THE SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I)
SUCH SECURITIES HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF
1933, AS AMENDED, (II) SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE 144(K), OR
(III) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
IT THAT SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933 OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS.
SUBJECT TO THE PROVISIONS OF SECTION 10 HEREOF, THIS WARRANT SHALL BE
VOID AFTER 5:00 P.M. EASTERN TIME ON AUGUST __, 2010 (THE "EXPIRATION DATE").
No. __________
ALANCO TECHNOLOGIES. INC.
WARRANT TO PURCHASE _______ SHARES OF COMMON STOCK
For VALUE RECEIVED, ____________________ ("Warrantholder"), is entitled
to purchase, subject to the provisions of this Warrant, from Alanco
Technologies, Inc., an Arizona corporation ("Company"), at any time not later
than 5:00 P.M., Eastern time, on the Expiration Date (as defined above), at an
exercise price per share equal to $3.00 (the exercise price in effect being
herein called the "Warrant Price"), ______(1) shares ("Warrant Shares") of the
Company's Class A Common Stock ("Common Stock"). The number of Warrant Shares
purchasable upon exercise of this Warrant and the Warrant Price shall be subject
to adjustment from time to time as described herein. This Warrant is being
issued pursuant to the Purchase Agreement, dated as of August __, 2007 (the
"Purchase Agreement"), among the Company and the initial holders of the Company
Warrants (as defined below). Capitalized terms used herein have the respective
meanings ascribed thereto in the Purchase Agreement unless otherwise defined
herein.
Section 1. Registration. The Company shall maintain books for the
transfer and registration of the Warrant. Upon the initial issuance of this
Warrant, the Company shall issue and register the Warrant in the name of the
Warrantholder.
Section 2. Transfers. As provided herein, this Warrant may be
transferred only pursuant to a registration statement filed under the Securities
Act of 1933, as amended (the "Securities Act"), or an exemption from such
registration. Subject to such restrictions, the Company shall transfer this
Warrant from time to time upon the books to be maintained by the Company for
that purpose, upon surrender hereof for transfer, properly endorsed or
accompanied by appropriate instructions for transfer and such other documents as
may be reasonably required by the Company, including, if required by the
Company, an opinion of its counsel to the effect that such transfer is exempt
from the registration requirements of the Securities Act, to establish that such
transfer is being made in accordance with the terms hereof, and a new Warrant
shall be issued to the transferee and the surrendered Warrant shall be canceled
by the Company.
Section 3. Exercise of Warrant. Subject to the provisions hereof, the
Warrantholder may exercise this Warrant, in whole or in part, at any time prior
to its expiration upon surrender of the Warrant, together with delivery of a
duly executed Warrant exercise form, in the form attached hereto as Appendix A
(the "Exercise Agreement") and payment by cash, certified check or wire transfer
of funds (or, in certain circumstances, by cashless exercise as provided below)
of the aggregate Warrant Price for that number of Warrant Shares then being
purchased, to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the Warrantholder). The Warrant Shares
so purchased shall be deemed to be issued to the Warrantholder or the
Warrantholder's designee, as the record owner of such shares, as of the close of
business on the date on which this Warrant shall have been surrendered (or the
date evidence of loss, theft or destruction thereof and security or indemnity
satisfactory to the Company has been provided to the Company), the Warrant Price
shall have been paid and the completed Exercise Agreement shall have been
delivered. Upon the exercise of the Warrant, the Company shall notify the
transfer agent for the Common Stock (the "Transfer Agent") promptly, and in no
event later than the close of business on the date the Company receives the
Exercise Agreement, and shall instruct the Transfer Agent to deliver the Warrant
Shares for which this Warrant has been exercised, to the Warrantholder or as
otherwise specified in the Exercise Agreement. The Company shall cause the
Transfer Agent to deliver the certificates for the Warrant Shares so purchased
to be delivered to a nationally recognized overnight courier service (the
"Courier Service") for next day delivery within two business days of the
delivery to the Company of the documentation specified above. The certificates
so delivered shall be in such denominations as may be requested by the
Warrantholder and shall be registered in the name of the Warrantholder or such
other name as shall be designated by the Warrantholder, as specified in the
Exercise Agreement. If this Warrant shall have been exercised only in part,
then, unless this Warrant has expired, the Company shall, at its expense, at the
time of delivery of such certificates, deliver to the Warrantholder a new
Warrant representing the right to purchase the number of shares with respect to
which this Warrant shall not then have been exercised. As used herein, "business
day" means a day, other than a Saturday or Sunday, on which banks in New York
City are open for the general transaction of business. Each exercise hereof
shall constitute the re-affirmation by the Warrantholder that the
representations and warranties contained in Section 5 of the Purchase Agreement
are true and correct in all material respects with respect to the Warrantholder
as of the time of such exercise.
If (1) a certificate representing the Warrant Shares is not delivered
to the Warrantholder within three (3) Business Days of the due exercise of this
Warrant by the Warrantholder (other than as a result of a delay in delivery by
the Courier Service) and (2) prior to the time such certificate is received by
the Warrantholder, the Warrantholder, or any third party on behalf of the
Warrantholder or for the Warrantholder's account, purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a
sale by the Warrantholder of shares represented by such certificate (a
"Buy-In"), then the Company shall pay in cash to the Warrantholder (for costs
incurred either directly by such Warrantholder or on behalf of a third party)
the amount by which the total purchase price paid for Common Stock as a result
of the Buy-In (including brokerage commissions, if any) exceeds the proceeds
received by such Warrantholder as a result of the sale to which such Buy-In
relates. The Warrantholder shall provide the Company written notice indicating
the amounts payable to the Warrantholder in respect of the Buy-In.
Section 4. Compliance with the Securities Act of 1933. Except as
provided in the Purchase Agreement, the Company may cause the legend set forth
on the first page of this Warrant to be set forth on each Warrant, and a similar
legend on any security issued or issuable upon exercise of this Warrant, unless
counsel for the Company is of the opinion as to any such security that such
legend is unnecessary.
Section 5. Payment of Taxes. The Company will pay any documentary stamp
taxes attributable to the initial issuance of Warrant Shares issuable upon the
exercise of the Warrant; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificates for Warrant Shares in a
name other than that of the Warrantholder in respect of which such shares are
issued, and in such case, the Company shall not be required to issue or deliver
any certificate for Warrant Shares or any Warrant until the person requesting
the same has paid to the Company the amount of such tax or has established to
the Company's reasonable satisfaction that such tax has been paid. The
Warrantholder shall be responsible for income taxes due under federal, state or
other law, if any such tax is due.
Section 6. Mutilated or Missing Warrants. In case this Warrant shall be
mutilated, lost, stolen, or destroyed, the Company shall issue in exchange and
substitution of and upon surrender and cancellation of the mutilated Warrant, or
in lieu of and substitution for the Warrant lost, stolen or destroyed, a new
Warrant of like tenor and for the purchase of a like number of Warrant Shares,
but only upon receipt of evidence reasonably satisfactory to the Company of such
loss, theft or destruction of the Warrant, and with respect to a lost, stolen or
destroyed Warrant, reasonable indemnity or bond with respect thereto, if
requested by the Company.
Section 7. Reservation of Common Stock. The Company hereby represents
and warrants that there have been reserved, and the Company shall at all
applicable times keep reserved until issued (if necessary) as contemplated by
this Section 7, out of the authorized and unissued shares of Common Stock,
sufficient shares to provide for the exercise of the rights of purchase
represented by this Warrant. The Company agrees that all Warrant Shares issued
upon due exercise of the Warrant shall be, at the time of delivery of the
certificates for such Warrant Shares, duly authorized, validly issued, fully
paid and non-assessable shares of Common Stock of the Company.
Section 8. Adjustments. Subject and pursuant to the provisions of this
Section 8, the Warrant Price and number of Warrant Shares subject to this
Warrant shall be subject to adjustment from time to time as set forth
hereinafter.
(a) If the Company shall, at any time or from time to time
while this Warrant is outstanding, pay a dividend or make a distribution on its
Common Stock in shares of Common Stock, subdivide its outstanding shares of
Common Stock into a greater number of shares or combine its outstanding shares
of Common Stock into a smaller number of shares or issue by reclassification of
its outstanding shares of Common Stock any shares of its capital stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing corporation), then (i) the Warrant
Price in effect immediately prior to the date on which such change shall become
effective shall be adjusted by multiplying such Warrant Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such change and the denominator of which shall be the
number of shares of Common Stock outstanding immediately after giving effect to
such change and (ii) the number of Warrant Shares purchasable upon exercise of
this Warrant shall be adjusted by multiplying the number of Warrant Shares
purchasable upon exercise of this Warrant immediately prior to the date on which
such change shall become effective by a fraction, the numerator of which is
shall be the Warrant Price in effect immediately prior to the date on which such
change shall become effective and the denominator of which shall be the Warrant
Price in effect immediately after giving effect to such change, calculated in
accordance with clause (i) above. Such adjustments shall be made successively
whenever any event listed above shall occur.
(b) If any capital reorganization, reclassification of the
capital stock of the Company, consolidation or merger of the Company with
another corporation in which the Company is not the survivor, or sale, transfer
or other disposition of all or substantially all of the Company's assets to
another corporation shall be effected, then, as a condition of such
reorganization, reclassification, consolidation, merger, sale, transfer or other
disposition, lawful and adequate provision shall be made whereby each
Warrantholder shall thereafter have the right to purchase and receive upon the
basis and upon the terms and conditions herein specified and in lieu of the
Warrant Shares immediately theretofore issuable upon exercise of the Warrant,
such shares of stock, securities or assets as would have been issuable or
payable with respect to or in exchange for a number of Warrant Shares equal to
the number of Warrant Shares immediately theretofore issuable upon exercise of
the Warrant, had such reorganization, reclassification, consolidation, merger,
sale, transfer or other disposition not taken place, and in any such case
appropriate provision shall be made with respect to the rights and interests of
each Warrantholder to the end that the provisions hereof (including, without
limitation, provision for adjustment of the Warrant Price) shall thereafter be
applicable, as nearly equivalent as may be practicable in relation to any shares
of stock, securities or assets thereafter deliverable upon the exercise hereof.
The Company shall not effect any such consolidation, merger, sale, transfer or
other disposition unless prior to or simultaneously with the consummation
thereof the successor corporation (if other than the Company) resulting from
such consolidation or merger, or the corporation purchasing or otherwise
acquiring such assets or other appropriate corporation or entity shall assume
the obligation to deliver to the Warrantholder, at the last address of the
Warrantholder appearing on the books of the Company, such shares of stock,
securities or assets as, in accordance with the foregoing provisions, the
Warrantholder may be entitled to purchase, and the other obligations under this
Warrant. The provisions of this paragraph (b) shall similarly apply to
successive reorganizations, reclassifications, consolidations, mergers, sales,
transfers or other dispositions.
(c) In case the Company shall fix a payment date for the
making of a distribution to all holders of Common Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing corporation) of evidences of indebtedness or assets
(other than cash dividends or cash distributions payable out of consolidated
earnings or earned surplus or dividends or distributions referred to in Section
8(a)), or subscription rights or warrants, the Warrant Price to be in effect
after such payment date shall be determined by multiplying the Warrant Price in
effect immediately prior to such payment date by a fraction, the numerator of
which shall be the total number of shares of Common Stock outstanding multiplied
by the Market Price (as defined below) per share of Common Stock immediately
prior to such payment date, less the fair market value (as determined by the
Company's Board of Directors in good faith) of said assets or evidences of
indebtedness so distributed, or of such subscription rights or warrants, and the
denominator of which shall be the total number of shares of Common Stock
outstanding multiplied by such Market Price per share of Common Stock
immediately prior to such payment date. "Market Price" as of a particular date
(the "Valuation Date") shall mean the following: (a) if the Common Stock is then
listed on the Nasdaq Global Market or the Nasdaq Capital Market ("Nasdaq") or
any other national stock exchange, the closing sale price of one share of Common
Stock on such exchange on the last trading day prior to the Valuation Date; (b)
if the Common Stock is then quoted on the National Association of Securities
Dealers, Inc. OTC Bulletin Board (the "Bulletin Board") or such similar
quotation system or association, the closing sale price of one share of Common
Stock on the Bulletin Board or such other quotation system or association on the
last trading day prior to the Valuation Date or, if no such closing sale price
is available, the average of the high bid and the low asked price quoted thereon
on the last trading day prior to the Valuation Date; or (c) if the Common Stock
is not then listed on a national stock exchange or quoted on the Bulletin Board
or such other quotation system or association, the fair market value of one
share of Common Stock as of the Valuation Date, as determined in good faith by
the Board of Directors of the Company and the Warrantholder. If the Common Stock
is not then listed on a national securities exchange, the Bulletin Board or such
other quotation system or association, the Board of Directors of the Company
shall respond promptly, in writing, to an inquiry by the Warrantholder prior to
the exercise hereunder as to the fair market value of a share of Common Stock as
determined by the Board of Directors of the Company. In the event that the Board
of Directors of the Company and the Warrantholder are unable to agree upon the
fair market value in respect of subpart (c) of this paragraph, the Company and
the Warrantholder shall jointly select an appraiser, who is experienced in such
matters. The decision of such appraiser shall be final and conclusive, and the
cost of such appraiser shall be borne equally by the Company and the
Warrantholder. Such adjustment shall be made successively whenever such a
payment date is fixed.
(d) An adjustment to the Warrant Price shall become effective
immediately after the payment date in the case of each dividend or distribution
and immediately after the effective date of each other event which requires an
adjustment.
(e) In the event that, as a result of an adjustment made
pursuant to this Section 8, the Warrantholder shall become entitled to receive
any shares of capital stock of the Company other than shares of Common Stock,
the number of such other shares so receivable upon exercise of this Warrant
shall be subject thereafter to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Warrant Shares contained in this Warrant.
(f) Except as provided in subsection (g) hereof, if as a
result of the issuance of Options or Convertible Securities only, on or prior to
October 31, 2007, the Company shall, in accordance with any of subsections
(f)(l) through (f)(7) hereof, be deemed to have issued or sold, any Additional
Shares of Common Stock for no consideration or for a consideration per share
less than the Warrant Price in effect immediately prior to the time of such
issue or sale, then and in each such case (a "Trigger Issuance") the
then-existing Warrant Price, shall be reduced, as of the close of business on
the effective date of the Trigger Issuance, to the lowest price per share at
which any share of Common Stock was issued or sold or deemed to be issued or
sold; provided, however, that in no event shall the Warrant Price after giving
effect to such Trigger Issuance be greater than the Warrant Price in effect
prior to such Trigger Issuance.
For purposes of this subsection (f), "Additional Shares of
Common Stock" shall mean all shares of Common Stock deemed to be issued pursuant
to this subsection (f), other than Excluded Issuances (as defined in subsection
(g) hereof).
For purposes of this subsection (f), the following subsections
(f)(l) to (f)(7) shall also be applicable:
(f)(1) Issuance of Rights or Options. In case at any
time the Company shall in any manner grant (directly and not
by assumption in a merger or otherwise) any warrants or other
rights to subscribe for or to purchase, or any options for the
purchase of, Common Stock or any stock or security convertible
into or exchangeable for Common Stock (such warrants, rights
or options being called "Options" and such convertible or
exchangeable stock or securities being called "Convertible
Securities") whether or not such Options or the right to
convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which
Common Stock is issuable upon the exercise of such Options or
upon the conversion or exchange of such Convertible Securities
(determined by dividing (i) the sum (which sum shall
constitute the applicable consideration) of (x) the total
amount, if any, received or receivable by the Company as
consideration for the granting of such Options, plus (y) the
aggregate amount of additional consideration payable to the
Company upon the exercise of all such Options, plus (z), in
the case of such Options which relate to Convertible
Securities, the aggregate amount of additional consideration,
if any, payable upon the issue or sale of such Convertible
Securities and upon the conversion or exchange thereof, by
(ii) the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the
conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options) shall be less than
the Warrant Price in effect immediately prior to the time of
the granting of such Options, then the total number of shares
of Common Stock issuable upon the exercise of such Options or
upon conversion or exchange of the total amount of such
Convertible Securities issuable upon the exercise of such
Options shall be deemed to have been issued for such price per
share as of the date of granting of such Options or the
issuance of such Convertible Securities and thereafter shall
be deemed to be outstanding for purposes of adjusting the
Warrant Price. Except as otherwise provided in subsection
8(f)(3), no adjustment of the Warrant Price shall be made upon
the actual issue of such Common Stock or of such Convertible
Securities upon exercise of such Options or upon the actual
issue of such Common Stock upon conversion or exchange of such
Convertible Securities.
(f)(2) Issuance of Convertible Securities. In case
the Company shall in any manner issue (directly and not by
assumption in a merger or otherwise) or sell any Convertible
Securities, whether or not the rights to exchange or convert
any such Convertible Securities are immediately exercisable,
and the price per share for which Common Stock is issuable
upon such conversion or exchange (determined by dividing (i)
the sum (which sum shall constitute the applicable
consideration) of (x) the total amount received or receivable
by the Company as consideration for the issue or sale of such
Convertible Securities, plus (y) the aggregate amount of
additional consideration, if any, payable to the Company upon
the conversion or exchange thereof, by (ii) the total number
of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities) shall be less
than the Warrant Price in effect immediately prior to the time
of such issue or sale, then the total maximum number of shares
of Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall be deemed to have been
issued for such price per share as of the date of the issue or
sale of such Convertible Securities and thereafter shall be
deemed to be outstanding for purposes of adjusting the Warrant
Price, provided that (a) except as otherwise provided in
subsection 8(f)(3), no adjustment of the Warrant Price shall
be made upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities and (b)
no further adjustment of the Warrant Price shall be made by
reason of the issue or sale of Convertible Securities upon
exercise of any Options to purchase any such Convertible
Securities for which adjustments of the Warrant Price have
been made pursuant to the other provisions of subsection 8(f).
(f)(3) Change in Option Price or Conversion Rate.
Upon the happening of any of the following events, namely, if
the purchase price provided for in any Option referred to in
subsection 8(f)(l) hereof, the additional consideration, if
any, payable upon the conversion or exchange of any
Convertible Securities referred to in subsections 8(f)(l) or
8(f)(2), or the rate at which Convertible Securities referred
to in subsections 8(f)(l) or 8(f)(2) are convertible into or
exchangeable for Common Stock shall change at any time
(including, but not limited to, changes under or by reason of
provisions designed to protect against dilution), the Warrant
Price in effect at the time of such event shall forthwith be
readjusted to the Warrant Price which would have been in
effect at such time had such Options or Convertible Securities
still outstanding provided for such changed purchase price,
additional consideration or conversion rate, as the case may
be, at the time initially granted, issued or sold. On the
termination of any Option for which any adjustment was made
pursuant to this subsection 8(f) or any right to convert or
exchange Convertible Securities for which any adjustment was
made pursuant to this subsection 8(f) (including without
limitation upon the redemption or purchase for consideration
of such Convertible Securities by the Company), the Warrant
Price then in effect hereunder shall forthwith be changed to
the Warrant Price which would have been in effect at the time
of such termination had such Option or Convertible Securities,
to the extent outstanding immediately prior to such
termination, never been issued.
(f)(4) [reserved]
(f)(5) Consideration. In case any Options or
Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the net
amount received by the Company therefor, after deduction
therefrom of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Company in
connection therewith. In case any Options or Convertible
Securities shall be issued or sold for a consideration other
than cash, the amount of the consideration other than cash
received by the Company shall be deemed to be the fair value
of such consideration as determined in good faith by the Board
of Directors of the Company, after deduction of any expenses
incurred or any underwriting commissions or concessions paid
or allowed by the Company in connection therewith. In case any
Options shall be issued in connection with the issue and sale
of other securities of the Company, together comprising one
integral transaction in which no specific consideration is
allocated to such Options by the parties thereto, such Options
shall be deemed to have been issued for such consideration as
determined in good faith by the Board of Directors of the
Company. If Common Stock, Options or Convertible Securities
shall be issued or sold by the Company and, in connection
therewith, other Options or Convertible Securities (the
"Additional Rights") are issued, then the consideration
received or deemed to be received by the Company shall be
reduced by the fair market value of the Additional Rights (as
determined using the Black-Scholes option pricing model or
another method mutually agreed to by the Company and the
Warrantholder). The Board of Directors of the Company shall
respond promptly, in writing, to an inquiry by the
Warrantholder as to the fair market value of the Additional
Rights. In the event that the Board of Directors of the
Company and the Warrantholder are unable to agree upon the
fair market value of the Additional Rights, the Company and
the Warrantholder shall jointly select an appraiser, who is
experienced in such matters. The decision of such appraiser
shall be final and conclusive, and the cost of such appraiser
shall be borne evenly by the Company and the Warrantholder.
(f)(6) Record Date. In case the Company shall take a
record of the holders of its Common Stock for the purpose of
entitling them (i) to receive a dividend or other distribution
payable in Options or Convertible Securities or (ii) to
subscribe for or purchase Options or Convertible Securities,
then such record date shall be deemed to be the date of the
issue or sale of the shares of Common Stock deemed to have
been issued or sold upon the declaration of such dividend or
the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the
case may be.
(f)(7) Treasury Shares. The number of shares of
Common Stock outstanding at any given time shall not include
shares owned or held by or for the account of the Company or
any of its wholly-owned subsidiaries, and the disposition of
any such shares (other than the cancellation or retirement
thereof) shall be considered an issue or sale of Common Stock
for the purpose of this subsection (f).
(f)(8) Nasdaq Limitation. Notwithstanding any other
provision in Section 8(f) to the contrary, if a reduction in
the Warrant Price pursuant to Section 8(f) (other than as set
forth in this clause (f)(8)) would require the Company to
obtain stockholder approval of the transactions contemplated
by the Purchase Agreement pursuant to Nasdaq Marketplace Rule
4350(i) and such stockholder approval has not been obtained,
(i) the Warrant Price shall be reduced to the maximum extent
that would not require stockholder approval under such Rule,
and (ii) the Company shall use its commercially reasonable
efforts to obtain such stockholder approval as soon as
reasonably practicable, including by calling a special meeting
of stockholders to vote on such Warrant Price adjustment. This
provision shall not restrict the number of shares of Common
Stock which a Warrantholder may receive or beneficially own in
order to determine the amount of securities or other
consideration that such Holder may receive in the event of a
transaction contemplated by Section 8 of this Warrant.
(g) Anything herein to the contrary notwithstanding, the
Company shall not be required to make any adjustment of the Warrant Price in the
case of the issuance of (A) Options or Convertible Securities issued to
directors, officers, employees or consultants of the Company in connection with
their service as directors of the Company, their employment by the Company or
their retention as consultants by the Company pursuant to an equity compensation
program approved by the Board of Directors of the Company or the compensation
committee of the Board of Directors of the Company, (B) securities issued
pursuant to the Purchase Agreement and securities issued upon the exercise or
conversion of those securities, (C) Convertible Securities issued in the Other
Offering, provided that the terms of the Other Offering are no less favorable to
the investors in the Other Offering than the terms of the offering pursuant to
the Purchase Agreement and (D) Convertible Securities issued to The Pinnacle
Fund, L.P. or its Affiliates, provided that the terms of such issuance are no
less favorable to the investors in the Other Offering than the terms of the
offering pursuant to the Purchase Agreement (collectively, "Excluded
Issuances").
(h) Upon any adjustment to the Warrant Price pursuant to
Section 8(f) above, the number of Warrant Shares purchasable hereunder shall be
adjusted by multiplying such number by a fraction, the numerator of which shall
be the Warrant Price in effect immediately prior to such adjustment and the
denominator of which shall be the Warrant Price in effect immediately
thereafter.
(i) To the extent permitted by applicable law and the listing
requirements of any stock market or exchange on which the Common Stock is then
listed, the Company from time to time may decrease the Warrant Price by any
amount for any period of time if the period is at least twenty (20) days, the
decrease is irrevocable during the period and the Board shall have made a
determination that such decrease would be in the best interests of the Company,
which determination shall be conclusive. Whenever the Warrant Price is decreased
pursuant to the preceding sentence, the Company shall provide written notice
thereof to the Warrantholder at least five (5) days prior to the date the
decreased Warrant Price takes effect, and such notice shall state the decreased
Warrant Price and the period during which it will be in effect.
Section 9. Fractional Interest. The Company shall not be required to
issue fractions of Warrant Shares upon the exercise of this Warrant. If any
fractional share of Common Stock would, except for the provisions of the first
sentence of this Section 9, be deliverable upon such exercise, the Company, in
lieu of delivering such fractional share, shall pay to the exercising
Warrantholder an amount in cash equal to the Market Price of such fractional
share of Common Stock on the date of exercise.
Section 10. Extension of Expiration Date. If the Company fails to cause
any Registration Statement covering Registrable Securities (as defined in the
Registration Rights Agreement) to be declared effective prior to the applicable
dates set forth therein, or if any of the events specified in Section 2(c)(ii)
of the Registration Rights Agreement occurs, and the Blackout Period (as defined
in the Registration Rights Agreement) (whether alone, or in combination with any
other Blackout Period) continues for more than 60 days in any 12 month period,
or for more than a total of 90 days, then the Expiration Date of this Warrant
shall be extended one day for each day beyond the 60-day or 90-day limits, as
the case may be, that the Blackout Period continues.
Section 11. Benefits. Nothing in this Warrant shall be construed to
give any person, firm or corporation (other than the Company and the
Warrantholder) any legal or equitable right, remedy or claim, it being agreed
that this Warrant shall be for the sole and exclusive benefit of the Company and
the Warrantholder.
Section 12. Notices to Warrantholder. Upon the happening of any event
requiring an adjustment of the Warrant Price, the Company shall promptly give
written notice thereof to the Warrantholder at the address appearing in the
records of the Company, stating the adjusted Warrant Price and the adjusted
number of Warrant Shares resulting from such event and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. Failure to give such notice to the Warrantholder or any
defect therein shall not affect the legality or validity of the subject
adjustment.
Section 13. Identity of Transfer Agent. The Transfer Agent for the
Common Stock is Computershare Investor Services, 350 Indiana Street, Suite 800,
Golden, Colorado 80401. Upon the appointment of any subsequent transfer agent
for the Common Stock or other shares of the Company's capital stock issuable
upon the exercise of the rights of purchase represented by the Warrant, the
Company will mail to the Warrantholder a statement setting forth the name and
address of such transfer agent.
Section 14. Notices. Unless otherwise provided, any notice required or
permitted under this Warrant shall be given in writing and shall be deemed
effectively given as hereinafter described (i) if given by personal delivery,
then such notice shall be deemed given upon such delivery, (ii) if given by
telex or facsimile, then such notice shall be deemed given upon receipt of
confirmation of complete transmittal, (iii) if given by mail, then such notice
shall be deemed given upon the earlier of (A) receipt of such notice by the
recipient or (B) three days after such notice is deposited in first class mail,
postage prepaid, and (iv) if given by an internationally recognized overnight
air courier, then such notice shall be deemed given one business day after
delivery to such carrier. All notices shall be addressed as follows: if to the
Warrantholder, at its address as set forth in the Company's books and records
and, if to the Company, at the address as follows, or at such other address as
the Warrantholder or the Company may designate by ten days' advance written
notice to the other:
If to the Company:
Alanco Technologies, Inc.
15575 North 83rd Way, Suite 3
Scottsdale, Arizona 85260
Attention: Chief Financial Officer
Fax: (480) 607-1515
With a copy to:
Steven P. Oman, Esq.
8664 E. Chama Road
Scottsdale, Arizona 95255
Fax: (480) 348-1471
Section 15. Registration Rights. The initial Warrantholder is entitled
to the benefit of certain registration rights with respect to the shares of
Common Stock issuable upon the exercise of this Warrant as provided in the
Registration Rights Agreement, and any subsequent Warrantholder may be entitled
to such rights.
Section 16. Successors. All the covenants and provisions hereof by or
for the benefit of the Warrantholder shall bind and inure to the benefit of its
respective successors and assigns hereunder.
Section 17. Governing Law; Consent to Jurisdiction; Waiver of Jury
Trial. This Warrant shall be governed by, and construed in accordance with, the
internal laws of the State of New York, without reference to the choice of law
provisions thereof. The Company and, by accepting this Warrant, the
Warrantholder, each irrevocably submits to the exclusive jurisdiction of the
courts of the State of New York located in New York County and the United States
District Court for the Southern District of New York for the purpose of any
suit, action, proceeding or judgment relating to or arising out of this Warrant
and the transactions contemplated hereby. Service of process in connection with
any such suit, action or proceeding may be served on each party hereto anywhere
in the world by the same methods as are specified for the giving of notices
under this Warrant. The Company and, by accepting this Warrant, the
Warrantholder, each irrevocably consents to the jurisdiction of any such court
in any such suit, action or proceeding and to the laying of venue in such court.
The Company and, by accepting this Warrant, the Warrantholder, each irrevocably
waives any objection to the laying of venue of any such suit, action or
proceeding brought in such courts and irrevocably waives any claim that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. EACH OF THE COMPANY AND, BY ITS ACCEPTANCE HEREOF, THE
WARRANTHOLDER HEREBY WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
LITIGATION WITH RESPECT TO THIS WARRANT AND REPRESENTS THAT COUNSEL HAS BEEN
CONSULTED SPECIFICALLY AS TO THIS WAIVER.
Section 18. Call Provision. Notwithstanding any other provision
contained in this Warrant to the contrary, in the event that the closing bid
price per share of Common Stock as traded on the Nasdaq (or such other exchange
or stock market on which the Common Stock may then be listed or quoted) equals
or exceeds $5.00 (appropriately adjusted for any stock split, reverse stock
split, stock dividend or other reclassification or combination of the Common
Stock occurring after the date hereof) for twenty (20) consecutive trading days
commencing after the Registration Statement (as defined in the Registration
Rights Agreement) has been declared effective, the Company, upon thirty (30)
days prior written notice (the "Notice Period") given to the Warrantholder
within one business day immediately following the end of such twenty (20)
trading day period, may call this Warrant, in whole but not in part, at a
redemption price equal to $0.01 per share of Common Stock then purchasable
pursuant to this Warrant; provided that (i) the Company simultaneously calls all
Company Warrants (as defined below) on the same terms, (ii) all of the shares of
Common Stock issuable hereunder either (A) are registered pursuant to an
effective Registration Statement (as defined in the Registration Rights
Agreement) which is not suspended and for which no stop order is in effect, and
pursuant to which the Warrantholder is able to sell such shares of Common Stock
at all times during the Notice Period or (B) no longer constitute Registrable
Securities (as defined in the Registration Rights Agreement) and (iii) this
Warrant is fully exercisable for the full amount of Warrant Shares covered
hereby. Notwithstanding any such notice by the Company, the Warrantholder shall
have the right to exercise this Warrant prior to the end of the Notice Period.
Section 19. Cashless Exercise. Notwithstanding any other provision
contained herein to the contrary, from and after the first anniversary of the
Closing Date and so long as the Company is required under the Registration
Rights Agreement to have effected the registration of the Warrant Shares for
resale to the public pursuant to a Registration Statement (as such term is
defined in the Registration Rights Agreement), if the Warrant Shares may not be
freely sold to the public for any reason (including, but not limited to, the
failure of the Company to have effected the registration of the Warrant Shares
or to have a current prospectus available for delivery or otherwise, but
excluding the period of any Allowed Delay (as defined in the Registration Rights
Agreement), the Warrantholder may elect to receive, without the payment by the
Warrantholder of the aggregate Warrant Price in respect of the shares of Common
Stock to be acquired, shares of Common Stock of equal value to the value of this
Warrant, or any specified portion hereof, by the surrender of this Warrant (or
such portion of this Warrant being so exercised) together with a Net Issue
Election Notice, in the form annexed hereto as Appendix B, duly executed, to the
Company. Thereupon, the Company shall issue to the Warrantholder such number of
fully paid, validly issued and nonassessable shares of Common Stock as is
computed using the following formula:
X = Y (A - B)
---------
A
where
X = the number of shares of Common Stock to which
the Warrantholder is entitled upon such cashless exercise;
Y = the total number of shares of Common Stock
covered by this Warrant for which the Warrantholder has surrendered purchase
rights at such time for cashless exercise (including both shares to be issued
to the Warrantholder and shares as to which the purchase rights are to be
canceled as payment therefor);
A = the "Market Price" of one share of Common Stock
as at the date the net issue election is made; and
B = the Warrant Price in effect under this Warrant
at the time the net issue election is made.
Section 20. Limitations on Exercise. Notwithstanding anything to the
contrary contained herein, the number of Warrant Shares that may be acquired by
the Warrantholder upon any exercise of this Warrant (or otherwise in respect
hereof) shall be limited to the extent necessary to insure that, following such
exercise (or other issuance), the total number of shares of Common Stock then
beneficially owned by such Warrantholder and its Affiliates and any other
Persons whose beneficial ownership of Common Stock would be aggregated with the
Warrantholder's for purposes of Section 13(d) of the 1934 Act, does not exceed
9.999% of the total number of issued and outstanding shares of Common Stock
(including for such purpose the shares of Common Stock issuable upon such
exercise). For such purposes, beneficial ownership shall be determined in
accordance with Section 13(d) of the 1934 Act and the rules and regulations
promulgated thereunder. This provision shall not restrict the number of shares
of Common Stock which a Holder may receive or beneficially own in order to
determine the amount of securities or other consideration that such Holder may
receive in the event of a transaction contemplated by Section 8 of this Warrant.
This restriction may not be waived.
Section 21. No Rights as Stockholder. Prior to the exercise of this
Warrant, the Warrantholder shall not have or exercise any rights as a
stockholder of the Company by virtue of its ownership of this Warrant.
Section 22. Amendment; Waiver. This Warrant is one of a series of
Warrants of like tenor issued by the Company pursuant to the Purchase Agreement
and initially covering an aggregate of 631,579 shares of Common Stock
(collectively, the "Company Warrants"). Any term of this Warrant may be amended
or waived (including the adjustment provisions included in Section 8 of this
Warrant) upon the written consent of the Company and the holders of Company
Warrants representing at least 50% of the number of shares of Common Stock then
subject to all outstanding Company Warrants (the "Majority Holders"); provided,
that (x) any such amendment or waiver must apply to all Company Warrants; and
(y) the number of Warrant Shares subject to this Warrant, the Warrant Price and
the Expiration Date may not be amended, and the right to exercise this Warrant
may not be altered or waived, without the written consent of the Warrantholder.
Section 23. Section Headings. The section headings in this Warrant are
for the convenience of the Company and the Warrantholder and in no way alter,
modify, amend, limit or restrict the provisions hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed, as of the ______ day of August, 2007.
ALANCO TECHNOLOGIES, INC.
By:___________________________
Name:
Title:
APPENDIX A
ALANCO TECHNOLOGIES, INC.
WARRANT EXERCISE FORM
PLEASE HANDLE ON A RUSH BASIS
To Alanco Technologies, Inc.:
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant ("Warrant") for, and to purchase
thereunder by the payment of the Warrant Price and surrender of the Warrant,
_______________ shares of Common Stock ("Warrant Shares") provided for therein,
and requests that certificates for the Warrant Shares be issued as follows:
------------------------------------
Name
------------------------------------
Address
------------------------------------
Federal Tax ID or Social Security No.
and delivered by (certified mail to the above address, or
(electronically (provide DWAC
Instructions:___________________), or
(other (specify): __________________________________________).
and, if the number of Warrant Shares shall not be all the Warrant Shares
purchasable upon exercise of the Warrant, that a new Warrant for the balance of
the Warrant Shares purchasable upon exercise of this Warrant be registered in
the name of the undersigned Warrantholder or the undersigned's Assignee as below
indicated and delivered to the address stated below.
Dated: ___________________, ____
Note: The signature must correspond Signature:___________________________
with the name of the Warrantholder as
written on the first page of the ______________________________
Warrant in every particular, without Name (please print)
alteration or enlargementor any change
whatever, unless the Warranthas been
assigned. ______________________________
Address
______________________________
Federal Identification or
Social Security No.
Assignee:
______________________________
______________________________
______________________________
APPENDIX B
ALANCO TECHNOLOGIES, INC.
NET ISSUE ELECTION NOTICE
PLEASE HANDLE ON A RUSH BASIS
To: Alanco Technologies, Inc.
Date:[_________________________]
The undersigned hereby elects under Section 19 of this Warrant to
surrender the right to purchase [____________] shares of Common Stock pursuant
to this Warrant and hereby requests the issuance of [_____________] shares of
Common Stock. The certificate(s) for the shares issuable upon such net issue
election shall be issued in the name of the undersigned or as otherwise
indicated below.
- -----------------------------------------
Signature
- -----------------------------------------
Name for Registration
- -----------------------------------------
Mailing Address
(1) 40% warrant coverage.