Document:

exv10w22

Exhibit 10.22

April 15, 2008

Silicon Mountain Holdings, Inc.

4755 Walnut Street

Boulder, Colorado 80301

Attention: Rudolph (Tré) A. Cates III

			
	          Re:	 	Amended and Restated Overadvance Side Letter

     Reference is hereby made to that certain Security and Purchase Agreement dated as of September
25, 2006 by and among SILICON MOUNTAIN HOLDINGS, INC., a Colorado corporation (“Parent”), SILICON
MOUNTAIN MEMORY, INCORPORATED, a Colorado corporation (“SMM”), VCI SYSTEMS, INC., a Colorado
corporation (“VCI”, and together with Parent and SMM, the “Companies” and, each a “Company”) and
Laurus Master Fund, Ltd. (“Laurus”) (as amended, modified and/or supplemented from time to time,
the “Security Agreement”). This Amended and Restated Overadvance Side Letter amends and restates
in its entirety (and is given in substitution for and not in satisfaction of) that certain
Overadvance Side Letter dated as of March 14, 2008 by and among each Company and Laurus (the
“Original Overadvance Side Letter”). On September 28, 2007, Laurus, together with other affiliates
of Laurus appointed LV Administrative Services, Inc. as administrative and collateral agent for
Laurus and such affiliates (the “Agent” and together with Laurus and certain of its affiliates, the
“Creditors”). Capitalized terms used but not defined herein shall have the meanings ascribed them
in the Security Agreement. Subject to satisfaction of the Overadvance Conditions (as defined
below), Laurus is hereby notifying the Companies of its decision to exercise the discretion granted
to it pursuant to Section 2(a)(ii) of the Security Agreement to make Loans to the Companies during
the Period (as defined below) in excess of the Formula Amount on the date hereof (the
“Overadvance”). Subject to satisfaction of the Overadvance Conditions, the aggregate principal
amount of the Overadvance as of the date hereof shall be up to $1,050,000 (the “Initial Overadvance
Amount”). The outstanding Overadvance shall at no time exceed the lesser of (x) the Applicable
Overadvance Amount (as defined below) and (y) the remainder of the Capital Availability Amount less
the Formula Amount as of the date of determination (the lesser of clauses (x) and (y) above, the
“Maximum Overadvance Amount”). The “Applicable Overadvance Amount” shall mean on any date of
determination such amount set forth on Annex A hereto opposite the period during which such
determination is made.

     In connection with making the Overadvance, from the date of the Original Overadvance Side
Letter through and including September 25, 2009 (the “Period”), the Creditors hereby waive
compliance with Section 3 of the Security Agreement, but solely as such provision relates to the
immediate repayment requirement for Overadvances. The Creditors further agree that

 

 

solely for such Period (but not thereafter), (i) the incurrence and existence of the
Overadvance shall not trigger an Event of Default under Section 19(a) of the Security Agreement and
(ii) during the Period, the rate of interest applicable to such Overadvances shall be as set forth
in Section 5(b)(ii) of the Security Agreement (collectively, the “Overadvance Rate”). Interest
shall be (i) calculated on the basis of a 360 day year and shall accrue beginning on the date
hereof, and (ii) payable monthly, in arrears, commencing on April 1, 2008 and on the first business
day of each consecutive calendar month thereafter through and including the expiration of the
Period, whether by acceleration or otherwise. All other terms and provisions of the Security
Agreement and the Ancillary Agreements shall remain in full force and effect. For the avoidance of
doubt, all proceeds applied by any Company in repayment of its obligations to the Creditors
hereunder and under the Security Agreement and the Ancillary Agreements shall be first applied as a
repayment of the Overadvance unless otherwise agreed by the Creditors. Once repaid, the
Overadvance may be reborrowed during the Period provided that the maximum amount of the Overadvance
outstanding shall not at any time exceed the Maximum Overadvance Amount.

     Each Company hereby acknowledges and agrees that Laurus’ obligation to fund the Initial
Overadvance Amount on the date hereof and each permitted reborrowing thereof after the date hereof
up to the Maximum Overadvance Amount shall, at the time of such making of such Overadvance or
reborrowing, and immediately after giving effect thereto, be at the sole discretion of the
Creditors and also subject to the satisfaction of the following conditions (the “Overadvance
Conditions”): (i) no Event of Default shall exist and be continuing as of such date; (ii) all
representations, warranties and covenants made by each Company in connection with the Security
Agreement and the Ancillary Agreements shall be true, correct and complete as of such date; and
(iii) each Company and its Subsidiaries shall have taken all action necessary to grant Agent
“control” over all of such Company’s and its respective Subsidiaries’ Deposit Accounts (the
“Control Accounts”), with any agreements establishing “control” to be in form and substance
satisfactory to Agent. “Control” over such Control Accounts shall be released upon the
indefeasible repayment in full and termination of the Overadvance (together with all accrued
interest and fees which remain unpaid in respect thereof).

     The Companies hereby acknowledge that all amounts outstanding under the Overadvance (together
with accrued interest and fees which remain unpaid in respect thereof) on the date of expiration of
the Period shall, jointly and severally, be repaid in full by the Companies on such date of
expiration. The failure to make any required repayment of an Overadvance shall give rise to an
immediate Event of Default.

     SMM hereby agrees that it shall, within three (3) days of the date hereof, issue a twenty-five
year warrant (the “Additional Warrant”) to Laurus to purchase up to 25% (on a fully diluted basis)
of the outstanding shares of common stock of SMM with an exercise price of $0.01 per share, such
Additional Warrant to be in form and substance satisfactory to Laurus as determined by Laurus in
its sole discretion. Parent and SMM further agree, within three (3) days of the date hereof, to
duly approve, execute and enter into with Laurus a side letter providing Laurus with certain tag
along rights relating to the shares issuable under the Additional Warrant, such side letter also to
be in form and substance satisfactory to Laurus as determined by Laurus in its sole discretion. In
concept, the tag along rights would require Parent to offer Laurus the right to include its shares
of SMM in any sale of shares of SMM by Parent.

2

 

     The parties hereto agree that the fair market value of the Additional Warrant (as reasonably
determined by the parties) received in consideration of the amendment and restatement of the
Original Overadvance Side Letter made by Laurus hereunder is hereby designated as interest and,
accordingly, shall be treated, on a pro rata basis, as a reduction of the remaining stated
principal amount (which reduced principal amount shall be treated as the issue price) of Laurus for
U.S. federal income tax purposes under and pursuant to Treasury Regulation Sections
1.1001-3(e)(2)(iii), 1.1273-2(g)(2)(ii) and 1.1274-2(b)(1). The parties further agree to file all
applicable tax returns in accordance with such characterization and shall not take a position on
any tax return or in any judicial or administrative proceeding that is inconsistent with such
characterization. Notwithstanding the foregoing, nothing contained in this paragraph shall or
shall be deemed to modify or impair in any manner whatsoever any Company’s obligations from time to
time owing to any Creditor hereunder, under the Security Agreement or under any Ancillary Agreement
referred to in the Security Agreement.

     The Parent understands that it has an affirmative obligation to make prompt public disclosure
of material agreements and material amendments to such agreements. It is the Parent’s determination
that this letter is material. The Parent agrees to file an 8-K within 4 business days following
the date of execution of this letter and in the form otherwise prescribed by the SEC.

     This letter may not be amended or waived except by an instrument in writing signed by each of
the Companies, Laurus and Agent. This letter may be executed in any number of counterparts, each
of which shall be an original and all of which, when taken together, shall constitute one
agreement. Delivery of an executed signature page of this letter by facsimile transmission shall
be effective as delivery of a manually executed counterpart hereof or thereof, as the case may be.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK. This letter sets forth the entire agreement between the parties hereto as to the matters set
forth herein and supersede all prior communications, written or oral, with respect to the matters
herein.

     This Amended and Restated Overadvance Side Letter shall for all purposes be deemed to be an
Ancillary Agreement.

     If the foregoing meets with the Companies’ approval please signify the Companies’ acceptance
of the terms hereof by signing below.

[Signature page follows.]

3

 

	 	 	 	 	 
	 	 	LAURUS MASTER FUND, LTD.

By: Laurus Capital Management, LLC,

its investment manager.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 	 	Name:
	 	 	Title:
	 	 	Date:
	 
	 	 	 	 
	 	 	VALENS U.S. SPV I, LLC

By: Valens Capital Management, LLC,

its investment manager
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 	 	Name:
	 	 	Title:
	 	 	Date:
	 
	 	 	 	 
	 	 	VALENS OFFSHORE SPV I, LTD.

By: Valens Capital Management, LLC

its investment manager
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 	 	Name:
	 	 	Title:
	 	 	Date:
	 
	 	 	 	 
	 	 	PSOURCE STRUCTURED DEBT LIMITED

By: Laurus Capital Management, LLC

its investment manager
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 	 	Name:
	 	 	Title:
	 	 	Date:
	 
	 	 	 	 
	 	 	LV ADMINISTRATIVE SERVICES, INC.

as Agent
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 	 	Name:
	 	 	Title:
	 	 	Date:

4

 

AGREED AND ACCEPTED AS OF THE DATE OF THIS LETTER AGREEMENT:

SILICON MOUNTAIN HOLDINGS, INC.

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	Name:

	 	Rudolph (Tré) A. Cates III
	 	 
	Title:

	 	President and Chief Executive Officer	 	 
	Date:
	 	 	 	 

SILICON MOUNTAIN MEMORY, INCORPORATED

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	Name:

	 	Rudolph (Tré) A. Cates III
	 	 
	Title:

	 	President and Chief Executive Officer	 	 
	Date:
	 	 	 	 

VCI SYSTEMS, INC.

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	Name:

	 	Rudolph (Tré) A. Cates III
	 	 
	Title:

	 	President and Chief Executive Officer	 	 
	Date:
	 	 	 	 

5

 

ANNEX A

APPLICABLE OVERADVANCE AMOUNT

	 	 	 
	Period	 	Applicable Overadvance Amount
	 
	 	 
	Feb 1, 2009 through and including February
28, 2009

	 	$1,050,000 
	 
	 	 
	March 1, 2009 through and including March
31, 2009

	 	$1,025,000 
	 
	 	 
	April 1, 2009 through and including April
30, 2009

	 	$1,050,000 
	 
	 	 
	May 1, 2009 through and including May 31,
2009

	 	$975,000 
	 
	 	 
	May 1, 2009 through and including May 31,
2009

	 	$950,000 
	 
	 	 
	June 1, 2009 through and including June 30,
2009

	 	$925,000 
	 
	 	 
	July 1, 2009 through and including July 31,
2009

	 	$900,000 
	 
	 	 
	August 1, 2009 through and including August
31, 2009

	 	$875,000 
	 
	 	 
	September 1, 2009 through maturity

	 	$0 

6exv10w23

Exhibit 10.23

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
(A) AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR (B) AN EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS.

Right to Purchase up to the Specified Number of Warrant Shares (as defined below) of Common

Stock of Silicon Mountain Memory, Incorporated

(subject to adjustment as provided herein)

COMMON STOCK PURCHASE WARRANT

			
	No.                                         
	 	Issue Date: April 23, 2008

     Silicon Mountain Memory, Incorporated, a corporation organized under the laws of the State of
Colorado (the “Company”), hereby certifies that, for value received, LAURUS MASTER FUND, LTD., or
assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the
Company (as defined herein) from and after the Issue Date of this Warrant and at any time or from
time to time thereafter, up to such number of fully paid and non-assessable shares of Common Stock
(as hereinafter defined), $0.01 par value per share, equal to the Specified Number of Warrant
Shares. The term Specified Number of Warrant Shares means, on any date on which the Company
receives an Exercise Notice (as defined below) from the Holder, the Specified Number of Warrant
Shares computed on any date of determination (each, an “Exercise Determination Date”) using the
following formula:

(A/B) — A — C

     Where (i) “A” equals the number of shares of Common Stock outstanding on a Fully Diluted Basis
(as defined below) on the date of issuance of this Warrant, (ii) “B” equals 75%; provided,
that, in the event that (a) a Permitted Exercise Date (as defined below) does not occur on
or prior to March 31, 2009 and the Company’s performance, on a consolidated basis, as tested on
March 31, 2009, equals and/or is greater than each Targeted Level for the Target Period, or (b) in
the event of a Transfer of Control Transaction is commenced on or before April 23, 2009, “B” shall
mean 80%; and (iii) “C” equals the aggregate number of shares of Common Stock, if any, Holder has
previously acquired upon exercise of any portion of this Warrant prior to the applicable Exercise
Determination Date (such aggregate number, the “Previously Acquired Warrant Shares”). The
calculation of the Previously Acquired Warrant Shares shall be adjusted upon the occurrence of any
event described in Section 4 hereof in the manner specified therein. The number and character of
such shares of Common Stock and the applicable Exercise Price (as defined below) per share are
subject to further adjustment as provided herein.

 

 

     As used herein the following terms, unless the context otherwise requires, have the following
respective meanings:

     (a) “Common Stock” means (i) the Company’s Common Stock, par value $0.01 per share; and
(ii) any other securities into which or for which any of the securities described in the
preceding clause (i) may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.

     (b) “Company” means Silicon Mountain Memory, Incorporated and any person or entity
which shall succeed, or assume the obligations of, Silicon Mountain Memory, Incorporated
hereunder.

     (c) “Exercise Price” means a price of $0.01 per share.

     (d) “Fully Diluted Basis” means all outstanding shares of Common Stock of the Company
plus all shares of Common Stock of the Company issuable on conversion or exercise of
securities convertible into or exercisable for shares of Common Stock of the Company,
regardless of whether any payment must be made pursuant to such conversion or exercise or
whether any conversion or exercise price is above or below the market price of the shares of
Common Stock of the Company.

     (e) “Other Securities” means any stock (other than Common Stock) and other securities
of the Company or any other person (corporate or otherwise) which the Holder at any time
shall be entitled to receive, or shall have received, on the exercise of this Warrant, in
lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have
been issued in exchange for or in replacement of Common Stock or Other Securities pursuant
to Section 4 or otherwise.

     (f) “Permitted Exercise Date” shall mean the first date upon which the Holder is
entitled to exercise all or a portion of this Warrant pursuant to Section 1.1 below.

     (g) “Security Agreement” shall mean that certain Security and Purchase Agreement dated
as of September 25, 2006 by and among Company, Silicon Mountain Holdings, Inc. (“SMH”), VCI
Systems, Inc. (“VCI”) and Holder (as amended, restated, modified and/or supplemented from
time to time, the “Security Agreement”).

     (h) “Specifed Event of Default” shall mean an “Event of Default” arising under Section
19(a) and/or 19(i) of the Security Agreement.

     (i) “Targeted Level” shall mean, each of the following financial calculations for the
applicable period calculated in a manner and supported by appropriate backup which
calculations shall exclude any non-cash and/or non-cash cost, in each case, acceptable to
Holder in its sole discretion:

          (i) Consolidated EBITDA — $708,000

          (ii) Consolidated Revenue — $23,826,000

2

 

          (iii) Net Income — ($1,090,000)

          (iv) Cashflow — ($182,000)

     (j) “Target Period” shall mean the period commencing on April 1, 2008 and continuing
through and including March 31, 2009

     (k) “Transfer of Control Transaction” shall mean (A) any sale or transfer of the
Company’s Common Stock or the common stock of Silicon Mountain Holdings, Inc. (“Parent”) or
any merger, consolidation, share exchange, or combination of the Company or Parent with or
into another entity, which in each case results in the holders of the voting securities of
the Company or Parent outstanding immediately prior thereto owning immediately thereafter
less than a majority of the voting securities of the Company, Parent or the surviving
entity, as the case may be, outstanding immediately after such sale, transfer, merger,
consolidation share exchange, or combination; (B) a sale of all or substantially all of the
assets of the Company or Parent, including, without limitation, equity in subsidiaries held
by the Company and/or Parent.

     1. Exercise of Warrant.

               1.1 Exercise Restriction. This Warrant may only be exercised in whole or in part on
and after the later of (i) the business day immediately preceding the consummation of a Transfer of
Control Transaction with such exercise to be effective upon the date of consummation of the
Transfer of Control Transaction and (ii) the first date upon which a Specified Event of Default
shall have occurred.

               1.2 Number of Shares Issuable upon Exercise. From and after the date hereof, the
Holder shall be entitled to receive, upon exercise of this Warrant in whole or in part, by delivery
of an original or fax copy of an exercise notice in the form attached hereto as Exhibit A
(the “Exercise Notice”), shares of Common Stock of the Company, subject to adjustment pursuant to
Section 4.

               1.3 Fair Market Value. For purposes hereof, the “Fair Market Value” of a share of
Common Stock as of a particular date (the “Determination Date”) shall mean:

               (a) If the Company’s Common Stock is traded on the American Stock Exchange or another
national exchange or is quoted on the National or Capital Market of The Nasdaq Stock Market,
Inc. (“Nasdaq”), then the closing or last sale price, respectively, reported for the last
business day immediately preceding the Determination Date.

               (b) If the Company’s Common Stock is not traded on the American Stock Exchange or
another national exchange or on the Nasdaq but is traded on the NASD Over The Counter
Bulletin Board, then the mean of the average of the closing bid and asked prices reported
for the last business day immediately preceding the Determination Date.

3

 

               (c) Except as provided in clause (d) below, if the Company’s Common Stock is not
publicly traded, then as the Holder and the Company agree or in the absence of agreement by
arbitration in accordance with the rules then in effect of the American Arbitration
Association, before a single arbitrator to be chosen from a panel of persons qualified by
education and training to pass on the matter to be decided.

               (d) If the Determination Date is the date of a liquidation, dissolution or winding up,
or any event deemed to be a liquidation, dissolution or winding up pursuant to the Company’s
charter, then all amounts to be payable per share to holders of the Common Stock pursuant to
the charter in the event of such liquidation, dissolution or winding up, plus all other
amounts to be payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of Common Stock
then issuable upon exercise of this Warrant are outstanding at the Determination Date.

               1.4 Company Acknowledgment. The Company will, at the time of the exercise of this
Warrant, upon the request of the Holder acknowledge in writing its continuing obligation to afford
to the Holder any rights to which the Holder shall continue to be entitled after such exercise in
accordance with the provisions of this Warrant. If the Holder shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to afford to the Holder any
such rights.

               1.5 Trustee for Warrant Holders. In the event that a bank or trust company shall have
been appointed as trustee for the Holder pursuant to Subsection 3.2, such bank or trust company
shall have all the powers and duties of a warrant agent (as hereinafter described) and shall
accept, in its own name for the account of the Company or such successor person as may be entitled
thereto, all amounts otherwise payable to the Company or such successor, as the case may be, on
exercise of this Warrant pursuant to this Section 1.

     2. Procedure for Exercise.

               2.1 Delivery of Stock Certificates, Etc., on Exercise. The Company agrees that the
shares of Common Stock purchased upon exercise of this Warrant shall be deemed to be issued to the
Holder as the record owner of such shares as of the close of business on the date on which this
Warrant shall have been surrendered and payment made for such shares in accordance herewith. As
soon as practicable after the exercise of this Warrant in full or in part, and in any event within
three (3) business days thereafter, the Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of and delivered to the Holder, or as
the Holder (upon payment by the Holder of any applicable transfer taxes) may direct in compliance
with applicable securities laws, a certificate or certificates for the number of duly and validly
issued, fully paid and non-assessable shares of Common Stock (or Other Securities) to which the
Holder shall be entitled on such exercise, plus, in lieu of any fractional share to which the
Holder would otherwise be entitled, cash equal to such fraction multiplied by the then Fair Market
Value of one full share, together with any other stock or other securities and property (including
cash, where applicable) to which the Holder is entitled upon such exercise pursuant to Section 1 or
otherwise.

4

 

               2.2 Exercise.

               (a) Payment may be made either (i) in cash by wire transfer of immediately available
funds or by certified or official bank check payable to the order of the Company equal to
the applicable aggregate Exercise Price, (ii) by delivery of this Warrant, or shares of
Common Stock and/or Common Stock receivable upon exercise of this Warrant in accordance with
the formula set forth in subsection (b) below, or (iii) by a combination of any of the
foregoing methods, for the number of shares of Common Stock specified in such Exercise
Notice (as such exercise number shall be adjusted to reflect any adjustment in the total
number of shares of Common Stock issuable to the Holder per the terms of this Warrant) and
the Holder shall thereupon be entitled to receive the number of duly authorized, validly
issued, fully-paid and non-assessable shares of Common Stock (or Other Securities)
determined as provided herein.

               (b) Notwithstanding any provisions herein to the contrary, if the Fair Market Value of
one share of Common Stock is greater than the Exercise Price (at the date of calculation as
set forth below), in lieu of exercising this Warrant for cash, the Holder may elect to
receive shares equal to the value (as determined below) of this Warrant (or the portion
thereof being exercised) by surrender of this Warrant at the principal office of the Company
together with the properly endorsed Exercise Notice in which event the Company shall issue
to the Holder a number of shares of Common Stock computed using the following formula:

	 	 	 
	X=

	 	Y(A-B)
A
	 
	 	 
	Where X =

	 	the number of shares of Common Stock to be issued to the Holder
	 
	 	 
	Y =

	 	the number of shares of Common Stock purchasable under this Warrant or,
if only a portion of this Warrant is being exercised, the portion of this
Warrant being exercised (at the date of such calculation)
	 
	 	 
	A =

	 	the Fair Market Value of one share of the Company’s Common Stock (at the
date of such calculation)
	 
	 	 
	B =

	 	the Exercise Price per share (as adjusted to the date of such calculation)

     3. Effect of Reorganization, Etc.; Adjustment of Exercise Price.

               3.1 Reorganization, Consolidation, Merger, Etc. If there occurs any capital
reorganization or any reclassification of the Common Stock of the Company, the consolidation or
merger of the Company with or into another person (other than a merger or consolidation of the
Company in which the Company is the continuing entity and which does not result in any
reorganization or reclassification of its outstanding Common Stock) or the sale or conveyance of
all or substantially all of the assets of the Company to another person, then, as a condition
precedent to any such reorganization, reclassification, consolidation, merger, sale or conveyance,
the Holder will be entitled to receive upon surrender of this Warrant to the Company (x) to the
extent there are cash proceeds resulting from the consummation of such reorganization,

5

 

reclassification, consolidation, merger, sale or conveyance, in exchange for such Warrant,
cash in an amount equal to the cash proceeds that would have been payable to the Holder had the
Holder exercised such Warrant immediately prior to the consummation of such reorganization,
reclassification, consolidation, merger, sale or conveyance, less the aggregate Exercise Price
payable upon exercise of this Warrant, and (y) to the extent that the Holder would be entitled to
receive Common stock (or Other Securities) (in addition to or in lieu of cash in connection with
any such reorganization, reclassification, consolidation, merger, sale or conveyance), the same
kind and amounts of securities or other assets, or both, that are issuable or distributable to the
holders of outstanding Common Stock (or Other Securities) of the Company with respect to their
Common Stock (or Other Securities) upon such reorganization, reclassification, consolidation,
merger, sale or conveyance, as would have been deliverable to the Holder had the Holder exercised
such Warrant immediately prior to the consummation of such reorganization, reclassification,
consolidation, merger, sale or conveyance less an amount of such securities having a value equal to
the aggregate Exercise Price payable upon exercise of this Warrant.

               3.2 Dissolution. In the event of any dissolution of the Company following the
transfer of all or substantially all of its properties or assets, the Company, concurrently with
any distributions made to holders of its Common Stock, shall at its expense deliver or cause to be
delivered to the Holder the stock and other securities and property (including cash, where
applicable) receivable by the Holder pursuant to Section 3.1, or, if the Holder shall so instruct
the Company, to a bank or trust company specified by the Holder and having its principal office in
New York, NY as trustee for the Holder (the “Trustee”).

               3.3 Continuation of Terms. Upon any reorganization, consolidation, merger or transfer
(and any dissolution following any transfer) referred to in this Section 3, this Warrant shall
continue in full force and effect and the terms hereof shall be applicable to the shares of stock
and other securities and property receivable on the exercise of this Warrant after the consummation
of such reorganization, consolidation or merger or the effective date of dissolution following any
such transfer, as the case may be, and shall be binding upon the issuer of any such stock or other
securities, including, in the case of any such transfer, the person acquiring all or substantially
all of the properties or assets of the Company, whether or not such person shall have expressly
assumed the terms of this Warrant as provided in Section 4. In the event this Warrant does not
continue in full force and effect after the consummation of the transactions described in this
Section 3, then the Company’s securities and property (including cash, where applicable) receivable
by the Holder will be delivered to the Holder or the Trustee as contemplated by Section 3.2.

     4. Extraordinary Events Regarding Common Stock. In the event that the Company shall
(a) issue additional shares of the Common Stock as a dividend or other distribution on outstanding
Common Stock or any preferred stock issued by the Company, (b) subdivide its outstanding shares of
Common Stock, (c) combine its outstanding shares of the Common Stock into a smaller number of
shares of the Common Stock, then, in each such event, the number of shares of Common Stock that the
Holder shall thereafter, on the exercise hereof as provided in Section 1, be entitled to receive
shall be adjusted to a number determined by multiplying the number of shares of Common Stock that
would otherwise (but for the provisions of this Section 4) be issuable on such exercise by a
fraction of which (a) the numerator is the number of issued and outstanding shares of Common Stock
immediately after such Event, and (b) the denominator

6

 

is the number of issued and outstanding shares of Common Stock immediately prior to such
Event.

     5. Certificate as to Adjustments. In each case of any adjustment or readjustment in
the shares of Common Stock (or Other Securities) issuable on the exercise of this Warrant, the
Company at its expense will promptly cause its Chief Financial Officer or other appropriate
designee to compute such adjustment or readjustment in accordance with the terms of this Warrant
and prepare a certificate setting forth such adjustment or readjustment and showing in detail the
facts upon which such adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any additional shares of Common Stock (or
Other Securities) issued or sold or deemed to have been issued or sold, (b) the number of shares of
Common Stock (or Other Securities) outstanding or deemed to be outstanding, and (c) the Exercise
Price and the number of shares of Common Stock to be received upon exercise of this Warrant, in
effect immediately prior to such adjustment or readjustment and as adjusted or readjusted as
provided in this Warrant. The Company will forthwith mail a copy of each such certificate to the
Holder and any warrant agent of the Company (appointed pursuant to Section 11 hereof).

     6. Reservation of Stock, Etc., Issuable on Exercise of Warrant. The Company will at
all times reserve and keep available, solely for issuance and delivery on the exercise of this
Warrant, shares of Common Stock (or Other Securities) from time to time issuable on the exercise of
this Warrant.

     7. Assignment; Exchange of Warrant. Subject to compliance with applicable securities
laws, this Warrant, and the rights evidenced hereby, may be transferred by any registered holder
hereof (a “Transferor”) in whole or in part. Holder agrees not to transfer any of its rights
evidenced hereby to a known direct competitor of the Company so long as there is no Event of
Default by the Company. On the surrender for exchange of this Warrant, with the Transferor’s
endorsement in the form of Exhibit B attached hereto (the “Transferor Endorsement Form”)
and together with evidence reasonably satisfactory to the Company demonstrating compliance with
applicable securities laws, which shall include, without limitation, a legal opinion from the
Transferor’s counsel (at the Company’s expense) that provides that such transfer is exempt from the
registration requirements of applicable securities laws, the Company at its expense (but with
payment by the Transferor of any applicable transfer taxes) will issue and deliver to or on the
order of the Transferor thereof a new Warrant of like tenor, in the name of the Transferor and/or
the transferee(s) specified in such Transferor Endorsement Form (each a “Transferee”), calling in
the aggregate on the face or faces thereof for the number of shares of Common Stock called for on
the face or faces of this Warrant so surrendered by the Transferor.

     8. Replacement of Warrant. On receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such
loss, theft or destruction of this Warrant, on delivery of an indemnity agreement or security
reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation,
on surrender and cancellation of this Warrant, the Company at its expense will execute and deliver,
in lieu thereof, a new Warrant of like tenor.

7

 

     9. Maximum Exercise. Notwithstanding anything herein to the contrary, in no event
shall the Holder be entitled to exercise any portion of this Warrant in excess of that portion of
this Warrant upon exercise of which the sum of (1) the number of shares of Common Stock
beneficially owned by the Holder and its Affiliates (other than shares of Common Stock which may be
deemed beneficially owned through the ownership of the unexercised portion of this Warrant or the
unexercised or unconverted portion of any other security of the Holder subject to a limitation on
conversion analogous to the limitations contained herein) and (2) the number of shares of Common
Stock issuable upon the exercise of the portion of this Warrant with respect to which the
determination of this proviso is being made, would result in beneficial ownership by the Holder and
its Affiliates of any amount greater than 9.99% of the then outstanding shares of Common Stock
(whether or not, at the time of such exercise, the Holder and its Affiliates beneficially own more
than 9.99% of the then outstanding shares of Common Stock). As used herein, the term “Affiliate”
means any person or entity that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a person or entity, as such terms are
used in and construed under Rule 144 under the Securities Act of 1933, as amended. For purposes
of the second preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulations 13D-G thereunder,
except as otherwise provided in clause (1) of such sentence. For any reason at any time, upon
written or oral request of the Holder, the Company shall within one (1) business day confirm orally
and in writing to the Holder the number of shares of Common Stock outstanding as of any given date.
The limitations set forth herein (x) shall automatically become null and void following notice to
the Company upon the occurrence and during the continuance of an Event of Default (as defined in
the Security Agreement) and (y) may be waived by the Holder upon provision of no less than
sixty-one (61) days prior written notice to the Company; provided, however, that, such written
notice of waiver shall only be effective if delivered at a time when no indebtedness (including,
without limitation, principal, interest, fees and charges) of the Company of which the Holder or
any of its Affiliates was, at any time, the owner, directly or indirectly is outstanding.

     10. Warrant Agent. The Company may, by written notice to the Holder of this Warrant,
appoint an agent for the purpose of issuing Common Stock (or Other Securities) on the exercise of
this Warrant pursuant to Section 1, exchanging this Warrant pursuant to Section 7, and replacing
this Warrant pursuant to Section 8, or any of the foregoing, and thereafter any such issuance,
exchange or replacement, as the case may be, shall be made at such office by such agent.

     11. Transfer on the Company’s Books. Until this Warrant is transferred on the books
of the Company, the Company may treat the registered holder hereof as the absolute owner hereof for
all purposes, notwithstanding any notice to the contrary.

     12. Rights of Shareholders. No Holder shall be entitled to vote or receive dividends
or be deemed the holder of the shares of Common Stock or any other securities of the Company which
may at any time be issuable upon exercise of this Warrant for any purpose (the “Warrant Shares”),
nor shall anything contained herein be construed to confer upon the Holder, as such, any of the
rights of a shareholder of the Company or any right to vote for the election of directors or upon
any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon the recapitalization, issuance of shares,

8

 

reclassification of shares, change of nominal value, consolidation, merger, conveyance or
otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or
otherwise, in each case, until the earlier to occur of (x) the date of actual delivery to Holder
(or its designee) of the Warrant Shares issuable upon the exercise hereof or (y) the third business
day following the date such Warrant Shares first become deliverable to Holder, as provided herein.

     13. Notices, Etc. All notices and other communications from the Company to the Holder
shall be mailed by first class registered or certified mail, postage prepaid, at such address as
may have been furnished to the Company in writing by the Holder from time to time.

     14. Miscellaneous. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. THIS WARRANT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS. ANY ACTION BROUGHT CONCERNING THE TRANSACTIONS CONTEMPLATED BY
THIS WARRANT SHALL BE BROUGHT ONLY IN THE STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED
IN THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT THE HOLDER MAY CHOOSE TO WAIVE THIS PROVISION AND
BRING AN ACTION OUTSIDE THE STATE OF NEW YORK. The individuals executing this Warrant on behalf of
the Company agree to submit to the jurisdiction of such courts and waive trial by jury. The
prevailing party shall be entitled to recover from the other party its reasonable attorneys’ fees
and costs. In the event that any provision of this Warrant is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed inoperative to the extent
that it may conflict therewith and shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable under any law shall not affect
the validity or enforceability of any other provision of this Warrant. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the
terms hereof. The invalidity or unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision hereof. The Company acknowledges that legal
counsel participated in the preparation of this Warrant and, therefore, stipulates that the rule of
construction that ambiguities are to be resolved against the drafting party shall not be applied in
the interpretation of this Warrant to favor any party against the other party.

[BALANCE OF PAGE INTENTIONALLY LEFT BLANK;

SIGNATURE PAGE FOLLOWS]

9

 

     IN WITNESS WHEREOF, the Company has executed this Warrant as of the date first written above.

	 	 	 	 	 
	WITNESS:	 	SILICON MOUNTAIN MEMORY, INCORPORATED
	 
	 	 	 	 
	
 

	 	By:
	 	
 

Name:
	 

	 	 	 	Title:

 

SIGNATURE PAGE TO

COMMON STOCK PURCHASE WARRANT

 

 

EXHIBIT A

FORM OF SUBSCRIPTION

(To Be Signed Only On Exercise Of Warrant)

			
	To:	 	[Newco]

                                        

                                        

Attention:

     The undersigned, pursuant to the provisions set forth in the attached Warrant (No.     ) (the
“Warrant”), hereby irrevocably elects to purchase (check applicable box):

	 	 	 
	                    

	 	                                shares of the common stock covered by the Warrant; or
	 
	 	 
	                    

	 	the maximum number of shares of common stock covered by the Warrant
pursuant to the cashless exercise procedure set forth in Section 2 of
the Warrant.

     The undersigned herewith makes payment of the full Exercise Price for such shares at the price
per share provided for in the Warrant, which is $                    . Such payment takes the form of (check
applicable box or boxes):

	 	 	 
	                    

	 	$                     in lawful money of the United States; and/or
	 
	 	 
	                    

	 	the cancellation of such portion of the Warrant as is exercisable for
a total of                                 shares of Common Stock (using a Fair Market Value
of $      per share for purposes of this calculation); and/or
	 
	 	 
	                    

	 	the cancellation of such number of shares of Common Stock as is
necessary, in accordance with the formula set forth in Section 2.2 of
the Warrant, to exercise this Warrant with respect to the maximum
number of shares of Common Stock purchasable pursuant to the cashless
exercise procedure set forth in Section 2 of the Warrant.

     The undersigned requests that the certificates for such shares be issued in the name of, and
delivered to               
               
            whose address is      
               
                    .

     The undersigned represents and warrants that all offers and sales by the undersigned of the
securities issuable upon exercise of the Warrant shall be made pursuant to registration of the
Common Stock under the Securities Act of 1933, as amended (the “Securities Act”) or pursuant to an
exemption from registration under the Securities Act.

	 	 	 	 	 
	Dated:                     	 	
 
(Signature must conform to name of holder as specified on
the face of the Warrant)

	 

	 	Address:
	 	
 

 

 

 

EXHIBIT B

FORM OF TRANSFEROR ENDORSEMENT

(To Be Signed Only On Transfer Of Warrant)

     For value received, the undersigned hereby sells, assigns, and transfers unto the person(s)
named below under the heading “Transferees” the right represented by the within Warrant to purchase
the percentage and number of shares of Common Stock of [Newco] into which the within Warrant
relates specified under the headings “Percentage Transferred” and “Number Transferred,”
respectively, opposite the name(s) of such person(s) and appoints each such person Attorney to
transfer its respective right on the books of [Newco] with full power of substitution in the
premises.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Percentage	 	 	Number	 
	Transferees	 	Address	 	 	Transferred	 	 	Transferred	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 

	 	 	 	 	 
	Dated:                     	 	
 
(Signature must conform to name of holder as
specified on the face of the Warrant)
	 

	 	Address:
	 	
 

 

	 
	 	 	 	 
	 	 	SIGNED IN THE PRESENCE OF:
	 	 	
 
(Name)

	 
	 	 	 	 
	ACCEPTED AND AGREED:
	 	 	 	 
	[TRANSFEREE]
	 	 	 	 
	
 

(Name)

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