Document:

EXHIBIT 10.19

 

THIS
WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR OTHERWISE IN ACCORDANCE WITH APPLICABLE LAW.

 

WARRANT TO PURCHASE STOCK

 

	
  Company:

  	
   

  	
  Nexsan Corporation

  
	
  Number of Shares:

  	
   

  	
  570,497 Shares

  
	
  Class of Stock:

  	
   

  	
  Common Stock

  
	
  Initial Exercise Price:

  	
   

  	
  $0.6135 per share

  
	
  Issue Date:

  	
   

  	
  August 10, 2005

  
	
  Expiration Date:

  	
   

  	
  August 10, 2012

  

 

THIS WARRANT CERTIFIES
THAT, for value received, receipt of which is hereby acknowledged, ORIX Venture Finance LLC (“Holder”) is entitled to purchase
the number of fully paid and nonassessable shares of the Class of Stock
(the “Shares”) of Nexsan Corporation
(the “Company”) at the initial exercise price per Share (the “Warrant Price”)
set forth above, as constituted on the date hereof and as adjusted pursuant to
the other terms of this Warrant, subject to the provisions and upon the terms
and conditions set forth in this Warrant. This Warrant is being issued pursuant
to a Loan and Security Agreement between the Company and Holder dated as of August 10,
2005 (the “Loan Agreement”) (Capitalized terms used herein, which are not
defined, shall have the meanings set forth in the Loan Agreement.)

 

ARTICLE 1.         SHARES; EXERCISE.

 

1.1           Number of Shares. The number of Shares initially subject
to this Warrant shall initially be the number of Shares set forth above.

 

1.2           Method of Exercise. Holder may exercise this Warrant
by delivering (including a facsimile transmission) a duly executed Notice of
Exercise in substantially the form attached as Appendix 1 to the principal
office of the Company. Unless Holder is exercising the conversion right set forth
in Section 1.3, Holder shall also deliver to the Company the aggregate
Warrant Price for the Shares being purchased (i) by wire transfer or by
check, or (ii) by notice of cancellation of indebtedness of the Company to
Holder, or (iii) a combination of (i) or (ii).

 

1.3           Conversion Right. In lieu of exercising this Warrant as
specified in Section 1.2, Holder may from time to time convert this
Warrant, in whole or in part, into a number of Shares determined by dividing (a) the
aggregate fair market value of the Shares or other securities otherwise
issuable upon the proposed whole or partial exercise of this Warrant minus the
aggregate Warrant Price of such Shares by (b) the fair market value of one
Share. The fair market value of the Shares shall be determined pursuant to Section 1.6
below.

 

1.4           Effective Date of Exercise. This Warrant shall be deemed to have
been exercised immediately prior to the close of business on the date of its
surrender for exercise as provided 

 

 

above. The person
entitled to receive the Shares issuable upon exercise of this Warrant shall be
treated for all purposes as the holder of record of such shares as of the close
of business on the date the Holder is deemed to have exercised this Warrant.

 

1.5           No Rights of Shareholder. This Warrant does not entitle Holder to
any voting rights as a shareholder of the Company prior to the exercise hereof.
Upon exercise hereof, as set forth herein, the Holder shall be deemed to be a
shareholder of the Company holding the number of shares as to which this
Warrant has been exercised on the date the Notice of Exercise in substantially
the form attached as Appendix 1 has been delivered to the principal office
of the Company with any payment or other documents called for by the terms
hereof.

 

1.6           Fair Market Value. If the Shares are traded in a public
market, the fair market value of the Shares shall be the closing price of the
Shares (or the closing price of the Company’s stock into which the Shares are
convertible) reported for the business day immediately before Holder delivers
its Notice of Exercise to the Company. If the Shares are not traded in a public
market, the Board of Directors of the Company shall determine fair market value
in its reasonable good faith judgment. The foregoing notwithstanding, if Holder
advises the Board of Directors in writing that Holder disagrees with such
determination, then the Company and Holder shall promptly agree upon a
reputable investment banking firm to undertake such valuation. If the Company
and Holder are unable to agree on such investment banking firm, then the Holder
shall select three reputable investment banking firms, and from those three
firms the Company shall select one to undertake such valuation. If the
valuation of such investment banking firm is greater than that determined by
the Board of Directors, then all fees and expenses of such investment banking
firm shall be paid by the Company. In all other circumstances, such fees and
expenses shall be paid by Holder.

 

1.7           Delivery of Certificate and New Warrant. Promptly after Holder exercises or
converts this Warrant, the Company shall deliver to Holder certificates for the
Shares acquired and, if this Warrant has not been fully exercised or converted
and has not expired, a new Warrant representing the Shares not so acquired
shall be delivered to Holder.

 

1.8           Replacement of Warrants. On receipt of an affidavit of an
officer of the Holder of the loss, theft, destruction or mutilation of this
Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the
Company or, in the case of mutilation, on surrender and cancellation of this
Warrant, the Company at its expense shall execute and deliver, in lieu of this
Warrant, a new warrant of like tenor.

 

1.9           Acquisition of the Company. Upon the closing of any Acquisition the
successor entity shall assume the obligations of this Warrant, and this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the unexercised portion of
this Warrant as if such Shares were outstanding on the record date for the
Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly. As used herein, “Acquisition” means any sale, license, or other
disposition of all or substantially all of the assets of the Company, or any
reorganization, consolidation, or merger of the Company in which the holders of
the Company’s voting securities before the transaction (for such purpose
treating all outstanding options and warrants to purchase voting securities of
the Company as 

 

2

 

having been
exercised and treating all outstanding debt and equity securities convertible
into voting securities of the Company as having been converted) beneficially
own less than 50% of the outstanding voting securities of the surviving entity
after the transaction.

 

1.10         Automatic Exercise Prior to Expiration. To the extent this Warrant is not
previously exercised as to all of the Shares subject hereto, and if the fair
market value of one Share is greater than the Warrant Price then in effect,
this Warrant shall be deemed automatically exercised pursuant to Section 1.3
above (even if not surrendered) immediately before its expiration date as set
forth in this Warrant. For purposes of such automatic exercise, the fair market
value of one Share upon such expiration shall be determined pursuant to Section 1.6
above. To the extent this Warrant or any portion thereof is deemed
automatically exercised pursuant to this Section, the Company agrees to
promptly notify the holder hereof of the number of Shares, if any, the holder
hereof is to receive by reason of such automatic exercise.

 

ARTICLE 2.         ADJUSTMENTS TO THE SHARES.

 

2.1           Stock Dividends, Splits, Etc. If the Company declares or pays a
dividend on its Stock payable in Common Stock or other securities, or
subdivides the outstanding Stock into a greater amount of Stock, then upon
exercise of this Warrant, for each Share acquired, Holder shall receive,
without cost to Holder, the total number and kind of securities to which Holder
would have been entitled had Holder owned the Shares of record as of the date
the dividend or subdivision occurred.

 

2.2           Reclassification, Exchange or
Substitution. Upon
any reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise
or conversion of this Warrant, Holder shall be entitled to receive, upon
exercise or conversion of this Warrant, the number and kind of securities and
property that Holder would have received for the Shares if this Warrant had
been exercised immediately before such reclassification, exchange,
substitution, or other event. Such an event shall include any automatic
conversion of the outstanding or issuable securities of the Company of the same
class or series as the Shares to Common Stock pursuant to the terms
of the Company’s Articles or Certificate of Incorporation upon the closing of a
registered public offering of the Company’s Common Stock. After the occurrence
of such an event, the Company or its successor shall promptly issue to Holder a
new Warrant for such new securities or other property. The new Warrant shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article 2 including,
without limitation, adjustments to the Warrant Price and to the number of
securities or property issuable upon exercise of the new Warrant. The
provisions of this Section 2.2 shall similarly apply to successive
reclassifications, exchanges, substitutions, or other events.

 

2.3           Adjustments for Combinations, Etc. If the outstanding Shares are combined
or consolidated, by reclassification or otherwise, into a lesser number of
shares, the Warrant Price shall be proportionately increased.

 

2.4           Price Adjustment. If the Company issues additional common
shares (including shares of Common Stock ultimately issuable upon conversion of
a security convertible into Common Stock), other than Excluded Stock (as
defined in the Company’s Certificate of 

 

3

 

Incorporation in
effect on the Issue Date), after the date of the Warrant and the consideration
per additional common share is less than the Warrant Price in effect
immediately before such issue, the Warrant Price shall be adjusted in
accordance with the treatment of the Series A Convertible Preferred Stock
under the Company’s Certificate of Incorporation in effect on the Issue Date.

 

2.5           No Impairment. The Company shall not, by amendment of
its Articles or Certificate of Incorporation or through a reorganization,
transfer of assets, consolidation, merger, dissolution, issue, or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed under this
Warrant by the Company, but shall at all times in good faith assist in carrying
out of all the provisions of this Article 2 and in taking all such action
as may be necessary or appropriate to protect Holder’s rights under this Article against
impairment.

 

2.6           Fractional Shares. No fractional Shares shall be issuable
upon exercise or conversion of the Warrant and the number of Shares to be
issued shall be rounded down to the nearest whole Share. If a fractional share
interest arises upon any exercise or conversion of the Warrant, the Company
shall eliminate such fractional share interest by paying Holder a cash amount
computed by multiplying the fractional interest by the fair market value of a
full Share.

 

2.7           Certificate as to Adjustments: Other
Adjustments. Upon
each adjustment of the Warrant Price, the Company at its expense shall promptly
compute such adjustment, and furnish Holder with a certificate of its Chief
Financial Officer setting forth such adjustment and the facts upon which such
adjustment is based. The Company shall, upon written request, furnish Holder a
certificate setting forth the Warrant Price in effect upon the date thereof and
the series of adjustments leading to such Warrant Price. If any change in
the outstanding securities of the Company or any other event occurs, as to
which the other provisions of this Article 2 are not strictly applicable,
or if strictly applicable would not fairly protect the purchase rights of the
Holder in accordance with such provisions, then the Board of Directors of the
Company shall make an adjustment in the number and class of shares subject
to this Warrant, the Warrant Price or the application of such provisions, so as
to protect such purchase rights as aforesaid and to give the Holder, upon
exercise for the same aggregate Warrant Price, the total number, class and
kind of securities as it would have owned had the Warrant been exercised prior
to the event and had it continued to hold such securities until after the event
requiring the adjustment.

 

ARTICLE 3.         REPRESENTATIONS AND COVENANTS OF THE
COMPANY.

 

3.1           Representations and Warranties. The Company hereby represents and
warrants to the Holder as follows:

 

(a)           The initial Warrant Price hereunder is
not greater than the price per share at which the Shares were last issued in an
arm’s length transaction in which at least $500,000 of the Shares were sold.

 

(b)           All Shares which may be issued upon
the exercise of the purchase right represented by this Warrant, and all
securities, if any, issuable upon conversion of the Shares, shall, upon
issuance, be duly authorized, validly issued, fully paid and nonassessable, and
free of any liens and encumbrances except for restrictions on transfer provided
for herein or under 

 

4

 

applicable federal
and state securities laws. The Company shall, at all times, reserve a
sufficient number of Shares and of shares of Common Stock for issuance upon
Holder’s exercise of its rights hereunder and conversion of the Shares.

 

(c)           The Capitalization Table attached hereto
as Exhibit A is true and complete as of the Issue Date. If additional
shares are issued in connection with the acquisition of AESign Evertrust as
indicated in the Notes to Exhibit A, the Warrant Price shall be reduced to
equal the revised Parent Share Value (as defined in the Purchase Agreement,
dated March 14, 2005, among the Company, AESign Evertrust, Inc. and
others). Additionally, the number of Shares issuable upon exercise of the
Warrant shall be adjusted to equal $350,000 divided by the adjusted Warrant
Price.

 

3.2           Notice of Certain Events. If the Company proposes at any time (a) to
declare any dividend or distribution upon its Common Stock, whether in cash,
property, stock, or other securities and whether or not a regular cash
dividend; (b) to offer for subscription pro rata to the holders of any class or
series of its stock any additional shares of stock of any class or series or
other rights; (c) to effect any reclassification or recapitalization of
Common Stock; (d) to merge or consolidate with or into any other
corporation, or sell, lease, license, or convey all or substantially all of its
assets, or to liquidate, dissolve or wind up; or (e) offer holders of
registration rights the opportunity to participate in an underwritten public
offering of the company’s securities for cash, then, in connection with each
such event, the Company shall give Holder (1) at least 30 days prior
written notice of the date on which a record will be taken for such dividend,
distribution, or subscription rights (and specifying the date on which the
holders of Common Stock will be entitled thereto) or for determining rights to
vote, if any, in respect of the matters referred to in (a) and (b) above;
(2) in the case of the matters referred to in (c) and (d) above
at least 30 days prior written notice of the date when the same will take place
(and specifying the date on which the holders of Common Stock will be entitled
to exchange their Common Stock for securities or other property deliverable
upon the occurrence of such event); and (3) in the case of the matter
referred to in (e) above, the same notice as is given to the holders of
such registration rights.

 

3.3           Information Rights. So long as the Holder holds this
Warrant and/or any of the Shares, the Company shall deliver to the Holder (a) promptly
after mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of
each fiscal year of the Company, an accountant-reviewed year end financial
statement and certified by an Officer of the Company, (c) within forty-five
(45) days after the end of each fiscal quarter of the Company, a
Company-prepared quarterly financial statement of the Company, and (d) within
thirty (30) days after the end of each month, a Company-prepared monthly
financial statement of the Company.

 

3.4           Registration Under Securities Act of
1933, as amended.
The Company agrees that with respect to the Shares, Holder shall have the
registration rights set forth in the Company’s Second Amended and Restated
Registration Rights Agreement, dated as of October 27, 2003, as amended
(the “Registration Rights Agreement”), as the same is in effect on the date
hereof; and for purposes of the Registration Rights Agreement, the Shares shall
be deemed to be “Registrable Shares” and “Prior Common Registrable Shares” (as
defined therein) and the Holder shall be deemed to be a “Stockholder” (as
defined therein). In the event of any 

 

5

 

subsequent changes
to said Agreement which would be advantageous to the Holder, the Holder shall
have the benefit of such changes, but no changes to said Agreement which would
be less advantageous to the Holder shall be binding on the Holder.

 

ARTICLE 4.         REPRESENTATIONS, WARRANTIES OF THE HOLDER. The Holder represents and warrants to
the Company as follows:

 

4.1           Purchase for Own Account. Except for transfers to Holder’s
affiliates, this Warrant and the securities to be acquired upon exercise of
this Warrant by the Holder will be acquired for investment for the Holder’s
account, not as a nominee or agent, and not with a view to the public resale or
distribution within the meaning of the 1933 Act, and the Holder has no present
intention of selling, granting any participation in, or otherwise distributing
the same. The Holder also represents that the Holder has not been formed for
the specific purpose of acquiring this Warrant or the Shares.

 

4.2           Disclosure of Information. The Holder has received or has had full
access to all the information it considers necessary or appropriate to make an
informed investment decision with respect to the acquisition of this Warrant
and its underlying securities. The Holder further has had an opportunity to ask
questions and receive answers from the Company regarding the terms and
conditions of the offering of this Warrant and its underlying securities and to
obtain additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify any information furnished to the Holder or to which the
Holder has access.

 

4.3           Investment Experience. The Holder: (i) has experience as
an investor in securities and acknowledges that the Holder is able to fend for
itself, can bear the economic risk of the Holder’s investment in this Warrant
and its underlying securities and has such knowledge and experience in
financial or business matters that the Holder is capable of evaluating the
merits and risks of its investment in this Warrant and its underlying
securities and/or (ii) has a preexisting personal or business relationship
with the Company and certain of its officers, directors or controlling persons
of a nature and duration that enables the Holder to be aware of the character,
business acumen and financial circumstances of such persons.

 

4.4           Accredited Investor Status. The Holder is an “accredited investor”
within the meaning of Regulation D promulgated under the 1933 Act.

 

ARTICLE 5.         MISCELLANEOUS

 

5.1           Term. This Warrant is exercisable, in whole or in part, at
any time and from time to time on or before the Expiration Date set forth
above.

 

5.2           Legends. This Warrant and the Shares (and the securities
issuable, directly or indirectly, upon conversion of the Shares, if any) shall
be imprinted with a legend in substantially the following form:

 

THIS SECURITY HAS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION 

 

6

 

THEREOF UNDER SUCH
ACT OR.AS PERMITTED UNDER APPLICABLE LAW.

 

5.3           Compliance with Securities Laws on
Transfer. This
Warrant and the Shares issuable upon exercise of this Warrant (and the
securities issuable, directly or indirectly, upon conversion of the Shares, if
any) may not be transferred or assigned in whole or in part without
compliance with applicable federal and state securities laws by the transferor
and the transferee.

 

5.4           Transfer Procedure. Subject to the provisions of Section 5.2,
Holder may transfer all or part of this Warrant or the Shares
issuable upon exercise of this Warrant (or the securities issuable, directly or
indirectly, upon conversion of the Shares, if any) by giving the Company notice
of the portion of the Warrant being transferred setting forth the name, address
and taxpayer identification number of the transferee and surrendering this
Warrant to the Company for reissuance to the transferee(s) (and Holder if
applicable).

 

5.5           Notices. All notices and other communications from the
Company to the Holder, or vice versa, shall be deemed delivered and effective
when given personally or mailed by first class registered or certified
mail, postage -prepaid, to such address as may have been furnished to the
Company or the Holder, as the case may be, in writing by the Company or
the Holder from time to time.

 

5.6           Waiver; Amendment. 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.

 

5.7           Issue Tax. The issuance of the securities subject to this
Warrant shall be made without charge to the Holder for any issue tax (other
than applicable income taxes) in respect thereof.

 

5.8           Attorneys Fees. In the event of any dispute between the
parties concerning the terms and provisions of this Warrant, the party
prevailing in such dispute shall be entitled to collect from the other party
all costs reasonably incurred in such dispute, including reasonable attorneys’
fees.

 

7

 

5.9           Governing Law. This Warrant and all acts,
transactions, disputes and controversies arising hereunder or relating hereto,
and all rights and obligations of Holder and Company shall be governed by, and
construed in accordance with the internal laws (and not the conflict of laws
rules) of the State of California.

 

	
   

  	
  Company:

  
	
   

  	
   

  
	
   

  	
  NEXSAN CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Dale J. Bartos

  
	
   

  	
  Title

  	
  CFO

  
	
   

  	
   

  
	
  Holder:

  	
   

  
	
   

  	
   

  
	
  ORIX Venture Finance LLC

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By

  	
  /s/ Kevin P. Sheehan

  	
   

  	
   

  
	
   

  	
  Kevin P. Sheehan,

  	
   

  
	
   

  	
  President and CEO

  	
   

  
						

 

8

 

APPENDIX 1

 

NOTICE OF EXERCISE

 

1.             The undersigned hereby elects to purchase                    
shares of the Series       Preferred Stock
of [Company] pursuant to the terms of the attached Warrant, and tenders
herewith payment of the purchase price of such shares in full.

 

1.             The undersigned hereby elects to convert the attached
Warrant into Shares in the manner specified in the Warrant. This conversion is
exercised with respect to                                     
of the Shares covered by the Warrant.

 

[Strike paragraph that does not apply.]

 

2.             Please issue a certificate or certificates
representing said shares in the name of the undersigned or in such other name
as is specified below:

 

 

 

 

3.             The undersigned represents it is acquiring the Shares
solely for its own account and not as a nominee for any other party and not
with a view toward the resale or distribution thereof except in compliance with
applicable securities laws.

 

	
   

  	
  (Signature)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Date

  

 

 

Exhibit A

Capitalization Table

 

Capitalization at July 31,
2005

 

	
  Common Shares

  	
   

  	
  51,693,049

  	
   

  
	
  Preferred Shares

  	
   

  	
  43,714,194

  	
   

  
	
  Warrants for Common Shares (excluding Directors’ Warrants)

  	
   

  	
  3,161,310

  	
   

  
	
  Warrants for Preferred Shares

  	
   

  	
  50,000

  	
   

  
	
  Directors’ Warrants for Common Shares

  	
   

  	
  590,930

  	
   

  
	
  Options for Common Shares

  	
   

  	
  6,588,794

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  105,798,277

  	
   

  

 

In addition to the above:

 

The Company has entered
in to agreements with Philip Black, CEO and President, and Dale Bartos, CFO,
for the issuance of a maximum of 8,073,497 shares of Common Stock solely upon
the occurrence of a Change of Control or an Initial Public Offering. The number
of shares to be issued is based upon timing and valuation.

 

The Company is reviewing
the calculation of the shares that were issued for Evertrust. The number of
additional shares that may need to be issued is approximately 550,000.

 

The Company is reviewing
the calculation of the options that were issued to two employees of Evertrust. The
number of additional options that may need to be issued is approximately
100,000.

 

 

 

NEXSAN CORPORATION

 

April 16, 2008

 

ORIX
Venture Finance LLC

1717 Main Street, Suite 900

Dallas,
TX 75201

Dear
Mr. Lionelli:

 

Reference
is made to the warrant issued to ORIX Venture Finance LLC (“ORIX”) by Nexsan Corporation, a Delaware
corporation (“Nexsan”), on August 10,
2005 for the purchase of 570,497 shares of Common Stock of Nexsan (the “Warrant”).

 

As
we have previously discussed, Nexsan is contemplating an initial public
offering of its common stock (“IPO”) and
intends to file a registration statement with the U.S. Securities and Exchange
Commission (“SEC”). The proposed IPO has not yet been
publicly announced and Nexsan is currently in what the SEC refers to as the “quiet
period.” Any publicity about our planned IPO could jeopardize the IPO’s timing
and success. Therefore, please continue to treat this information as
confidential.

 

In
connection with the proposed IPO, and as an inducement for Nexsan and the
representatives of the investment banks that are underwriting the IPO to
continue their efforts in connection with the proposed IPO, the underwriters
are requesting that you, as holder of the Warrant, acknowledge and confirm your
consent to the following matters (collectively, the “Transactions”), which (except item 3 below) were
effected in connection with the issuance and sale of Series C Preferred
Stock of Nexsan in March 2007 which you approved in your capacity as
lender under the Loan and Security Agreement, dated August 10, 2005,
between you and Nexsan Technologies Incorporated, as amended from time to time,
and the issuance of Common Stock of Nexsan and exchangeable shares of one of
Nexsan’s Canadian subsidiaries in November 2007:

 

1.       The amendment and restatement of the certificate of incorporation of
Nexsan which was filed with Delaware on March 29, 2007 as the Fifth
Amended and Restated Certificate of Incorporation, as amended by the Amendment
to the Fifth Amended and Restated Certificate of Incorporation filed on November 26,
2007 with Delaware, copies of which documents were previously provided to you
(as amended, the “Certificate of Incorporation”);

 

2.       The amendment and restatement of the Second Amended and Restated
Registration Rights Agreement, dated October 27, 2003, which was entered
into as the Third Amended and Restated Registration Rights Agreement, dated March 29,
2007, as amended by the Amendment to the Third Amended and Restated
Registration Rights Agreement dated November 14, 2007, copies of which
documents were previously provided to you; and

 

 

3.     The matters described in the Written Consent
and Waiver of the Stockholders of Nexsan which the stockholders of Nexsan have
approved, a copy of which is attached hereto as Exhibit A, which includes, among
other things, a further amendment to the Third Amended and Restated Registration
Rights Agreement dated March 29, 2007, as amended, approval of executive
management bonus compensation in connection with the IPO, repurchase of certain
shares of restricted stock beneficially owned by certain directors and current
and former executive officers in order to comply with requirements of the
Sarbanes-Oxley Act, issuance of new options to such parties, and automatic
conversion of preferred stock upon consummation of the IPO.

 

Under
Section 3.1(c) of the Warrant, if additional shares were issued in
connection with the acquisition of AESign Evertrust as indicated in the Notes
to Exhibit A to the Warrant, the Warrant Price (as defined in the Warrant)
and the number of shares issuable upon exercise of the Warrant were subject to
adjustment as provided therein. The underwriters are requesting that you, as
the holder of the Warrant, confirm that no adjustment to the Warrant Price (as
defined in the Warrant) or the number of shares issuable upon exercise of the
Warrant was triggered under Section 3.1(c) of the Warrant and
accordingly, ORIX is not entitled to any adjustment thereunder.

 

Further,
the underwriters are requesting that you, as the holder of the Warrant, agree
to the automatic termination of Section 2.4 (Price Adjustment) of the
Warrant upon consummation of the IPO.

 

Lastly,
at the request of the underwriters, in order to eliminate ambiguity and conform
the definitions in the Warrant to those in the Certificate of Incorporation,
please confirm that from and after March 29, 2007 (the filing of the
Certificate of Incorporation (as defined above)) the following shall apply to
the Warrant (referred to herein as “Definition Amendment”):

 

1.      The term “Excluded Stock” as used in Section 2.4 of the Warrant
means the “Series A Excluded Stock” as defined in the Certificate of
Incorporation (as defined above) and any adjustment pursuant to Section 2.4
(Price Adjustment) of the Warrant shall be applied to the Warrant in the same
manner and extent as applied to the Series A Preferred Stock under Section 4.3.5.4
of the Certificate of Incorporation; and

 

2.      Under the Certificate of Incorporation, the shares of Common Stock
issuable upon conversion of the Series C Preferred Stock or pursuant to Section 3.6
of the Series C Purchase Agreement referred to therein are deemed “Series A
Excluded Stock.” Accordingly, the issuance and sale of the Series C
Preferred Stock of Nexsan in March, 2007 shall be deemed “Series A
Excluded Stock” for purposes of the Warrant;

 

3.      By letter agreement among certain
stockholders of Nexsan, the shares of Series A Preferred Stock or other
equity securities of Nexsan (the “Terrapin Conversion Securities”) issuable upon conversion of that certain 8%
Secured Subordinated Convertible Promissory Note, dated November 2, 2006
(the “Terrapin
Note”), issued by Nexsan in
favor of Terrapin Partners Nexsan Partnership LP constitute Series A
Excluded Stock and Series C Excluded Stock under the Certificate of
Incorporation.

 

2

 

Accordingly,
for all purposes of the Warrant, the Terrapin Note and the Terrapin Conversion
Securities shall be deemed “Series A Excluded Stock”; and

 

4.     For all purposes of the Warrant, the sale and
issuance of Common Stock of Nexsan by Nexsan in the IPO shall be deemed “Series
A Excluded Stock.”

 

Please
acknowledge and confirm your approval of the following by signing and dating
the enclosed copy of this letter in the space provided below and returning the
copy to the undersigned:

 

(i)            The
Transactions;

 

(ii)           Definition
Amendment;

 

(iii)          The
automatic termination of Section 2.4 (Price Adjustment) of the Warrant
upon consummation of the IPO; and

 

(iv)          No
adjustment to the Warrant Price (as defined in the Warrant) or the number of
shares issuable upon exercise of the Warrant was triggered under Section 3.1(c) of
the Warrant and accordingly, neither the Warrant Price nor the number of shares
issuable upon exercise of the Warrant has been or is required to be adjusted
thereunder.

 

If
you have any questions, please feel free to contact me.

 

	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
  NEXSAN CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
    /s/
  Gene Spies

  
	
   

  	
   

  	
  Gene
  Spies, Chief Financial Officer

  

 

	
  AGREED TO AND ACCEPTED:

  
	
   

  
	
  ORIX Venture Finance LLC

  
	
   

  
	
   

  
	
  /s/ Kevin P. Sheehan

  	
   

  
	
   

  
	
  Date:
  4/16/2008

  

 

3

 

Exhibit A

 

See the attached.

 

4EXHIBIT 10.20

 

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED
OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH
ACT OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.

 

WARRANT TO PURCHASE STOCK

 

	
  Corporation:

  	
   

  	
  NEXSAN CORPORATION, a Delaware Corporation

  
	
  Number of Shares

  	
   

  	
  50,000

  
	
  Class of Stock:

  	
   

  	
  Series A Preferred Stock

  
	
  Initial Exercise Price:

  	
   

  	
  $0.61385 per share

  
	
  Issue Date:

  	
   

  	
  April 22, 2005

  
	
  Expiration Date:

  	
   

  	
  April 22, 2012 (Subject to Section 4.1)

  

 

THIS
WARRANT CERTIFIES THAT, for good and valuable consideration, the receipt of
which is hereby acknowledged, COMERICA BANK or its assignee (“Holder”) is
entitled to purchase the number of fully paid and nonassessable shares of the
class of securities (the “Shares”) of the corporation (the “Company”) at the
initial exercise price per Share (the “Warrant Price”) all as set forth above
and as adjusted pursuant to Article 2 of this warrant, subject to the
provisions and upon the terms and conditions set forth in this warrant.

 

ARTICLE 1.         EXERCISE.

 

1.1           Method
of Exercise.  Holder may exercise this
warrant by delivering this warrant and a duly executed Notice of Exercise in
substantially the form attached as Appendix 1 to the principal office of the
Company.  Unless Holder is exercising the
conversion right set forth in Section 1.2, Holder shall also deliver to
the Company a check for the aggregate Warrant Price for the Shares being
purchased.

 

1.2           Conversion
Right.  In lieu of exercising this
warrant as specified in Section 1.1, Holder may from time to time convert
this warrant, in whole or in part, into a number of Shares determined by
dividing (a) the aggregate fair market value of the Shares or other
securities otherwise issuable upon exercise of this warrant minus the aggregate
Warrant Price of such Shares by (b) the fair market value of one Share.  The fair market value of the Shares shall be
determined pursuant to Section 1.4.

 

1.3           Intentionally
Omitted.

 

1.4           Fair Market
Value.  If the Shares are traded
regularly in a public market, the fair market value of the Shares shall be the
average closing price of the Shares (or the closing price of the Company’s
stock into which the Shares are convertible) reported for the 10 trading days
immediately before Holder delivers its Notice of Exercise to the Company.  If the Shares are not regularly traded in a
public market, the Board of Directors of the Company shall determine fair
market value in its good faith judgment.

 

1.5           Delivery
of Certificate and New Warrant.  Promptly after Holder exercises or converts
this warrant, the Company shall deliver to Holder certificates for the Shares
acquired and, if this warrant has not been fully exercised or converted and has
not expired, a new warrant representing the Shares not so acquired.

 

1.6           Replacement
of Warrants.  On receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this warrant and, in the case of loss, theft or destruction, on
delivery of an indemnity agreement reasonably satisfactory in form and amount
to the Company or, in the case of mutilation, on surrender and cancellation of
this warrant, the Company at its expense shall execute and deliver, in lieu of
this warrant, a new warrant of like tenor.

 

1

 

1.7           Repurchase
on Sale, Merger, or Consolidation of the Company.

 

1.7.1        “Acquisition.”  For the purpose of this warrant, “Acquisition”
means (a) any sale, license, or other disposition of all or substantially
all of the assets (including intellectual property) of the Company, or (b) any
reorganization, consolidation, merger or sale of the voting securities of the
Company or any other transaction where the holders of the Company’s securities
before the transaction beneficially own less than 50% of the outstanding voting
securities of the surviving entity after the transaction.

 

1.7.2        Assumption of Warrant.  If upon the closing of any Acquisition the
successor entity assumes the obligations of this warrant, then this warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the unexercised portion of
this warrant as if such Shares were outstanding on the record date for the
Acquisition and subsequent closing.  The
Warrant Price shall be adjusted accordingly. 
The Company shall use reasonable efforts to cause the surviving
corporation to assume the obligations of this warrant.

 

1.7.3        Nonassumption.  If upon the closing of any Acquisition the
successor entity does not assume the obligations of this warrant and Holder has
not otherwise exercised this warrant in full, then Holder shall have the option
either to (a) deem this warrant to have been automatically converted
pursuant to Section 1.2 and thereafter Holder shall participate in the
Acquisition on the same terms as other holders of the same class of securities
of the Company; or (b) require the Company to purchase this warrant for
cash upon the closing of the Acquisition for an amount per Share equal to one
and one half (11⁄2) times the Warrant Price.

 

ARTICLE 2.           ADJUSTMENTS
TO THE SHARES.

 

2.1           Stock
Dividends, Splits, Etc.  If the
Company declares or pays a dividend on its common stock payable in common
stock, or other securities, or subdivides the outstanding common stock into a
greater amount of common stock, then upon exercise of this warrant, for each
Share acquired, Holder shall receive, without cost to Holder, the total number
and kind of securities to which Holder would have been entitled had Holder
owned the Shares of record as of the date the dividend or subdivision occurred.

 

2.2           Reclassification,
Exchange or Substitution.  Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this warrant, Holder shall be entitled to receive, upon exercise
or conversion of this warrant, the number and kind of securities and property
that Holder would have received for the Shares if this warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event.  Such an event shall include
any automatic conversion of the outstanding or issuable securities of the
Company of the same class or series as the Shares to common stock pursuant to
the terms of the Company’s Articles of Incorporation upon the closing of a
registered public offering of the Company’s common stock.  The Company or its successor shall promptly
issue to Holder a new warrant for such new securities or other property.  The new warrant shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article 2 including, without limitation, adjustments
to the Warrant Price and to the number of securities or property issuable upon
exercise of the new warrant.  The provisions
of this Section 2.2 shall similarly apply to successive reclassifications,
exchanges, substitutions, or other events.

 

2.3           Adjustments
for Combinations, Etc.  If the
outstanding Shares are combined or consolidated, by reclassification or
otherwise, into a lesser number of shares, the Warrant Price shall be
proportionately increased.  If the
outstanding Shares are combined or consolidated, by reclassification or
otherwise, into a greater number of shares, the Warrant Price shall be
proportionately decreased.

 

2.4           Adjustments
for Diluting Issuances.  The number
of shares of common stock issuable upon conversion of the Shares shall be
subject to adjustment, from time to time, in the manner set forth on Exhibit A,
if attached, in the event of Diluting Issuances (as defined on Exhibit A).

 

2.5           No
Impairment.  The Company shall not,
by amendment of its Certificate of Incorporation or through a reorganization,
transfer of assets, consolidation, merger, dissolution, issue, or sale of
securities or any

 

2

 

other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed under
this warrant by the Company, but shall at all times in good faith assist in
carrying out all the provisions of this Article 2 and in taking all such
action as may be necessary or appropriate to protect Holder’s rights under this
Article against impairment.

 

2.6           Certificate
as to Adjustments.  Upon each
adjustment of the Warrant Price, the Company at its expense shall promptly
compute such adjustment, and furnish Holder with a certificate of its Chief
Financial Officer setting forth such adjustment and the facts upon which such
adjustment is based.  The Company shall,
upon written request, furnish Holder a certificate setting forth the Warrant
Price in effect upon the date thereof and the series of adjustments leading to
such Warrant Price.

 

2.7           Fractional
Shares.  No fractional Shares shall
be issuable upon exercise or conversion of the Warrant and the Number of Shares
to be issued shall be rounded down to the nearest whole Share.  If a fractional share interest arises upon
any exercise or conversion of the Warrant, the company shall eliminate such fractional
share interest by paying Holder amount computed by multiplying the fractional
interest by the fair market value of a full Share.

 

ARTICLE 3.         REPRESENTATIONS
AND COVENANTS OF THE COMPANY.

 

3.1           Representations
and Warranties.  The Company hereby
represents and warrants to the Holder as follows:

 

(a)           The
initial Warrant Price referenced on the first page of this warrant is not
greater than the most recent price at which the Company has sold its Common
Stock.

 

(b)           All
Shares which may be issued upon the exercise of the purchase right represented
by this warrant, and all securities, if any, issuable upon conversion of the
Shares, shall, upon issuance, be duly authorized, validly issued, fully paid
and nonassessable, and free of any liens and encumbrances except for
restrictions on transfer provided for herein or under applicable federal and
state securities laws.

 

(c)           The
Company’s capitalization table attached to this warrant is true and complete as
of the Issue Date.

 

3.2           Notice
of Certain Events.  If the Company
proposes at any time (a) to declare any dividend or distribution upon its
common stock, whether in cash, property, stock, or other securities and whether
or not a regular cash dividend; (b) to offer for subscription pro rata to
the holders of any class or series of its stock any additional shares of stock
of any class or series or other rights; (c) to effect any reclassification
or recapitalization of common stock; or (d) to merge or consolidate with
or into any other corporation, or sell, lease, license, or convey all or
substantially all of its assets, or to liquidate, dissolve or wind up, then, in
connection with each such event, the Company shall give Holder (1) at
least 10 days prior written notice of the date on which a record will be taken
for such dividend, distribution, or subscription rights (and specifying the
date on which the holders of common stock will be entitled thereto) or for
determining rights to vote, if any, in respect of the matters referred to in (a) and
(b) above; and (2) in the case of the matters referred to in (c) and
(d) above at least 10 days prior written notice of the date when the same
will take place (and specifying the date on which the holders of common stock
will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event).

 

3.3           Information
Rights.  So long as the Holder holds
this warrant and/or any of the shares, the Company shall deliver to the Holder (a) promptly
after mailing, copies of all communiques to the shareholders of the Company, (b) within
one hundred twenty (120) days after the end of each fiscal year of the Company,
the annual audited financial statements of the Company certified by independent
public accountants of recognized standing and (c) within forty-five (45)
days after the end of each of the first three quarters of each fiscal year, the
Company’s quarterly, unaudited financial statements.

 

3

 

3.4           Registration
Under Securities Act of 1933, as amended. 
The Company agrees that the shares or, if the Shares are convertible
into common stock of the Company, such common stock, shall be subject to the
registration rights set forth on Exhibit B, if attached.

 

ARTICLE 4.         MISCELLANEOUS

 

4.1           Term; Exercise
Upon Expiration.  This warrant is
exercisable in whole or in part, at any time and from time to time on or before
the Expiration Date set forth above; provided, however, that if the Company
completes its initial public offering within the one-year period immediately
prior to the Expiration Date, the Expiration Date shall automatically be
extended until the first anniversary of the effective date of the Company’s
initial public offering.  If this warrant
has not been exercised prior to the Expiration Date, this warrant shall be
deemed to have been automatically exercised on the Expiration Date by “cashless”
conversion pursuant to Section 1.2.

 

4.2           Legends.  This warrant and the Shares (and the
securities issuable, directly or indirectly, upon conversion of the Shares, if
any) shall be imprinted with a legend in substantially the following form:

 

THIS
SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.

 

4.3           Compliance
with Securities Laws on Transfer. 
This warrant and the Shares issuable upon exercise of this warrant (and
the securities issuable, directly or indirectly, upon conversion of the Shares,
if any) may not be transferred or assigned in whole or in part without
compliance with applicable federal and state securities laws by the transferor
and the transferee (including, without limitation, the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company).  The Company shall not require
Holder to provide an opinion of counsel if the transfer is to an affiliate of
Holder or if there is no material question as to the availability of current
information as referenced in Rule 144(c), Holder represents that it has
complied with Rule 144(d) and (e) in reasonable detail, the
selling broker represents that it has complied with Rule 144(f), and the
Company is provided with it copy of Holder’s notice of proposed sale.

 

4.4           Transfer
Procedure.  Subject to the provisions
of Section 4.3, Holder may transfer all or part of this warrant or the
Shares issuable upon exercise of this warrant (or the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) by giving the
Company notice of the portion of the warrant being transferred setting forth
the name, address and taxpayer identification number of the transferee and
surrendering this warrant to the Company for reissuance to the transferee(s) (and
Holder, if applicable); provided, however, that Holder may transfer all or part
of this warrant to its affiliates, including, without limitation, Comerica
Incorporated, at any time without notice to the Company, and such affiliate
shall then be entitled to all the rights of Holder under this warrant and any
related agreements, and the Company shall cooperate fully in ensuring that any
stock issued upon exercise of this warrant is issued in the name of the
affiliate that exercises the warrant. 
The terms and conditions of this warrant shall inure to the benefit of,
and be binding upon, the Company and the holders hereof and their respective
permitted successors and assigns.  Unless
the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of this warrant to any person who directly competes with
the Company.

 

4.5           Notices.  All notices and other communications from the
Company to the Holder, or vice versa, shall be deemed delivered and effective
when given personally or mailed by first-class registered or certified mail,
postage prepaid, at such address as may have been furnished to the Company or
the Holder, as the case may be, in writing by the Company or such Holder from
time to time.  All notices to the Holder
shall be addressed as follows:

 

	
   

  	
  Comerica Bank

  
	
   

  	
  Attn: Warrant Administrator

  
	
   

  	
  500 Woodward Avenue, 32nd Floor, MC 3379

  
	
   

  	
  Detroit, MI 48226

  

 

4

 

4.6           Amendments.  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.

 

4.7           Attorneys’
Fees.  In the event of any dispute
between the parties concerning the terms and provisions of this warrant, the
party prevailing in such dispute shall be entitled to collect from the other
party all costs incurred in such dispute, including reasonable attorneys’ fees.

 

4.8           Governing
Law.  This warrant shall be governed
by and construed in accordance with the laws of the State of California,
without giving effect to its principles regarding conflicts of law.

 

 

	
   

  	
   

  	
  NEXSAN
  CORPORATION:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Dale J.
  Bartos

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Dale J. Bartos

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  CFO

  

 

 

	
   

  	
   

  	
  By:

  	
  /s/ Philip Black

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Philip Black

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  CEO

  
	
   

  	
   

  	
   

  

 

Authorized
signatories under Corporate Resolutions to Borrow or an authorized signer(s) under
a resolution covering warrants must sign the warrant.

 

5

 

APPENDIX 1

 

NOTICE OF EXERCISE

 

1.             The undersigned
hereby elects to purchase                    
shares of the                    stock
of NEXSAN CORPORATION pursuant to the
terms of the attached warrant, and tenders herewith payment of the purchase
price of such shares in full.

 

1.             The undersigned
hereby elects to convert the attached warrant into shares in the manner
specified in the warrant.  This conversion
is exercised with respect to                   of
the shares covered by the warrant.

 

[Strike
paragraph that does not apply.]

 

2.             Please issue a
certificate or certificates representing said shares in the name of the
undersigned or in such other name as is specified below:

 

Comerica Bank

Attn: Warrant Administrator

500 Woodward Avenue, 32nd Floor, MC 3379

Detroit, MI 48226

 

3.             The undersigned
represents it is acquiring the shares solely for its own account and not as a
nominee for any other party and not with a view toward the resale or
distribution thereof except in compliance with applicable securities laws.

 

COMERICA BANK or Registered
Assignee

 

 

	
   

  	
   

  
	
  (Signature)

  
	
   

  
	
   

  	
   

  
	
  (Date)

  

 

6

 

EXHIBIT A

 

Anti-Dilution Provisions

 

In the
event of the issuance (a “Diluting Issuance”) by the Company, after the Issue
Date of the warrant, of securities at a price per share less than the
Conversion Price (as defined in the Company’s Certificate of Incorporation),
then the number of shares of common stock issuable upon conversion of the
Shares shall be adjusted in accordance with those provisions of the Company’s
Certificate of Incorporation which apply to Diluting Issuances.

 

Under
no circumstances shall the aggregate Warrant Price payable by the Holder upon
exercise of the warrant increase as a result of any adjustment arising from a
Diluting Issuance,

 

B-1

 

EXHIBIT B

 

Registration Rights

 

The
Shares (if common stock), or the common stock issuable upon conversion of the
Shares, shall be deemed “Series A Preferred Registrable Shares” for
purposes of and entitled to “piggy back” registration rights in accordance with
Section 3 of the following agreement (the “Agreement”) between the Company
and its investor(s):

 

Second Amended and
Restated Registration Rights Agreement dated October 27, 2003

 

The
Company agrees that no amendments will be made to the Agreement, which would
have an adverse impact on Holder’s registration rights thereunder without the
consent of Holder, which consent shall not be unreasonably withheld.  By acceptance of the Warrant to which this Exhibit B
is attached, Holder shall be deemed to be a party to the Agreement and agrees
to be bound by the terms thereof as if it were a “Stockholder” (as defined
therein).

 

If no
Agreement exists, then the Company and the Holder shall enter into Holder’s
standard form of Registration Rights Agreement as in effect on the Issue Date
of the Warrant.

 

B-2

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