WARRANT
WARRANT
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO DIGITILITI, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
| Right to Purchase 250,000 shares of Common Stock of Digitiliti, Inc. (subject to adjustment as provided herein) |
COMMON STOCK PURCHASE WARRANT
No. _____________________
Issue Date: November 20, 2008
DIGITILITI, INC., a corporation organized under the laws of the State of Delaware (the “Company”), hereby certifies that, for value received, Xxxxxxxx X. Xxxxx and Xxxxxx X. Xxxxx, as joint tenants and not as tenants-in-common, whose address is 000 Xxxxxxxxxx Xxxx X, Xxxxxxxx XX 00000, or their assigns (the “Holders”), are entitled, subject to the terms set forth below, to purchase from the Company at any time after the Issue Date until 5:00 p.m., C.S.T on November 20, 2013, the five year anniversary of the date under which these Warrants were issuable (the “Issue Date” and the “Expiration Date,” respectively), up to 250,000 fully paid and nonassessable shares of the Common Stock of the Company (the “Warrant Shares”), at a per share purchase price of $0.35 in lawful money of the United States. The aforedescribed purchase price per share, as adjusted from time-to-time as herein provided, is referred to herein as the “Purchase Price.” The number and character of such shares of Common Stock and the Purchase Price are subject to adjustment as provided herein. The Company may reduce the Purchase Price without the consent of the Holders.
As used herein the following terms, unless the context otherwise requires, have the following respective meanings:
(a)
The term “Company” shall include Digitiliti, Inc. and any corporation which shall succeed or assume the obligations of Digitiliti, Inc. hereunder.
(b)
The term “Common Stock” includes (a) the Company’s Common Stock, $0.001 par value per share, as authorized on the Issue Date, and (b) any other securities into which or for which any of the securities described in (a) may be converted or exchanged pursuant to a plan of recapitalization, reorganization, merger, sale of assets or otherwise.
(c)
The term “Other Securities” refers to any stock (other than Common Stock) and other securities of the Company or any other person (corporate or otherwise) which the Holders of the Warrant at any time shall be entitled to receive, or shall have received, on the exercise of the Warrant, in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities pursuant to Section 4 or otherwise.
1.
Exercise of Warrant.
1.1.
Number of Shares Issuable upon Exercise. From and after the Issue Date through and including the Expiration Date, the Holders hereof shall be entitled to receive, upon exercise of this Warrant in whole in accordance with the terms of subsection 1.2 or upon exercise of this Warrant in part in accordance with subsection 1.3, shares of Common Stock of the Company, subject to adjustment pursuant to Section 4.
1.2.
Full Exercise. This Warrant may be exercised in full by the Holders hereof by delivery of an original or facsimile copy of the form of subscription attached as Exhibit A hereto (the “Subscription Form”), duly executed by such Holders and surrender of the original Warrant within five (5) trading days of exercise, to the Company at its principal office, accompanied by payment, in cash, wire transfer or by certified or official bank check payable to the order of the Company, in the amount obtained by multiplying the number of shares of Common Stock for which this Warrant is then exercisable by the Purchase Price then in effect.
1.3.
Registration Rights. The Holders of this Warrant, and the Holders of any Common Stock issued upon the exercise of such Warrant, shall be entitled to an unlimited number of standard “Piggy-Back” registration rights to sell such Common Stock simultaneous with the Company offering its shares to the public under any Registration Statement filed with the Securities and Exchange Commission under the Securities Act, provided the Securities and Exchange Commission Form of Registration Statement utilized by the Company allows the inclusion of such Holders’ Common Stock for resale thereunder, and specifically excluding Forms S-4 and S-8 of the Securities and Exchange Commission for these “Piggy-Back” registration rights. The Company shall be obligated to pay and remit all expenses related to such “Piggy-Back” registrations. Notwithstanding anything to the contrary herein, it shall not constitute a breach of these “Piggy-Back” registration rights nor shall the Company be liable in any manner (including for any losses resulting therefrom), if its failure to comply with these “Piggy-Back” registration rights results directly or indirectly from the application of Rule 415 of the Securities and Exchange Commission or any guidance of the Securities and Exchange Commission provided thereunder. Further, these “Piggy-Back” registration rights shall be subject to customary cut backs by underwriters of the Company that have agreed to publicly offer other shares of the Company’s Common Stock, on a pro rata basis only.
1.4.
Partial Exercise. This Warrant may be exercised in part (but not for a fractional share) by surrender of this Warrant in the manner and at the place provided in subsection 1.2, except that the amount payable by the Holders on such partial exercise shall be the amount obtained by multiplying (a) the number of whole shares of Common Stock designated by the Holders in the Subscription Form by (b) the Purchase Price then in effect. On any such partial exercise, the Company, at its expense, will forthwith issue and deliver to or upon the order of the Holders hereof, a new Warrant of like tenor, in the name of the Holders hereof or as such Holders (upon payment by such Holders of any applicable transfer taxes) may request, the whole number of shares of Common Stock for which such Warrant may still be exercised.
1.5.
Fair Market Value. Fair Market Value of a share of Common Stock as of a particular date (the “Determination Date”) shall mean:
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(a)
If the Company’s Common Stock is traded on an exchange or is quoted on the Financial Industry Regulatory Authority’s Automated System in the NASDAQ National Market System, the NASDAQ SmallCap Market or the American Stock Exchange, then the closing or last sale price, respectively, reported for the last business day immediately preceding the Determination Date;
(b)
If the Company’s Common Stock is not traded on an exchange or on the NASDAQ National Market System, the NASDAQ SmallCap Market or the American Stock Exchange, but is traded in the over-the-counter market on the OTCBB or the Pink Sheets, then the average of the closing bid and ask prices reported for the last business day immediately preceding the Determination Date;
(c)
Except as provided in clause (d) below, if the Company’s Common Stock is not publicly traded, then as the Board of Directors of the Company shall in good faith determine; or
(d)
If the Determination Date is the date of a liquidation, dissolution or winding up, or any event deemed to be a liquidation, dissolution or winding up pursuant to the Company’s charter, then all amounts to be payable per share to holders of the Common Stock pursuant to the charter in the event of such liquidation, dissolution or winding up, plus all other amounts to be payable per share in respect of the Common Stock in liquidation under the charter, assuming for the purposes of this clause (d) that all of the shares of Common Stock then issuable upon exercise of all of the Warrants are outstanding at the Determination Date.
1.6.
Delivery of Stock Certificates, etc. on Exercise. As soon as practicable after the exercise of this Warrant in full or in part, and in any event within five (5) trading days thereafter, the Company at its expense will cause to be issued in the name of and delivered to the Holders hereof, or as such Holders (upon payment by such Holders of any applicable transfer taxes) may direct in compliance with applicable securities laws, a certificate or certificates for the number of duly and validly issued, fully paid and nonassessable shares of Common Stock (or Other Securities) to which such Holders shall be entitled on such exercise, plus, in lieu of any fractional share to which such Holders would otherwise be entitled, cash equal to such fraction multiplied by the then Fair Market Value of one full share of Common Stock, together with any other stock or other securities and property (including cash, where applicable) to which such Holders are entitled upon such exercise pursuant to Section 1 or otherwise.
1.7.
Common Stock Legend. The Holders acknowledge and agree that the shares of Common Stock of the Company and, until such time as the Common Stock has been registered under the Securities Act and sold in accordance with an effective registration statement, or exemption from registration, certificates and other instruments representing any of the Common Stock shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of any such Securities):
“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
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SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.”
2.
Adjustment for Reorganization, Consolidation, Merger, etc.
2.1.
Reorganization, Consolidation, Merger, etc. In case at any time or from time to time, the Company shall (a) effect a reorganization, (b) consolidate with or merge into any other person or (c) transfer all or substantially all of its properties or assets to any other person under any plan or arrangement contemplating the dissolution of the Company, then, in each such case, as a condition to the consummation of such a transaction, proper and adequate provision shall be made by the Company whereby the Holders of this Warrant, on the exercise hereof as provided in Section 1, at any time after the consummation of such reorganization, consolidation or merger or the effective date of such dissolution, as the case may be, shall receive, in lieu of the Common Stock (or Other Securities) issuable on such exercise prior to such consummation or such effective date, the stock and other securities and property (including cash) to which such Holders would have been entitled upon such consummation or in connection with such dissolution, as the case may be, if such Holders had so exercised this Warrant, immediately prior thereto, all subject to further adjustment thereafter as provided in Section 4.
3.
Extraordinary Events Regarding Common Stock. In the event that the Company shall (a) issue additional shares of the Common Stock as a dividend or other distribution on outstanding Common Stock, (b) subdivide its outstanding shares of Common Stock, or (c) combine its outstanding shares of the Common Stock into a smaller number of shares of the Common Stock, then, in each such event, the Purchase Price shall, simultaneously with the happening of such event, be adjusted by multiplying the then Purchase Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event, and the product so obtained shall thereafter be the Purchase Price then in effect. The Purchase Price, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described herein in this Section 4. The number of shares of Common Stock that the Holders of this Warrant shall thereafter, on the exercise hereof as provided in Section 1, be entitled to receive shall be adjusted to a number determined by multiplying the number of shares of Common Stock that would otherwise (but for the provisions of this Section 4) be issuable on such exercise by a fraction of which (a) the numerator is the Purchase Price that would otherwise (but for the provisions of this Section 4) be in effect, and (b) the denominator is the Purchase Price in effect on the date of such exercise.
4.
Certificate as to Adjustments. In each case of any adjustment or readjustment in the shares of Common Stock (or Other Securities) issuable on the exercise of the Warrant, the Company at its expense will promptly cause its Chief Financial Officer or other appropriate designee to compute such adjustment or readjustment in accordance with the terms of the Warrant and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or receivable by the Company for any additional shares of Common Stock (or Other Securities) issued or sold or deemed to have been issued or sold,
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(b) the number of shares of Common Stock (or Other Securities) outstanding or deemed to be outstanding, and (c) the Purchase Price and the number of shares of Common Stock to be received upon exercise of this Warrant, in effect immediately prior to such adjustment or readjustment and as adjusted or readjusted as provided in this Warrant. The Company will promptly mail a copy of each such certificate to the Holders of the Warrant.
5.
Reservation of Stock, etc. Issuable on Exercise of Warrant; Financial Statements. The Company will at all times reserve and keep available, solely for issuance and delivery on the exercise of the Warrants, all shares of Common Stock (or Other Securities) from time to time issuable on the exercise of the Warrant.
6.
Assignment; Exchange of Warrant. Subject to compliance with applicable securities laws, this Warrant, and the rights evidenced hereby, may be transferred by any registered holder hereof (a “Transferor”). On the surrender for exchange of this Warrant, with the Transferor’s endorsement in the form of Exhibit B attached hereto (the “Transferor Endorsement Form”) and together with an opinion of counsel reasonably satisfactory to the Company that the transfer of this Warrant will be in compliance with applicable securities laws, the Company at its expense, twice, only, but with payment by the Transferor of any applicable transfer taxes, will issue and deliver to or on the order of the Transferor thereof a new Warrant or Warrants of like tenor, in the name of the Transferor and/or the transferee(s) specified in such Transferor Endorsement Form (each a “Transferee”), calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Warrant so surrendered by the Transferor. No such transfers shall result in a public distribution of the Warrant.
7.
Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement or security reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of this Warrant, the Company at its expense, twice only, will execute and deliver, in lieu thereof, a new Warrant of like tenor.
8.
Transfer on the Company’s Books. Until this Warrant is transferred on the books of the Company, the Company may treat the registered holders hereof as the absolute owners hereof for all purposes, notwithstanding any notice to the contrary.
9.
Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day
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following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: (i) if to the Company to: Digitiliti, Inc., 000 X. 0xx Xx. 0xx Xxxxx, Xx. Xxxx, XX 00000, Attn: Xxxxxx X. Xxxxxxx, President, telecopier number: 000-000-0000, and (ii) if to the Holders, to the address listed on the first paragraph of this Warrant.
10.
Miscellaneous. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. This Warrant shall be construed and enforced in accordance with and governed by the laws of Delaware. Any dispute relating to this Warrant shall be adjudicated in Hennepin County in the State of Minnesota or in the county in Minnesota where the Company maintains its principal executive offices. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.
12.
No Rights as Stockholders. Until the Holders have exercised this Warrant, the Holders shall have no rights as stockholders of the Company in respect to the Warrants until the Holders have exercised their rights to receive Warrant Shares.
IN WITNESS WHEREOF, the Company has executed this Warrant as of the date first written above.
| DIGITILITI, INC. By: /s/Xxxxxx X. Xxxxxxx Name: Xxxxxx X. Xxxxxxx Title: President | |
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Exhibit A
FORM OF SUBSCRIPTION
(to be signed only on exercise of Warrant)
TO: DIGITILITI, INC.
The undersigned, pursuant to the provisions set forth in the attached Warrant (No.____), hereby irrevocably elect to purchase ________ shares of the Common Stock covered by such Warrant.
The undersigned herewith make payment of the full purchase price for such shares at the price per share provided for in such Warrant, which is $___________. Such payment takes the form of (check applicable box or boxes):
___
$__________ in lawful money of the United States (which sum reflects any concession amount described in the Warrant or otherwise); and/or
___
the cancellation of such portion of the attached Warrant as is exercisable for a total of _______ shares of Common Stock (using a Fair Market Value of $_______ per share for purposes of this calculation).
The undersigned request that the certificates for such shares be issued in the name of, and delivered to _____________________________________________________ whose address is _________________________________________________ _____.
The undersigned represent and warrant that all offers and sales by the undersigned of the securities issuable upon exercise of the within Warrant shall be made pursuant to registration of the Common Stock under the Securities Act of 1933, as amended (the “Securities Act”), or pursuant to an exemption from registration under the Securities Act.
Dated:___________________ | ____________________________________ (Signatures must conform to names of holders as specified on the face of the Warrant) (Address) |
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Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sell, assign, and transfer unto the person(s) named below under the heading “Transferees” the right represented by the within Warrant to purchase the percentage and number of shares of Common Stock of DIGITILITI, INC. to which the within Warrant relates specified under the headings “Percentage Transferred” and “Number Transferred,” respectively, opposite the name(s) of such person(s) and appoint each such person Attorney to transfer their respective rights on the books of DIGITILITI, INC. with full power of substitution in the premises.
Transferees | Percentage Transferred | Number Transferred |
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Dated: ______________, ___________ Signed in the presence of: ________________________________ (Name) Dated: ______________, ___________ Signed in the presence of: ________________________________ ACCEPTED AND AGREED: [TRANSFEREE] (Name) | __________________________________________ (Signature must conform to name of holder as specified on the face of the warrant) _________________________________________ _________________________________________ (address) _________________________________________ (Signature must conform to name of holder as specified on the face of the warrant) _________________________________________ _________________________________________ (address) |
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