Document:

Ex#10.3 Form of Security Agreement

SECURITY AGREEMENT

This Security Agreement (“Agreement”) is made as of August __, 2011 by and among Digitiliti, Inc., a Delaware corporation (the “Debtor”), and the parties listed on Schedule A (each a “Secured Party”, and collectively the “Secured Parties”), and the Collateral Agent (as defined herein) on behalf of the Secured Parties.

A.    The Secured Parties have purchased and the Debtor has issued Junior Secured Convertible Promissory Notes (the “Notes”) pursuant to that certain Junior Secured Convertible Promissory Note and Warrant Purchase Agreement dated as of August __, 2011(the “Purchase Agreement”). 

B.    Each Note provides that it is secured by a general security interest over all of the assets of the Debtor, as provided in this Agreement.

NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1.    Grant of Security Interest.  The Debtor, in consideration of the funds advanced under the Notes, hereby grants, and conveys to the Collateral Agent, on behalf of the Secured Parties, a security interest in and to all of the Debtor's existing and future right, title and interest in, to and under the Collateral (as defined in Section 2).  This security interest is granted to the Secured Parties to secure (a) the payment of all indebtedness evidenced by the Notes and all renewals, extensions, and modifications of the Notes; (b) the payment of all other sums, with interest thereon, advanced under the terms of this Agreement; and (c) the performance of the agreements and warranties of the Debtor contained in this Agreement, the Notes, the Purchase Agreement, or incorporated in any of these agreements by reference (the “Obligations”). The Secured Parties shall have all of the rights of a secured party under the Uniform Commercial Code of Delaware or any applicable jurisdiction where the Collateral may be located (“UCC”).  The Secured Parties' security interest in the Col-lateral shall attach to all such Collateral without further action on the part of the Secured Parties.

2.     Collateral.  The property subject to the security interest (the “Collateral”) includes all of the Debtor's tangible and intangible property and assets, wherever located and in whatever form, whether now owned or hereafter acquired, including, without limitation, the following:

2.1     All of the Debtor's machinery and equipment (as defined in the UCC), and all substitutions, creations, replacements and additions thereto and all components and auxiliary parts used in connection therewith, including all furniture and fixtures;

         2.2     All of the Debtor's accounts, accounts receivable, contract rights, instruments, documents, chattel paper and general intangibles (as such terms are defined in the UCC);

         2.3     All forms of obligations owing to the Debtor;

         2.4     All tax refunds and tax refund claims;

         2.5     All guaranties, security and liens for which the Debtor may hold for the payment or performance of any item of Collateral;

         2.6     Letters of credit payable to the Debtor and all proceeds therefrom;

         2.7     All rights to goods represented by any item of Collateral, or the sale of which goods gave rise to any item of Collateral;

         2.8     the Debtor's good will;

2.9     All of the Debtor's inventory (as defined in the UCC), including all goods, merchandise, materials, raw materials, work in progress, finished goods, now owned or hereinafter acquired and held for sale or 

lease or furnished or to be furnished under contracts or service agreements or to be used or consumed in the Debtor's business and all other tangible personal property of the Debtor, wherever located, whether in the Debtor's or some other person's possession,  and any materials and supplies of any kind used in connection with the Debtor's business or for packaging or shipping such inventory upon its return to replevy or repossession by the Debtor after sale;

         2.10     All instruments of title or documents relating to any item of Collateral;

         2.11     All the Debtor's books, records and lists in whatever form maintained related to any item of Collateral;

2.12    All patents and applications for a patent, together with all reissues, continuations, divisions, modifications, substitutions and extensions thereof;

 2.13     All know-how, proprietary information, all software source and object code whether created or licensed by the Debtor, maskworks, all data that comprises the Debtor's databases;

2.14     All trademarks and copyrights;

         2.15     All commercial tort claims;

         2.16     Any other property which now or hereafter serves as security for the Obligations;

2.17     All property of the types described in Sections 2.1 through 2.15 or similar thereto, that at any time hereafter may be acquired by the Debtor, including but not limited to all accessions, parts, additions, and replacements; and

2.18    All proceeds of any item of Collateral and all proceeds of such proceeds, including (without limitation) all accounts, instruments, chattel paper or other rights to payment, money, insurance proceeds and all refunds of insurance premiums due or to become due under all insurance policies covering the foregoing property and proceeds derived from any condemnation of the Collateral.

3.    Perfection of Security Interest.  Concurrently with the execution of this Agreement, the Debtor shall deliver to Secured Parties, or their agents, a form or forms of National Financing Statement (Form UCC-1) and such other documentation as may be required or helpful as evidence of the granting and perfection of the security interest in the Collateral granted to the Secured Parties hereunder.  The Secured Parties shall, immediately upon execution of this Agreement, cause the financing statement(s) to be filed with the Secretary of State of Delaware.

4.    Subordination.  Each Secured Party hereby agrees and acknowledges that the security interest granted to the Secured Parties pursuant to this Agreement is expressly subordinate to all secured notes previously issued by the Company before the date of the Purchase Agreement, estimated to be approximately $1,400,000 in principal amount.

5.    Removal of Collateral Prohibited.  The Debtor shall not permanently remove any Collateral from its premises without the written consent of the Collateral Agent, except that the Debtor may dispose of Collateral in the ordinary course of business.

6.    Debtor's Representations, Warranties and Covenants.  As long as the Debtor has outstanding Obligations to a Secured Party, the Debtor hereby represents, warrants and covenants with such Secured Party that:

6.1     The Debtor is a corporation duly organized and validly existing under the laws of the State of Delaware, and it will at all times take or cause to be taken all actions as may from time to time be necessary to maintain in good standing, preserve and renew its company existence and rights.

6.2     The Debtor and its officers signing this Agreement have the corporate power and authority to enter into and perform this Agreement and have taken all corporate action necessary to authorize the execution, delivery and performance of this Agreement and any related agreements or documents.  This Agreement is a legal, valid and 

binding obligation of the Debtor, enforceable in accordance with its terms; and the Debtor's execution, delivery and performance of this Agreement does not conflict with or violate the Debtor's Certificate of Incorporation, bylaws, or any law, regulation, order, judgment, rule or agreement to which the Debtor is a party or by which it is bound.

6.3     Except for the Permitted Liens listed on Exhibit 6.3, all of the Collateral is and shall at all times remain free and clear of any and all liens, claims or encumbrances that are senior to the lien granted by this Agreement.

6.4     Except for inventory sold in the ordinary course of business, the Debtor has and will have good and indefeasible title to, and is and will be the true owner of the Collateral.
    
6.5     The execution of and performance by the Debtor of all of the terms and provisions contained in this Agreement do not and will not constitute, or would not constitute following any notice or lapse of time, an event of default under any agreement (including any existing loan agreement, promissory note or other loan document) to which the Debtor is now or hereafter becomes a party.

6.6     The Debtor will punctually pay or cause to be paid all payments of principal and interest to become due in respect of the Notes according to the terms thereof.

6.7     The Debtor will keep, at all times, true and complete books of account and financial records in accordance with generally accepted accounting principles.

6.8    Within ten days after written notice from the Collateral Agent, the Debtor shall reimburse the Collateral Agent, for all sums expended by the Collateral Agent, in connection with the filing of any third-party claim as to the Collateral or any part thereof which the Collateral Agent may deem reasonably necessary or desirable, or in connection with any action brought by the Collateral Agent, to correct any default or enforce any provision of this Agreement, including reasonable hourly attorneys' fees and expenses and court costs.

6.9     The Debtor will not sell, transfer or encumber the Collateral except in the ordinary course of business.  

6.10    Except in the ordinary course of business, the Debtor shall not lease or otherwise dispose of, remove, move, relocate or transfer, or permit the removal, movement, relocation or transfer, whether by sale or otherwise, any of the Collateral, and shall keep the Collateral only at its principal place of business, or at any other secured warehouse or location owned or leased by the Debtor, or such other location as shall be used from time to time by the Debtor to temporarily store the Collateral so long as the Collateral remains fully insured, unless and until the Debtor provides Secured Party, with written notice that the Collateral is being moved to such location, specifying the exact address of such location and the exact Collateral to be moved, at least 30 days prior to moving the Collateral to such location.

7.    Protection of Secured Party's Security.  If an Event of Default, as defined in the Notes, has occurred, or if any action or proceeding is commenced which materially adversely affects the Collateral or title thereto or the interest of the Secured Parties therein, then the Secured Parties, upon the prior written consent of the Collateral Agent, may make such appearance, disburse such sums, and take such action as the Secured Parties deem necessary, in their sole discretion, to protect the Secured Parties' interest, including but not limited to (a) disbursement of reasonable hourly attorneys' fees, (b) entry upon the Debtor's property to make repairs to the Collateral, and (c) procurement of satisfactory insurance that is reasonable under the circumstances.  Any amounts disbursed by the Secured Parties pursuant to this Section 7, with interest thereon, shall become additional indebtedness of the Debtor secured by this Agreement.  Unless the Debtor and the Collateral Agent agree to other terms of payment, such amounts shall be immediately due and payable, and if the Secured Parties notify the Debtor within five days of such disbursement, all such amounts shall bear interest from the date which is ten days following the date of disbursement at the rate stated in the Notes.  Nothing contained in this Section 7 shall require the Secured Parties to incur any expense or take any action.  

8.    Collateral Agent.

(a)    Appointment.  The Majority Noteholders may from time to time appoint a collateral agent for the Secured Parties (in such capacity, the “Collateral Agent”) to serve from the date of such appointment until the earliest of resignation, removal of the Collateral Agent by the Majority Noteholders, or termination of this Agreement.  Upon ten days written notice to the Debtor, the Majority Noteholders (as such term is defined in the Purchase Agreement) may appoint another Collateral Agent.

(b)    Powers and Duties of Collateral Agent.  Each Secured Party hereby irrevocably authorizes the Collateral Agent, if any, to take such action and to exercise such powers hereunder as provided herein or as requested in writing by the Majority Noteholders.  The Collateral Agent may execute any of its duties hereunder by or through agents or employees and shall be entitled to request and act in reliance upon the advice of counsel concerning all matters pertaining to its duties hereunder and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance therewith.  The Collateral Agent may not, without consent of the Majority Noteholders, demand payment of the Notes or foreclose on the Collateral.  For the avoidance of doubt and without in any way limiting the rights of the Collateral Agent set forth herein, the Collateral Agent may with consent of the Majority Noteholders subordinate repayment of the Notes and their security interest hereby granted to other obligations of the Debtor.

(c)    Indemnity by Secured Parties.  Neither the Collateral Agent nor any of its partners, directors, officers, employees, or agents shall be liable or responsible to any Secured Party or to the Debtor for any action taken or omitted to be taken by the Collateral Agent or any other such person hereunder or under any related agreement, instrument or document, nor shall the Collateral Agent or any of its partners, directors, officers, employees, or agents be liable or responsible for:  (i) the validity, effectiveness, sufficiency, enforceability or enforcement of the Notes, this Agreement or any instrument or document delivered hereunder or relating hereto; (ii) the title of the Debtor to any of the Collateral or the freedom of any of the Collateral from any prior or other liens or security interests; (iii) the determination, verification or enforcement of the Debtor's compliance with any of the terms and conditions of this Agreement; (iv) the failure by the Debtor to deliver any instrument or document required to be delivered pursuant to the terms hereof; or (v) the receipt, disbursement, waiver, extension or other handling of payments or proceeds made or received with respect to the Collateral, the servicing of the Collateral or the enforcement or the collection of any amounts owing with respect to the Collateral.  In the case of this Agreement, the transactions contemplated hereby and any document relating to the Collateral, each of the Secured Parties agrees to pay to the Collateral Agent, on demand, its pro rata share of all fees and all expenses incurred by the Collateral Agent in connection with the operation and enforcement of this Agreement, the Notes or any related agreement to the extent that such fees or expenses have not been paid by the Debtor.  In the case of this Agreement and each instrument and document relating to any of the Collateral, each of the Secured Parties and the Debtor hereby agrees to hold the Collateral Agent harmless, and to indemnify the Collateral Agent from and against any and all loss, damage, expense or liability which may be incurred by the Collateral Agent under this Agreement and the transactions contemplated hereby and any related agreement or other instrument or document, as the case may be.

9.    Forbearance by Collateral Agent Not a Waiver.  Any forbearance by the Collateral Agent in exercising any right or remedy hereunder, or otherwise afforded by applicable law, shall not be a waiver of, or preclude the exercise of, any right or remedy.  The acceptance by the Collateral Agent of payment of any sum secured by this Agreement or the Purchase Agreement after the due date of such payment shall not be a waiver of the Secured Parties' right to either require prompt payment when due of all other sums so secured or to declare a default for failure to make prompt payment. No action taken by the Collateral Agent shall waive the Secured Parties' right to accelerate the indebtedness secured by this Agreement and seek such other remedies as are provided by this Agreement, the Purchase Agreement or applicable law.

10.    Uniform Commercial Code Security Agreement.  This Agreement is intended to be a security agreement pursuant to the UCC for all of the items specified above as part of the Collateral which, under applicable law, may be subject to a security interest pursuant to the UCC, and the Debtor hereby grants the Collateral Agent a security interest in such items.  The Debtor agrees that the Secured Parties may file any appropriate document in the appropriate jurisdiction as a financing statement for any of the Collateral.  Upon the occurrence of an Event of Default 

(as such term is defined in the Notes), the Secured Parties shall have the remedies of a “secured party” under the UCC and, at the Collateral Agent's option, may also invoke the other remedies provided in this Agreement, the Notes, or the Purchase Agreement as to such items.  In exercising any of such remedies, the Secured Parties may proceed against any or all of the Collateral separately or together and in any order whatsoever, without in any way affecting the availability of the Secured Parties remedies under the UCC or of the other remedies provided in this Agreement and/or the Purchase Agreement.  

11.    Events of Default.  The Debtor shall be in default under this Agreement upon the occurrence of an Event of Default (as such term is defined in the Notes).

12.    Rights of Secured Parties.  

(a)     Upon the occurrence of an Event of Default (as such term is defined in the Notes), the Collateral Agent may, at the request of the Majority Noteholders, require the Debtor to assemble the Collateral and make it available to the Collateral Agent at the place to be designated by the Collateral Agent which is reasonably convenient to both parties.  The Collateral Agent may sell all or any part of the Collateral as a whole or in parcels either by public auction, private sale, or other method of disposition pursuant to the UCC.  The Collateral Agent or any Secured Party may bid at any public sale on all or any portion of the Collateral. The Collateral Agent shall give the Debtor reasonable notice of the time and place of any public sale or of the time after which any private sale or other disposition of the Collateral is to be made, and notice given at least ten days before the time of the sale or other disposition shall be conclusively presumed to be reasonable.
    
(b)    Notwithstanding any provision of this Agreement, the Collateral Agent shall be under no obli-gation to offer to sell the Collateral.  In the event the Collateral Agent offers to sell the Collateral, the Collateral Agent will be under no obligation to consummate a sale of the Collateral if, in its reason-able business judgment, none of the offers received by it reasonably approximates the fair value of the Collateral.

(c)    In the event the Collateral Agent elects not to sell the Collateral, the Collateral Agent may elect to follow the procedures set forth in the UCC for retaining the Collateral in satisfaction of the Debtor's obligation, subject to the Debtor's rights under such procedures.

13.    Remedies Cumulative.  Each remedy provided in this Agreement or the Purchase Agreement is distinct and cumulative to all other rights or remedies under this Agreement or the Purchase Agreement or afforded by law or equity, and may be exercised concurrently, independently, or successively, in any order whatsoever.  

14.    Costs and Expenses.  The Debtor agrees to pay on demand all costs and expenses, including reasonable hourly attorneys' fees and court costs, of the Secured Parties in connection with the enforcement of this Agreement (whether suit is commenced or not).

15.     Notices.  All notices, requests, consents and other communications given hereunder to any party shall be deemed to be sufficient if contained in a written instrument: (a) delivered in per-son, (b) sent by confirmed facsimile transmission to the number provided by the receiving party, or (c) duly sent by first class registered or certified mail, return receipt requested, postage prepaid, or overnight delivery service (e.g., Federal Express), addressed to such party at the address designated in writing by receiving party, as may be revised by the receiving party.  All such notices and communi-cations shall be deemed to have been received (i) in the case of personal delivery, on the date of such delivery, (ii) in the case of facsimile transmission, on the date of transmission, and (iii) in the case of mailing or delivery by service, on the date of delivery as shown on the return receipt or delivery service statement.

16.     Entire Agreement, Savings Clause, Assigns and Governing Law.  This Agreement and the other Transaction Documents (as defined in the Purchase Agreement) contain the entire understanding between and among the parties and supersede any prior understandings and agreements among them respecting the subject matter of such agreements and instruments. If any provision of this Agreement, or the application of such pro-vision to any person or circumstance, shall be held invalid, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby.  This Agreement shall be 

binding upon the heirs, executors, administrators, successors and assigns of the parties hereto.  This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota. 

17.    Amendment and Additional Parties.  The Agreement may be amended only in writing signed by the Debtor and the Collateral Agent or the Majority Noteholders if a Collateral Agent has not been appointed on behalf of the holders of the Notes.

18.    Attorneys' Fees.  Any actions or proceedings, including arbitration, brought by either party with respect to this Agreement, the court or arbitrator in such action or proceeding shall award to the prevailing party, in addition to any other relief granted, (i) the actual attorneys' fees based on a reasonable hourly basis which the prevailing party has paid or is obligated to pay; and (ii) all costs and expenses, not merely recoverable costs, which the prevailing party has paid or is obligated to pay.  The court may reduce such actual attorneys' fees, costs and expenses only to the extent that the court determines that such amounts were unnecessarily incurred or unreasonable.  In addition, the parties agree that if any dispute between the parties results in a judgment in favor of either party, such party shall be entitled to recover from the other all reasonable hourly attorneys' fees and costs incurred by it in enforcing such judgment.  This provision is intended to be severable from any other provision of this Agreement and is not to be deemed merged in the judgment.

19.    Counterparts; Execution.  This Agreement may be executed in multiple counterparts, each of which shall be deemed an original Agreement, and all of which shall constitute one Agreement to be effective as of the date of execution of this Agreement.

[Multiple signature pages follow.]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first above written.

	
		
	THE DEBTOR:

DIGITILITI, Inc.
a Delaware corporation

By:_____________________________
Name: ______________________________
Its:_____________________________

Address: 266 East 7th Street, St. Paul, MN 55101
Phone:  (651) 925-3200
Fax:  (651) 925-3232

	COLLATERAL AGENT:

INSERT NAME OF COLLATERAL AGENT, IF ANY 

By:_____________________________
Name: ______________________________
Its:_____________________________

Address:
Phone:  
Fax: 

[Multiple secured party signature pages follow.]

IN WITNESS WHEREOF, the parties have caused this Security Agreement to be executed as of the date first above written.

SECURED PARTY:

Name:                        

By:                        

Its:    ____________________________    

                        
                        
                        
                        
 (Address)

                        
                        
 (Phone and Fax Numbers)

SCHEDULE A

SECURED PARTIES

EXHIBIT 6.3

PERMITTED LIENS

“Permitted Liens” are:
(a)Liens approved in writing by the Collateral Agent or the Majority Noteholders;
(b)Liens for taxes, fees, assessments or other government charges or levies, either not delinquent or being contested in good faith and for which the Debtor maintains adequate reserves on its books;
(c)Purchase money liens (i) on equipment acquired or held by the Debtor incurred for financing the acquisition of the equipment, or (ii) existing on equipment when acquired, if the lien is confined to the property and improvements and the proceeds of the equipment;
(d)Leases or subleases and licenses or sublicenses granted in the ordinary course of the Debtor's business; and
(e)Liens of carriers, warehousemen, suppliers, or other persons that are possessory in nature arising in the ordinary course of business so long as such liens attach only to inventory and which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto.

6081427v3Ex#10.4 - Form of Warrant Agreement

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UNPON EXERCISE HAS NOT BEEN REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE BLUE SKY LAWS, AND IS SUBJECT TO CERTAIN INVESTMENT REPRESENTATIONS.  NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UNPON EXERCISE  MAY NOT BE SOLD, OFFERED FOR SALE OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION UNDER THE ACT AND APPLICABLE BLUE SKY LAWS, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

Warrant No. _____

WARRANT TO PURCHASE COMMON STOCK
of
DIGITILITI, INC.
a Delaware corporation

Void after June __, 2016

This certifies that, for value received, [_____________], or his, her or its successors or assigns (“Holder”), is entitled during the Exercise Period (as defined below), subject to the terms set forth below, to purchase from Digitiliti, Inc., a Delaware corporation (the “Company”), up to [_______] shares of Common Stock, par value $.001 per share, of the Company (“Common Stock”) at the price of $0.06 per share, subject to adjustment as set forth below (the “Purchase Price”), upon surrender of this Warrant at the principal office of the Company referred to below, with the subscription form attached hereto (the “Subscription Form”) duly executed, and simultaneous payment therefor in the manner specified in Section 1.  The Purchase Price and the number of shares of Common Stock purchasable hereunder are subject to adjustment as provided in Section 3.  This Warrant is one of the warrants (collectively, the “Warrants”) referred to and issued pursuant to that certain Junior Secured Convertible Promissory Note and Warrant Purchase Agreement dated as of June ___, 2011 (the “Purchase Agreement”).
As used herein, “Exercise Date” means the particular date (or dates) on which this Warrant is exercised. “Exercise Period” means the period during which this Warrant is exercisable; such period shall begin on the date hereof and shall end at 6:00 p.m., Central Daylight Time, on June __, 2016.  “Issue Date” means the date hereof, June ___, 2011.  “Warrant” includes this Warrant and any warrant delivered in substitution or exchange therefor as provided herein.  “Warrant Shares” means any shares of Common Stock acquired by Holder upon exercise of this Warrant.
1.    Exercise.
(a)    This Warrant may be exercised, in whole or in part, at any time or from time to time, on any business day during the Exercise Period, by surrendering it at the principal office of the Company at 266 East 7th Street, Saint Paul, MN 55101, together with an executed Subscription Form and a check in an amount equal to (i) the number of Warrant Shares being purchased, multiplied by (ii) the Purchase Price.   
(b)    This Warrant may be exercised for less than the full number of Warrant Shares as of the Exercise Date. Upon such partial exercise, this Warrant shall be surrendered, and a new Warrant of the same tenor and for the purchase of the Warrant Shares not purchased upon such exercise shall be issued to Holder by the Company.
(c)    A 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, and the person entitled to receive the Warrant Shares issuable upon such exercise shall be treated for all purposes as the holder of such shares of record as of the close of business on such date. As soon as practicable on or after such date, and in any event within ten business days thereafter, the Company shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of shares of Common Stock issuable upon such exercise.
(d)    Notwithstanding the foregoing, the Company shall not be required to deliver any certificate for Warrant Shares upon exercise of this Warrant except in accordance with exemptions from the applicable 

securities registration requirements or registrations under applicable securities laws.  Nothing herein shall obligate the Company to effect registrations under federal or state securities laws.  If registrations are not in effect and if exemptions are not available when the Holder seeks to exercise the Warrant, the Warrant exercise period will be extended, if need be, to prevent the Warrant from expiring, until such time as either registrations become effective or exemptions are available, and the Warrant shall then remain exercisable for a period of at least 30 calendar days from the date the Company delivers to the Holder written notice of the availability of such registrations or exemptions.  The Holder agrees to execute such documents and make such representations, warranties, and agreements as may be required solely to comply with the exemptions relied upon by the Company, or the registrations made, for the issuance of the Warrant Shares.
2.    Payment of Taxes. All shares of Common Stock issued upon the exercise of this Warrant shall be validly issued, fully paid and non-assessable and the Company shall pay all taxes and other governmental charges that may be imposed in respect of the issue or delivery thereof, other than any tax or other charge imposed in connection with any transfer involved in the issue of any certificate for shares of Common Stock in any name other than that of the registered Holder of this Warrant, and in such case the Company shall not be required to issue or deliver any stock certificate until such tax or other charge has been paid or it has been established to the Company's satisfaction that no tax or other charge is due.
3.    Certain Adjustments.
(a)     Adjustment for Reorganization, Consolidation, Merger. In case of any reclassification or change of outstanding Company securities, or of any reorganization of the Company (or any other entity, the stock or securities of which are at the time receivable upon the exercise of this Warrant) or any similar corporate reorganization on or after the date hereof, then and in each such case Holder, upon the exercise hereof at any time after the consummation of such reclassification, change, reorganization, merger or conveyance, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise hereof prior to such consummation, the stock or other securities or property to which Holder would have been entitled upon such consummation if Holder had exercised this Warrant immediately prior thereto, the terms of this Section 3 shall be applicable to the Company securities properly receivable upon the exercise of this Warrant after such consummation.
(b)    Adjustments for Dividends in Common Stock. If the Company at any time or from time to time after the Issue Date declares any dividend on the Common Stock which is payable in shares of Common Stock, the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately increased and the Purchase Price shall be proportionately decreased.
(c)    Stock Split and Reverse Stock Split. If the Company at any time or from time to time after the Issue Date effects a subdivision of the Common Stock, the Purchase Price shall be proportionately decreased and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately increased. If the Company at any time or from time to time after the Issue Date combines the outstanding shares of Common Stock into a smaller number of shares, the Purchase Price shall be proportionately increased and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately decreased. Each adjustment under this Section 3(c) shall become effective at the close of business on the date the subdivision or combination becomes effective.
(d)    Accountants' Certificate as to Adjustment. In each case of an adjustment in the shares of Common Stock receivable on the exercise of this Warrant, if Holder so requests in writing, the Company at its expense shall cause its independent public accountants to compute such adjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment and showing the facts upon which such adjustment is based. The Company will mail a copy of each such certificate to each holder of a Warrant at the time outstanding. 
(e)    Rights Under Warrant Agreement. The Company will not, by amendment of its Certificate of Incorporation, as amended, or through reorganization, consolidation, merger, dissolution, issue or sale of securities, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holders of the Warrants under this Warrant Agreement.

4.    Notices of Record Date. If either (a) the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive any dividend or other distribution, or any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right; or (b) the Company undertakes a voluntary dissolution, liquidation or winding-up of the Company, then, and in each such case, the Company shall mail or cause to be mailed to each holder of a Warrant at the time outstanding a notice specifying, as the case may be, (1) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (2) the date on which such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up.
5.    No Rights as Shareholder. Prior to the exercise of this Warrant, Holder shall not be entitled to any rights of a shareholder with respect to the Warrant Shares, including without limitation the right to vote such Warrant Shares, receive dividends or other distributions thereon or be notified of shareholder meetings, and Holder shall not be entitled to any notice or other communication concerning the business or affairs of the Company. However, nothing in this Section 5 shall limit the right of Holder to be provided the notices required under this Warrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a shareholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.
6.    Notice of Transfer of Warrant or Resale of the Warrant Shares.

(a)    The Holder, by acceptance hereof, agrees to give written notice to the Company before transferring this Warrant or transferring any Warrant Shares of such Holder's intention to do so, describing briefly the manner of any proposed transfer.  Promptly upon receiving such written notice, the Company shall present copies thereof to the Company's counsel.  If in the opinion of such counsel the proposed transfer may be effected without registration or qualification under any federal or state securities laws, the Company, as promptly as practicable, shall notify the Holder of such opinion, whereupon the Holder shall be entitled to transfer this Warrant or the Warrant Shares received upon the exercise of this Warrant, all in accordance with the terms of the notice delivered by the Holder to the Company..

(b)    If, in the opinion of the Company's counsel, the proposed transfer or disposition of this Warrant or such Warrant Shares described in the written notice given pursuant to this Section 6 may not be effected without registration or qualification of this Warrant or such Warrant Shares, the Company shall promptly give written notice thereof to the Holder, and the Holder will limit its activities in respect to such transfer or disposition as, in the opinion of such counsel, are permitted by law.
7.    Investment Intent. Holder, by acceptance hereof, agrees that this Warrant and the Warrant Shares to be issued upon exercise hereof are being acquired for investment and not with a view towards resale and that it will not offer, sell or otherwise dispose of this Warrant or any Warrant Shares to be issued upon exercise hereof except under circumstances which will not result in a violation of the Securities Act. Upon exercise of this Warrant, Holder shall confirm in writing, in the form of Exhibit A, that the Warrant Shares so purchased are being acquired for investment and not with a view toward distribution or resale. This Warrant and all shares of Warrant Shares issued upon exercise of this Warrant (unless registered under the Securities Act) shall be stamped or imprinted with a similar legend indicated on the first page of this Warrant.
8.    Loss or Mutilation. Upon receipt by the Company of evidence satisfactory to it (in the exercise of reasonable discretion) of the ownership of and the loss, theft, destruction or mutilation of any Warrant and, in the case of loss, theft or destruction, of indemnity satisfactory to it (in the exercise of reasonable discretion), and in the case of mutilation, upon surrender and cancellation thereof, the Company will execute and deliver in lieu thereof a new Warrant of like tenor.
9.    Notices. All notices, requests, consents and other communications given hereunder to any party shall be deemed to be sufficient if contained in a written instrument: (a) delivered in per-son, (b) sent by confirmed facsimile transmission to the number provided by the receiving party, or (c) duly sent by first class registered or certified mail, 

return receipt requested, postage prepaid, or overnight delivery service (e.g., Federal Express), addressed to such party at the address designated in writing by receiving party, as may be revised by the receiving party.  All such notices and communications shall be deemed to have been received (i) in the case of personal delivery, on the date of such delivery, (ii) in the case of facsimile transmission, on the date of transmission, and (iii) in the case of mailing or delivery by service, on the date of delivery as shown on the return receipt or delivery service statement.
10.    Change; Waiver. Neither this Warrant nor any term hereof may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the Company and the Majority Noteholders (as defined in the Purchase Agreement).
11.    Headings. The headings in this Warrant are for purposes of convenience in reference only, and shall not be deemed to constitute a part hereof. 
12.    Governing Law. This Warrant is delivered in Minnesota and shall be construed and enforced in accordance with and governed by the internal laws, and not the law of conflicts thereof.

IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this Warrant as of the date first above written.

COMPANY:

DIGITILITI, INC.

By:                                
Name:________________________________________
Its: ___________________________________________

EXHIBIT A
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
The undersigned registered owner of this Warrant irrevocably exercises this Warrant and purchases ____________ of the number of shares of Common Stock of DIGITILITI, INC., a Delaware corporation, purchasable with this Warrant, and makes payment therefore in the amount of $__________.
The undersigned hereby represents and warrants that the undersigned is acquiring such shares of Common Stock for the undersigned's own account for investment purposes only, and not for resale or with a view to distribution of such shares or any part thereof.

Dated:_________________
_________________________________________
(Signature of Registered Owner)

_________________________________________
(Street Address)

_________________________________________
(City), (State), (Zip)

FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under the within Warrant, with respect to the number of shares of Common Stock set forth below:
Name of Assignee                 Address                 No. of Shares

and does hereby irrevocably constitute and appoint ___________________________ Attorney to make such transfer on the books of DIGITILITI, INC., a Delaware corporation, maintained for the purpose, with full power of substitution in the premises. 
Dated: ___________________

_______________________________
(Signature)
                            
_______________________________
(Print Name)

_______________________________
(Witness)

_______________________________
(Print Name)

6081426v1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00194-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00194-of-00352.parquet"}]]