facts underlying this release or with
regard to any of such party’s rights or asserted rights.

       

      7.4 This
release may be pleaded as a full and complete defense and/or as a
cross-complaint or counterclaim against any action, suit, or other proceeding
that may be instituted, prosecuted or attempted in breach of this
release.  Borrower acknowledges that the release contained herein
constitutes a material inducement to Bank to enter into this Amendment, and that
Bank would not have done so but for Bank’s expectation that such release is
valid and enforceable in all events.

       

      7.5 Borrower
hereby represents and warrants to Bank, and Bank is relying thereon, as
follows:

       

      (a) Except as
expressly stated in this Amendment, neither Bank nor any agent, employee or
representative of Bank has made any statement or representation to Borrower
regarding any fact relied upon by Borrower in entering into this
Amendment.

       

      (b) Borrower
has made such investigation of the facts pertaining to this Amendment and all of
the matters appertaining thereto, as it deems necessary.

       

      (c) The terms
of this Amendment are contractual and not a mere recital.

       

      (d) This
Amendment has been carefully read by Borrower, the contents hereof are known and
understood by Borrower, and this Amendment is signed freely, and without duress,
by Borrower.

       

      (e) Borrower
represents and warrants that it is the sole and lawful owner of all right, title
and interest in and to every claim and every other matter which it releases
herein, and that it has not heretofore assigned or transferred, or purported to
assign or transfer, to any person, firm or entity any claims or other matters
herein released.  Borrower shall indemnify Bank, defend and hold it
harmless from and against all claims based upon or arising in connection with
prior assignments or purported assignments or transfers of any claims or matters
released herein.

       

      8. Counterparts.  This
Amendment may be executed in any number of counterparts and all of such
counterparts taken together shall be deemed to constitute one and the same
instrument.

       

       

      
        
           

        

        
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      9. Effectiveness.  This
Amendment shall be deemed effective upon (a) the due execution and delivery
to Bank of this Amendment by each party hereto, (b) Borrower’s payment of
an amendment and forbearance fee in an amount equal to Five Thousand Dollars
($5,000), and (c) the due execution and delivery to Bank of updated
Borrowing Resolutions.

       

      10. Governing Law.  This
Amendment and the rights and obligations of the parties hereto shall be governed
by and construed in accordance with the laws of the State of
California.

       

      [Balance of Page Intentionally Left
Blank]

       

       

      
 

      
        
           

        

        
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      In Witness
Whereof, the parties hereto have caused this Amendment to be duly
executed and delivered as of the date first written above.

       

      
        
          	
                  BANK

                   

                  SILICON
      VALLEY BANK

                   

                   

                   

                  By:
      Priya
      Iyer

                  Name:
      Priya
      Iyer

                  Title:
      Relationship
      Manager

                	
                  BORROWER

                   

                  US
      DATAWORKS, INC.

                   

                   

                   

                  By:
      Randall J.
      Frapart

                  Name:
      Randall J.
      Frapart

                  Title:
      Chief Financial
      Officer

                

        

      

      

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      [Signature Page to Forbearance and
First Amendment to

       

      Amended and Restated Loan and
Security Agreement]

       

      

       

      

       

       

       

       

       

      -5-Converted by EDGARwiz

Exhibit A

Form of Warrant Certificate

[Face of Warrant]

 No. SCW- ___________

 ______________Warrants

 

To Purchase One Share

Of Common Stock Each

CITIZENS BANCORP

Organized Under the Laws of the State of California

THIS CERTIFIES THAT, for value received, _________________________________

the registered holder hereof or registered assigns (the “Holder”), is entitled to purchase from Citizens Bancorp, a California corporation (the “Company”), at $5.00 (the “Warrant Price”), one share of the Company’s common stock, no par value (the “Common Stock”), for each Warrant comprising the aggregate number of Warrants set forth above.  The number of shares purchasable upon exercise of this Warrant and the Warrant Price per share may be subject to adjustment from time to time as set forth herein.  This Warrant shall expire at 5:00 p.m. Pacific Time on [*], 20[*] (the “Expiration Date”), unless extended by the Company, subject to regulatory approval.  

This Warrant is issued in connection with the Company’s offering of units of the Company.  Each unit consists of one share of Common Stock and two Warrants, each to purchase one share of Common Stock.  The shares of Common Stock to be issued upon the exercise of Warrants are referred to herein as “Warrant Shares.”  

1.

Exercise Period and Expiration Date.  The Warrants are exercisable commencing one year after the date of issuance until the Expiration Date (the “Exercise Period”), unless extended.  This Warrant shall expire in its entirety and no longer be exercisable at 5:00 p.m., Pacific Time, on the Expiration Date, unless extended.  The Company shall use its best efforts to qualify or register the Warrant Shares under the laws of the states in which the Holders reside and under applicable federal securities laws where no exemption from such registration or qualification is available.

2.

Exercise of Warrants.  This Warrant may be exercised at the office of the Company’s Warrant Agent at 250 Royall Street, Canton, Massachusetts 02021, upon presentation and surrender hereof, with the Warrant Exercise Form on the reverse side hereof duly completed and signed, and upon payment to the Company of the Warrant Price (as adjusted in accordance with the provisions of Section 9 hereof), for the number of Warrant Shares in respect of which such Warrant is then exercised.  Payment of the aggregate Warrant Price shall be made in cash in United States dollars, by certified or official Company check payable in United States dollars to the order of the Company, or by any combination thereof. 

The Company shall not be required to issue fractional Warrant Shares on the exercise of Warrants.  When Warrants shall be presented for exercise in full at the same time by the same Holder, the number of full Warrant Shares which shall be issuable upon the exercise thereof shall be computed on the basis of the aggregate number of Warrant Shares purchasable by such Holder on exercise of the Warrants so presented.  If any fraction of a Warrant Share would be issuable on the exercise of any Warrants in full, the Company shall pay an amount in cash equal to the then current market price per Warrant Share multiplied by such fraction.  When Warrants shall be presented for exercise as to a specified portion, only full Warrant Shares shall be issuable and a new Warrant shall be issuable evidencing the remaining Warrant or Warrants.

Upon such surrender of Warrants and payment of the Warrant Price as aforesaid, the Company or its Warrant Agent shall issue and cause to be delivered with all reasonable dispatch to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate or certificates for the number of full Warrant Shares so purchased upon the exercise of such Warrants, together with cash, as provided above in this Section 2, in respect of any

 

 

fractional Warrant Share otherwise issuable upon such surrender.  Such certificate or certificates shall be deemed to have been issued and any person so designated to be named therein shall be deemed to become a holder of record of such Warrant Shares as of the date of the surrender of such Warrants and payment of the Warrant Price, as aforesaid; provided, however, that if, at the date of surrender of such Warrants and payment of the Warrant Price, the transfer books for the Warrant Shares or other class of stock purchasable upon the exercise of such Warrants shall be closed, the certificates for the Warrant Shares in respect of which such Warrants are then exercised shall be issuable as of the date on which such books shall next be opened (whether before or after the Expiration Date) and until such date the Company shall be under no duty to deliver any certificate for such Warrant Shares.  The purchase rights represented by the Warrants shall be
exercisable, at the election of the Holders thereof, either in full or from time to time in part and, in the event that a Warrant is exercised in respect of less than all of the Warrant Shares purchasable on such exercise at any time prior to the date of expiration of the Warrants, a new Warrant evidencing the remaining Warrant or Warrants will be issued.  All Warrants surrendered in the exercise of the rights thereby evidenced shall be cancelled by the Company. 

3.

Exchange of Warrants.  This Warrant may be exchanged without charge by the Warrant Agent (although the Warrant Agent may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any such exchange) for another Warrant(s) entitling the Holder thereof to purchase a like aggregate number of Warrant Shares as the Warrant(s) surrendered then entitle such Holder to purchase.  Any Holder desiring to exchange a Warrant(s) shall make such request in writing delivered to the Warrant Agent and shall surrender, properly endorsed, the Warrant(s) to be so exchanged.  Thereupon, the Warrant Agent shall deliver to the person(s) entitled thereto new Warrant(s) as so requested. 

Reference is hereby made to the further provisions of this Warrant set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. 

WITNESS, the facsimile seal of the Company and the facsimile signatures of its duly authorized officers.  This Warrant Certificate is not valid until countersigned by the Warrant Agent. 

CITIZENS BANCORP,

[SEAL]

a California corporation

         By:

_______________________________________

President

         By:

_______________________________________

Secretary

         Dated:

_______________________________________

         Countersigned: 

COMPUTERSHARE, INC.

As Warrant Agent

         By: _______________________________________

Authorized Officer

[End Warrant Face]

 

[Reverse Side Of Warrant]

4.

Transfer, Split Up, Combination and Exchange of Warrant Certificates. Subject to the provisions of Section 2 hereof and Section 5 and subject to applicable law, rules or regulations, restrictions on transferability that may appear on Warrant Certificates in accordance with the terms hereof or any “stop transfer” instructions the Company may give to the Warrant Agent, at any time after the Close of Business on the date hereof, at or prior to the Close of Business on the Expiration Date (as such term is hereinafter defined), any Warrant Certificate or Warrant Certificates may be transferred, split up, combined or exchanged for another Warrant Certificate or Warrant Certificates, entitling the registered holder to purchase a like number of shares of Common Stock as the Warrant Certificate or Warrant Certificates surrendered then entitled such holder to purchase.  Any registered holder desiring to transfer, split up,
combine or exchange any Warrant Certificate shall make such request in writing delivered to the Warrant Agent, and shall surrender the Warrant Certificate or Warrant Certificates to be transferred, split up, combined or exchanged at the principal office of the Warrant Agent.  Thereupon the Warrant Agent shall, subject to Section 5, countersign and deliver to the person entitled thereto a Warrant Certificate or Warrant Certificates, as the case may be, as so requested.  

 

5.

Payment of Taxes.  The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of Warrant Shares upon the exercise of Warrants; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any Warrants or certificates for Warrant Shares in a name other than that of the registered Holder of the Warrants, and in such case the Company shall not be required to issue or deliver any certificates for shares of Common Stock or any Warrant until the person requesting the same has paid to the Company the amount of such tax or has established to the Company’s satisfaction that such tax has been paid.

6.

Mutilated or Missing Warrants.  In case any of the Warrants shall be mutilated, lost, stolen or destroyed, the Company or its Warrant Agent may, at its discretion issue, upon cancellation of the mutilated Warrant, or in lieu of and in substitution for the Warrant lost, stolen or destroyed, a new Warrant of like tenor and representing an equivalent right or interest; but only upon receipt of evidence satisfactory to the Company or its Warrant Agent of such loss, theft or destruction of such Warrant and indemnity, if requested, also satisfactory to the Company or its Warrant Agent.  An applicant for such a substitute Warrant shall reimburse Company and its Warrant Agent for all reasonable expenses and shall also comply with such other reasonable regulations as the Company or its Warrant Agent may prescribe. 

7.

Reservation of Warrant Shares.  Upon receiving approval from the shareholders to increase the number of shares of authorized common stock, the Company shall at all times, while the Warrants are exercisable, keep reserved, out of its authorized Common Stock, a number of shares of Common Stock sufficient to provide for the exercise of the rights of purchase represented by the outstanding Warrants.  Promptly after the date of expiration of the Warrants, no shares shall be subject to reservation in respect of such Warrants.

8.

Cancellation of Warrants.  The Warrant Agent shall cancel any Warrants surrendered for exchange, substitution, transfer or exercise in whole or in part.  

9.

Adjustment of Warrant Price and Number of Warrant Shares.  The number and kind of securities purchasable upon the exercise of each Warrant and the Warrant Price shall be subject to adjustments from time to time upon the happening of certain events, as hereinafter defined:

9.1

Mechanical Adjustments.  The number of Warrant Shares purchasable upon the exercise of each Warrant and the Warrant Price shall be subject to adjustment as follows:

(a)

In case the Company shall: (i) pay a dividend in shares of Common Stock or
make a distribution in shares of Common Stock; (ii) subdivide its outstanding shares of Common Stock into a greater number of shares; (iii) combine
its outstanding shares of Common Stock into a smaller number of shares of Common Stock; or (iv) issue by reclassification of its shares of Common
Stock or capital reorganization other securities of the Company, the number of Warrant Shares purchasable upon exercise of each Warrant immediately
prior thereto shall be adjusted so that the Holder of each Warrant shall be entitled to receive the kind and number of Warrant Shares or other securities of the

Company which the Holder would have owned or would have been entitled to receive after the happening of any of the events described above, had such Warrant been exercised immediately prior to the happening of such event or any record date with respect thereto.  An adjustment made pursuant to this Paragraph (a) shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event.

(b)

No adjustment in the number of Warrant Shares purchasable hereunder shall be required unless such adjustment would require an increase or decrease of at least one percent (1%) in the number of Warrant Shares purchasable upon the exercise of each Warrant; provided, however, that any adjustments which by reason of this Paragraph (b) are not required to be made shall be carried forward and taken into account in any subsequent adjustment(s).  All calculations shall be made to the nearest one hundredth (1/100) of a share.  

(c)

Whenever the number of Warrant Shares purchasable upon the exercise of each Warrant is adjusted, as herein provided, each Warrant Price payable upon exercise of each Warrant shall be adjusted by multiplying the Warrant Price immediately prior to the adjustment by a fraction, of which the numerator shall be the number of Warrant Shares purchasable upon the exercise of each Warrant immediately prior to the adjustment, and of which the denominator shall be the number of Warrant Shares so purchasable immediately thereafter.  All calculations shall be made to the nearest whole penny.

(d)

For the purpose of this Subsection 9.1, the term “shares of Common Stock” shall mean: (i) the class of stock designated as the Common Stock of the Company at the date of this Warrant; or (ii) any other class of stock resulting from successive changes or reclassifications of such shares consisting solely of changes in par value, or from par value to no par value, or from no par value to par value.  In the event that at any time, as a result of an adjustment made pursuant to Paragraph (a) above, the Holder shall become entitled to purchase any shares of the Company other than shares of Common Stock, thereafter the number of such other shares so purchasable upon exercise of each Warrant and the Warrant Price of such shares shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Warrant Shares contained in Paragraphs (a) through (c),
inclusive, above, and the provisions of Sections 1 and 2 and Subsections 9.2 through 9.4, inclusive, with respect to the Warrant Shares, shall apply on like terms to any such other shares.  

9.2

Voluntary Adjustment by the Company.  The Company may at its option, at any time during the term of the Warrants, reduce the then current Warrant Price to any amount deemed appropriate by the Board of Directors of the Company, subject to regulatory approval.  

9.3

Notice of Adjustment.  Whenever the number of Warrant Shares purchasable upon the exercise of each Warrant and the Warrant Price of such Warrant Shares are adjusted, as herein provided, the Company shall cause to be mailed by first class mail, postage prepaid, to each Holder, notice of such adjustment or adjustments setting forth the number of Warrant Shares purchasable upon the exercise of each Warrant and the Warrant Price of such Warrant Shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made.  Any failure by the Company to give notice to any Holder or any defect therein shall not affect the validity of such adjustment or of the event resulting in the adjustment, nor of the Holder’s rights to such adjustment.

9.4

No Adjustment for Dividends or Distributions.  Except as provided in Subsections 9.1 and 9.6, no adjustment in respect of any dividends or distributions shall be made during the term of a Warrant or upon the exercise of a Warrant.

9.5

Rights Upon Consolidation, Merger, etc.

(a)

In the case of any consolidation of the Company with or merger of the Company
into another corporation or in the case of any sale or conveyance to another corporation of the property of the 

  

Company as an entirety or substantially as an entirety, such successor or purchasing
corporation may assume the obligations hereunder, and may execute with the Company an agreement that each Holder shall have the right thereafter upon payment
of the Warrant Price in effect immediately prior to such transaction to purchase upon exercise of each Warrant the kind and amount of shares and other securities
and property (including cash) which each Holder would have owned or would have been entitled to receive after the happening of such consolidation, merger, sale
or conveyance had such Warrant been exercised immediately prior to such action.  The Company shall mail by first class mail, postage prepaid, to ­each
Holder, notice of the execution of any such agreement.  Such agreement shall provide for adjustments, which shall be as nearly equivalent as may be practicable
to the adjustments provided for in this Section 9.  The provisions of this Subsection 9.5 shall similarly apply to successive consolidations, mergers, sales or
conveyances. 

(b)

In the event that such successor corporation does not execute such an agreement with the Company as provided above, and the Warrants are currently exercisable, then each Holder shall be entitled to exercise outstanding Warrants, during a period of at least 30 days, which period shall terminate at least 5 days prior to consummation of the consolidation, merger, sale or conveyance, and thereby receive consideration in the transaction on the same basis as other previously outstanding shares of the same class as the Warrant Shares acquired upon exercise.  The Company shall use its best efforts to qualify or register the Warrant Shares issued pursuant to this Paragraph (b) under the laws of the states in which the holders reside and under applicable federal securities laws where no exemption from registration or qualification is available.  Warrants not exercised in accordance with this Paragraph (b) before consummation of the
transaction will be canceled and become null and void.  The Company shall mail by first class mail, postage prepaid, to each Holder, at least 10 days prior to the first date on which the Warrants shall become exercisable, notice of the proposed transaction setting forth the first and last date on which the Holder may exercise outstanding Warrants and a description of the terms of this Warrant providing for cancellation of the Warrants in the event that Warrants are not exercised by the prescribed date.

(c)

The Company’s failure to give any notice required by this Subsection 9.5 or any defect therein shall not affect the validity of any such agreement, consolidation, merger, sale or conveyance of property.

(d)

The Company agrees that it will not, by amendment of its Articles of Incorporation or through reorganization, consolidation, merger, dissolution or sale of assets, or by any other voluntary act, avoid or seek to avoid the observance or performance of any of the covenants, stipulations or conditions to be observed or performed hereunder by the Company.  

9.6

Rights Upon Liquidation.  In case: (i) the Company shall make any distribution of its assets to holders of its shares of Common Stock as a liquidation or partial liquidation dividend or by way of return of capital, or other than as a dividend payable out of capital and unimpaired surplus legally available for dividends under California law; or (ii) the Company shall liquidate, dissolve or wind up its affairs (other than in connection with a consolidation, merger or sale of all or substantially all of its property, assets, and business as an entirety), then the Company shall cause to be mailed to each Holder, by first class mail, postage prepaid, at least 20 days prior to the applicable record date, a notice stating the date on which such distribution, liquidation, dissolution or winding up is expected to become effective, and the date on which it is expected that holders of shares of Common Stock of record shall be entitled

to exchange their shares of Common Stock for securities or other property or assets (including cash) deliverable upon such distribution, liquidation, dissolution or winding up.  The Company’s failure to give the notice required by this Subsection 9.6 or any defect therein shall not affect the validity of such distribution, liquidation, dissolution or winding up.

9.7

Statement on Warrant. Irrespective of any adjustments in the
Warrant Price or the number or kind of shares purchasable upon the exercise of the Warrants, Warrants theretofore or thereafter issued may
continue to express the same price and number and kind of shares as are stated in the Warrants initially issued.

10.

No Rights as Stockholders.  Nothing contained in this Warrant shall be construed as conferring upon the Holder hereof or the Holder’s transferees the right to vote or to receive dividends or to consent to or to receive notice as stockholders in respect of any meeting of stockholders for the election of directors of the Company or any other matter, or any rights whatsoever as stockholders of the Company.

11.

Notices.  Any notice pursuant to this Warrant by any Holder to the Company or by the Company to the Holder, shall be in writing and shall be mailed first class, postage prepaid, or delivered: (a) if to the Company, at its Administrative Office at 208 Providence Mine Rd., Suite 122, Nevada City, California 95959; or (b) if to the Holder, at the Holder’s respective address on the books of the Company. 

12.

Applicable Law.  This Warrant shall be governed by and construed in accordance with the laws of the State of California, without giving effect to principles of conflict of laws. 

13.

Captions.  The captions of the Sections and Subsections of this Warrant have been inserted for convenience only and shall have no substantive effect.

ASSIGNMENT OF WARRANT

(To be signed only upon assignment or transfer of Warrant)

		
	To: 

CITIZENS BANCORP 

208 Providence Mine Rd., Suite 122

Nevada City, California, 95959

	Or to:  

COMPUTERSHARE, INC.

250 Royall Street

Canton, Massachusetts 02021

 

FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and transfer(s) ______________________________________________________________________________________

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE: ______________________________________________________________________________________

(Name and Address of Assignee Must be Printed or Typewritten)

______________________________________________________________________________________

the within Warrant, hereby irrevocably constituting and appointing ___________________ Attorney to transfer said Warrant on the books of the Company, with full power of substitution in the premises.

Dated: ______________________________

________________________________________________________________

Signature of Record Holder

________________________________________________________________

Signature of Record Holder

NOTE:  The above signatures(s) must correspond with the names(s) as written upon the face of this Warrant in every particular, without alteration or enlargement or any change whatsoever.

Signature(s) Guaranteed By: ___________________________________

WARRANT EXERCISE FORM

(To be signed only upon exercise of Warrant)

		
	To: 

COMPUTERSHARE, INC.

250 Royall Street

Canton, Massachusetts 02021

	With a Copy to :  

CITIZENS BANCORP 

                  208 Providence Mine Rd., Suite 122

             Nevada City, California, 95959

 

The undersigned hereby irrevocably elect(s) to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder, _______________ shares of the Company’s Common Stock, and request(s) that certificates for such shares be issued in the name of:

Please print name and address:

______________________________________________

______________________________________________

______________________________________________

Please provide Social Security or Federal Tax I.D. No.:

______________________________________________

and, if said number of shares shall not be all the shares purchasable thereunder, that a new Warrant for the balance remaining of the whole number of shares purchasable under the within Warrant be registered in the name of the undersigned Holder or assignee as indicated below and delivered to the address stated below.

DATED:  _____________________________

Address:

_____________________________________

_____________________________________

_____________________________________

Signature of Record Holder or Assignee

_____________________________________

Signature of Record Holder or Assignee

NOTE:  The above signatures(s) must correspond with the name(s) as written upon the face of this Warrant in every particular, without alteration or enlargement or any change whatsoever, unless this Warrant has been assigned.

Signature(s) Guaranteed By: ____________________________________

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