WARRANT TO PURCHASE COMMON STOCK OF DIGITAL ANGEL CORPORATION
Exhibit
10.3
THIS
WARRANT (THIS “WARRANT”) AND
THE
SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
OR ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED FOR SALE OR SOLD UNLESS
A
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS
SHALL
BE EFFECTIVE WITH RESPECT THERETO, OR AN EXEMPTION FROM REGISTRATION UNDER
THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE IN CONNECTION
WITH SUCH OFFER OR SALE. THIS WARRANT AND THE SECURITIES ISSUABLE UPON
EXERCISE
HEREOF
(I) MAY BE PLEDGED OR HYPOTHECATED IN CONNECTION WITH A BONA FIDE MARGIN LOAN
OR
OTHER FINANCING SECURED BY SUCH SECURITIES OR (II) MAY BE TRANSFERRED OR
ASSIGNED TO AN AFFILIATE OF THE HOLDER HEREOF WITHOUT THE NECESSITY OF AN
OPINION OF COUNSEL OR THE CONSENT OF THE ISSUER HEREOF.
WARRANT
TO
PURCHASE COMMON STOCK
OF
DIGITAL
ANGEL CORPORATION
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Issue
Date: February 6, 2007
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Warrant
No. 2007A
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THIS
CERTIFIES that IMPERIUM
MASTER
FUND, LTD., or
any
permitted subsequent holder hereof (the “Holder”),
has
the right to purchase from DIGITAL ANGEL CORPORATION,
a
Delaware corporation (the
“Company”),
up to
699,600 fully paid and nonassessable shares of the Company’s common stock, par
value $0.005 per share (the “Common
Stock”),
subject to adjustment as provided herein, at a price per share equal to the
Exercise Price (as defined below), at any time and from time to time beginning
on the earlier of (i) March 2, 2007 (the “Listing
Deadline Date”)
and
(ii) the date on which the Company obtains listing approval from the American
Stock Exchange for the issuance of the Warrant Shares (the “Listing
Date”)
and
ending at 5:00 p.m., New York City time (the “Expiration
Time”),
on
the Expiration Date (as defined below) or, if such day is not a Business Day,
on
the next succeeding Business Day. As used herein, the term “Expiration
Date”
means
February 6, 2012; provided,
however,
that if
the Company has not obtained listing approval from the American Stock Exchange
for the issuance of the Warrant Shares by the Listing Deadline Date, then the
“Expiration
Date”
shall
be extended by a number days equal to the number of days between the Listing
Deadline Date and the Listing Date.
This
Warrant is issued pursuant to a Securities Purchase Agreement, dated as of
the
date hereof (the “Securities
Purchase Agreement”),
between the Company and the investors named therein. Capitalized terms used
herein and not otherwise defined shall have the respective meanings set forth
in
the Securities Purchase Agreement.
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1.
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EXERCISE.
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(a) Right
to Exercise; Exercise Price.
The
Holder shall have the right to exercise this Warrant as to all or any part
of
the shares of Common Stock covered hereby (the “Warrant
Shares”).
The
“Exercise
Price”
for
each Warrant Share purchased by the Holder upon the exercise of this Warrant
shall be $2.973,
subject
to adjustment for the events specified in Section
6
of this
Warrant. No issuances of Warrant Shares hereunder shall be made in violation
of
Article 9 of the Company’s certificate of incorporation unless and until the
Stockholder Amendment Approval Date.
(b) Exercise
Notice.
In
order to exercise this Warrant, the Holder shall (i) send by facsimile
transmission at any time prior to 5:00 p.m., New York City time, on the Business
Day on which the Holder wishes to effect such exercise (the “Exercise
Date”),
to
the Company an executed copy of the notice of exercise in the form attached
hereto as Exhibit
A
(the
“Exercise
Notice”)
and
(ii) in the case of a Cash Exercise (as defined below), deliver on the Exercise
Date the Exercise Price to the Company by wire transfer of immediately available
funds. The Holder shall promptly thereafter deliver the original Warrant to
the
Company for cancellation (and replacement with a new Warrant if exercised in
part) pursuant to Section
1(d).
Subject
to Section
8(d),
the
Exercise Notice shall also state the name or names in which the Warrant Shares
issuable on such exercise shall be issued if other than the Holder. In
the
case of a dispute as to the calculation of the Exercise Price or the number
of
Warrant Shares issuable hereunder (including, without limitation, the
calculation of any adjustment pursuant to Section
6),
the
Company shall promptly issue to the Holder the number of Warrant Shares that
are
not disputed, the Company and the Holder shall provide each other with their
respective calculations, and the Company shall submit the disputed calculations
to a certified public accounting firm of national recognition (other than the
Company’s independent accountants) within two (2) Business Days following the
later of the date on which the Holder delivers its calculations to the Company
and the date on which the Exercise Notice is delivered to the Company. The
Company shall use its best efforts to cause such accountant to calculate the
Exercise Price and/or the number of Warrant Shares issuable hereunder and to
notify the Company and the Holder of the results in writing no later than two
(2) Business Days following the day on which such accountant received the
disputed calculations (the “Dispute
Procedure”).
Such
accountant’s calculation shall be deemed conclusive absent manifest error. The
fees of any such accountant shall be borne by the party whose calculations
were
most at variance with those of such accountant.
(c) Holder
of Record.
The
Holder shall, for all purposes, be deemed to have become the holder of record
of
the Warrant Shares specified in an Exercise Notice on the Exercise Date
specified therein, irrespective of the date of delivery of such Warrant Shares.
Except as specifically provided herein, nothing in this Warrant shall be
construed as conferring upon the Holder any rights as a stockholder of the
Company prior to the Exercise Date.
(d) Cancellation
of Warrant.
This
Warrant shall be canceled upon its exercise and, if this Warrant is exercised
in
part, the Company shall, at the time that it delivers Warrant Shares to the
Holder pursuant to such exercise as provided herein, issue a new warrant, and
deliver to the Holder a certificate representing such new warrant, with terms
identical in all respects to this Warrant (except that such new warrant shall
be
exercisable into the number of shares of Common Stock with respect to which
this
Warrant shall remain unexercised); provided,
however,
that
the Holder shall be entitled to exercise all or any portion of such new warrant
at any time following the time at which this Warrant is exercised, regardless
of
whether the Company has actually issued such new warrant or delivered to the
Holder a certificate therefor.
2
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2.
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DELIVERY
OF WARRANT SHARES UPON EXERCISE.
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Upon
receipt of an Exercise Notice and payment of the Exercise Price, if applicable,
pursuant to Section
1,
the
Company shall, (A) in the case of a Cash Exercise (as defined below) no later
than the close of business on the later to occur of (i) the third (3rd) Business
Day following the Exercise Date set forth in such Exercise Notice and (ii)
the
date on which the Company has received payment of the Exercise Price, (B) in
the
case of a Cashless Exercise (as defined below), no later than the close of
business on the third (3rd) Business Day following the Exercise Date set forth
in such Exercise Notice, and (C) with respect to Warrant Shares that are the
subject of a Dispute Procedure, the close of business on the third (3rd)
Business Day following the determination made pursuant to Section
1(b)
(each of
the dates specified in the foregoing clauses
(A),
(B)
or
(C)
being
referred to as a “Delivery
Date”),
issue
and deliver or cause to be delivered to the Holder the number of Warrant Shares
as shall be determined as provided herein. The Company shall use reasonable
efforts to effect delivery of Warrant Shares to the Holder, as long as the
Company’s designated transfer agent or co-transfer agent in the United States
for the Common Stock (the “Transfer
Agent”)
participates in the Depository Trust Company (“DTC”)
Fast
Automated Securities Transfer program (“FAST”),
by
crediting the account of the Holder or its nominee at DTC (as specified in
the
applicable Exercise Notice) with the number of Warrant Shares required to be
delivered, no later than the close of business on such Delivery Date. In the
event that the Transfer Agent is not a participant in FAST, or if the Holder
so
specifies in an Exercise Notice or otherwise in writing on or before the
Exercise Date, the Company shall use reasonable efforts to effect delivery
of
Warrant Shares by delivering to the Holder or its nominee physical certificates
representing such Warrant Shares, no later than the close of business on such
Delivery Date. If any exercise would create a fractional Warrant Share, such
fractional Warrant Share shall be disregarded and the number of Warrant Shares
issuable upon such exercise, in the aggregate, shall be the nearest whole number
of Warrant Shares. Warrant Shares delivered to the Holder shall not contain
any
restrictive legend unless such legend is required pursuant to the terms of
the
Securities Purchase Agreement.
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3.
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FAILURE
TO DELIVER WARRANT SHARES.
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(a) In
the
event that the Company fails for any reason (other than as a result of the
Holder’s failure, in the case of a Cash Exercise (as defined below), to pay the
aggregate Exercise Price for the Warrant Shares being purchased) to deliver
to
the Holder the number of Warrant Shares specified in the applicable Exercise
Notice (without any restrictive legend to the extent permitted by applicable
law
and the terms of the Securities Purchase Agreement) on or before the Delivery
Date therefor, or fails to remove any restrictive legend from outstanding
Warrant Shares at the request of the Holder in accordance with Section 2.5
of
the Securities Purchase Agreement on or before the fifth (5th) Business Day
following such request (an “Exercise
Default”),
the
Holder shall have the right to receive from the Company an amount equal to
(i)
(N/365) multiplied
by
(ii) the
aggregate Exercise Price of the Warrant Shares which are the subject of such
Exercise Default multiplied
by
(iii)
the lower of eighteen percent (18%) and the maximum rate permitted by applicable
law or by the applicable rules or regulations of any Governmental Agency (the
“Default
Interest Rate”),
where
“N” equals the number of days elapsed between the original Delivery Date of such
Warrant Shares (or from such fifth Business Day in the event of a failure to
remove a legend from outstanding Warrant Shares) and the date on which such
Exercise Default has been cured. In the event that shares of Common Stock are
purchased by or on behalf of the Holder in order to
make
delivery on a sale effected in anticipation of receiving Warrant Shares upon
an
exercise, and there is an Exercise Default with respect to such exercise, the
Holder shall have the right to receive from the Company, in addition to the
foregoing amounts, (i) the aggregate amount paid by or on behalf of the Holder
for such shares of Common Stock minus
(ii) the
aggregate amount of net proceeds, if any, received by the Holder from the sale
of the Warrant Shares issued by the Company pursuant to such exercise after
such
shares are actually delivered to the Holder. Amounts
payable under this Section
3(a) shall
be
paid to the Holder in immediately available funds on or before the second (2nd)
Business Day following written notice from the Holder to the
Company.
3
(b) In
addition to its rights under Section
3(a),
the
Holder shall have the right to pursue all other remedies available to it at
law
or in equity (including, without limitation, a decree of specific performance
and/or injunctive relief).
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4.
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EXERCISE
LIMITATION.
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(a) In
no
event shall the Holder be permitted to exercise this Warrant, or part thereof,
if, upon such exercise, the number of shares of Common Stock beneficially owned
by the Holder (other than shares which may be deemed beneficially owned except
for being subject to a limitation on exercise or exercise analogous to the
limitation contained in this Section
4),
would
exceed 4.99% of the number of shares of Common Stock then issued and
outstanding, it being the intent of the Company and the Holder that the Holder
not be deemed at any time to have the power to vote or dispose of greater than
4.99% of the number of shares of Common Stock issued and outstanding at any
time. Nothing contained herein shall be deemed to restrict the right of the
Holder to exercise this Warrant at such time as such exercise will not violate
the provisions of this Section
4.
As
used
herein, beneficial ownership shall be determined in accordance with Section
13(d) of the Exchange Act. To the extent that the limitation contained in this
Section
4
applies
(and without limiting any rights the Company may otherwise have), the submission
of an Exercise Notice by the Holder shall be deemed to be the Holder’s
representation that this Warrant is exercisable
pursuant
to the terms hereof,
the
Company may rely on the Holder’s representation that this Warrant
is
exercisable pursuant to the terms hereof,
and the
Company shall have no obligation whatsoever to verify or confirm the accuracy
of
such representation. The Company shall have no liability to any person if the
Holder’s determination of whether this Warrant is exercisable pursuant to the
terms hereof is incorrect.
(b) Notwithstanding
anything to the contrary in this Warrant, the aggregate number of shares of
Common Stock that may be issued by the Company to the Holder pursuant to this
Warrant shall be subject to the shareholder cap limitations set forth in Section
4.16 of the Securities Purchase Agreement.
4
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5.
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PAYMENT
OF THE EXERCISE PRICE; CASHLESS EXERCISE.
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The
Holder may pay the Exercise Price in either of the following forms or, at the
election of Holder, a combination thereof:
(a) through
a
cash exercise (a “Cash
Exercise”)
by
delivering immediately available funds, or
(b) through
a
cashless exercise (a “Cashless
Exercise”)
but
only if (i) an effective Registration Statement is not available for the resale
of all of the Warrant Shares issuable hereunder at the time an Exercise Notice
is delivered to the Company, or (ii) if the Company in its discretion otherwise
consents in writing. The Holder shall effect a Cashless Exercise by surrendering
this Warrant to the Company and noting on the Exercise Notice that the Holder
wishes to effect a Cashless Exercise, upon which the Company shall issue to
the
Holder a number of Warrant Shares determined as follows:
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X
=
Y x (A-B)/A
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where:
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X
=
the number of Warrant Shares to be issued to the
Holder;
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Y
=
the number of Warrant Shares with respect to which this Warrant is
being
exercised;
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A
=
the VWAP as of the Exercise Date (or if the Exercise Date is not
a Trading
Day, then the VWAP as of the Trading Day immediately preceding such
Exercise Date); and
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B
=
the Exercise Price.
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It
is
intended and acknowledged that the Warrant Shares issued in a Cashless Exercise
transaction shall be deemed to have been acquired by the Holder, and the holding
period for the Warrant Shares required by Rule 144 shall be deemed, subject
to
applicable law, to have been commenced, on the Issue Date.
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6.
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ANTI-DILUTION
ADJUSTMENTS; DISTRIBUTIONS; OTHER EVENTS.
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The
Exercise Price and the number of Warrant Shares issuable hereunder shall be
subject to adjustment from time to time as provided in this Section
6.
(a) Stock
Splits, Stock Interests, Etc.
If, at
any time on or after the Issue Date, the number of outstanding shares of Common
Stock is increased by a stock split, stock dividend, reclassification or other
similar event, the Exercise Price shall be proportionately reduced, or if the
number of outstanding shares of Common Stock is decreased by a reverse stock
split, combination, reclassification or other similar event, the Exercise Price
shall be proportionately increased. In such event, the Company shall notify
the
Company’s transfer agent of such change on or before the effective date
thereof.
5
(b) Major
Transactions.
In the
event of a merger, consolidation, business combination, tender offer, exchange
of shares, recapitalization, reorganization, redemption or other similar event,
as a result of which shares of Common Stock shall be changed into the same
or a
different number of shares of the same or another class or classes of stock
or
securities or other assets of the Company or another entity or the Company
shall
sell all or substantially all of its assets (each of the foregoing being a
“Major
Transaction”),
the
Company will give the Holder at least ten (10) Trading Days’ written notice
prior to the earlier of (i) the closing or effectiveness of such Major
Transaction and (ii) the record date for the receipt of such shares of stock
or
securities or other assets, and the Holder shall be permitted to either (x)
require the Company to repurchase this Warrant for cash in an amount equal
to
the value of this Warrant calculated pursuant to the Black-Scholes pricing
model
or (y) exercise this Warrant in whole or in part at any time prior to, on or
after the record date for the receipt of such consideration and shall be
entitled to receive, in lieu of the shares of Common Stock otherwise issuable
upon exercise of this Warrant, such shares of stock, securities and/or other
assets as would have been issued or payable upon such Major Transaction with
respect to or in exchange for the number of shares of Common Stock which would
have been issuable upon exercise of this Warrant had such Major Transaction
not
taken place (without giving effect to any limitations on such exercise contained
in this Warrant or the Securities Purchase Agreement). If and to the extent
that
the Holder retains this Warrant or any portion hereof following such record
date, the Company will cause the surviving or, in the event of a sale of assets,
purchasing entity, as a condition precedent to such Major Transaction, to assume
by written instrument (in form and substance reasonably satisfactory to the
Holder) the obligations of the Company with respect to this Warrant, with such
adjustments to the Exercise Price and the securities covered hereby as may
be
necessary in order to preserve the economic benefits of this Warrant to the
Holder.
(c) Distributions.
If, at
any time after the Issue Date, the Company declares or makes any distribution
of
cash or any other assets (or rights to acquire such assets) to holders of Common
Stock, including without limitation any dividend or distribution to the
Company’s stockholders in shares (or rights to acquire shares) of capital stock
of a subsidiary) (a “Distribution”),
the
Company shall deliver written notice of such Distribution (a “Distribution
Notice”)
to the
Holder at least ten (10) Trading Days prior to the earlier to occur of (i)
the
record date for determining stockholders entitled to such Distribution (the
“Record
Date”)
and
(ii) the date on which such Distribution is made (the “Distribution
Date”)
(the
earlier of such dates being referred to as the “Determination
Date”).
Upon
receipt of the Distribution Notice, the Holder shall promptly (but in no event
later than three (3) Business Days) notify the Company whether it has elected
(A) to receive the same amount and type of assets (including, without
limitation, cash) being distributed as though the Holder were, on the
Determination Date, a holder of a number of shares of Common Stock into which
this Warrant is exercisable as of such Determination Date (such number of shares
to be determined without giving effect to any limitations on such exercise)
or
(B) upon any exercise of this Warrant on or after the Distribution Date, to
reduce the Exercise Price in effect on the Business Day immediately preceding
the Record Date by an amount equal to the fair market value of the assets to
be
distributed divided
by
the
number of shares of Common Stock as to which such Distribution is to be made,
such fair market value to be reasonably determined in good faith by the
independent members of the Company’s Board of Directors. Upon receipt of such
election notice from the Holder, the Company shall timely effectuate the
transaction or adjustment contemplated in the foregoing clause
(A) or
(B),
as
applicable.
If the
Holder does not notify the Company of its election pursuant to the preceding
sentence on or prior to the Determination Date, the Holder shall be deemed
to
have elected clause
(A)
of the
preceding sentence.
6
(d) Dilutive
Issuances.
(i) Adjustment
Upon Dilutive Issuance.
If, at
any time after the Issue Date, the Company issues or sells, or in accordance
with Section
6(d)(ii) is
deemed
to have issued or sold, any shares of Common Stock for no consideration or
for a
consideration per share less than the Exercise Price on the date of such
issuance or sale (or deemed issuance or sale) (a “Dilutive
Issuance”),
then
the Exercise Price shall be adjusted so as to equal the consideration received
or receivable by the Company (on a per share basis) for the additional shares
of
Common Stock so issued, sold or deemed issued or sold in such Dilutive Issuance
(which, in the case of a deemed issuance or sale, shall be calculated in
accordance with Section
6(d)(ii)).
Notwithstanding the foregoing, no adjustment shall be made pursuant to this
Section
6(d)(i)
if such
adjustment would result in an increase in the Exercise Price.
(ii) Effect
On Exercise Price Of Certain Events.
For
purposes of determining the adjusted Exercise Price under Section
6(d)(i),
the
following will be applicable:
(A) Issuance
Of Options.
If the
Company issues or sells any rights, warrants or options to subscribe for,
purchase or receive Common Stock or Convertible Securities (any of the
foregoing, “Options”),
whether or not immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such Options (and the price of any
conversion of Convertible Securities (as defined below), if applicable) is
less
than the Exercise Price in effect on the date of issuance or sale of such
Options, then the maximum total number of shares of Common Stock issuable upon
the exercise of all such Options (assuming full conversion, exercise or exchange
of Convertible Securities (as defined below), if applicable) shall, as of the
date of the issuance or sale of such Options, be deemed to be outstanding and
to
have been issued and sold by the Company for such price per share. For purposes
of the preceding sentence, the “price per share for which Common Stock is
issuable upon the exercise of such Options” shall be determined by dividing
(x) the
total amount, if any, received or receivable by the Company as consideration
for
the issuance or sale of all such Options, plus
the
minimum aggregate amount of additional consideration, if any, payable to the
Company upon the exercise of all such Options, plus,
in the
case of Convertible Securities (as defined below) issuable upon the exercise
of
such Options, the minimum aggregate amount of additional consideration payable
upon the conversion, exercise or exchange thereof (determined in accordance
with
the calculation method set forth in Section
6(d)(ii)(B))
at the
time such Convertible Securities first become convertible, exercisable or
exchangeable, by (y) the maximum total number of shares of Common Stock issuable
upon the exercise of all such Options (assuming full conversion, exercise or
exchange of Convertible Securities, if applicable). No further adjustment to
the
Exercise Price shall be made upon the actual issuance of such Common Stock
upon
the exercise of such Options or upon the conversion, exercise or exchange of
Convertible Securities (as defined below) issuable upon exercise of such
Options.
To the
extent that shares of Common Stock or Convertible Securities (as defined below)
are not delivered pursuant to such Options, upon the expiration or termination
of such Options, the Exercise Price shall be readjusted to the Exercise Price
that would then be in effect had the adjustments made upon the issuance of
such
Options been made on the basis of delivery of only the number of shares of
Common Stock actually delivered.
7
(B) Issuance
Of Convertible Securities.
If the
Company issues or sells any stock
or
securities (other than Options) of the Company convertible into or exercisable
or exchangeable for Common Stock (any of the foregoing, “Convertible
Securities”),
whether or not immediately convertible, exercisable or exchangeable, and the
price per share for which Common Stock is issuable upon such conversion,
exercise or exchange is less than the Exercise Price in effect on the date
of
issuance or sale of such Convertible Securities, then the maximum total number
of shares of Common Stock issuable upon the conversion, exercise or exchange
of
all such Convertible Securities shall, as of the date of the issuance or sale
of
such Convertible Securities, be deemed to be outstanding and to have been issued
and sold by the Company for such price per share. If the Convertible Securities
so issued or sold do not have a fluctuating conversion or exercise price or
exchange ratio, then for the purposes of the immediately preceding sentence,
the
“price per share for which Common Stock is issuable upon such conversion,
exercise or exchange” shall be determined by dividing
(A) the
total amount, if any, received or receivable by the Company as consideration
for
the issuance or sale of all such Convertible Securities, plus
the
minimum aggregate amount of additional consideration, if any, payable to the
Company upon the conversion, exercise or exchange thereof (determined in
accordance with the calculation method set forth in this Section
6(d)(ii)(B))
at the
time such Convertible Securities first become convertible, exercisable or
exchangeable, by (B) the maximum total number of shares of Common Stock issuable
upon the exercise, conversion or exchange of all such Convertible Securities.
If
the Convertible Securities so issued or sold have a fluctuating conversion
or
exercise price or exchange ratio (a “Variable
Rate Convertible Security”),
then
for purposes of the first sentence of this Section
6(d)(ii)(B),
the
“price per share for which Common Stock is issuable upon such conversion,
exercise or exchange” shall be deemed to be the lowest price per share which
would be applicable (assuming all holding period and other conditions to any
discounts contained in such Variable Rate Convertible Security have been
satisfied) if the conversion price of such Variable Rate Convertible Security
on
the date of issuance or sale thereof were equal to the actual conversion price
on such date (or such higher minimum conversion price if such Variable Rate
Convertible Security is subject to a minimum conversion price) (the
“Assumed
Variable Market Price”),
and,
further, if the conversion price of such Variable Rate Convertible Security
at
any time or times thereafter is less than or equal to the Assumed Variable
Market Price last used for making any adjustment under this Section
6(d)
with
respect to any Variable Rate Convertible Security, the Exercise Price in effect
at such time shall be readjusted to equal the Exercise Price which would have
resulted if the Assumed Variable Market Price at the time of issuance of the
Variable Rate Convertible Security had been equal to the actual conversion
price
of such Variable Rate Convertible Security existing at the time of the
adjustment required by this sentence; provided,
however,
that if
the conversion or exercise price or exchange ratio of a Convertible Security
may
fluctuate solely as a result of provisions designed to protect against dilution,
such Convertible Security shall not be deemed to be a Variable Rate Convertible
Security. No further adjustment to the Exercise Price shall be made upon the
actual issuance of such Common Stock upon conversion, exercise or exchange
of
such Convertible Securities.
8
(C) Change
In Option Price Or Conversion Rate.
If
there is a change at any time (including, without limitation, a change with
respect to any Options or Convertible Securities outstanding as of the Issue
Date) in (x) the amount of additional consideration payable to the Company
upon
the exercise of any Options; (y) the amount of additional consideration, if
any,
payable to the Company upon the conversion, exercise or exchange of any
Convertible Securities; or (z) the rate at which any Convertible Securities
are
convertible into or exercisable or exchangeable for Common Stock (in each such
case, other than under or by reason of provisions designed to protect against
dilution), the Exercise Price in effect at the time of such change shall be
readjusted to the Exercise Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding provided for such
changed additional consideration or changed conversion, exercise or exchange
rate, as the case may be, at the time initially issued or sold.
(D) Calculation
Of Consideration Received.
If any
Common Stock, Options or Convertible Securities are issued or sold for cash,
the
consideration received therefor will be the amount received by the Company
therefor. In case any Common Stock, Options or Convertible Securities are issued
or sold for a consideration part or all of which shall be other than cash,
the
amount of the consideration other than cash received by the Company (including
the net present value of the consideration expected by the Company for the
provided or purchased services) shall be the fair market value of such
consideration. In case any Common Stock, Options or Convertible Securities
are
issued in connection with any merger or consolidation in which the Company
is
the surviving corporation, the amount of consideration therefor will be deemed
to be the fair market value of such portion of the net assets and business
of
the non-surviving corporation as is attributable to such Common Stock, Options
or Convertible Securities, as the case may be. The independent members of the
Company’s Board of Directors shall calculate reasonably and in good faith, using
standard commercial valuation methods appropriate for valuing such assets,
the
fair market value of any consideration.
(iii) Exceptions
To Adjustment Of Exercise Price.
Notwithstanding the foregoing, no adjustment to the Exercise Price shall be
made
pursuant to this Section
6(d)
upon the
issuance of any Excluded Securities.
(f) Change
of Control; Events of Default.
If, at
any time after the Issue Date, a Change of Control (as defined in the Notes)
or
an Event of Default (as defined in the Notes) occurs, then upon each such
occurrence (and, in the case of an Event of Default that is continuing, on
the
last day of each calendar month during which such Event of Default remains
uncured), the Exercise Price shall be adjusted so as to equal the lowest of
the
following (i) the average
of the daily VWAP for each of the ten (10) consecutive Trading Days occurring
immediately prior to (but not including) the date on which such Event of Default
or Change of Control occurred, (ii) the
average
of the daily VWAP for each of the ten (10) consecutive Trading Days occurring
on
and immediately after the date on which such Event of Default or Change of
Control occurred, and (iii) the Exercise Price in effect on the date on which
such Event of Default or Change of Control occurred.
Notwithstanding the foregoing, no adjustment shall be made pursuant to this
Section
6(f)
if such
adjustment would result in an increase in the Exercise Price.
9
(g) Notice
Of Adjustments.
Upon
the occurrence of each adjustment or readjustment of the Exercise Price pursuant
to this Section
6
resulting in a change in the Exercise Price by more than one percent (1%),
or
any change in the number or type of stock, securities and/or other property
issuable upon exercise of this Warrant, the Company, at its expense, shall
promptly compute such adjustment, readjustment or change and prepare and furnish
to the Holder a certificate setting forth such adjustment, readjustment or
change and showing in detail the facts upon which such adjustment, readjustment
or change is based. The Company shall, upon the written request at any time
of
the Holder, furnish to the Holder a like certificate setting forth (x) such
adjustment, readjustment or change, (y) the Exercise Price at the time in effect
and (z) the number of shares of Common Stock and the amount, if any, of other
securities or property which at the time would be received upon exercise of
this
Warrant.
(h) Adjustments;
Additional Shares, Securities or Assets.
In the
event that at any time, as a result of an adjustment made pursuant to this
Section
6,
the
Holder of this Warrant shall, upon exercise of this Warrant, become entitled
to
receive securities or assets (other than Common Stock) then, wherever
appropriate, all references herein to shares of Common Stock shall be deemed
to
refer to and include such shares and/or other securities or assets; and
thereafter the number of such shares and/or other securities or assets shall
be
subject to adjustment from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this Section
6.
Any
adjustment made herein that results in a decrease in the Exercise Price shall
also effect a proportional increase in the number of shares of Common Stock
into
which this Warrant is exercisable.
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7.
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MISCELLANEOUS.
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(a) Failure
to Exercise Rights not Waiver.
No
failure or delay on the part of the Holder in the exercise of any power, right
or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power, right or privilege preclude any other
or
further exercise thereof. All rights and remedies of the Holder hereunder are
cumulative and not exclusive of any rights or remedies otherwise available.
In
the event that the Company breaches any of its obligations hereunder to issue
Warrant Shares or pay any amounts as and when due, the Company shall bear all
costs incurred by the Holder in collecting such amount, including without
limitation reasonable legal fees and expenses.
(b) Notices.
Any
notice, demand or request required or permitted to be given by the Company
or
the Holder pursuant to the terms of this Warrant shall be in writing and shall
be deemed delivered (i) when delivered personally or by verifiable facsimile
transmission, unless such delivery is made on a day that is not a Business
Day,
in which case such delivery will be deemed to be made on the next succeeding
Business Day, (ii) on the next Business Day after timely delivery to an
overnight courier and (iii) on the Business Day actually received if deposited
in the U.S. mail (certified or registered mail, return receipt requested,
postage prepaid), addressed as follows:
10
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If
to the Company:
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Digital
Angel Corporation
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Suite
201
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1690
South Congress
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▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
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Attn:
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▇▇▇▇▇
▇▇▇▇▇▇▇
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Tel:
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(▇▇▇)
▇▇▇-▇▇▇▇
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Fax:
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(▇▇▇)
▇▇▇-▇▇▇▇
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with
a copy (which
shall not constitute notice) to:
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Winthrop
& Weinstine, P.A.
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Suite
3500
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▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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Attn:
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▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
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Tel:
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(▇▇▇)
▇▇▇-▇▇▇▇
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Fax:
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(▇▇▇)
▇▇▇-▇▇▇▇
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and
if to
the Holder, to such address for such party as shall appear on the signature
page
of the Securities Purchase Agreement executed by such party, or as shall be
designated by such party in writing to the other parties hereto in accordance
this Section
7(b).
(c) Amendments
and Waivers.
No
amendment, modification or other change to, or waiver of any provision of,
this
Warrant or any other Warrant may be made unless such amendment, modification
or
change, or request for waiver, is (A) set forth in writing and is signed by
the
Company, (B) consented to in writing by the holders of at least sixty-six
percent (66%) of the Warrant Shares underlying the Warrants then outstanding,
and (C) applied to all of the Warrants. Upon the satisfaction of the conditions
described in (A), (B) and (C) above, this Warrant shall be deemed to incorporate
the amendment, modification, change or waiver effected thereby as of the
effective date thereof, even if the Holder did not consent to such amendment,
modification, change or waiver.
Notwithstanding the foregoing, the limitation on beneficial ownership set forth
in Section
4
may not
be amended without the consent of the holders of a majority of the shares of
Common Stock then outstanding; provided,
however,
that
such limitation may be waived by the Holder upon sixty (60) days’ prior written
notice to the Company, and such waiver shall be valid and shall not require
the
consent of the Company or any other holder of Common Stock or
Warrants.
(d) Transfer
of Warrant.
The
Holder may sell, transfer or otherwise dispose of all or any part of this
Warrant (including without limitation pursuant to a pledge) to any person or
entity as long as such sale, transfer or disposition is the subject of an
effective registration statement under the Securities Act of 1933, as amended,
and applicable state securities laws, or is exempt from registration thereunder,
and is otherwise made in accordance with the applicable law and applicable
provisions of the Securities Purchase Agreement. From and after the date of
any
such sale, transfer or disposition, the transferee hereof shall be deemed to
be
the holder of the portion of this Warrant acquired by such transferee, and
the
Company shall upon notice, as promptly as practicable, issue and deliver to
such
transferee a new Warrant identical in all respects to this Warrant, in the
name
of such transferee. The Company shall be entitled to treat the original Holder
as the holder of this entire Warrant unless and until it receives written notice
of the sale, transfer or disposition hereof.
11
(e) Lost
or Stolen Warrant.
Upon
receipt by the Company of evidence of the loss, theft, destruction or mutilation
of this Warrant, and (in the case of loss, theft or destruction) of indemnity
or
security reasonably satisfactory to the Company, and upon surrender and
cancellation of this Warrant, if mutilated, the Company shall execute and
deliver to the Holder a new Warrant identical in all respects to this
Warrant.
(f) Governing
Law.
This
Warrant shall be governed by and construed in accordance with the laws of the
State of New York applicable
to contracts made and to be performed entirely within the State of New
York.
(g) Successors
and Assigns.
The
terms and conditions of this Warrant shall inure to the benefit of and be
binding upon the respective successors (whether by merger or otherwise) and
permitted assigns of the Company and the Holder. The Company may not assign
its
rights or obligations under this Warrant except as specifically required or
permitted pursuant to the terms hereof.
[Signature
Page to Follow]
12
IN
WITNESS WHEREOF, the Company has duly executed and delivered this Warrant as
of
the Issue Date.
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DIGITAL
ANGEL CORPORATION
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By:
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/s/
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Title:
President and Chief Executive Officer
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EXHIBIT
A to WARRANT
EXERCISE
NOTICE
The
undersigned Holder hereby irrevocably exercises the right to purchase
of the
shares of Common Stock (“Warrant
Shares”)
of
DIGITAL ANGEL CORPORATION evidenced
by the attached Warrant (the “Warrant”).
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Warrant.
1. Form
of
Exercise Price. The Holder intends that payment of the Exercise Price shall
be
made as:
______
a
Cash
Exercise
with
respect to _________________ Warrant Shares; and/or
______
a
Cashless
Exercise
with
respect to _________________ Warrant Shares, as permitted by Section 5(b) of
the
attached Warrant.
2. Payment
of Exercise Price. In the event that the Holder has elected a Cash Exercise
with
respect to some or all of the Warrant Shares to be issued pursuant hereto,
the
Holder shall pay the sum of $________________ to the Company in accordance
with
the terms of the Warrant.
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Date:
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Name
of Registered Holder
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By:
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Name:
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Title:
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Holder
Requests Delivery to be made:
(check
one)
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o
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By
Delivery of Physical Certificates to the Above
Address
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o
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Through
Depository Trust Corporation
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(DWAC
to _____________ DTC #
__________________)
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(FBO
___________________________)
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(Account
# _______________________)
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