Contract
EXHIBIT 4.6
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR
ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i)
EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL OR
OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE
NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL
AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THIS
WARRANT.
WARRANT TO PURCHASE SHARES
OF COMMON STOCK
OF COMMON STOCK
THIS CERTIFIES THAT, for value received, OTA LLC and its assigns are entitled to subscribe for
and purchase 1,239,527 shares of the fully paid and nonassessable Common Stock (as adjusted pursuant
to Section 4 hereof, the “Shares”) of Dot Hill Systems Corp., a Delaware corporation (the
“Company”), at the price of $2.97 per share, the average of the Company’s closing price as reported
by the New York Stock Exchange 60 trading days before the Date of Grant (such price and such other
price as shall result, from time to time, from the adjustments specified in Section 4 hereof is
herein referred to as the “Warrant Price”), subject to the provisions and upon the terms and
conditions hereinafter set forth. As used herein, the term “Date of Grant” shall mean May 24, 2002,
and (b) the term “Other Warrants” shall mean any other warrants issued by the Company in connection
with the transaction with respect to which this Warrant was issued, and any warrant issued upon
transfer or partial exercise of this Warrant. The term “Warrant” as used herein shall be deemed to
include Other Warrants unless the context clearly requires otherwise.
1. Exercisability; Term. Subject to Section 10.1 below, the purchase right
represented by this Warrant is exercisable as to 413,175 shares immediately, and an additional
413,176 shares on each of the first anniversary and second anniversary of the Date of Grant, in
whole or in part, at any time and from time to time from the Date of Grant through Five (5) years
after the Date of Grant.
2. Method of Exercise; Payment; Issuance of New Warrant. Subject to Section 1 hereof,
the purchase right represented by this Warrant may be exercised by the holder hereof, in whole or
in part and from time to time, at the election of the holder hereof, by (a) the surrender of this
Warrant (with the notice of exercise substantially in the form attached hereto as Exhibit A-1 duly
completed and executed) at the principal office of the Company and by the payment to the Company,
by certified or bank check, or by wire transfer to an account designated by the Company (a “Wire
Transfer”) of an amount equal to the then applicable Warrant Price multiplied by the number of
Shares then being purchased, or (b) if in connection with a registered public offering of the
Company’s securities, the surrender of this Warrant (with the notice of exercise
form attached hereto as Exhibit A-2 duly completed and executed) at the principal office of
the Company together with notice of arrangements reasonably satisfactory to the Company for payment
to the Company either by certified or bank check or by Wire Transfer from the proceeds of the sale
of shares to be sold by the holder in such public offering of an amount equal to the then
applicable Warrant Price per share multiplied by the number of Shares then being purchased or (c)
exercise of the “net issuance” right provided for in Section 10.2 hereof. The person or persons in
whose name(s) any certificate(s) representing the Shares shall be issuable upon exercise of this
Warrant shall be deemed to have become the holder(s) of record of, and shall be treated for all
purposes as the record holder(s) of, the shares represented thereby (and such shares shall be
deemed to have been issued) immediately prior to the close of business on the date or dates upon
which this Warrant is exercised. In the event of any exercise of the rights represented by this
Warrant, certificates for the shares of stock so purchased shall be delivered to the holder hereof
as soon as practicable and, if requested by the holder of this Warrant, the Company shall cause its
transfer agent to deliver the certificate representing Shares issued upon exercise of this Warrant
to a broker or other person (as directed by the holder exercising this Warrant) within the time
period required to settle any trade made by the holder after exercise of this Warrant.
3. Stock Fully Paid; Reservation of Shares. All Shares that may be issued upon the
exercise of the rights represented by this Warrant will, upon issuance pursuant to the terms and
conditions herein, be fully paid and nonassessable, and free from all taxes, liens and charges with
respect to the issue thereof. During the period within which the rights represented by this Warrant
may be exercised, the Company will at all times have authorized, and reserved for the purpose of
the issue upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of
shares of its Common Stock to provide for the exercise of the rights represented by this Warrant.
4. Adjustment of Warrant Price and Number of Shares. The number and kind of
securities purchasable upon the exercise of this Warrant and the Warrant Price shall be subject to
adjustment from time to time upon the occurrence of certain events, as follows:
(a) Reclassification or Merger. In case of any reclassification or change of
securities of the class issuable upon exercise of this Warrant (other than a change in par value,
or from par value to no par value, or from no par value to par value, or as a result of a
subdivision or combination), or in case of any merger of the Company with or into another
corporation (other than a merger with another corporation in which the Company is the acquiring and
the surviving corporation and which does not result in any reclassification or change of
outstanding securities issuable upon exercise of this Warrant), or in case of any sale of all or
substantially all of the assets of the Company, the Company, or such successor or purchasing
corporation, as the case may be, shall duly execute and deliver to the holder of this Warrant a new
Warrant (in form and substance satisfactory to the holder of this Warrant), or the Company shall
make appropriate provision without the issuance of a new Warrant, so that the holder of this
Warrant shall have the right to receive upon exercise of this Warrant, at a total purchase price
not to exceed that payable upon the exercise of the unexercised portion of this Warrant, and in
lieu of the shares of Common Stock theretofore issuable upon exercise of this Warrant, the kind and
amount of shares of stock, other securities, money and property receivable upon such
reclassification, change or merger by a holder of the number of shares of Common Stock then
purchasable under this Warrant. Such new Warrant shall provide for adjustments that shall be as
nearly equivalent as
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may be practicable to the adjustments provided for in this Section 4. The provisions of this
subparagraph (a) shall similarly apply to successive reclassifications, changes, mergers and
transfers.
(b) Subdivision or Combination of Shares. If the Company at any time while this
Warrant remains outstanding and unexpired shall subdivide or combine its outstanding shares of
Common Stock, the Warrant Price shall be proportionately decreased and the number of Shares
issuable hereunder shall be proportionately increased in the case of a subdivision or and the
Warrant Price shall be proportionately increased and the number of Shares issuable hereunder shall
be proportionately decreased in the case of a combination.
(c) Stock Dividends and Other Distributions. If the Company at any time while this
Warrant is outstanding and unexpired shall (i) pay a dividend with respect to its Common Stock
payable in Common Stock, then the Warrant Price shall be adjusted, from and after the date of
determination of shareholders entitled to receive such dividend or distribution, to that price
determined by multiplying the Warrant Price in effect immediately prior to such date of
determination by a fraction (A) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such dividend or distribution, and (B) the
denominator of which shall be the total number of shares of Common Stock outstanding immediately
after such dividend or distribution; or (ii) make any other distribution with respect to Common
Stock (except any distribution specifically provided for in Sections 4(a) and 4(b)), then, in each
such case, provision shall be made by the Company such that the holder of this Warrant shall
receive upon exercise of this Warrant a proportionate share of any such dividend or distribution as
though it were the holder of the Shares as of the record date fixed for the determination of the
shareholders of the Company entitled to receive such dividend or distribution.
(d) Adjustment of Number of Shares. Upon each adjustment in the Warrant Price, the
number of Shares purchasable hereunder shall be adjusted, to the nearest whole share, to the
product obtained by multiplying the number of Shares purchasable immediately prior to such
adjustment in the Warrant Price by a fraction, the numerator of which shall be the Warrant Price
immediately prior to such adjustment and the denominator of which shall be the Warrant Price
immediately thereafter.
5. Notice of Adjustments. Whenever the Warrant Price or the number of Shares
purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the Company shall make a
certificate signed by its chief financial officer setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by which such adjustment was
calculated, and the Warrant Price and the number of Shares purchasable hereunder after giving
effect to such adjustment, and shall cause copies of such certificate to be mailed (without regard
to Section 13 hereof, by first class mail, postage prepaid) to the holder of this Warrant at such
holder’s last known address.
6. Fractional Shares. No fractional shares of Common Stock will be issued in
connection with any exercise hereunder, but in lieu of such fractional shares the Company shall
make a cash payment therefor based on the fair market value of the Common Stock on the date of
exercise as reasonably determined in good faith by the Company’s Board of Directors.
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7. Compliance with Securities Act; Disposition of Warrant or Shares of Common Stock.
(a) Compliance with Securities Act. The holder of this Warrant, by acceptance hereof, agrees
that this Warrant, and the Shares to be issued upon exercise hereof are being acquired for
investment and that such holder will not offer, sell or otherwise dispose of this Warrant, or any
Shares except under circumstances which will not result in a violation of the Securities Act of
1933, as amended (the “Act”) or any applicable state securities laws. Upon exercise of this
Warrant, unless the Shares being acquired are registered under the Act and any applicable state
securities laws or an exemption from such registration is available, the holder hereof shall
confirm in writing that the Shares so purchased are being acquired for investment and not with a
view toward distribution or resale in violation of the Act and shall confirm such other matters
related thereto as may be reasonably requested by the Company. This Warrant and all Shares issued
upon exercise of this Warrant (unless registered under the Act and any applicable state securities
laws) shall be stamped or imprinted with a legend in substantially the following form:
“THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION OF
COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NOACTION LETTERS FROM THE APPROPRIATE
GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 7
OF THE WARRANT UNDER WHICH THESE SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY.”
Said legend shall be removed by the Company, upon the request of a holder, at such time as the
restrictions on the transfer of the applicable security shall have terminated. In addition, in
connection with the issuance of this Warrant, the holder specifically represents to the Company by
acceptance of this Warrant as follows:
(1) The holder is aware of the Company’s business affairs and financial condition, and has
acquired information about the Company sufficient to reach an informed and knowledgeable decision
to acquire this Warrant. The holder is acquiring this Warrant for its own account for investment
purposes only and not with a view to, or for the resale in connection with, any “distribution”
thereof in violation of the Act.
(2) The holder understands that this Warrant has not been registered under the Act in reliance
upon a specific exemption therefrom, which exemption depends upon, among other things, the bona
fide nature of the holder’s investment intent as expressed herein.
(3) The holder further understands that this Warrant must be held indefinitely unless
subsequently registered under the Act and qualified under any applicable
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state securities laws, or unless exemptions from registration and qualification are otherwise
available. The holder is aware of the provisions of Rule 144, promulgated under the Act.
(4) The holder is an “accredited investor” as such term is defined in Rule 501 of Regulation D
promulgated under the Act.
(b) Disposition of Warrant or Shares. With respect to any offer, sale or other
disposition, in whole or in part, of this Warrant or of any Shares acquired pursuant to the
exercise of this Warrant prior to registration of such Warrant or Shares, the holder hereof agrees
to give written notice to the Company prior thereto, describing briefly the manner thereof,
together with a written opinion of such holder’s counsel, or other evidence, if reasonably
satisfactory to the Company, to the effect that such offer, sale or other disposition may be
effected without registration or qualification (under the Act as then in effect or any federal or
state securities law then in effect) of this Warrant , the Shares or any portion thereof and
indicating whether or not under the Act certificates for this Warrant, the Shares or any portion
thereof to be sold or otherwise disposed of require any restrictive legend as to applicable
restrictions on transferability in order to ensure compliance with such law. Upon receiving such
written notice and reasonably satisfactory opinion or other evidence, the Company, as promptly as
practicable but no later than fifteen (15) days after receipt of the written notice, shall take
such steps as necessary for such holder to sell or otherwise dispose of this Warrant, such Shares
or any portion thereof, all in accordance with the terms of the notice delivered to the Company. If
a determination has been made pursuant to this Section 7(b) that the opinion of counsel for the
holder or other evidence is not reasonably satisfactory to the Company, the Company shall so notify
the holder promptly with details thereof after such determination has been made. Notwithstanding
the foregoing, this Warrant, such Shares or any portion thereof, may, as to such federal laws, be
offered, sold or otherwise disposed of in accordance with Rule 144 or 144A under the Act, provided
that the Company shall have been furnished with such information as the Company may reasonably
request to provide a reasonable assurance that the provisions of Rule 144 or 144A have been
satisfied. Each certificate representing this Warrant, the Shares or any portion thereof thus
transferred (except a transfer pursuant to Rule 144 or 144A) shall bear a legend as to the
applicable restrictions on transferability in order to ensure compliance with such laws, unless in
the aforesaid opinion of counsel for the holder, such legend is not required in order to ensure
compliance with such laws. The Company may issue stop transfer instructions to its transfer agent
in connection with such restrictions.
(c) Applicability of Restrictions. Neither any restrictions of any legend described
in this Warrant nor the requirements of Section 7(b) above shall apply to any transfer or grant of
a security interest in, this Warrant (or the Common Stock obtainable upon exercise thereof) or any
part hereof (i) to a partner of the holder if the holder is a partnership or to a member of the
holder if the holder is a limited liability company, (ii) to a partnership of which the holder is a
partner or a limited liability company of which the holder is a member, or (iii) to any affiliate
of the holder if the holder is a corporation; provided, however, in any such
transfer, if applicable, the transferee shall on the Company’s request agree in writing to be bound
by the terms of this Warrant as if an original holder hereof.
8. Rights as Shareholders; Information. No holder of this Warrant, as such, shall be
entitled to vote or receive dividends or be deemed the holder of Common Stock or any other
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securities which may at any time be issuable upon the exercise hereof for any purpose, nor
shall anything contained herein be construed to confer upon the holder of this Warrant, as such,
any of the rights of a shareholder of the Company or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof, or to receive notice
of meetings, or to receive dividends or subscription rights or otherwise until this Warrant shall
have been exercised and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein. Notwithstanding the foregoing, the Company will transmit to the
holder of this Warrant such information, documents and reports as are generally distributed to the
holders of any class or series of the securities of the Company concurrently with the distribution
thereof to the shareholders.
9. Registration Rights.
(a) Registration.
(i) On or before the date six months after the Date of Grant, the Company shall prepare and
file with the Securities and Exchange Commission (“SEC”) a registration statement under Rule 415 of
the Act to register the resale of the Common Stock issuable upon exercise of this Warrant (the
“Registrable Shares”) and shall thereafter use all reasonable efforts to cause such registration
statement to become effective as promptly as practicable.
(ii) The Company shall, until the date 30 months after the Date of Grant, keep such
registration statement for the Registrable Shares in effect and current and from time to time amend
or supplement the registration statement and the prospectus in connection therewith in compliance
with the Act to permit the sale or distribution of the Registrable Shares with respect to which
such registration statement shall have become effective. If at any time the SEC should institute or
threaten to institute any proceedings for the purpose of issuing, or should issue a stop order
suspending the effectiveness of any such registration statement, the Company will promptly notify
the holder of this Warrant (which term shall include any holder of the Shares) and will use its
reasonable best efforts to prevent the issuance of any such stop order or to obtain the withdrawal
thereof as soon as possible. The Company will advise the holder of this Warrant promptly of any
order or communication of any public board or body addressed to the Company suspending or
threatening to suspend the registration or qualification of any of the Registrable Shares for sale
in any jurisdiction.
(iii) The holder of this Warrant agrees, by acceptance of this Warrant, that, upon receipt of
any notice from the Company of (A) the happening of any event which makes any statements made in
the registration statement or related prospectus filed pursuant to this Section 9, or any document
incorporated or deemed to be incorporated therein by reference, untrue in any material respect or
which requires the making of any changes in such registration statement or prospectus so that, in
the case of such registration statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or necessary to make the
statements therein not misleading, and that in the case of the prospectus, it will not contain any
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 were
made, not misleading or (B) that, in the judgment of the
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Company’s Board of Directors, it is advisable to suspend use of the prospectus for a discrete
period of time due to pending corporate developments, public filings with the SEC or similar
events, the holder will forthwith discontinue, for a period not to exceed sixty (60) days,
disposition of such Registrable Shares covered by such registration statement or prospectus until
it is advised in writing by the Company that use of the applicable prospectus may be resumed, and
has received copies of any additional or supplemented filings that are incorporated or deemed to be
incorporated by reference in such prospectus. The Company shall use all reasonable efforts to
insure that the use of the prospectus may be resumed as soon as practicable, and in any event shall
not be entitled to require the holder to suspend use of any prospectus for more than ninety (90)
days in any twelve month period.
(b) Company Obligations. Whenever any Registrable Shares become subject to a registration
statement pursuant to this Section 9, the Company shall:
(i) Promptly notify the holder of this Warrant and confirm such advice in writing (i) when
such registration statement becomes effective, (ii) when any post-effective amendment to any such
registration statement becomes effective and (iii) of any request by the SEC for any amendment or
supplement to such registration statement or any prospectus relating thereto or for additional
information;
(ii) Furnish to the holder of this Warrant such number of copies of any registration statement
or any amendment or supplement thereto, and any prospectus (including any preliminary prospectus)
contained therein in conformity with the requirements of the Act as the holder of this Warrant may
reasonably request in order to effect the offering and sale of the Registrable Shares being offered
and sold by the holder of this Warrant, but only while the Company is required under the provisions
hereof to cause the registration statement to remain current;
(iii) Use its reasonable best efforts to register or qualify not later than the effective date
of such registration statement the Registrable Shares registered thereunder under the “blue sky”
laws of such states as the holder of this Warrant may reasonably request; provided, however, that
the Company shall not be obligated to qualify as a foreign corporation or as a dealer in securities
or to execute or file any general consent to service of process under the laws of any such state
where it is not at such time so qualified or subject;
(iv) Immediately notify the holder of this Warrant, at any time when a prospectus relating to
a sale of Registrable Shares is required by law to be delivered in connection with sales thereof,
of the occurrence of an event requiring the preparation of a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such Registrable Shares, such
prospectus will not contain an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading and promptly make available to the holder
of this Warrant and to the underwriters any such amendment or supplement;
(v) The Company and the holder of this Warrant will enter into customary agreements (including
an underwriting or indemnity agreement in customary form)
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and take such other actions as are reasonably required in order to expedite or facilitate the
sale of the Registrable Shares;
(vi) In the event of an underwritten offering (in the Company’s sole discretion), the Company
will use its reasonable best efforts to cause to be furnished to the holder of this Warrant a
signed counterpart, addressed to the holder of this Warrant or such underwriter, of (i) an opinion
or opinions of counsel to the Company and (ii) a comfort letter or comfort letters from the
Company’s independent accountants, each in customary form and covering such matters of the type
customarily covered by opinions or comfort letters as the case may be, as the holder of this
Warrant reasonably requests;
(vii) In the event of an underwritten offering (in the Company’s sole discretion), the Company
will make generally available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of twelve months, beginning within three months after the
effective date of the registration statement, which earnings statement shall satisfy the provisions
of Section 11(a) of the Act; and
(viii) The Company will use its reasonably best efforts to cause all Common Stock to be listed
on each securities exchange (or the Nasdaq National Market System) on which similar securities
issued by the Company are then listed.
(c) Expenses. The Company shall bear the out-of-pocket costs and expenses incurred in
connection with any registration pursuant to this Section 9. The costs and expenses of any such
registration shall include, without limitation, the reasonable fees and expenses of the Company’s
counsel and its accountants and all other out-of-pocket costs and expenses of the Company incident
to the preparation, printing and filing under the Act of the registration statement and all
amendments and supplements thereto and the cost of furnishing copies of each preliminary
prospectus, each final prospectus and each amendment or supplement thereto to underwriters, dealers
and other purchasers of the securities so registered, the costs and expenses incurred in connection
with the qualification of such securities so registered under the “blue sky” laws of various
jurisdictions, the fees and expenses of the Company’s transfer agent and all other costs and
expenses of complying with the foregoing provisions of this Section 9. The holder of this Warrant
shall pay any underwriting fees, discounts or commissions attributable to the sale of Registrable
Shares. The Company shall pay internal Company expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or accounting duties).
(d) Indemnification.
(i) In the case of any offering registered pursuant to Section 9(a), the Company hereby
indemnifies and agrees to hold harmless the holder of this Warrant (or the Registrable Shares) and
each person, if any, who controls the holder of this Warrant (or the Registrable Shares) within the
meaning of either Section 15 of the Act or Section 20 of the Securities and Exchange Act of 1934,
as amended. (the “Exchange Act”) from and against any losses, claims, damages or liabilities, joint
or several, to which any such persons may be subject, under the Act, the Exchange Act or otherwise,
and to reimburse any of such persons for any legal or other expenses reasonably incurred by them in
connection with investigating any claims or
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defending against any actions, insofar as such losses, claims, damages or liabilities arise
out of or are based upon any untrue statement or alleged untrue statement of a material fact
contained in the registration statement under which such Registrable Shares were registered under
the Act pursuant to this Section 9, any prospectus (including any preliminary prospectus) contained
therein, if used during the period appropriate for such prospectus, or any amendment or supplement
thereto, or the omission or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the circumstances in which they
were made, not misleading; provided that the indemnification agreement contained in this Section
9(d)(i) shall not apply to such losses, claims, damages or liabilities which shall arise out of the
sale of Registrable Shares to any person to the extent such losses, claims, damages or liabilities
arise out of or are based upon any such untrue statement or omission or alleged untrue statement or
omission if such statement or omission shall have been made (A) in reliance upon information
furnished to the Company in writing by the holder of this Warrant specifically for use therein, or
(B) in any preliminary prospectus, and the prospectus contained in the registration statement as
declared effective or in the form filed by the Company with the SEC pursuant to Rule 424 under the
Act corrected such statement or omission and a copy of such final prospectus shall not have been
sent or otherwise delivered to such person at or prior to the confirmation of such sale to such
person or to the holder of this Warrant for delivery to such person. The Company also agrees to
indemnify the underwriters (as defined in the Act) of the Registrable Shares, their officers and
directors and each person who controls such underwriters on substantially the same basis as that of
the indemnification of the holder of this Warrant provided in this Section 9(d)(i).
(ii) By acceptance of this Warrant, the holder of this Warrant agrees, in the same manner and
to the same extent as set forth in the preceding paragraph, to indemnify and to hold harmless the
Company and its directors and officers against any losses, claims, damages or liabilities, joint or
several, to which any of such persons may be subject under the Act or otherwise, and to reimburse
any of such persons for any legal or other expenses incurred in connection with investigating or
defending against any such losses, claims, damages or liabilities, but only to the extent it arises
out of or is based upon an untrue statement or alleged untrue statement or omission or alleged
omission of a material fact in any registration statement under which the Registrable Shares were
registered under the Act pursuant to this Section 9, any prospectus contained therein, or any
amendment or supplement thereto, which was based upon and made in conformity with information
furnished to the Company in writing by the holder of this Warrant expressly for use therein. The
holder of this Warrant also agrees to indemnify and hold harmless any underwriter (as defined in
the Act) of the Registrable Shares, its officers and directors and each person who controls such
underwriter on substantially the same basis as that of the indemnification of the Company provided
in this Section 9(d)(ii). Provided however, that the obligations of the holder of this Warrant
hereunder shall be limited to an amount equal to the net proceeds after expenses and commissions to
such holder of Registrable Shares sold as contemplated herein.
(iii) Each party indemnified under this Section 9 shall, promptly after receipt of notice of
the commencement of any action against such indemnified party in respect of which indemnity may be
sought, notify the indemnifying party in writing of the commencement thereof. The omission of any
indemnified party so to notify an indemnifying party of any such action shall not relieve the
indemnifying party from any liability in respect of such action which
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it may have to such indemnified party on account of the indemnity agreement contained in this
Section 9, unless the indemnifying party was materially prejudiced by such omission, and in no
event shall relieve the indemnifying party from any other liability which it may have to such
indemnified party. In case any such action shall be brought against any indemnified party and it
shall notify an indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to the indemnified party. In any such action, 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 (A) the indemnifying party and the indemnified party shall have
mutually agreed to the retention of such counsel or (B) the named parties to any such action
(including any impleaded parties) include both the indemnified party and the indemnifying party and
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 in the same jurisdiction, be liable for the 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, and that all such fees and expenses shall be reimbursed as they are
incurred.
(iv) If the indemnification provided for in this Section 9 as between the holder of this
Warrant and the Company is unavailable to the holder of this Warrant and each person, if any, who
controls the holder of this Warrant within the meaning of either Section 15 of the Act or Section
20 of the Exchange Act or to the Company in respect of any losses, claims, damages or liabilities
referred to herein, then each indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a result of such
losses, claims, damages or liabilities in such proportion as is appropriate to reflect the relative
fault of the Company and of the holder of this Warrant in connection with such statements or
omissions, as well as other relevant equitable considerations. The relative fault of the Company on
the one hand and of the holder of this Warrant on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of material fact or the omission
or alleged omission to state a material fact relates to information supplied by such party and the
parties’ relative intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
(v) The Company and holder of this Warrant agree that it would not be just and equitable if
contribution pursuant to this Section 9(d)(iv) were determined by pro rata allocation (even if the
underwriters were treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending any such action or
claim. Notwithstanding the provisions of this Section 9(d)(iv), the holder of this Warrant shall
not be required to contribute any amount in excess of the amount by which the net proceeds of the
offering (before deducting expenses) received by the holder of this Warrant exceeds the amount of
any damages which the holder of this Warrant would have or has been required to pay by reason of
the relevant fault in connection with such untrue or alleged
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untrue statement or omission or alleged omission allocated to the holder of this Warrant.
Notwithstanding the foregoing, the obligations of the holder of this Warrant hereunder shall be
limited to an amount equal to the net proceeds after expenses and commissions to such holder of
Registrable Shares sold as contemplated herein. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
9. Additional Rights.
10.1 Mergers. The Company shall provide the holder of this Warrant with at least
twenty (20) days’ written notice prior to the closing thereof of the terms and conditions of any of
the following transactions (an “Acquisition”): (i) the sale, lease, exchange, conveyance or other
disposition of all or substantially all of the Company’s property or business, or (ii) its merger
into or consolidation with any other corporation (other than a wholly-owned subsidiary of the
Company), or any transaction (including a merger or other reorganization) or series of related
transactions, in which more than 50% of the voting power of the Company is disposed of. In the
event of an Acquisition, the purchase rights represented by this Warrant shall be fully
exercisable.
10.2 Right to Convert Warrant into Stock: Net Issuance.
(a) Right to Convert. In addition to and without limiting the rights of the holder
under the terms of this Warrant, the holder shall have the right to convert this Warrant or any
portion thereof (the “Conversion Right”) into shares of Common Stock as provided in this Section
10.2 at any time or from time to time the number of shares of Common Stock for which this Warrant
is exercisable pursuant to Section 1 and 10.1 above, during the term of this Warrant. Upon exercise
of the Conversion Right with respect to a particular number of shares subject to this Warrant (the
“Converted Warrant Shares”), the Company shall deliver to the holder (without payment by the holder
of any exercise price or any cash or other consideration) that number of shares of fully paid and
nonassessable Common Stock as is determined according to the following formula:
| X = | B — A
|
| Where: | X = | the number of shares of Common Stock that may be issued to the holder | ||||
| Y = | the fair market value of one share of Common Stock | |||||
| A = | the aggregate Warrant Price of the specified number of Converted Warrant Shares immediately prior to the exercise of the Conversion Right (i.e., the number of Converted Warrant Shares multiplied by the Warrant Price) | |||||
| B = | the aggregate fair market value of the specified number of converted Warrant Shares (i.e., the number |
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| of Converted Warrant Shares multiplied by the fair market value of one Converted Warrant Shares) |
No fractional shares shall be issuable upon exercise of the Conversion Right, and, if the
number of shares to be issued determined in accordance with the foregoing formula is other than a
whole number, the Company shall pay to the holder an amount in cash equal to the fair market value
of the resulting fractional share on the Conversion Date (as hereinafter defined). For purposes of
Section 9 of this Warrant, shares issued pursuant to the Conversion Right shall be treated as if
they were issued upon the exercise of this Warrant.
(b) Method of Exercise. The Conversion Right may be exercised by the holder by the
surrender of this Warrant at the principal office of the Company together with a written statement
(which may be in the form of Exhibit A-1 or Exhibit A-2 hereto) specifying that the holder thereby
intends to exercise the Conversion Right and indicating the number of shares subject to this
Warrant which are being surrendered (referred to in Section 10.2(a) hereof as the Converted Warrant
Shares) in exercise of the Conversion Right. Such conversion shall be effective upon receipt by the
Company of this Warrant together with the aforesaid written statement, or on such later date as is
specified therein (the “Conversion Date”), and, at the election of the holder hereof, may be made
contingent upon the closing of the sale of the Company’s Common Stock to the public in a public
offering pursuant to a Registration Statement under the Act (a “Public Offering”). Certificates for
the shares issuable upon exercise of the Conversion Right and, if applicable, a new warrant
evidencing the balance of the shares remaining subject to this Warrant, shall be issued as of the
Conversion Date and shall be delivered to the holder within thirty (30) days following the
Conversion Date.
(c) Determination of Fair Market Value. For purposes of this Section 10.2, “fair
market value” of a share of Common Stock as of a particular date (the “Determination Date”) shall
mean:
(i) If the Conversion Right is exercised in connection with and contingent upon a Public
Offering, and if the Company’s Registration Statement relating to such Public Offering
(“Registration Statement”) has been declared effective by the Securities and Exchange Commission,
then the initial “Price to Public” specified in the final prospectus with respect to such offering.
(ii) If the Conversion Right is not exercised in connection with and contingent upon a Public
Offering, then as follows:
(A) If traded on a securities exchange, the fair market value of the Common Stock shall
be deemed to be the average of the closing prices of the Common Stock on such exchange over
the five trading days immediately prior to the Determination Date;
(B) If traded on the Nasdaq Stock Market or other over-the-counter system, the fair
market value of the Common Stock shall be deemed to be the average of the closing bid prices
of the Common Stock over the five trading days immediately prior to the Determination Date;
and
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(C) If there is no public market for the Common Stock, then fair market value shall be
determined by mutual agreement of the holder of this Warrant and the Company.
If closing prices or closing bid prices are no longer reported by a securities exchange or other
trading system, the closing price or closing bid price shall be that which is reported by such
securities exchange or other trading system at 4:00 p.m. New York City time on the applicable
trading day.
10.3 Exercise Prior to Expiration. To the extent this Warrant is not previously
exercised as to all of the Shares subject hereto, and if the fair market value of one share of the
Common Stock is greater than the Warrant Price then in effect, this Warrant shall be deemed
automatically exercised pursuant to Section 10.2 above (even if not surrendered) immediately before
its expiration. For purposes of such automatic exercise, the fair market value of one share of the
Series Preferred upon such expiration shall be determined pursuant to Section 10.2(c). To the
extent this Warrant or any portion thereof is deemed automatically exercised pursuant to this
Section 10.3, the Company agrees to promptly notify the holder hereof of the number of Shares, if
any, the holder hereof is to receive by reason of such automatic exercise.
10. Representations and Warranties. The Company represents and warrants to the holder
of this Warrant as follows:
(a) This Warrant has been duly authorized and executed by the Company and is a valid and
binding obligation of the Company enforceable in accordance with its terms, subject to laws of
general application relating to bankruptcy, insolvency and the relief of debtors and the rules of
law or principles at equity governing specific performance, injunctive relief and other equitable
remedies;
(b) The Shares have been duly authorized and reserved for issuance by the Company and, when
issued in accordance with the terms hereof will be validly issued, fully paid and non-assessable;
(c) The execution and delivery of this Warrant are not, and the issuance of the Shares upon
exercise of this Warrant in accordance with the terms hereof will not be, inconsistent with the
Company’s Charter or by-laws, do not and will not contravene any law, governmental rule or
regulation, judgment or order applicable to the Company, and do not and will not conflict with or
contravene any provision of, or constitute a default under, any indenture, mortgage, contract or
other instrument of which the Company is a party or by which it is bound or require the consent or
approval of, the giving of notice to, the registration or filing with or the taking of any action
in respect of or by, any Federal, state or local government authority or agency or other person,
except for the filing of notices pursuant to federal and state securities laws, which filings will
be effected by the time required thereby; and
(d) There are no actions, suits, audits, investigations or proceedings pending or, to the
knowledge of the Company, threatened against the Company in any court or before any governmental
commission, board or authority which, if adversely determined, will have a material adverse effect
on the ability of the Company to perform its obligations under this Warrant.
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11. Modification and Waiver. This Warrant and any provision hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the party against which
enforcement of the same is sought.
12. Notices. Any notice, request, communication or other document required or
permitted to be given or delivered to the holder hereof or the Company shall be delivered, or shall
be sent by certified or registered mail, postage prepaid, to each such holder at its address as
shown on the books of the Company or to the Company at the address indicated therefor on the
signature page of this Warrant.
13. Binding Effect on Successors. This Warrant shall be binding upon any corporation
succeeding the Company by merger, consolidation or acquisition of all or substantially all of the
Company’s assets, and all of the obligations of the Company relating to the Shares issuable upon
the exercise or conversion of this Warrant shall survive the exercise, conversion and termination
of this Warrant and all of the covenants and agreements of the Company shall inure to the benefit
of the successors and assigns of the holder hereof.
14. Lost Warrants or Stock Certificates. The Company covenants to the holder hereof
that, upon receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant or any stock certificate and, in the case of any such
loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory to the Company, or
in the case of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock certificate, of like tenor,
in lieu of the lost, stolen, destroyed or mutilated Warrant or stock certificate.
15. Descriptive Headings. The descriptive headings of the several paragraphs of this
Warrant are inserted for convenience only and do not constitute a part of this Warrant. The
language in this Warrant shall be construed as to its fair meaning without regard to which party
drafted this Warrant.
16. Governing Law. This Warrant shall be construed and enforced in accordance with,
and the rights of the parties shall be governed by, the laws of the State of California.
17. Survival of Representations, Warranties and Agreements. All representations and
warranties of the Company and the holder hereof contained herein shall survive the Date of Grant,
the exercise or conversion of this Warrant (or any part hereof) or the termination or expiration of
rights hereunder. All agreements of the Company and the holder hereof contained herein shall
survive indefinitely until, by their respective terms, they are no longer operative.
18. Remedies. In case any one or more of the covenants and agreements contained in
this Warrant shall have been breached, the holders hereof (in the case of a breach by the Company),
or the Company (in the case of a breach by a holder), may proceed to protect and enforce their or
its rights either by suit in equity and/or by action at law, including, but not limited to, an
action for damages as a result of any such breach and/or an action for specific performance of any
such covenant or agreement contained in this Warrant.
19. No Impairment of Rights. The Company will not, by amendment of its Charter or
through any other means, avoid or seek to avoid the observance or performance of any of the
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terms of this Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the holder of this Warrant against impairment.
20. Severability. The invalidity or unenforceability of any provision of this Warrant
in any jurisdiction shall not affect the validity or enforceability of such provision in any other
jurisdiction, or affect any other provision of this Warrant, which shall remain in full force and
effect.
21. Recovery of Litigation Costs. If any legal action or other proceeding is brought
for the enforcement of this Warrant, or because of an alleged dispute, breach, default, or
misrepresentation in connection with any of the provisions of this Warrant, the successful or
prevailing party or parties shall be entitled to recover reasonable attorneys’ fees and other costs
incurred in that action or proceeding, in addition to any other relief to which it or they may be
entitled.
[Remainder of page intentionally left blank]
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22. Entire Agreement; Modification. This Warrant constitutes the entire agreement
between the parties pertaining to the subject matter contained in it and supersedes all prior and
contemporaneous agreements, representations, and undertakings of the parties, whether oral or
written, with respect to such subject matter.
| DOT HILL SYSTEMS CORP. | ||||||||||
| By: | /s/ Xxxx X. Xxxxx | |||||||||
| Title: Interim Chief Financial Officer | ||||||||||
| Address: | 0000 Xxxxxxx Xxxxxx | |||||||||
| Xxxxx 000 | ||||||||||
| Xxxxxxxx, XX 00000 | ||||||||||
| Date: June 22, 2006 | ||||||||||
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EXHIBIT A-1
NOTICE OF EXERCISE
To: DOT HILL SYSTEMS CORP. (the “Company”)
1. The undersigned hereby:
| q | elects to purchase shares of Common Stock of the Company pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price of such shares in full, or | ||
| q | elects to exercise its net issuance rights pursuant to Section 10.2 of the attached Warrant with respect to shares of Common Stock. |
2. Please issue a certificate or certificates representing said shares in the name of the
undersigned or in such other name or names as are specified below:
(Name)
(Address)
3. The undersigned represents that the aforesaid shares are being acquired for the account of
the undersigned for investment and not with a view to, or for resale in connection with, the
distribution thereof and that the undersigned has no present intention of distributing or reselling
such shares, all except as in compliance with applicable securities laws.
OTA LLC
(Signature)
(Date)
EXHIBIT A-2
NOTICE OF EXERCISE
To: DOT HILL SYSTEMS CORP. (the “Company”)
1. Contingent upon and effective immediately prior to the closing (the “Closing”) of the
Company’s public offering contemplated by the Registration Statement on Form S, filed, 19, the
undersigned hereby:
| q | elects to purchase shares of Common Stock of the Company (or such lesser number of shares as may be sold on behalf of the undersigned at the Closing) pursuant to the terms of the attached Warrant, or | ||
| q | elects to exercise its net issuance rights pursuant to Section 10.2 of the attached Warrant with respect to ___ Shares of Common Stock. |
2. Please deliver to the custodian for the selling shareholders a stock certificate
representing such shares.
3. The undersigned has instructed the custodian for the selling shareholders to deliver to the
Company $ or, if less, the net proceeds due the undersigned from the sale of shares in
the aforesaid public offering. If such net proceeds are less than the purchase price for such
shares, the undersigned agrees to deliver the difference to the Company prior to the Closing.
OTA LLC
(Name)
(Address)
(Date)
