Exhibit 10.4

 

[FORM OF COMMON WARRANT]

 

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY
ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
(II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER
SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES. THE NUMBER OF SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE OF THIS COMMON WARRANT MAY BE LESS THAN THE AMOUNTS SET
FORTH ON THE FACE HEREOF PURSUANT TO SECTION 1(a) OF THIS COMMON WARRANT.

 

Sigma Labs, Inc.

 

Warrant To Purchase Common Stock

 

Common Warrant No.:

 

Date of Issuance: [                   ], 20__ (“Issuance Date”)

 

Sigma Labs, Inc., a Nevada corporation (the “Company”), hereby certifies that,
for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, [BUYER], the registered holder hereof or its permitted
assigns (the “Holder”), is entitled, subject to the terms set forth below, to
purchase from the Company, at the Exercise Price (as defined below) then in
effect, upon exercise of this Warrant to Purchase Common Stock (including any
Warrants to Purchase Common Stock issued in exchange, transfer or replacement
hereof, the “Common Warrant”), at any time or times on or after six month and
one day anniversary of the Issuance Date (the “Initial Exercisability Date”),
but not after 11:59 p.m., New York time, on the Expiration Date (as defined
below), _________________1 (subject to adjustment as provided herein) fully paid
and non-assessable shares of Common Stock (as defined below) (the “Warrant
Common Shares”, and such aggregate number of Warrant Common Shares issuable
hereunder as of any time of determination, the “Warrant Common Number”). Except
as otherwise defined herein, capitalized terms in this Common Warrant shall have
the meanings set forth in Section 17. This Common Warrant is one of the Warrants
to Purchase Common Stock (the “SPA Common Warrants”) issued pursuant to Section
1 of that certain Securities Purchase Agreement, dated as of January ___, 2020
(the “Subscription Date”), by and among the Company and the investors (the
“Buyers”) referred to therein, as amended from time to time (the “Securities
Purchase Agreement”).

 

 

1 100% Common Warrant coverage on all Preferred Shares

 

 

 

 

1. EXERCISE OF COMMON WARRANT.

 

(a) Mechanics of Exercise. Subject to the terms and conditions hereof
(including, without limitation, the limitations set forth in Section 1(f)), this
Common Warrant may be exercised by the Holder on any day on or after the Initial
Exercisability Date (an “Exercise Date”), in whole or in part, by delivery
(whether via facsimile or otherwise) of a written notice, in the form attached
hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to
exercise this Common Warrant. Within one (1) Trading Day following an exercise
of this Common Warrant as aforesaid, the Holder shall deliver payment to the
Company of an amount equal to the Exercise Price in effect on the date of such
exercise multiplied by the number of Warrant Common Shares as to which this
Common Warrant was so exercised (the “Aggregate Exercise Price”) in cash or via
wire transfer of immediately available funds if the Holder did not notify the
Company in such Exercise Notice that such exercise was made pursuant to a
Cashless Exercise (as defined in Section 1(d)). The Holder shall not be required
to deliver the original of this Common Warrant in order to effect an exercise
hereunder. Execution and delivery of an Exercise Notice with respect to less
than all of the Warrant Common Shares shall have the same effect as cancellation
of the original of this Common Warrant and issuance of a new Common Warrant
evidencing the right to purchase the remaining number of Warrant Common Shares.
Execution and delivery of an Exercise Notice for all of the then-remaining
Warrant Common Shares shall have the same effect as cancellation of the original
of this Common Warrant after delivery of the Warrant Common Shares in accordance
with the terms hereof. On or before the first (1st) Trading Day following the
date on which the Company has received an Exercise Notice, the Company shall
transmit by facsimile or electronic mail an acknowledgment of confirmation of
receipt of such Exercise Notice, in the form attached hereto as Exhibit B, to
the Holder and the Company’s transfer agent (the “Transfer Agent”), which
confirmation shall constitute an instruction to the Transfer Agent to process
such Exercise Notice in accordance with the terms herein. On or before the
second (2nd) Trading Day following the date on which the Company has received
such Exercise Notice (or such earlier date as required pursuant to the 1934 Act
or other applicable law, rule or regulation for the settlement of a trade of
such Warrant Common Shares initiated on the applicable Exercise Date), the
Company shall (X) provided that the Transfer Agent is participating in The
Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program and
such Warrant Common Shares are eligible to be resold pursuant to Rule 144 or an
effective registration statement, upon the request of the Holder, credit such
aggregate number of shares of Common Stock to which the Holder is entitled
pursuant to such exercise to the Holder’s or its designee’s balance account with
DTC through its Deposit/Withdrawal at Custodian system, or (Y) if the Transfer
Agent is not participating in the DTC Fast Automated Securities Transfer Program
or such Warrant Common Shares are not eligible to be resold pursuant to Rule 144
or an effective registration statement, upon the request of the Holder, issue
and deliver (via reputable overnight courier) to the address as specified in the
Exercise Notice, a certificate, registered in the name of the Holder or its
designee, for the number of shares of Common Stock to which the Holder shall be
entitled pursuant to such exercise. Upon delivery of an Exercise Notice, the
Holder shall be deemed for all corporate purposes to have become the holder of
record of the Warrant Common Shares with respect to which this Common Warrant
has been exercised, irrespective of the date such Warrant Common Shares are
credited to the Holder’s DTC account or the date of delivery of the certificates
evidencing such Warrant Common Shares (as the case may be). If this Common
Warrant is submitted in connection with any exercise pursuant to this Section
1(a) and the number of Warrant Common Shares represented by this Common Warrant
submitted for exercise is greater than the number of Warrant Common Shares being
acquired upon an exercise and upon surrender of this Common Warrant to the
Company by the Holder, then, at the request of the Holder, the Company shall as
soon as practicable and in no event later than two (2) Business Days after any
exercise and at its own expense, issue and deliver to the Holder (or its
designee) a new Common Warrant (in accordance with Section 7(d)) representing
the right to purchase the number of Warrant Common Shares purchasable
immediately prior to such exercise under this Common Warrant, less the number of
Warrant Common Shares with respect to which this Common Warrant is exercised. No
fractional shares of Common Stock are to be issued upon the exercise of this
Common Warrant, but rather the number of shares of Common Stock to be issued
shall be rounded up to the nearest whole number. The Company shall pay any and
all transfer, stamp, issuance and similar taxes, costs and expenses (including,
without limitation, fees and expenses of the Transfer Agent) that may be payable
with respect to the issuance and delivery of Warrant Common Shares upon exercise
of this Common Warrant. Notwithstanding the foregoing, except in the case where
an exercise of this Common Warrant is validly made pursuant to a Cashless
Exercise, the Company’s failure to deliver Warrant Common Shares to the Holder
on or prior to the later of (i) two (2) Trading Days after receipt of the
applicable Exercise Notice (or such earlier date as required pursuant to the
1934 Act or other applicable law, rule or regulation for the settlement of a
trade of such Warrant Common Shares initiated on the applicable Exercise Date)
and (ii) one (1) Trading Day after the Company’s receipt of the Aggregate
Exercise Price (or valid notice of a Cashless Exercise) (such later date, the
“Share Delivery Date”) shall not be deemed to be a breach of this Common
Warrant. Notwithstanding anything to the contrary contained in this Common
Warrant or the Registration Rights Agreement, after the effective date of the
Registration Statement (as defined in the Registration Rights Agreement) and
prior to the Holder’s receipt of the notice of a Grace Period (as defined in the
Registration Rights Agreement), the Company shall cause the Transfer Agent to
deliver unlegended shares of Common Stock to the Holder (or its designee) in
connection with any sale of Registrable Securities (as defined in the
Registration Rights Agreement) with respect to which the Holder has entered into
a contract for sale, and delivered a copy of the prospectus included as part of
the particular Registration Statement to the extent applicable, and for which
the Holder has not yet settled. From the Issuance Date through and including the
Expiration Date, the Company shall maintain a transfer agent that participates
in the DTC’s Fast Automated Securities Transfer Program. Notwithstanding the
foregoing, prior to the earlier to occur of (x) the Share Increase Shareholder
Approval Date (as defined in the Securities Purchase Agreement) and (y) the
Shareholder Meeting Deadline (as defined in the Securities Purchase Agreement),
the Holder shall not be permitted to exercise this Warrant to the extent that
after such exercise the Holder shall have received, whether upon conversion of
Preferred Shares and/or exercise of this Warrant, as applicable, more than such
Holder’s Authorized Share Allocation (as defined below). NOTWITHSTANDING ANY
PROVISION OF THIS COMMON WARRANT TO THE CONTRARY, NO MORE THAN THE MAXIMUM
ELIGIBILITY NUMBER OF WARRANT COMMON SHARES SHALL BE EXERCISABLE HEREUNDER. For
the avoidance of doubt, no ink original Exercise Notices, other notices or
medallion guarantees will be required by the Holder to exercise this Warrant or
for the Holder take any other action in connection herewith.

 

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(b) Exercise Price. For purposes of this Common Warrant, “Exercise Price” means
$[      ]2, subject to adjustment as provided herein.

 

(c) Company’s Failure to Timely Deliver Securities. If the Company shall fail,
for any reason or for no reason, on or prior to the Share Delivery Date, either
(I) if the Transfer Agent is not participating in the DTC Fast Automated
Securities Transfer Program or such Warrant Common Shares are not eligible to be
resold pursuant to Rule 144 or an effective registration statement, to issue and
deliver to the Holder (or its designee) a certificate for the number of Warrant
Common Shares to which the Holder is entitled and register such Warrant Common
Shares on the Company’s share register or, if the Transfer Agent is
participating in the DTC Fast Automated Securities Transfer Program and such
Warrant Common Shares are eligible to be resold pursuant to Rule 144 or an
effective registration statement, to credit the balance account of the Holder or
the Holder’s designee with DTC for such number of Warrant Common Shares to which
the Holder is entitled upon the Holder’s exercise of this Common Warrant (as the
case may be) or (II) if a Registration Statement covering the resale of the
Warrant Common Shares that are the subject of the Exercise Notice (the
“Unavailable Warrant Common Shares”) is not available for the resale of such
Unavailable Warrant Common Shares (solely to the extent such Unavailable Warrant
Common Shares were ever available pursuant to such Registration Statement) and
the Company fails to promptly, but in no event later than as required pursuant
to the Registration Rights Agreement (x) so notify the Holder and (y) deliver
the Warrant Common Shares electronically without any restrictive legend by
crediting such aggregate number of Warrant Common Shares to which the Holder is
entitled pursuant to such exercise to the Holder’s or its designee’s balance
account with DTC through its Deposit/Withdrawal At Custodian system (the event
described in the immediately foregoing clause (II) is hereinafter referred as a
“Notice Failure” and together with the event described in clause (I) above, a
“Delivery Failure”), then, in addition to all other remedies available to the
Holder, (X) the Company shall pay in cash to the Holder on each day after the
Share Delivery Date and during such Delivery Failure an amount equal to 2% of
the product of (A) the sum of the number of shares of Common Stock not issued to
the Holder on or prior to the Share Delivery Date and to which the Holder is
entitled, multiplied by (B) any trading price of the Common Stock selected by
the Holder in writing as in effect at any time during the period beginning on
the applicable Exercise Date and ending on the applicable Share Delivery Date,
and (Y) the Holder, upon written notice to the Company, may void its Exercise
Notice with respect to, and retain or have returned, as the case may be, any
portion of this Common Warrant that has not been exercised pursuant to such
Exercise Notice; provided that the voiding of an Exercise Notice shall not
affect the Company’s obligations to make any payments which have accrued prior
to the date of such notice pursuant to this Section 1(c) or otherwise. In
addition to the foregoing, if on or prior to the Share Delivery Date either (I)
the Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program or such Warrant Common Shares are not eligible to be resold
pursuant to Rule 144 or an effective registration statement, the Company shall
fail to issue and deliver to the Holder (or its designee) a certificate and
register such shares of Common Stock on the Company’s share register or, if the
Transfer Agent is participating in the DTC Fast Automated Securities Transfer
Program and such Warrant Common Shares are eligible to be resold pursuant to
Rule 144 or an effective registration statement, the Transfer Agent shall fail
to credit the balance account of the Holder or the Holder’s designee with DTC
for the number of shares of Common Stock to which the Holder is entitled upon
the Holder’s exercise hereunder or pursuant to the Company’s obligation pursuant
to clause (ii) below or (II) a Notice Failure occurs, and if on or after such
Share Delivery Date the Holder purchases (in an open market transaction or
otherwise) shares of Common Stock corresponding to all or any portion of the
number of shares of Common Stock issuable upon such exercise that the Holder is
entitled to receive from the Company and has not received from the Company in
connection with such Delivery Failure or Notice Failure, as applicable (a
“Buy-In”), then, in addition to all other remedies available to the Holder, the
Company shall, within two (2) Business Days after the Holder’s request and in
the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to
the Holder’s total purchase price (including brokerage commissions and other
out-of-pocket expenses, if any) for the shares of Common Stock so purchased
(including, without limitation, by any other Person in respect, or on behalf, of
the Holder) (the “Buy-In Price”), at which point the Company’s obligation to so
issue and deliver such certificate (and to issue such shares of Common Stock) or
credit the balance account of such Holder or such Holder’s designee, as
applicable, with DTC for the number of Warrant Common Shares to which the Holder
is entitled upon the Holder’s exercise hereunder (as the case may be) (and to
issue such Warrant Common Shares) shall terminate, or (ii) promptly honor its
obligation to so issue and deliver to the Holder a certificate or certificates
representing such Warrant Common Shares or credit the balance account of such
Holder or such Holder’s designee, as applicable, with DTC for the number of
Warrant Common Shares to which the Holder is entitled upon the Holder’s exercise
hereunder (as the case may be) and pay cash to the Holder in an amount equal to
the excess (if any) of the Buy-In Price over the product of (A) such number of
Warrant Common Shares multiplied by (B) the lowest Closing Sale Price of the
Common Stock on any Trading Day during the period commencing on the date of the
applicable Exercise Notice and ending on the date of such issuance and payment
under this clause (ii) (the “Buy-In Payment Amount”). Nothing shall limit the
Holder’s right to pursue any other remedies available to it hereunder, at law or
in equity, including, without limitation, a decree of specific performance
and/or injunctive relief with respect to the Company’s failure to timely deliver
certificates representing shares of Common Stock (or to electronically deliver
such shares of Common Stock) upon the exercise of this Common Warrant as
required pursuant to the terms hereof. While this Common Warrant is outstanding,
the Company shall cause its transfer agent to participate in the DTC Fast
Automated Securities Transfer Program. In addition to the foregoing rights, (i)
if the Company fails to deliver the applicable number of Warrant Common Shares
upon an exercise pursuant to Section 1 by the applicable Share Delivery Date,
then the Holder shall have the right to rescind such exercise in whole or in
part and retain and/or have the Company return, as the case may be, any portion
of this Common Warrant that has not been exercised pursuant to such Exercise
Notice; provided that the rescission of an exercise shall not affect the
Company’s obligation to make any payments that have accrued prior to the date of
such notice pursuant to this Section 1(c). or otherwise, and (ii) if a
registration statement covering the issuance or resale of the Warrant Common
Shares that are subject to an Exercise Notice is not available for the issuance
or resale, as applicable, of such Warrant Common Shares and the Holder has
submitted an Exercise Notice prior to receiving notice of the non-availability
of such registration statement and the Company has not already delivered the
Warrant Common Shares underlying such Exercise Notice electronically without any
restrictive legend by crediting such aggregate number of Warrant Common Shares
to which the Holder is entitled pursuant to such exercise to the Holder’s or its
designee’s balance account with DTC through its Deposit / Withdrawal At
Custodian system, the Holder shall have the option, by delivery of notice to the
Company, to (x) rescind such Exercise Notice in whole or in part and retain or
have returned, as the case may be, any portion of this Common Warrant that has
not been exercised pursuant to such Exercise Notice; provided that the
rescission of an Exercise Notice shall not affect the Company’s obligation to
make any payments that have accrued prior to the date of such notice pursuant to
this Section 1(c). or otherwise, and/or (y) switch some or all of such Exercise
Notice from a cash exercise to a Cashless Exercise.

 

 

2 Insert initial Conversion Price (as defined in the Certificate of
Designations)

 

 3 

   

 

(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary
(other than Section 1(f) below), if at the time of exercise hereof a
Registration Statement (as defined in the Registration Rights Agreement) is not
effective (or the prospectus contained therein is not available for use) for the
resale by the Holder of all of the Warrant Common Shares, then the Holder may,
in its sole discretion, exercise this Common Warrant in whole or in part and, in
lieu of making the cash payment otherwise contemplated to be made to the Company
upon such exercise in payment of the Aggregate Exercise Price, elect instead to
receive upon such exercise the “Net Number” of Warrant Common Shares determined
according to the following formula (a “Cashless Exercise”):

 

Net Number = (A x B) - (A x C)

D

 

For purposes of the foregoing formula:

 

A= the total number of shares with respect to which this Common Warrant is then
being exercised.

 

B = the quotient of (x) the sum of the VWAP of the Common Stock of each of the
twenty (20) Trading Days ending at the close of business on the Principal Market
immediately prior to the time of exercise as set forth in the applicable
Exercise Notice, divided by (y) twenty (20).

 

C = the Exercise Price then in effect for the applicable Warrant Common Shares
at the time of such exercise.

 

D = as applicable: (i) the Closing Sale Price of the Common Stock on the Trading
Day immediately preceding the date of the applicable Exercise Notice if such
Exercise Notice is (1) both executed and delivered pursuant to Section 1(a)
hereof on a day that is not a Trading Day or (2) both executed and delivered
pursuant to Section 1(a) hereof on a Trading Day prior to the opening of
“regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMS
promulgated under the federal securities laws) on such Trading Day, (ii) the Bid
Price of the Common Stock as of the time of the Holder’s execution of the
applicable Exercise Notice if such Exercise Notice is executed during “regular
trading hours” on a Trading Day and is delivered within two (2) hours thereafter
pursuant to Section 1(a) hereof, or (iii) the Closing Sale Price of the Common
Stock on the date of the applicable Exercise Notice if the date of such Exercise
Notice is a Trading Day and such Exercise Notice is both executed and delivered
pursuant to Section 1(a) hereof after the close of “regular trading hours” on
such Trading Day.

 

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If the Warrant Common Shares are issued in a Cashless Exercise, the parties
acknowledge and agree that in accordance with Section 3(a)(9) of the 1933 Act,
the Warrant Common Shares take on the registered characteristics of the Common
Warrants being exercised. For purposes of Rule 144(d) promulgated under the 1933
Act, as in effect on the Subscription Date, it is intended that the Warrant
Common Shares issued in a Cashless Exercise shall be deemed to have been
acquired by the Holder, and the holding period for the Warrant Common Shares
shall be deemed to have commenced, on the date this Common Warrant was
originally issued pursuant to the Securities Purchase Agreement.

 

Subject to Section 1(f) and only with respect to the Maximum Eligibility Number
of Warrant Common Shares then issuable hereunder, this Warrant shall be
automatically exercised in a Cashless Exercise on the Expiration Date if the
“Net Number” calculated in the formula above as of the Expiration Date would
result in the issuance to the Holder of any Warrant Common Shares; provided,
that any such Warrant Common Shares that, if issued to the Holder in connection
with such automatic exercise, would result in a violation of Section 1(f) would,
in lieu of such automatic issuance, be held in abeyance for the benefit of the
Holder and delivered to the Holder, in whole or in part, within two (2) Trading
Days of the Company’s receipt of one (or more) written notices from the Holder
specifying that such delivery of such amount of Warrant Common Shares specified
in such notice would no longer result in a violation of Section 1(f) above.

 

(e) Disputes. In the case of a dispute as to the determination of the Exercise
Price or the arithmetic calculation of the number of Warrant Common Shares to be
issued pursuant to the terms hereof, the Company shall promptly issue to the
Holder the number of Warrant Common Shares that are not disputed and resolve
such dispute in accordance with Section 13.

 

(f) Limitations on Exercises. The Company shall not effect the exercise of any
portion of this Common Warrant, and the Holder shall not have the right to
exercise any portion of this Common Warrant, pursuant to the terms and
conditions of this Common Warrant and any such exercise shall be null and void
and treated as if never made, to the extent that after giving effect to such
exercise, the Holder together with the other Attribution Parties collectively
would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the
shares of Common Stock outstanding immediately after giving effect to such
exercise. For purposes of the foregoing sentence, the aggregate number of shares
of Common Stock beneficially owned by the Holder and the other Attribution
Parties shall include the number of shares of Common Stock held by the Holder
and all other Attribution Parties plus the number of shares of Common Stock
issuable upon exercise of this Common Warrant with respect to which the
determination of such sentence is being made, but shall exclude shares of Common
Stock which would be issuable upon (A) exercise of the remaining, unexercised
portion of this Common Warrant beneficially owned by the Holder or any of the
other Attribution Parties and (B) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Company (including, without
limitation, any convertible notes or convertible preferred stock or warrants,
including other SPA Common Warrants) beneficially owned by the Holder or any
other Attribution Party subject to a limitation on conversion or exercise
analogous to the limitation contained in this Section 1(f). For purposes of this
Section 1(f)(i), beneficial ownership shall be calculated in accordance with
Section 13(d) of the 1934 Act. For purposes of determining the number of
outstanding shares of Common Stock the Holder may acquire upon the exercise of
this Common Warrant without exceeding the Maximum Percentage, the Holder may
rely on the number of outstanding shares of Common Stock as reflected in (x) the
Company’s most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q,
Current Report on Form 8-K or other public filing with the SEC, as the case may
be, (y) a more recent public announcement by the Company or (z) any other
written notice by the Company or the Transfer Agent, if any, setting forth the
number of shares of Common Stock outstanding (the “Reported Outstanding Share
Number”). If the Company receives an Exercise Notice from the Holder at a time
when the actual number of outstanding shares of Common Stock is less than the
Reported Outstanding Share Number, the Company shall (i) notify the Holder in
writing of the number of shares of Common Stock then outstanding and, to the
extent that such Exercise Notice would otherwise cause the Holder’s beneficial
ownership, as determined pursuant to this Section 1(f), to exceed the Maximum
Percentage, the Holder must notify the Company of a reduced number of Warrant
Common Shares to be acquired pursuant to such Exercise Notice (the number of
shares by which such purchase is reduced, the “Reduction Shares”) and (ii) as
soon as reasonably practicable, the Company shall return to the Holder any
exercise price paid by the Holder for the Reduction Shares. For any reason at
any time, upon the written or oral request of the Holder, the Company shall
within one (1) Business Day confirm orally and in writing or by electronic mail
to the Holder the number of shares of Common Stock then outstanding. In any
case, the number of outstanding shares of Common Stock shall be determined after
giving effect to the conversion or exercise of securities of the Company,
including this Common Warrant, by the Holder and any other Attribution Party
since the date as of which the Reported Outstanding Share Number was reported.
In the event that the issuance of shares of Common Stock to the Holder upon
exercise of this Common Warrant results in the Holder and the other Attribution
Parties being deemed to beneficially own, in the aggregate, more than the
Maximum Percentage of the number of outstanding shares of Common Stock (as
determined under Section 13(d) of the 1934 Act), the number of shares so issued
by which the Holder’s and the other Attribution Parties’ aggregate beneficial
ownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed
null and void and shall be cancelled ab initio, and the Holder shall not have
the power to vote or to transfer the Excess Shares. As soon as reasonably
practicable after the issuance of the Excess Shares has been deemed null and
void, the Company shall return to the Holder the exercise price paid by the
Holder for the Excess Shares. Upon delivery of a written notice to the Company,
the Holder may from time to time increase (with such increase not effective
until the sixty-first (61st) day after delivery of such notice) or decrease the
Maximum Percentage to any other percentage not in excess of 9.99% as specified
in such notice; provided that (i) any such increase in the Maximum Percentage
will not be effective until the sixty-first (61st) day after such notice is
delivered to the Company and (ii) any such increase or decrease will apply only
to the Holder and the other Attribution Parties and not to any other holder of
SPA Common Warrants that is not an Attribution Party of the Holder. For purposes
of clarity, the shares of Common Stock issuable pursuant to the terms of this
Common Warrant in excess of the Maximum Percentage shall not be deemed to be
beneficially owned by the Holder for any purpose including for purposes of
Section 13(d) or Rule 16a-1(a)(1) of the 1934 Act. No prior inability to
exercise this Common Warrant pursuant to this paragraph shall have any effect on
the applicability of the provisions of this paragraph with respect to any
subsequent determination of exercisability. The provisions of this paragraph
shall be construed and implemented in a manner otherwise than in strict
conformity with the terms of this Section 1(f) to the extent necessary to
correct this paragraph or any portion of this paragraph which may be defective
or inconsistent with the intended beneficial ownership limitation contained in
this Section 1(f) or to make changes or supplements necessary or desirable to
properly give effect to such limitation. The limitation contained in this
paragraph may not be waived and shall apply to a successor holder of this Common
Warrant.

 

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(g) Reservation of Shares.

 

(i) Required Reserve Amount. So long as this Common Warrant remains outstanding,
but only after the Share Increase Shareholder Approval Date (as defined in the
Securities Purchase Agreement), the Company shall at all times keep reserved for
issuance under this Common Warrant a number of shares of Common Stock at least
equal to 150% of the maximum number of shares of Common Stock as shall be
necessary to satisfy the Company’s obligation to issue shares of Common Stock
under the SPA Common Warrants then outstanding (without regard to any
limitations on exercise) (the “Required Reserve Amount”); provided that at no
time shall the number of shares of Common Stock reserved pursuant to this
Section 1(g)(i) be reduced other than proportionally in connection with any
exercise or redemption of SPA Common Warrants or such other event covered by
Section 2(a) below. The Required Reserve Amount (including, without limitation,
each increase in the number of shares so reserved) shall be allocated pro rata
among the holders of the SPA Common Warrants based on number of shares of Common
Stock issuable upon exercise of SPA Common Warrants held by each holder on the
Closing Date (without regard to any limitations on exercise) or increase in the
number of reserved shares, as the case may be (the “Authorized Share
Allocation”). In the event that a holder shall sell or otherwise transfer any of
such holder’s SPA Common Warrants, each transferee shall be allocated a pro rata
portion of such holder’s Authorized Share Allocation. Any shares of Common Stock
reserved and allocated to any Person which ceases to hold any SPA Common
Warrants shall be allocated to the remaining holders of SPA Common Warrants, pro
rata based on the number of shares of Common Stock issuable upon exercise of the
SPA Common Warrants then held by such holders (without regard to any limitations
on exercise).

 

(ii) Insufficient Authorized Shares. If, notwithstanding Section 1(g)(i) above,
and not in limitation thereof, at any time after the Share Increase Shareholder
Approval Date while any of the SPA Common Warrants remain outstanding, the
Company does not have a sufficient number of authorized and unreserved shares of
Common Stock to satisfy its obligation to reserve the Required Reserve Amount
(an “Authorized Share Failure”), then the Company shall immediately take all
action necessary to increase the Company’s authorized shares of Common Stock to
an amount sufficient to allow the Company to reserve the Required Reserve Amount
for all the SPA Common Warrants then outstanding. Without limiting the
generality of the foregoing sentence, as soon as practicable after the date of
the occurrence of an Authorized Share Failure, but in no event later than sixty
(60) days after the occurrence of such Authorized Share Failure, the Company
shall hold a meeting of its shareholders for the approval of an increase in the
number of authorized shares of Common Stock. In connection with such meeting,
the Company shall provide each shareholder with a proxy statement and shall use
its best efforts to solicit its shareholders’ approval of such increase in
authorized shares of Common Stock and to cause its board of directors to
recommend to the shareholders that they approve such proposal. In the event that
the Company is prohibited from issuing shares of Common Stock upon an exercise
of this Common Warrant due to the failure by the Company to have sufficient
shares of Common Stock available out of the authorized but unissued shares of
Common Stock (such unavailable number of shares of Common Stock, the
“Authorization Failure Shares”), in lieu of delivering such Authorization
Failure Shares to the Holder, the Company shall pay cash in exchange for the
cancellation of such portion of this Common Warrant exercisable into such
Authorization Failure Shares at a price equal to the sum of (i) the product of
(x) such number of Authorization Failure Shares and (y) the greatest Closing
Sale Price of the Common Stock on any Trading Day during the period commencing
on the date the Holder delivers the applicable Exercise Notice with respect to
such Authorization Failure Shares to the Company and ending on the date of such
issuance and payment under this Section 1(f); and (ii) to the extent the Holder
purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by the Holder of Authorization Failure Shares,
any Buy-In Payment Amount, brokerage commissions and other out-of-pocket
expenses, if any, of the Holder incurred in connection therewith. Nothing
contained in this Section 1(g)(ii). shall limit any obligations of the Company
under any provision of the Securities Purchase Agreement.

 

 6 

   

 

2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT COMMON SHARES. The
Exercise Price and number of Warrant Common Shares issuable upon exercise of
this Common Warrant are subject to adjustment from time to time as set forth in
this Section 2.

 

(a) Stock Dividends and Splits. Without limiting any provision of Section 2(b),
Section 3 or Section 4, if the Company, at any time on or after the Subscription
Date, (i) pays a stock dividend on one or more classes of its then outstanding
shares of Common Stock or otherwise makes a distribution on any class of capital
stock that is payable in shares of Common Stock, (ii) subdivides (by any stock
split, stock dividend, recapitalization or otherwise) one or more classes of its
then outstanding shares of Common Stock into a larger number of shares or (iii)
combines (by combination, reverse stock split or otherwise) one or more classes
of its then outstanding shares of Common Stock into a smaller number of shares,
then in each such case the Exercise Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock outstanding
immediately before such event and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such event. Any
adjustment made pursuant to clause (i) of this paragraph shall become effective
immediately after the record date for the determination of shareholders entitled
to receive such dividend or distribution, and any adjustment pursuant to clause
(ii) or (iii) of this paragraph shall become effective immediately after the
effective date of such subdivision or combination. If any event requiring an
adjustment under this paragraph occurs during the period that an Exercise Price
is calculated hereunder, then the calculation of such Exercise Price shall be
adjusted appropriately to reflect such event.

 

(b) Adjustment Upon Issuance of Shares of Common Stock. If and whenever on or
after the Subscription Date, the Company issues or sells, or in accordance with
this Section 2 is deemed to have grants, issues or sells (or enter into any
agreement to grant issue or sell), any shares of Common Stock (including the
issuance or sale of shares of Common Stock owned or held by or for the account
of the Company, but excluding any Excluded Securities issued or sold or deemed
to have been issued or sold) for a consideration per share (the “New Issuance
Price”) less than a price equal to the Exercise Price in effect immediately
prior to such issuance or sale or deemed issuance or sale (such Exercise Price
then in effect is referred to herein as the “Applicable Price”) (the foregoing a
“Dilutive Issuance”), then immediately after such Dilutive Issuance, the
Exercise Price then in effect shall be reduced to an amount equal to the New
Issuance Price. For all purposes of the foregoing (including, without
limitation, determining the adjusted Exercise Price and the New Issuance Price
under this Section 2(b)), the following shall be applicable:

 

(i) Issuance of Options. If the Company in any manner grants, issues or sells
(or enters into any agreement to grant, issue or sell) any Options and the
lowest price per share for which one share of Common Stock is at any time
issuable upon the exercise of any such Option or upon conversion, exercise or
exchange of any Convertible Securities issuable upon exercise of any such Option
or otherwise pursuant to the terms thereof is less than the Applicable Price,
then such share of Common Stock shall be deemed to be outstanding and to have
been issued and sold by the Company at the time of the granting or sale of such
Option for such price per share. For purposes of this Section 2(b)(i), the
“lowest price per share for which one share of Common Stock is at any time
issuable upon the exercise of any such Options or upon conversion, exercise or
exchange of any Convertible Securities issuable upon exercise of any such Option
or otherwise pursuant to the terms thereof” shall be equal to (1) the lower of
(x) the sum of the lowest amounts of consideration (if any) received or
receivable by the Company with respect to any one share of Common Stock upon the
granting, issuance or sale of such Option, upon exercise of such Option and upon
conversion, exercise or exchange of any Convertible Security issuable upon
exercise of such Option or otherwise pursuant to the terms thereof and (y) the
lowest exercise price set forth in such Option for which one share of Common
Stock is issuable (or may become issuable assuming all possible market
conditions) upon the exercise of any such Options or upon conversion, exercise
or exchange of any Convertible Securities issuable upon exercise of any such
Option or otherwise pursuant to the terms thereof minus (2) the sum of all
amounts paid or payable to the holder of such Option (or any other Person) upon
the granting, issuance or sale of such Option, upon exercise of such Option and
upon conversion, exercise or exchange of any Convertible Security issuable upon
exercise of such Option or otherwise pursuant to the terms thereof plus the
value of any other consideration received or receivable by, or benefit conferred
on, the holder of such Option (or any other Person). Except as contemplated
below, no further adjustment of the Exercise Price shall be made upon the actual
issuance of such shares of Common Stock or of such Convertible Securities upon
the exercise of such Options or otherwise pursuant to the terms of or upon the
actual issuance of such shares of Common Stock upon conversion, exercise or
exchange of such Convertible Securities.

 

 7 

   

 

(ii) Issuance of Convertible Securities. If the Company in any manner issues or
sells (or enters into any agreement to issue or sell) any Convertible Securities
and the lowest price per share for which one share of Common Stock is at any
time issuable upon the conversion, exercise or exchange thereof or otherwise
pursuant to the terms thereof is less than the Applicable Price, then such share
of Common Stock shall be deemed to be outstanding and to have been issued and
sold by the Company at the time of the issuance or sale of such Convertible
Securities for such price per share. For the purposes of this Section 2(b)(ii),
the “lowest price per share for which one share of Common Stock is at any time
issuable upon the conversion, exercise or exchange thereof or otherwise pursuant
to the terms thereof” shall be equal to (1) the lower of (x) the sum of the
lowest amounts of consideration (if any) received or receivable by the Company
with respect to one share of Common Stock upon the issuance or sale of the
Convertible Security and upon conversion, exercise or exchange of such
Convertible Security or otherwise pursuant to the terms thereof and (y) the
lowest conversion price set forth in such Convertible Security for which one
share of Common Stock is issuable (or may become issuable assuming all possible
market conditions) upon conversion, exercise or exchange thereof or otherwise
pursuant to the terms thereof minus (2) the sum of all amounts paid or payable
to the holder of such Convertible Security (or any other Person) upon the
issuance or sale of such Convertible Security plus the value of any other
consideration received or receivable by, or benefit conferred on, the holder of
such Convertible Security (or any other Person). Except as contemplated below,
no further adjustment of the Exercise Price shall be made upon the actual
issuance of such shares of Common Stock upon conversion, exercise or exchange of
such Convertible Securities or otherwise pursuant to the terms thereof, and if
any such issuance or sale of such Convertible Securities is made upon exercise
of any Options for which adjustment of this Common Warrant has been or is to be
made pursuant to other provisions of this Section 2(b), except as contemplated
below, no further adjustment of the Exercise Price shall be made by reason of
such issuance or sale.

 

(iii) Change in Option Price or Rate of Conversion. If the purchase or exercise
price provided for in any Options, the additional consideration, if any, payable
upon the issue, conversion, exercise or exchange of any Convertible Securities,
or the rate at which any Convertible Securities are convertible into or
exercisable or exchangeable for shares of Common Stock increases or decreases at
any time (other than proportional changes in conversion or exercise prices, as
applicable, in connection with an event referred to in Section 2(a)), the
Exercise Price in effect at the time of such increase or decrease shall be
adjusted to the Exercise Price which would have been in effect at such time had
such Options or Convertible Securities provided for such increased or decreased
purchase price, additional consideration or increased or decreased conversion
rate, as the case may be, at the time initially granted, issued or sold. For
purposes of this Section 2(b)(iii), if the terms of any Option or Convertible
Security that was outstanding as of the Subscription Date are increased or
decreased in the manner described in the immediately preceding sentence, then
such Option or Convertible Security and the shares of Common Stock deemed
issuable upon exercise, conversion or exchange thereof shall be deemed to have
been issued as of the date of such increase or decrease. No adjustment pursuant
to this Section 2(b) shall be made if such adjustment would result in an
increase of the Exercise Price then in effect.

 

 8 

   

 

(iv) Calculation of Consideration Received. If any Option and/or Convertible
Security and/or Adjustment Right is issued in connection with the issuance or
sale or deemed issuance or sale of any other securities of the Company (as
determined by the Holder, the “Primary Security”, and such Option and/or
Convertible Security and/or Adjustment Right, the “Secondary Securities”),
together comprising one integrated transaction, (or one or more transactions if
such issuances or sales or deemed issuances or sales of securities of the
Company either (A) have at least one investor or purchaser in common, (B) are
consummated in reasonable proximity to each other and/or (C) are consummated
under the same plan of financing) the aggregate consideration per share of
Common Stock with respect to such Primary Security shall be deemed to be equal
to the difference of (x) the lowest price per share for which one share of
Common Stock was issued (or was deemed to be issued pursuant to Section 2(b)(i)
or 2(b)(ii) above, as applicable) in such integrated transaction solely with
respect to such Primary Security, minus (y) with respect to such Secondary
Securities, the sum of (I) the Black Scholes Consideration Value of each such
Option, if any, (II) the fair market value (as determined by the Holder in good
faith) or the Black Scholes Consideration Value, as applicable, of such
Adjustment Right, if any, and (III) the fair market value (as determined by the
Holder) of such Convertible Security, if any, in each case, as determined on a
per share basis in accordance with this Section 2(b)(iv). If any shares of
Common Stock, Options or Convertible Securities are issued or sold or deemed to
have been issued or sold for cash, the consideration received therefor (for the
purpose of determining the consideration paid for such Common Stock, Option or
Convertible Security, but not for the purpose of the calculation of the Black
Scholes Consideration Value) will be deemed to be the net amount of
consideration received by the Company therefor. If any shares of Common Stock,
Options or Convertible Securities are issued or sold for a consideration other
than cash, the amount of such consideration received by the Company (for the
purpose of determining the consideration paid for such Common Stock, Option or
Convertible Security, but not for the purpose of the calculation of the Black
Scholes Consideration Value) will be the fair value of such consideration,
except where such consideration consists of publicly traded securities, in which
case the amount of consideration received by the Company for such securities
will be the arithmetic average of the VWAPs of such security for each of the
five (5) Trading Days immediately preceding the date of receipt. If any shares
of Common Stock, Options or Convertible Securities are issued to the owners of
the non-surviving entity in connection with any merger in which the Company is
the surviving entity, the amount of consideration therefor (for the purpose of
determining the consideration paid for such Common Stock, Option or Convertible
Security, but not for the purpose of the calculation of the Black Scholes
Consideration Value) will be deemed to be the fair value of such portion of the
net assets and business of the non-surviving entity as is attributable to such
shares of Common Stock, Options or Convertible Securities (as the case may be).
The fair value of any consideration other than cash or publicly traded
securities will be determined jointly by the Company and the Holder. If such
parties are unable to reach agreement within ten (10) days after the occurrence
of an event requiring valuation (the “Valuation Event”), the fair value of such
consideration will be determined within five (5) Trading Days after the tenth
(10th) day following such Valuation Event by an independent, reputable appraiser
jointly selected by the Company and the Holder. The determination of such
appraiser shall be final and binding upon all parties absent manifest error and
the fees and expenses of such appraiser shall be borne by the Company.

 

 9 

   

 

(v) Record Date. If the Company takes a record of the holders of shares of
Common Stock for the purpose of entitling them (A) to receive a dividend or
other distribution payable in shares of Common Stock, Options or in Convertible
Securities or (B) to subscribe for or purchase shares of Common Stock, Options
or Convertible Securities, then such record date will be deemed to be the date
of the issuance or sale of the shares of Common Stock deemed to have been issued
or sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase (as the case may be).

 

(c) Number of Warrant Common Shares. Simultaneously with any adjustment to the
Exercise Price pursuant to Section 2(a) above, the number of Warrant Common
Shares that may be purchased upon exercise of this Common Warrant shall be
increased or decreased proportionately, so that after such adjustment the
aggregate Exercise Price payable hereunder for the adjusted number of Warrant
Common Shares shall be the same as the aggregate Exercise Price in effect
immediately prior to such adjustment (without regard to any limitations on
exercise contained herein).

 

(d) Holder’s Right of Alternative Exercise Price Following Issuance of Certain
Options or Convertible Securities. In addition to and not in limitation of the
other provisions of this Section 2, if the Company in any manner issues or sells
or enters into any agreement to issue or sell, any Common Stock, Options or
Convertible Securities (any such securities, “Variable Price Securities”) after
the Subscription Date that are issuable pursuant to such agreement or
convertible into or exchangeable or exercisable for shares of Common Stock at a
price which varies or may vary with the market price of the shares of Common
Stock, including by way of one or more reset(s) to a fixed price, but exclusive
of such formulations reflecting customary anti-dilution provisions (such as
share splits, share combinations, share dividends and similar transactions)
(each of the formulations for such variable price being herein referred to as,
the “Variable Price”), the Company shall provide written notice thereof via
facsimile and overnight courier to the Holder on the date of such agreement and
the issuance of such Convertible Securities or Options. From and after the date
the Company enters into such agreement or issues any such Variable Price
Securities, the Holder shall have the right, but not the obligation, in its sole
discretion to substitute the Variable Price for the Exercise Price upon exercise
of this Common Warrant by designating in the Exercise Notice delivered upon any
exercise of this Common Warrant that solely for purposes of such exercise the
Holder is relying on the Variable Price rather than the Exercise Price then in
effect. The Holder’s election to rely on a Variable Price for a particular
exercise of this Common Warrant shall not obligate the Holder to rely on a
Variable Price for any future exercises of this Common Warrant.

 

 10 

   

 

(e) Stock Combination Event Adjustment. If at any time and from time to time on
or after the Issuance Date there occurs any stock split, stock dividend, stock
combination recapitalization or other similar transaction involving the Common
Stock (each, a “Stock Combination Event”, and such date thereof, the “Stock
Combination Event Date”) and the Event Market Price is less than the Exercise
Price then in effect (after giving effect to the adjustment in clause 2(a)
above), then on the sixteenth (16th) Trading Day immediately following such
Stock Combination Event, the Exercise Price then in effect on such sixteenth
(16th) Trading Day (after giving effect to the adjustment in clause 2(a) above)
shall be reduced (but in no event increased) to the Event Market Price. For the
avoidance of doubt, if the adjustment in the immediately preceding sentence
would otherwise result in an increase in the Exercise Price hereunder, no
adjustment shall be made.

 

(f) Other Events. In the event that the Company (or any Subsidiary (as defined
in the Securities Purchase Agreement)) shall take any action to which the
provisions hereof are not strictly applicable, or, if applicable, would not
operate to protect the Holder from dilution (other than with respect to Excluded
Issuances) or if any event occurs of the type contemplated by the provisions of
this Section 2 but not expressly provided for by such provisions (including,
without limitation, the granting of stock appreciation rights, phantom stock
rights or other rights with equity features), then the Company’s board of
directors shall in good faith determine and implement an appropriate adjustment
in the Exercise Price and the number of Warrant Common Shares (if applicable) so
as to protect the rights of the Holder, provided that no such adjustment
pursuant to this Section 2(f) will increase the Exercise Price or decrease the
number of Warrant Common Shares as otherwise determined pursuant to this Section
2, provided further that if the Holder does not accept such adjustments as
appropriately protecting its interests hereunder against such dilution, then the
Company’s board of directors and the Holder shall agree, in good faith, upon an
independent investment bank of nationally recognized standing to make such
appropriate adjustments, whose determination shall be final and binding absent
manifest error and whose fees and expenses shall be borne by the Company.

 

(g) Calculations. All calculations under this Section 2 shall be made by
rounding to the nearest cent or the nearest 1/100th of a share, as applicable.
The number of shares of Common Stock outstanding at any given time shall not
include shares owned or held by or for the account of the Company, and the
disposition of any such shares shall be considered an issuance or sale of Common
Stock.

 

(h) Voluntary Adjustment By Company. Subject to the rules and regulations of the
Principal Market, the Company may at any time during the term of this Common
Warrant, with the prior written consent of the Required Holders (as defined in
the Securities Purchase Agreement), reduce the then current Exercise Price to
any amount and for any period of time deemed appropriate by the board of
directors of the Company.

 

 11 

   

 

(i) Floor Price. No adjustment pursuant to this Section 2 shall cause the
Exercise Price to be less than $0.95 (as adjusted for any stock dividend, stock
split, stock combination, reclassification or similar transaction occurring
after the date of the Securities Purchase Agreement) (the “Floor Price”).
Notwithstanding the foregoing, nothing contained in this Section 2(i) shall
apply after Shareholder Approval (as defined in the Securities Purchase
Agreement) is obtained and, on such Shareholder Approval Date (as defined in the
Securities Purchase Agreement), any adjustments that would have occurred
hereunder prior to the Shareholder Approval Date, but for the existence of this
Section 2(i), shall be applied pursuant to this Section 2 on the Shareholder
Approval Date (without regard to the limitations in this Section 2(i)) as if
such event or Dilutive Issuance, as applicable, occurred on the Shareholder
Approval Date.

 

3. RIGHTS UPON DISTRIBUTION OF ASSETS. In addition to any adjustments pursuant
to Section 2 above, if the Company shall declare or make any dividend or other
distribution of its assets (or rights to acquire its assets) to holders of
shares of Common Stock, by way of return of capital or otherwise (including,
without limitation, any distribution of cash, stock or other securities,
property, options, evidence of indebtedness or any other assets by way of a
dividend, spin off, reclassification, corporate rearrangement, scheme of
arrangement or other similar transaction) (a “Distribution”), at any time after
the issuance of this Common Warrant, then, in each such case, the Holder shall
be entitled to participate in such Distribution to the same extent that the
Holder would have participated therein if the Holder had held the number of
shares of Common Stock acquirable upon complete exercise of this Common Warrant
(without regard to any limitations or restrictions on exercise of this Common
Warrant, including without limitation, the Maximum Percentage) immediately
before the date on which a record is taken for such Distribution, or, if no such
record is taken, the date as of which the record holders of shares of Common
Stock are to be determined for the participation in such Distribution (provided,
however, that to the extent that the Holder’s right to participate in any such
Distribution would result in the Holder and the other Attribution Parties
exceeding the Maximum Percentage, then the Holder shall not be entitled to
participate in such Distribution to the extent of the Maximum Percentage (and
shall not be entitled to beneficial ownership of such shares of Common Stock as
a result of such Distribution (and beneficial ownership) to the extent of any
such excess) and the portion of such Distribution shall be held in abeyance for
the benefit of the Holder until such time or times, if ever, as its right
thereto would not result in the Holder and the other Attribution Parties
exceeding the Maximum Percentage, at which time or times the Holder shall be
granted such Distribution (and any Distributions declared or made on such
initial Distribution or on any subsequent Distribution held similarly in
abeyance) to the same extent as if there had been no such limitation).

 

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4. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.

 

(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above,
if at any time the Company grants, issues or sells any Options, Convertible
Securities or rights to purchase stock, warrants, securities or other property
pro rata to the record holders of any class of Common Stock (the “Purchase
Rights”), then the Holder will be entitled to acquire, upon the terms applicable
to such Purchase Rights, the aggregate Purchase Rights which the Holder could
have acquired if the Holder had held the number of shares of Common Stock
acquirable upon complete exercise of this Common Warrant (without regard to any
limitations or restrictions on exercise of this Common Warrant, including
without limitation, the Maximum Percentage) immediately before the date on which
a record is taken for the grant, issuance or sale of such Purchase Rights, or,
if no such record is taken, the date as of which the record holders of shares of
Common Stock are to be determined for the grant, issuance or sale of such
Purchase Rights (provided, however, that to the extent that the Holder’s right
to participate in any such Purchase Right would result in the Holder and the
other Attribution Parties exceeding the Maximum Percentage, then the Holder
shall not be entitled to participate in such Purchase Right to the extent of the
Maximum Percentage (and shall not be entitled to beneficial ownership of such
shares of Common Stock as a result of such Purchase Right (and beneficial
ownership) to the extent of any such excess) and such Purchase Right to such
extent shall be held in abeyance for the benefit of the Holder until such time
or times, if ever, as its right thereto would not result in the Holder and the
other Attribution Parties exceeding the Maximum Percentage, at which time or
times the Holder shall be granted such right (and any Purchase Right granted,
issued or sold on such initial Purchase Right or on any subsequent Purchase
Right held similarly in abeyance) to the same extent as if there had been no
such limitation).

 

(b) Fundamental Transactions. The Company shall not enter into or be party to a
Fundamental Transaction unless (i) the Successor Entity assumes in writing all
of the obligations of the Company under this Common Warrant and the other
Transaction Documents (as defined in the Securities Purchase Agreement) in
accordance with the provisions of this Section 4(b) pursuant to written
agreements in form and substance satisfactory to the Holder and approved by the
Holder prior to such Fundamental Transaction, including agreements to deliver to
the Holder in exchange for this Common Warrant a security of the Successor
Entity evidenced by a written instrument substantially similar in form and
substance to this Common Warrant, including, without limitation, which is
exercisable for a corresponding number of shares of capital stock equivalent to
the shares of Common Stock acquirable and receivable upon exercise of this
Common Warrant (without regard to any limitations on the exercise of this Common
Warrant) prior to such Fundamental Transaction, and with an exercise price which
applies the exercise price hereunder to such shares of capital stock (but taking
into account the relative value of the shares of Common Stock pursuant to such
Fundamental Transaction and the value of such shares of capital stock, such
adjustments to the number of shares of capital stock and such exercise price
being for the purpose of protecting the economic value of this Common Warrant
immediately prior to the consummation of such Fundamental Transaction) and (ii)
the Successor Entity (including its Parent Entity) is a publicly traded
corporation whose common stock is quoted on or listed for trading on an Eligible
Market. Upon the consummation of each Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and after the date
of the applicable Fundamental Transaction, the provisions of this Common Warrant
and the other Transaction Documents referring to the “Company” shall refer
instead to the Successor Entity), and may exercise every right and power of the
Company and shall assume all of the obligations of the Company under this Common
Warrant and the other Transaction Documents with the same effect as if such
Successor Entity had been named as the Company herein. Upon consummation of each
Fundamental Transaction, the Successor Entity shall deliver to the Holder
confirmation that there shall be issued upon exercise of this Common Warrant at
any time after the consummation of the applicable Fundamental Transaction, in
lieu of the shares of Common Stock (or other securities, cash, assets or other
property (except such items still issuable under Sections 3 and 4(a) above,
which shall continue to be receivable thereafter)) issuable upon the exercise of
this Common Warrant prior to the applicable Fundamental Transaction, such shares
of publicly traded common stock (or its equivalent) of the Successor Entity
(including its Parent Entity) which the Holder would have been entitled to
receive upon the happening of the applicable Fundamental Transaction had this
Common Warrant been exercised immediately prior to the applicable Fundamental
Transaction (without regard to any limitations on the exercise of this Common
Warrant), as adjusted in accordance with the provisions of this Common Warrant.
Notwithstanding the foregoing, and without limiting Section 1(f) hereof, the
Holder may elect, at its sole option, by delivery of written notice to the
Company to waive this Section 4(b) to permit the Fundamental Transaction without
the assumption of this Common Warrant. In addition to and not in substitution
for any other rights hereunder, prior to the consummation of each Fundamental
Transaction pursuant to which holders of shares of Common Stock are entitled to
receive securities or other assets with respect to or in exchange for shares of
Common Stock (a “Corporate Event”), the Company shall make appropriate provision
to insure that the Holder will thereafter have the right to receive upon an
exercise of this Common Warrant at any time after the consummation of the
applicable Fundamental Transaction but prior to the Expiration Date, in lieu of
the shares of the Common Stock (or other securities, cash, assets or other
property (except such items still issuable under Sections 3 and 4(a) above,
which shall continue to be receivable thereafter)) issuable upon the exercise of
the Common Warrant prior to such Fundamental Transaction, such shares of stock,
securities, cash, assets or any other property whatsoever (including warrants or
other purchase or subscription rights) which the Holder would have been entitled
to receive upon the happening of the applicable Fundamental Transaction had this
Common Warrant been exercised immediately prior to the applicable Fundamental
Transaction (without regard to any limitations on the exercise of this Common
Warrant). Provision made pursuant to the preceding sentence shall be in a form
and substance reasonably satisfactory to the Holder.

 

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(c) Black Scholes Value. Notwithstanding the foregoing and the provisions of
Section 4(b) above, at the request of the Holder delivered at any time
commencing on the earliest to occur of (x) the public disclosure of any
Fundamental Transaction, (y) the consummation of any Fundamental Transaction and
(z) the Holder first becoming aware of any Fundamental Transaction through the
date that is ninety (90) days after the public disclosure of the consummation of
such Fundamental Transaction by the Company pursuant to a Current Report on Form
8-K filed with the SEC, the Company or the Successor Entity (as the case may be)
shall purchase this Common Warrant from the Holder on the date of such request
by paying to the Holder cash in an amount equal to the Black Scholes Value.
Payment of such amounts shall be made by the Company (or at the Company’s
direction) to the Holder on or prior to the later of (x) the second (2nd)
Trading Day after the date of such request and (y) the date of consummation of
such Fundamental Transaction.

 

(d) Application. The provisions of this Section 4 shall apply similarly and
equally to successive Fundamental Transactions and Corporate Events and shall be
applied as if this Common Warrant (and any such subsequent warrants) were fully
exercisable and without regard to any limitations on the exercise of this Common
Warrant (provided that the Holder shall continue to be entitled to the benefit
of the Maximum Percentage, applied however with respect to shares of capital
stock registered under the 1934 Act and thereafter receivable upon exercise of
this Common Warrant (or any such other warrant)).

 

5. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company
will not, by amendment of its Articles of Incorporation (as defined in the
Securities Purchase Agreement), Bylaws (as defined in the Securities Purchase
Agreement) or through any reorganization, transfer of assets, consolidation,
merger, scheme of arrangement, dissolution, issuance or sale of securities, or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Common Warrant, and will at all times in good faith
carry out all the provisions of this Common Warrant and take all action as may
be required to protect the rights of the Holder. Without limiting the generality
of the foregoing, the Company (a) shall not increase the par value of any shares
of Common Stock receivable upon the exercise of this Common Warrant above the
Exercise Price then in effect, and (b) shall take all such actions as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and non-assessable shares of Common Stock upon the exercise of this
Common Warrant. Notwithstanding anything herein to the contrary, if after the
eight (8) month anniversary of the Issuance Date, the Holder is not permitted to
exercise this Common Warrant in full for any reason (other than pursuant to
restrictions set forth in Section 1(f) hereof), the Company shall use its best
efforts to promptly remedy such failure, including, without limitation,
obtaining such consents or approvals as necessary to permit such exercise into
shares of Common Stock.

 

6. COMMON WARRANT HOLDER NOT DEEMED A SHAREHOLDER. Except as otherwise
specifically provided herein, the Holder, solely in its capacity as a holder of
this Common Warrant, shall not be entitled to vote or receive dividends or be
deemed the holder of share capital of the Company for any purpose, nor shall
anything contained in this Common Warrant be construed to confer upon the
Holder, solely in its capacity as the Holder of this Common Warrant, any of the
rights of a shareholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the Holder of the Warrant Common Shares
which it is then entitled to receive upon the due exercise of this Common
Warrant. In addition, nothing contained in this Common Warrant shall be
construed as imposing any liabilities on the Holder to purchase any securities
(upon exercise of this Common Warrant or otherwise) or as a shareholder of the
Company, whether such liabilities are asserted by the Company or by creditors of
the Company. Notwithstanding this Section 6, the Company shall provide the
Holder with copies of the same notices and other information given to the
shareholders of the Company generally, contemporaneously with the giving thereof
to the shareholders.

 

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7. REISSUANCE OF COMMON WARRANTS.

 

(a) Transfer of Common Warrant. If this Common Warrant is to be transferred, the
Holder shall surrender this Common Warrant to the Company, whereupon the Company
will forthwith issue and deliver upon the order of the Holder a new Common
Warrant (in accordance with Section 7(d)), registered as the Holder may request,
representing the right to purchase the number of Warrant Common Shares being
transferred by the Holder and, if less than the total number of Warrant Common
Shares then underlying this Common Warrant is being transferred, a new Common
Warrant (in accordance with Section 7(d)) to the Holder representing the right
to purchase the number of Warrant Common Shares not being transferred.

 

(b) Lost, Stolen or Mutilated Common Warrant. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Common Warrant (as to which a written certification and
the indemnification contemplated below shall suffice as such evidence), and, in
the case of loss, theft or destruction, of any indemnification undertaking by
the Holder to the Company in customary and reasonable form and, in the case of
mutilation, upon surrender and cancellation of this Common Warrant, the Company
shall execute and deliver to the Holder a new Common Warrant (in accordance with
Section 7(d)) representing the right to purchase the Warrant Common Shares then
underlying this Common Warrant.

 

(c) Exchangeable for Multiple Common Warrants. This Common Warrant is
exchangeable, upon the surrender hereof by the Holder at the principal office of
the Company, for a new Common Warrant or Common Warrants (in accordance with
Section 7(d)) representing in the aggregate the right to purchase the number of
Warrant Common Shares then underlying this Common Warrant, and each such new
Common Warrant will represent the right to purchase such portion of such Warrant
Common Shares as is designated by the Holder at the time of such surrender;
provided, however, no warrants for fractional shares of Common Stock shall be
given.

 

(d) Issuance of New Common Warrants. Whenever the Company is required to issue a
new Common Warrant pursuant to the terms of this Common Warrant, such new Common
Warrant (i) shall be of like tenor with this Common Warrant, (ii) shall
represent, as indicated on the face of such new Common Warrant, the right to
purchase the Warrant Common Shares then underlying this Common Warrant (or in
the case of a new Common Warrant being issued pursuant to Section 7(a) or
Section 7(c), the Warrant Common Shares designated by the Holder which, when
added to the number of shares of Common Stock underlying the other new Common
Warrants issued in connection with such issuance, does not exceed the number of
Warrant Common Shares then underlying this Common Warrant), (iii) shall have an
issuance date, as indicated on the face of such new Common Warrant which is the
same as the Issuance Date, and (iv) shall have the same rights and conditions as
this Common Warrant.

 

 15 

   

 

8. NOTICES. Whenever notice is required to be given under this Common Warrant,
unless otherwise provided herein, such notice shall be given in accordance with
Section 9(f) of the Securities Purchase Agreement. The Company shall provide the
Holder with prompt written notice of all actions taken pursuant to this Common
Warrant (other than the issuance of shares of Common Stock upon exercise in
accordance with the terms hereof), including in reasonable detail a description
of such action and the reason therefor. Without limiting the generality of the
foregoing, the Company will give written notice to the Holder (i) immediately
upon each adjustment of the Exercise Price and the number of Warrant Common
Shares, setting forth in reasonable detail, and certifying, the calculation of
such adjustment(s), (ii) at least fifteen (15) days prior to the date on which
the Company closes its books or takes a record (A) with respect to any dividend
or distribution upon the shares of Common Stock, (B) with respect to any grants,
issuances or sales of any Options, Convertible Securities or rights to purchase
stock, warrants, securities or other property to holders of shares of Common
Stock or (C) for determining rights to vote with respect to any Fundamental
Transaction, dissolution or liquidation, provided in each case that such
information shall be made known to the public prior to or in conjunction with
such notice being provided to the Holder, (iii) at least ten (10) Trading Days
prior to the consummation of any Fundamental Transaction and (iv) within one (1)
Business Day of the occurrence of an Triggering Event (as defined in the
Certificate of Designations), setting forth in reasonable detail any material
events with respect to such Triggering Event and any efforts by the Company to
cure such Triggering Event. To the extent that any notice provided hereunder
constitutes, or contains, material, non-public information regarding the Company
or any of its Subsidiaries, the Company shall simultaneously file such notice
with the SEC (as defined in the Securities Purchase Agreement) pursuant to a
Current Report on Form 8-K. If the Company or any of its Subsidiaries provides
material non-public information to the Holder that is not simultaneously filed
in a Current Report on Form 8-K and the Holder has not agreed to receive such
material non-public information, the Company hereby covenants and agrees that
the Holder shall not have any duty of confidentiality to the Company, any of its
Subsidiaries or any of their respective officers, directors, employees,
affiliates or agents with respect to, or a duty to any of the foregoing not to
trade on the basis of, such material non-public information. It is expressly
understood and agreed that the time of execution specified by the Holder in each
Exercise Notice shall be definitive and may not be disputed or challenged by the
Company.

 

9. AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions of
this Common Warrant (other than Section 1(f)) may be amended and the Company may
take any action herein prohibited, or omit to perform any act herein required to
be performed by it, only if the Company has obtained the written consent of the
Holder. No waiver shall be effective unless it is in writing and signed by an
authorized representative of the waiving party.

 

10. SEVERABILITY. If any provision of this Common Warrant is prohibited by law
or otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or
unenforceable shall be deemed amended to apply to the broadest extent that it
would be valid and enforceable, and the invalidity or unenforceability of such
provision shall not affect the validity of the remaining provisions of this
Common Warrant so long as this Common Warrant as so modified continues to
express, without material change, the original intentions of the parties as to
the subject matter hereof and the prohibited nature, invalidity or
unenforceability of the provision(s) in question does not substantially impair
the respective expectations or reciprocal obligations of the parties or the
practical realization of the benefits that would otherwise be conferred upon the
parties. The parties will endeavor in good faith negotiations to replace the
prohibited, invalid or unenforceable provision(s) with a valid provision(s), the
effect of which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).

 

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11. GOVERNING LAW. This Common Warrant shall be governed by and construed and
enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Common Warrant shall be
governed by, the internal laws of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. The Company hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to the
Company at the address set forth in Section 9(f) of the Securities Purchase
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. The Company hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in The City
of New York, Borough of Manhattan, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Nothing contained herein shall
be deemed or operate to preclude the Holder from bringing suit or taking other
legal action against the Company in any other jurisdiction to collect on the
Company’s obligations to the Holder, to realize on any collateral or any other
security for such obligations, or to enforce a judgment or other court ruling in
favor of the Holder. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE
TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS COMMON WARRANT OR ANY
TRANSACTION CONTEMPLATED HEREBY.

 

12. CONSTRUCTION; HEADINGS. This Common Warrant shall be deemed to be jointly
drafted by the Company and the Holder and shall not be construed against any
Person as the drafter hereof. The headings of this Common Warrant are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Common Warrant. Terms used in this Common Warrant but
defined in the other Transaction Documents shall have the meanings ascribed to
such terms on the Closing Date (as defined in the Securities Purchase Agreement)
in such other Transaction Documents unless otherwise consented to in writing by
the Holder.

 

13. DISPUTE RESOLUTION.

 

(a) Submission to Dispute Resolution.

 

(i) In the case of a dispute relating to the Exercise Price, the Closing Sale
Price, the Bid Price, Black Scholes Consideration Value, Black Scholes Value or
fair market value or the arithmetic calculation of the number of Warrant Common
Shares (as the case may be) (including, without limitation, a dispute relating
to the determination of any of the foregoing), the Company or the Holder (as the
case may be) shall submit the dispute to the other party via facsimile (A) if by
the Company, within two (2) Business Days after the occurrence of the
circumstances giving rise to such dispute or (B) if by the Holder, at any time
after the Holder learned of the circumstances giving rise to such dispute. If
the Holder and the Company are unable to promptly resolve such dispute relating
to such Exercise Price, such Closing Sale Price, such Bid Price, such Black
Scholes Consideration Value, Black Scholes Value or such fair market value or
such arithmetic calculation of the number of Warrant Common Shares (as the case
may be), at any time after the second (2nd) Business Day following such initial
notice by the Company or the Holder (as the case may be) of such dispute to the
Company or the Holder (as the case may be), then the Holder may, at its sole
option, select an independent, reputable investment bank to resolve such
dispute.

 

 17 

   

 

(ii) The Holder and the Company shall each deliver to such investment bank (A) a
copy of the initial dispute submission so delivered in accordance with the first
sentence of this Section 13 and (B) written documentation supporting its
position with respect to such dispute, in each case, no later than 5:00 p.m.
(New York time) by the fifth (5th) Business Day immediately following the date
on which the Holder selected such investment bank (the “Dispute Submission
Deadline”) (the documents referred to in the immediately preceding clauses (A)
and (B) are collectively referred to herein as the “Required Dispute
Documentation”) (it being understood and agreed that if either the Holder or the
Company fails to so deliver all of the Required Dispute Documentation by the
Dispute Submission Deadline, then the party who fails to so submit all of the
Required Dispute Documentation shall no longer be entitled to (and hereby waives
its right to) deliver or submit any written documentation or other support to
such investment bank with respect to such dispute and such investment bank shall
resolve such dispute based solely on the Required Dispute Documentation that was
delivered to such investment bank prior to the Dispute Submission Deadline).
Unless otherwise agreed to in writing by both the Company and the Holder or
otherwise requested by such investment bank, neither the Company nor the Holder
shall be entitled to deliver or submit any written documentation or other
support to such investment bank in connection with such dispute (other than the
Required Dispute Documentation).

 

(iii) The Company and the Holder shall cause such investment bank to determine
the resolution of such dispute and notify the Company and the Holder of such
resolution no later than ten (10) Business Days immediately following the
Dispute Submission Deadline. The fees and expenses of such investment bank shall
be borne solely by the Company, and such investment bank’s resolution of such
dispute shall be final and binding upon all parties absent manifest error.

 

(b) Miscellaneous. The Company expressly acknowledges and agrees that (i) this
Section 13 constitutes an agreement to arbitrate between the Company and the
Holder (and constitutes an arbitration agreement) under the rules then in effect
under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”) and
that the Holder is authorized to apply for an order to compel arbitration
pursuant to CPLR § 7503(a) in order to compel compliance with this Section 13,
(ii) a dispute relating to the Exercise Price includes, without limitation,
disputes as to (A) whether an issuance or sale or deemed issuance or sale of
Common Stock occurred under Section 2(b), (B) the consideration per share at
which an issuance or deemed issuance of Common Stock occurred, (C) whether any
issuance or sale or deemed issuance or sale of Common Stock was an issuance or
sale or deemed issuance or sale of Excluded Securities, (D) whether an
agreement, instrument, security or the like constitutes and Option or
Convertible Security and (E) whether a Dilutive Issuance occurred, (iii) the
terms of this Common Warrant and each other applicable Transaction Document
shall serve as the basis for the selected investment bank’s resolution of the
applicable dispute, such investment bank shall be entitled (and is hereby
expressly authorized) to make all findings, determinations and the like that
such investment bank determines are required to be made by such investment bank
in connection with its resolution of such dispute (including, without
limitation, determining (A) whether an issuance or sale or deemed issuance or
sale of Common Stock occurred under Section 2(b), (B) the consideration per
share at which an issuance or deemed issuance of Common Stock occurred, (C)
whether any issuance or sale or deemed issuance or sale of Common Stock was an
issuance or sale or deemed issuance or sale of Excluded Securities, (D) whether
an agreement, instrument, security or the like constitutes and Option or
Convertible Security and (E) whether a Dilutive Issuance occurred) and in
resolving such dispute such investment bank shall apply such findings,
determinations and the like to the terms of this Common Warrant and any other
applicable Transaction Documents, (iv) the Holder (and only the Holder), in its
sole discretion, shall have the right to submit any dispute described in this
Section 13 to any state or federal court sitting in The City of New York,
Borough of Manhattan in lieu of utilizing the procedures set forth in this
Section 13 and (v) nothing in this Section 13 shall limit the Holder from
obtaining any injunctive relief or other equitable remedies (including, without
limitation, with respect to any matters described in this Section 13).

 

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14. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE
RELIEF. The remedies provided in this Common Warrant shall be cumulative and in
addition to all other remedies available under this Common Warrant and the other
Transaction Documents, at law or in equity (including a decree of specific
performance and/or other injunctive relief), and nothing herein shall limit the
right of the Holder to pursue actual and consequential damages for any failure
by the Company to comply with the terms of this Common Warrant. The Company
covenants to the Holder that there shall be no characterization concerning this
instrument other than as expressly provided herein. Amounts set forth or
provided for herein with respect to payments, exercises and the like (and the
computation thereof) shall be the amounts to be received by the Holder and shall
not, except as expressly provided herein, be subject to any other obligation of
the Company (or the performance thereof). The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to the Holder and
that the remedy at law for any such breach may be inadequate. The Company
therefore agrees that, in the event of any such breach or threatened breach, the
holder of this Common Warrant shall be entitled, in addition to all other
available remedies, to specific performance and/or temporary, preliminary and
permanent injunctive or other equitable relief from any court of competent
jurisdiction in any such case without the necessity of proving actual damages
and without posting a bond or other security. The Company shall provide all
information and documentation to the Holder that is requested by the Holder to
enable the Holder to confirm the Company’s compliance with the terms and
conditions of this Common Warrant (including, without limitation, compliance
with Section 2 hereof). The issuance of shares and certificates for shares as
contemplated hereby upon the exercise of this Common Warrant shall be made
without charge to the Holder or such shares for any issuance tax or other costs
in respect thereof, provided that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than the Holder or its agent on its
behalf.

 

15. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Common
Warrant is placed in the hands of an attorney for collection or enforcement or
is collected or enforced through any legal proceeding or the holder otherwise
takes action to collect amounts due under this Common Warrant or to enforce the
provisions of this Common Warrant or (b) there occurs any bankruptcy,
reorganization, receivership of the company or other proceedings affecting
company creditors’ rights and involving a claim under this Common Warrant, then
the Company shall pay the costs incurred by the Holder for such collection,
enforcement or action or in connection with such bankruptcy, reorganization,
receivership or other proceeding, including, without limitation, attorneys’ fees
and disbursements.

 

16. TRANSFER. This Common Warrant may be offered for sale, sold, transferred or
assigned without the consent of the Company, except as may otherwise be required
by Section [2(g)] of the Securities Purchase Agreement.

 

17. CERTAIN DEFINITIONS. For purposes of this Common Warrant, the following
terms shall have the following meanings:

 

(a) “1933 Act” means the Securities Act of 1933, as amended, and the rules and
regulations thereunder.

 

(b) “1934 Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder.

 

(c) “Adjustment Right” means any right granted with respect to any securities
issued in connection with, or with respect to, any issuance or sale (or deemed
issuance or sale in accordance with Section 2) of shares of Common Stock (other
than rights of the type described in Section 3 and 4 hereof) that could result
in a decrease in the net consideration received by the Company in connection
with, or with respect to, such securities (including, without limitation, any
cash settlement rights, cash adjustment or other similar rights).

 

(d) “Affiliate” means, with respect to any Person, any other Person that
directly or indirectly controls, is controlled by, or is under common control
with, such Person, it being understood for purposes of this definition that
“control” of a Person means the power directly or indirectly either to vote 10%
or more of the stock having ordinary voting power for the election of directors
of such Person or direct or cause the direction of the management and policies
of such Person whether by contract or otherwise.

 

(e) “Adjusted Share Amount” means, with respect to any given Adjustment Time,
the product of (x) [            ]3 multiplied by (y) the aggregate number of
Warrant Preferred Shares to be issued to the Holder pursuant to the
corresponding Exercise Notice (as defined in the Preferred Warrant) delivered to
the Company (or its designee) with respect to such Adjustment Time.

 

 

3 Insert aggregate number of shares of Common Stock issuable upon conversion of
one Preferred Share at the Alternate Conversion Price (as defined in the
Certificate of Designations) in effect as of the Closing Date.

 

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(f) “Adjustment Time” means, with respect to any given Exercise Notice (as
defined in the Preferred Warrant), the time the Holder (or its designee) shall
have delivered such Exercise Notice to the Company (or its designee) and, solely
if not a Cashless Exercise (as defined in the Preferred Warrant) thereunder, the
Aggregate Exercise Price (as defined in the Preferred Warrant) related thereto.

 

(g) “Approved Stock Plan” means any employee benefit plan which has been
approved by the board of directors of the Company prior to or subsequent to the
date hereof pursuant to which shares of Common Stock and options to purchase
Common Stock may be issued to any employee, consultants, officer or director for
services provided to the Company in their capacity as such.

 

(h) “Attribution Parties” means, collectively, the following Persons and
entities: (i) any investment vehicle, including, any funds, feeder funds or
managed accounts, currently, or from time to time after the Issuance Date,
directly or indirectly managed or advised by the Holder’s investment manager or
any of its Affiliates or principals, (ii) any direct or indirect Affiliates of
the Holder or any of the foregoing, (iii) any Person acting or who could be
deemed to be acting as a Group together with the Holder or any of the foregoing
and (iv) any other Persons whose beneficial ownership of the Company’s Common
Stock would or could be aggregated with the Holder’s and the other Attribution
Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose
of the foregoing is to subject collectively the Holder and all other Attribution
Parties to the Maximum Percentage.

 

(i) “Bid Price” means, for any security as of the particular time of
determination, the bid price for such security on the Principal Market as
reported by Bloomberg as of such time of determination, or, if the Principal
Market is not the principal securities exchange or trading market for such
security, the bid price of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg
as of such time of determination, or if the foregoing does not apply, the bid
price of such security in the over-the-counter market on the electronic bulletin
board for such security as reported by Bloomberg as of such time of
determination, or, if no bid price is reported for such security by Bloomberg as
of such time of determination, the average of the bid prices of any market
makers for such security as reported in the “pink sheets” by OTC Markets Group
Inc. (formerly Pink Sheets LLC) as of such time of determination. If the Bid
Price cannot be calculated for a security as of the particular time of
determination on any of the foregoing bases, the Bid Price of such security as
of such time of determination shall be the fair market value as mutually
determined by the Company and the Holder. If the Company and the Holder are
unable to agree upon the fair market value of such security, then such dispute
shall be resolved in accordance with the procedures in Section 13. All such
determinations shall be appropriately adjusted for any stock dividend, stock
split, stock combination or other similar transaction during such period.

 

(j) “Black Scholes Consideration Value” means the value of the applicable
Option, Convertible Security or Adjustment Right (as the case may be) as of the
date of issuance thereof calculated using the Black Scholes Option Pricing Model
obtained from the “OV” function on Bloomberg utilizing (i) an underlying price
per share equal to the Closing Sale Price of the Common Stock on the Trading Day
immediately preceding the public announcement of the execution of definitive
documents with respect to the issuance of such Option or Convertible Security
(as the case may be), (ii) a risk-free interest rate corresponding to the U.S.
Treasury rate for a period equal to the remaining term of such Option,
Convertible Security or Adjustment Right (as the case may be) as of the date of
issuance of such Option, Convertible Security or Adjustment Right (as the case
may be), (iii) a zero cost of borrow and (iv) an expected volatility equal to
the greater of 100% and the 30 day volatility obtained from the “HVT” function
on Bloomberg (determined utilizing a 365 day annualization factor) as of the
Trading Day immediately following the date of issuance of such Option,
Convertible Security or Adjustment Right (as the case may be).

 

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(k) “Black Scholes Value” means the value of the unexercised portion of this
Common Warrant remaining on the date of the Holder’s request pursuant to Section
4(c), which value is calculated using the Black Scholes Option Pricing Model
obtained from the “OV” function on Bloomberg utilizing (i) an underlying price
per share equal to the greater of (1) the highest Closing Sale Price of the
Common Stock during the period beginning on the Trading Day immediately
preceding the announcement of the applicable Fundamental Transaction (or the
consummation of the applicable Fundamental Transaction, if earlier) and ending
on the Trading Day of the Holder’s request pursuant to Section 4(c) and (2) the
sum of the price per share being offered in cash in the applicable Fundamental
Transaction (if any) plus the value of the non-cash consideration being offered
in the applicable Fundamental Transaction (if any), (ii) a strike price equal to
the Exercise Price in effect on the date of the Holder’s request pursuant to
Section 4(c), (iii) a risk-free interest rate corresponding to the U.S. Treasury
rate for a period equal to the greater of (1) the remaining term of this Common
Warrant as of the date of the Holder’s request pursuant to Section 4(c) and (2)
the remaining term of this Common Warrant as of the date of consummation of the
applicable Fundamental Transaction or as of the date of the Holder’s request
pursuant to Section 4(c) if such request is prior to the date of the
consummation of the applicable Fundamental Transaction, (iv) a zero cost of
borrow and (v) an expected volatility equal to the greater of 100% and the 30
day volatility obtained from the “HVT” function on Bloomberg (determined
utilizing a 365 day annualization factor) as of the Trading Day immediately
following the earliest to occur of (A) the public disclosure of the applicable
Fundamental Transaction, (B) the consummation of the applicable Fundamental
Transaction and (C) the date on which the Holder first became aware of the
applicable Fundamental Transaction.

 

(l) “Bloomberg” means Bloomberg, L.P.

 

(m) “Business Day” means any day other than Saturday, Sunday or other day on
which commercial banks in The City of New York are authorized or required by law
to remain closed.

 

(n) “Certificate of Designations” has the meaning ascribed to such term in the
Securities Purchase Agreement.

 

 21 

   

 

(o) “Closing Sale Price” means, for any security as of any date, the last
closing trade price for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing trade price, then the last trade price
of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg,
or, if the Principal Market is not the principal securities exchange or trading
market for such security, the last trade price of such security on the principal
securities exchange or trading market where such security is listed or traded as
reported by Bloomberg, or if the foregoing does not apply, the last trade price
of such security in the over-the-counter market on the electronic bulletin board
for such security as reported by Bloomberg, or, if no last trade price is
reported for such security by Bloomberg, the average of the ask prices of any
market makers for such security as reported in the “pink sheets” by OTC Markets
Group Inc. (formerly Pink Sheets LLC). If the Closing Sale Price cannot be
calculated for a security on a particular date on any of the foregoing bases,
the Closing Sale Price of such security on such date shall be the fair market
value as mutually determined by the Company and the Holder. If the Company and
the Holder are unable to agree upon the fair market value of such security, then
such dispute shall be resolved in accordance with the procedures in Section 13.
All such determinations shall be appropriately adjusted for any stock dividend,
stock split, stock combination or other similar transaction during such period.

 

(p) “Common Stock” means (i) the Company’s shares of common stock, $0.001 par
value per share, and (ii) any capital stock into which such common stock shall
have been changed or any share capital resulting from a reclassification of such
common stock.

 

(q) “Convertible Securities” means any stock or other security (other than
Options) that is at any time and under any circumstances, directly or
indirectly, convertible into, exercisable or exchangeable for, or which
otherwise entitles the holder thereof to acquire, any shares of Common Stock.

 

(r) “Eligible Market” means The New York Stock Exchange, the NYSE American, the
Nasdaq Global Select Market, the Nasdaq Global Market or the Principal Market.

 

(s) “Event Market Price” means, with respect to any Stock Combination Event
Date, the quotient determined by dividing (x) the sum of the VWAP of the Common
Stock for each of the five (5) lowest Trading Days during the twenty (20)
consecutive Trading Day period ending and including the Trading Day immediately
preceding the sixteenth (16th) Trading Day after such Stock Combination Event
Date, divided by (y) five (5). All such determinations shall be appropriately
adjusted for any stock dividend, stock split, stock combination,
recapitalization or other similar transaction during such period.

 

 22 

   

 

(t) “Excluded Securities” means (i) shares of Common Stock or options to
purchase Common Stock issued to directors, consultants, officers or employees of
the Company for services rendered to the Company in their capacity as such
pursuant to an Approved Stock Plan (as defined above), provided that (A) all
such issuances (taking into account the shares of Common Stock issuable upon
exercise of such options) after the Subscription Date pursuant to this clause
(i) do not, in the aggregate, exceed more than 15% of the Common Stock issued
and outstanding immediately prior to the Subscription Date and (B) the exercise
price of any such options is not lowered, none of such options are amended to
increase the number of shares issuable thereunder and none of the terms or
conditions of any such options are otherwise materially changed in any manner
that adversely affects any of the Buyers; (ii) shares of Common Stock issued
upon the conversion or exercise of Convertible Securities (other than options to
purchase Common Stock issued pursuant to an Approved Stock Plan that are covered
by clause (i) above) issued prior to the Subscription Date, provided that the
conversion price of any such Convertible Securities (other than options to
purchase Common Stock issued pursuant to an Approved Stock Plan that are covered
by clause (i) above) is not lowered, none of such Convertible Securities (other
than options to purchase Common Stock issued pursuant to an Approved Stock Plan
that are covered by clause (i) above) are amended to increase the number of
shares issuable thereunder and none of the terms or conditions of any such
Convertible Securities (other than options to purchase Common Stock issued
pursuant to an Approved Stock Plan that are covered by clause (i) above) are
otherwise materially changed in any manner that adversely affects any of the
Buyers; (iii) the shares of Common Stock issuable upon conversion of the
Preferred Shares or otherwise pursuant to the terms of the Certificate of
Designations; provided, that the terms of the Certificate of Designations is not
amended, modified or changed on or after the Subscription Date (other than
antidilution adjustments pursuant to the terms thereof in effect as of the
Subscription Date), (iv) the Preferred Shares issuable upon exercise of the
Preferred Warrants provided, that the terms of the Preferred Warrants are not
amended, modified or changed on or after the Subscription Date (other than
antidilution adjustments pursuant to the terms thereof in effect as of the
Subscription Date), (v) the shares of Common Stock issuable upon exercise of the
SPA Common Warrants; provided, that the terms of the SPA Common Warrant are not
amended, modified or changed on or after the Subscription Date (other than
antidilution adjustments pursuant to the terms thereof in effect as of the
Subscription Date) and (vi) shares of Common Stock and Common Stock issued upon
the conversion or exercise of Convertible Securities or Options (other than
options to purchase Common Stock issued pursuant to an Approved Stock Plan on or
after the date of this Warrant that are covered by clause (i) above) issued or
issuable pursuant to strategic alliances, strategic mergers and acquisitions,
strategic partnerships, strategic license agreements and other similar
transactions, provided that (I) the primary purpose of such issuance is not to
raise capital, (II) the purchaser or acquirer of such shares of Common Stock,
Options and/or Convertible Securities in such issuance solely consists of the
actual participants in such strategic transaction or the stockholders, partners,
members or Affiliates of the such participants, and (III) to the extent there
are multiple participants in such transaction, the number or amount (as the case
may be) of such shares of Common Stock, Options and/or Convertible Securities
issued to such Person by the Company in such transaction shall not be
disproportionate to such Person’s actual participation in such strategic
transaction.

 

(u) “Expiration Date” means the date that is the fifth (5th) anniversary of the
Initial Exercisability Date or, if such date falls on a day other than a Trading
Day or on which trading does not take place on the Principal Market (a
“Holiday”), the next date that is not a Holiday.

 

 23 

   

 

(v) “Fundamental Transaction” means (A) that the Company shall, directly or
indirectly, including through subsidiaries, Affiliates or otherwise, in one or
more related transactions, (i) consolidate or merge with or into (whether or not
the Company is the surviving corporation) another Subject Entity, or (ii) sell,
assign, transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of the Company or any of its “significant subsidiaries” (as
defined in Rule 1-02 of Regulation S-X) to one or more Subject Entities, or
(iii) make, or allow one or more Subject Entities to make, or allow the Company
to be subject to or have its Common Stock be subject to or party to one or more
Subject Entities making, a purchase, tender or exchange offer that is accepted
by the holders of at least either (x) 50% of the outstanding shares of Common
Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any
shares of Common Stock held by all Subject Entities making or party to, or
Affiliated with any Subject Entities making or party to, such purchase, tender
or exchange offer were not outstanding; or (z) such number of shares of Common
Stock such that all Subject Entities making or party to, or Affiliated with any
Subject Entity making or party to, such purchase, tender or exchange offer,
become collectively the beneficial owners (as defined in Rule 13d-3 under the
1934 Act) of at least 50% of the outstanding shares of Common Stock, or (iv)
consummate a stock or share purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off or
scheme of arrangement) with one or more Subject Entities whereby all such
Subject Entities, individually or in the aggregate, acquire, either (x) at least
50% of the outstanding shares of Common Stock, (y) at least 50% of the
outstanding shares of Common Stock calculated as if any shares of Common Stock
held by all the Subject Entities making or party to, or Affiliated with any
Subject Entity making or party to, such stock purchase agreement or other
business combination were not outstanding; or (z) such number of shares of
Common Stock such that the Subject Entities become collectively the beneficial
owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the
outstanding shares of Common Stock, or (v) reorganize, recapitalize or
reclassify its Common Stock, (B) that the Company shall, directly or indirectly,
including through subsidiaries, Affiliates or otherwise, in one or more related
transactions, allow any Subject Entity individually or the Subject Entities in
the aggregate to be or become the “beneficial owner” (as defined in Rule 13d-3
under the 1934 Act), directly or indirectly, whether through acquisition,
purchase, assignment, conveyance, tender, tender offer, exchange, reduction in
outstanding shares of Common Stock, merger, consolidation, business combination,
reorganization, recapitalization, spin-off, scheme of arrangement,
reorganization, recapitalization or reclassification or otherwise in any manner
whatsoever, of either (x) at least 50% of the aggregate ordinary voting power
represented by issued and outstanding Common Stock, (y) at least 50% of the
aggregate ordinary voting power represented by issued and outstanding Common
Stock not held by all such Subject Entities as of the date of this Common
Warrant calculated as if any shares of Common Stock held by all such Subject
Entities were not outstanding, or (z) a percentage of the aggregate ordinary
voting power represented by issued and outstanding shares of Common Stock or
other equity securities of the Company sufficient to allow such Subject Entities
to effect a statutory short form merger or other transaction requiring other
shareholders of the Company to surrender their shares of Common Stock without
approval of the shareholders of the Company or (C) directly or indirectly,
including through subsidiaries, Affiliates or otherwise, in one or more related
transactions, the issuance of or the entering into any other instrument or
transaction structured in a manner to circumvent, or that circumvents, the
intent of this definition in which case this definition shall be construed and
implemented in a manner otherwise than in strict conformity with the terms of
this definition to the extent necessary to correct this definition or any
portion of this definition which may be defective or inconsistent with the
intended treatment of such instrument or transaction.

 

(w) “Group” means a “group” as that term is used in Section 13(d) of the 1934
Act and as defined in Rule 13d-5 thereunder.

 

 24 

   

 

(x) “Maximum Eligibility Number” means initially [               ]4 and shall be
increased at each Adjustment Time by an amount equal to the corresponding
Adjusted Share Amount with respect thereto.

 

(y) “Options” means any rights, warrants or options to subscribe for or purchase
shares of Common Stock or Convertible Securities.

 

(z) “Parent Entity” of a Person means an entity that, directly or indirectly,
controls the applicable Person and whose common stock or equivalent equity
security is quoted or listed on an Eligible Market, or, if there is more than
one such Person or Parent Entity, the Person or Parent Entity with the largest
public market capitalization as of the date of consummation of the Fundamental
Transaction.

 

(aa) “Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization, any other
entity or a government or any department or agency thereof.

 

(bb) “Preferred Shares” has the meaning ascribed to such term in the Securities
Purchase Agreement, and shall include all shares of preferred stock issued in
exchange therefor or replacement thereof.

 

(cc) “Preferred Warrant” has the meaning ascribed to such term in the Securities
Purchase Agreement, and shall include all Common Warrants to purchase preferred
stock issued in exchange therefor or replacement thereof.

 

(dd) “Principal Market” means the Nasdaq Capital Market.

 

(ee) “Registration Rights Agreement” means that certain registration rights
agreement, dated as of the Closing Date, by and among the Company and the
initial holders of the Preferred Shares relating to, among other things, the
registration of the resale of the Preferred Shares, the Common Stock issuable
upon conversion of the Preferred Shares or otherwise pursuant to the terms of
the Certificate of Designations and exercise of the SPA Common Warrants, as may
be amended from time to time.

 

(ff) “SEC” means the United States Securities and Exchange Commission or the
successor thereto.

 

(gg) “Subject Entity” means any Person, Persons or Group or any Affiliate or
associate of any such Person, Persons or Group.

 

(hh) “Successor Entity” means the Person (or, if so elected by the Holder, the
Parent Entity) formed by, resulting from or surviving any Fundamental
Transaction or the Person (or, if so elected by the Holder, the Parent Entity)
with which such Fundamental Transaction shall have been entered into.

 

 

4 Insert 100% Common Warrant coverage for Initial Preferred Shares (as defined
in the Securities Purchase Agreement)

 

 25 

   

 

(ii) “Trading Day” means, as applicable, (x) with respect to all price or
trading volume determinations relating to the Common Stock, any day on which the
Common Stock is traded on the Principal Market, or, if the Principal Market is
not the principal trading market for the Common Stock, then on the principal
securities exchange or securities market on which the Common Stock is then
traded, provided that “Trading Day” shall not include any day on which the
Common Stock is scheduled to trade on such exchange or market for less than 4.5
hours or any day that the Common Stock is suspended from trading during the
final hour of trading on such exchange or market (or if such exchange or market
does not designate in advance the closing time of trading on such exchange or
market, then during the hour ending at 4:00:00 p.m., New York time) unless such
day is otherwise designated as a Trading Day in writing by the Holder or (y)
with respect to all determinations other than price or trading volume
determinations relating to the Common Stock, any day on which The New York Stock
Exchange (or any successor thereto) is open for trading of securities.

 

(jj) “VWAP” means, for any security as of any date, the dollar volume-weighted
average price for such security on the Principal Market (or, if the Principal
Market is not the principal trading market for such security, then on the
principal securities exchange or securities market on which such security is
then traded), during the period beginning at 9:30 a.m., New York time, and
ending at 4:00 p.m., New York time, as reported by Bloomberg through its “VAP”
function (set to 09:30 start time and 16:00 end time) or, if the foregoing does
not apply, the dollar volume-weighted average price of such security in the
over-the-counter market on the electronic bulletin board for such security
during the period beginning at 9:30 a.m., New York time, and ending at 4:00
p.m., New York time, as reported by Bloomberg, or, if no dollar volume-weighted
average price is reported for such security by Bloomberg for such hours, the
average of the highest closing bid price and the lowest closing ask price of any
of the market makers for such security as reported in the “pink sheets” by OTC
Markets Group Inc. (formerly Pink Sheets LLC). If the VWAP cannot be calculated
for such security on such date on any of the foregoing bases, the VWAP of such
security on such date shall be the fair market value as mutually determined by
the Company and the Holder. If the Company and the Holder are unable to agree
upon the fair market value of such security, then such dispute shall be resolved
in accordance with the procedures in Section 13. All such determinations shall
be appropriately adjusted for any stock dividend, stock split, stock
combination, recapitalization or other similar transaction during such period.

 

(kk) “Warrant Preferred Shares” has the meaning ascribed to such term in the
Securities Purchase Agreement, and shall include all shares of preferred stock
issued in exchange therefor or replacement thereof.

 

[signature page follows]

 

 26 

   

 

IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock
to be duly executed as of the Issuance Date set out above.

 

  Sigma Labs, Inc.       By:                               Name:     Title:  

 

 

 

 

EXHIBIT A

 

EXERCISE NOTICE

 

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT TO PURCHASE COMMON STOCK

 

SIGMA LABS, INC.

 

The undersigned holder hereby elects to exercise the Warrant to Purchase Common
Stock No. _______ (the “Common Warrant”) of Sigma Labs, Inc., a Nevada
corporation (the “Company”) as specified below. Capitalized terms used herein
and not otherwise defined shall have the respective meanings set forth in the
Common Warrant.

 

1. Form of Exercise Price. The Holder intends that payment of the Aggregate
Exercise Price shall be made as:

 

[  ] a “Cash Exercise” with respect to _________________ Warrant Common Shares;
and/or

 

[  ] a “Cashless Exercise” with respect to _______________ Warrant Common
Shares.

 

In the event that the Holder has elected a Cashless Exercise with respect to
some or all of the Warrant Common Shares to be issued pursuant hereto, the
Holder hereby represents and warrants that (i) this Exercise Notice was executed
by the Holder at __________ [a.m.][p.m.] on the date set forth below and (ii) if
applicable, the Bid Price as of such time of execution of this Exercise Notice
was $________.

 

2. Payment of Exercise Price. In the event that the Holder has elected a Cash
Exercise with respect to some or all of the Warrant Common Shares to be issued
pursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum of
$___________________ to the Company in accordance with the terms of the Common
Warrant.

 

3. Delivery of Warrant Common Shares. The Company shall deliver to Holder, or
its designee or agent as specified below, __________ shares of Common Stock in
accordance with the terms of the Common Warrant. Delivery shall be made to
Holder, or for its benefit, as follows:

 

[  ] Check here if requesting delivery as a certificate to the following name
and to the following address:

 

  Issue to:              

 

[  ] Check here if requesting delivery by Deposit/Withdrawal at Custodian as
follows:

 

  DTC Participant:     DTC Number:     Account Number:  

 

Date: _____________ __,           Name of Registered Holder         By:   Name:
                                   Title:    

 

Tax ID:____________________________       Facsimile:__________________________  
    E-mail Address: __________________  

 

 

 

 

EXHIBIT B

 

ACKNOWLEDGMENT

 

The Company hereby acknowledges this Exercise Notice and hereby directs
______________ to issue the above indicated number of shares of Common Stock in
accordance with the Transfer Agent Instructions dated _________, 201_, from the
Company and acknowledged and agreed to by _______________.

 

  Sigma Labs, Inc.         By:                               Name:     Title: