Exhibit 10.5

 

[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 PREFERRED SHARES ISSUABLE
UPON EXERCISE OF THIS WARRANT MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE
HEREOF PURSUANT TO SECTION 1(a) OF THIS WARRANT.

 

Sigma Labs, Inc.

 

Warrant to Purchase
Series D Convertible Preferred Stock

 

Preferred Warrant No.: D-[  ]

 

Date of Issuance: January __, 2020 (“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 Series D Convertible Preferred
Stock (including any Warrants to Purchase Series D Convertible Preferred Stock
issued in exchange, transfer or replacement hereof, this “Warrant”), at any time
or times on or after the Issuance Date, but not after 11:59 p.m., New York time,
on the Expiration Date (as defined below), [________] (subject to adjustment as
provided herein) fully paid and non-assessable shares of Series D Convertible
Preferred Stock (the “Warrant Preferred Shares” and such aggregate number of
Warrant Preferred Shares issuable hereunder as of any time of determination, the
“Warrant Preferred Number”). Except as otherwise defined herein, capitalized
terms in this Warrant shall have the meanings set forth in Section 16. This
Warrant is one of the Preferred Warrants (as defined in the Securities Purchase
Agreement (as defined below)) to purchase Preferred Shares (as defined in the
Securities Purchase Agreement) (the “SPA Preferred Warrants”, as exercised, the
“SPA Warrant Preferred Shares”) 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. EXERCISE OF WARRANT.

 

(a) Mechanics of Exercise. Subject to the terms and conditions hereof, this
Warrant may be exercised by the Holder on any day on or after the Issuance 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 Warrant. Within
one (1) Trading Day following an exercise of this 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
Preferred Shares as to which this Warrant was so exercised (the “Aggregate
Exercise Price”) in cash or via wire transfer of immediately available funds (if
such exercise was not made pursuant to a Cashless Exercise (as defined in
Section 1(d)(ii) below)). The Holder shall not be required to deliver the
original of this Warrant in order to effect an exercise hereunder. Execution and
delivery of an Exercise Notice with respect to less than all of the Warrant
Preferred Shares shall have the same effect as cancellation of the original of
this Warrant and issuance of a new Warrant evidencing the right to purchase the
remaining number of Warrant Preferred Shares. Execution and delivery of an
Exercise Notice for all of the then-remaining Warrant Preferred Shares shall
have the same effect as cancellation of the original of this Warrant after
delivery of the Warrant Preferred Shares in accordance with the terms hereof. 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 Preferred Shares initiated on the applicable Exercise
Date), the Company shall 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 Warrant Preferred
Shares to which the Holder shall be entitled pursuant to such exercise. Upon
delivery of an Exercise Notice and the release, at the direction of the Holder,
of a wire of the Aggregate Exercise Price to the Company (the “Exercise
Conditions”), the Holder shall be deemed for all corporate purposes to have
become the holder of record of the Warrant Preferred Shares with respect to
which this Warrant has been exercised (including, without limitation, the right
to convert such Warrant Preferred Shares), irrespective of the date of delivery
of the certificates evidencing such Warrant Preferred Shares (as the case may
be). If a certificate with respect to this Warrant is delivered to the Company
in connection with any exercise pursuant to this Section 1(a) and the number of
Warrant Preferred Shares represented by this Warrant submitted for exercise is
greater than the number of Warrant Preferred Shares being acquired upon an
exercise, 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
Warrant (in accordance with Section 6(d)) representing the right to purchase the
number of Warrant Preferred Shares purchasable immediately prior to such
exercise under this Warrant, less the number of Warrant Preferred Shares with
respect to which this Warrant is exercised. No fractional Warrant Preferred
Shares are to be issued upon the exercise of this Warrant, but rather the number
of Warrant Preferred Shares 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 that may be payable with respect to the
issuance and delivery of Warrant Preferred Shares upon exercise of this Warrant.
Notwithstanding the foregoing, except in connection with a Cashless Exercise
hereunder, the Company’s failure to deliver Warrant Preferred 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 Preferred Shares initiated on the applicable Exercise
Date) and (ii) one (1) Trading Day after the Company’s receipt of the Aggregate
Exercise Price (or the date of the applicable Exercise Notice electing to effect
a Cashless Exercise hereunder) (such later date, the “Share Delivery Deadline”)
shall not be deemed to be a breach of this Warrant. For the avoidance of doubt,
the Holder may convert the Warrant Preferred Shares into shares of Common Stock
in accordance with the terms of the Certificate of Designations at any time, at
the option of the Holder, following its satisfaction of the applicable Exercise
Conditions (whether or not a certificate with respect to such Warrant Preferred
Shares has been delivered to the Holder on or prior to such time of conversion).
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.

 

 2 

 

 

(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $975
subject to adjustment as provided herein.

 

(c) Disputes. In the case of a dispute as to the determination of the Exercise
Price or the arithmetic calculation of the number of Warrant Preferred Shares to
be issued pursuant to the terms hereof, the Company shall promptly issue to the
Holder the number of Warrant Preferred Shares that are not disputed and resolve
such dispute in accordance with Section 12.

 

(d) Forced Exercise; Cashless Exercise.

 

(i) Forced Exercise. Commencing on the initial Issuance Date (the “Eligibility
Date”), so long as (I) no Equity Conditions Failure then exists (unless waived
in writing by the Holder) and (II) no Forced Exercise (as defined below) has
occurred in the twenty (20) Trading Day period immediately prior to the
applicable date of determination, the Company shall have the right to require
the Holder to exercise this Warrant, in whole or in part, as designated in the
applicable Forced Exercise Notice (as defined below) into up to such aggregate
number of fully paid, validly issued and non-assessable Warrant Preferred Shares
equal to the difference of (x) the Holder Pro Rata Amount (as defined in the
Certificate of Designations) of 512 Warrant Preferred Shares less (y) such
aggregate number of Warrant Preferred Shares issued to the Holder pursuant to
any Forced Exercise prior to such date of determination (the “Maximum Forced
Exercise Share Amount”) to be issued and delivered in accordance with Section
1(a) hereof (each, a “Forced Exercise”). The Company may exercise its right to
require a Forced Exercise under this Section 1(d)(i) by delivering a written
notice thereof, at one, or more times, by facsimile or electronic mail to all,
but not less than all, of the holders of SPA Preferred Warrants (each, a “Forced
Exercise Notice”, and the date thereof, each a “Forced Exercise Notice Date”).
For purposes of Section 1(a) hereof, “Forced Exercise Notice” shall be deemed to
replace “Exercise Notice” for all purposes thereunder as if the Holder delivered
an Exercise Notice to the Company on the Forced Exercise Notice Date, mutatis
mutandis. Each Forced Exercise Notice shall be irrevocable. Each Forced Exercise
Notice shall state (i) the Trading Day selected for the Forced Exercise in
accordance with this Section 1(d)(i), which Trading Day shall be the second
(2nd) Trading Day following the applicable Forced Exercise Eligibility Date
(each, a “Forced Exercise Date”), (ii) the aggregate portion of this Warrant and
the SPA Preferred Warrants subject to forced exercise from the Holder and all of
the holders of the SPA Preferred Warrants pursuant to this Section 1(d)(i) (and
analogous provisions under the SPA Preferred Warrants), (iii) the Maximum Forced
Exercise Share Amount applicable to the Holder (including calculations and any
other documents reasonably requested by the Holder with respect thereto) and
(iv) that there has been no Equity Conditions Failure (or specifying any such
Equity Conditions Failure that then exists, with an acknowledgement that unless
such Equity Conditions are waived, in whole or in part, such Forced Exercise
Notice will be invalid). Notwithstanding anything herein to the contrary, if an
Equity Conditions Failure occurs at any time after a Forced Exercise Notice Date
and prior to the related Forced Exercise Date, (A) the Company shall provide the
Holder a subsequent notice to that effect and (B) unless the Holder waives the
applicable Equity Conditions Failure, the Forced Exercise shall be cancelled and
the applicable Forced Exercise Notice shall be null and void. For the avoidance
of doubt, if any Triggering Event has occurred and continuing, unless such
Triggering Event (as defined in the Certificate of Designations) has been
waived, in whole or in part, in writing by the Holder, Company shall have no
right to effect a Forced Exercise; provided, that such Triggering Event shall
have no effect upon the Holder’s right to exercise this Warrant in its
discretion. If the Company elects to cause a Forced Exercise of this Warrant
pursuant to this Section 1(d)(i), then it must simultaneously take the same
action in the same proportion with respect to all of the SPA Preferred Warrants.

 

 3 

 

 

(ii) Cashless Exercise. Notwithstanding anything contained herein to the
contrary, if the Company fails to deliver a Triggering Event Redemption Price
(as defined in the Certificate of Designations) to the Holder as required, from
time to time, pursuant to the terms of the Certificate of Designations and the
Holder and the Company, negotiating in good faith, are unable to reach a
resolution with respect to a waiver or cure of all Triggering Events (as defined
in the Certificate of Designations) then outstanding after a ten (10) Trading
Day period after the date of such payment default, but only so long as any
Triggering Events then remain outstanding, the Holder may, in its sole
discretion, exercise this 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 (each, a “Cashless Exercise”) such aggregate number of
Warrant Preferred Shares equal to the lesser of (A) the Warrant Number, (B) such
aggregate number of Warrant Preferred Shares elected by the Holder in the
applicable Exercise Notice to be exercised in such Cashless Exercise and (C) the
difference of (I) the quotient of (x) [TBD]% of the aggregate unpaid Triggering
Event Redemption Price as of the applicable Exercise Date, divided by (y) the
Exercise Price then in effect for the applicable Warrant Shares at the time of
such exercise, less (II) such aggregate number of Warrant Preferred Shares
previously issued to the Holder hereunder pursuant to one or more Cashless
Exercise prior to the time of delivery of the Exercise Notice to the Company. If
Preferred Shares are issued in a Cashless Exercise, the parties acknowledge and
agree that in accordance with Section 3(a)(9) of the 1933 Act, such Preferred
Shares take on the registered characteristics of the 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 Preferred Shares issued in a Cashless
Exercise shall be deemed to have been acquired by the Holder, and the holding
period for the Preferred Shares shall be deemed to have commenced, on the date
this Warrant was originally issued pursuant to the Securities Purchase
Agreement.

 

(e) Reservation of Shares. So long as this Warrant remains outstanding, the
Company shall at all times keep reserved for issuance under this Warrant a
number of Preferred Shares at least equal to 100% of the maximum number of
Preferred Shares as shall be necessary to satisfy the Company’s obligation to
issue Preferred Shares under the SPA Preferred Warrants then outstanding
(without regard to any limitations on exercise) (the “Required Reserve Amount”);
provided that at no time shall the number of Preferred Shares reserved pursuant
to this Section 1(e) be reduced other than proportionally in connection with any
exercise or redemption of SPA Preferred 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 Preferred Warrants based on number of Preferred
Shares issuable upon exercise of SPA Preferred 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 Preferred Warrants, each transferee shall be allocated a pro
rata portion of such holder’s Authorized Share Allocation. Any Preferred Shares
reserved and allocated to any Person which ceases to hold any SPA Preferred
Warrants shall be allocated to the remaining holders of SPA Preferred Warrants,
pro rata based on the number of Warrant Preferred Shares issuable upon exercise
of the SPA Preferred Warrants then held by such holders (without regard to any
limitations on exercise). If, notwithstanding the foregoing, and not in
limitation thereof, at any time while any of the SPA Preferred Warrants remain
outstanding, the Company does not have a sufficient number of authorized and
unreserved Preferred Shares 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
Preferred Shares to an amount sufficient to allow the Company to reserve the
Required Reserve Amount for all the SPA Preferred 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 ninety (90) 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 Preferred Shares. 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 Preferred Shares and to cause its board
of directors to recommend to the shareholders that they approve such proposal.

 

 4 

 

 

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

 

(a) Stock Dividends and Splits. 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 Warrant Preferred Shares (other than Capitalized Dividends (as
defined in the Certificate of Designations) and Capitalized Dividends (as
defined in the securities purchase agreement for the Insider Financing (as
defined in the Securities Purchase Agreement) as in effect on the Subscription
Date) or otherwise makes a distribution on any class of capital stock that is
payable in Warrant Preferred Shares, (ii) subdivides (by any stock split, stock
dividend, recapitalization or otherwise) one or more classes of its then
outstanding Warrant Preferred Shares into a larger number of shares or (iii)
combines (by combination, reverse stock split or otherwise) one or more classes
of its then outstanding Warrant Preferred Shares 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 Warrant Preferred Shares outstanding
immediately before such event and of which the denominator shall be the number
of Warrant Preferred Shares 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) Number of Warrant Preferred Shares. Simultaneously with any adjustment to
the Exercise Price pursuant to this Section 2, the number of Warrant Preferred
Shares that may be purchased upon exercise of this Warrant shall be increased or
decreased proportionately, so that after such adjustment the aggregate Exercise
Price payable hereunder for the adjusted number of Warrant Preferred 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).

 

(c) 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 Warrant,
with the prior written consent of the Holder (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.

 

 5 

 

 

3. FUNDAMENTAL TRANSACTIONS.

 

(a) 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 Warrant and the other Transaction
Documents (as defined in the Securities Purchase Agreement) in accordance with
the provisions of this Section 3(a) pursuant to written agreements in form and
substance reasonably 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 Warrant a security of the Successor Entity evidenced by a
written instrument substantially similar in form and substance to this Warrant,
including, without limitation, which is exercisable for a corresponding number
of shares of capital stock equivalent to the shares of Series D Convertible
Preferred Stock acquirable and receivable upon exercise of this 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 Series D Convertible Preferred 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
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 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 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 Warrant at any time after the
consummation of the applicable Fundamental Transaction, in lieu of the shares of
Series D Convertible Preferred Stock (or other securities, cash, assets or other
property) issuable upon the exercise of this 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 Warrant been completely exercised (and the
underlying Warrant Preferred Shares completely converted) immediately prior to
the applicable Fundamental Transaction (without regard to any limitations on the
conversion of the Warrant Preferred Shares), as adjusted in accordance with the
provisions of this Warrant. Notwithstanding the foregoing, the Holder may elect,
at its sole option, by delivery of written notice to the Company to waive this
Section 3(a) to permit the Fundamental Transaction without the assumption of
this 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
Warrant and conversion of the underlying Warrant Preferred Shares 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) issuable upon the exercise of the
Warrant and conversion of the underlying Warrant Preferred Shares 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 Warrant been exercised and
converted into Warrant Preferred Shares immediately prior to the applicable
Fundamental Transaction (without regard to any limitations on the exercise of
this Warrant). Provision made pursuant to the preceding sentence shall be in a
form and substance reasonably satisfactory to the Holder.

 

 6 

 

 

(b) Black Scholes Value. Notwithstanding the foregoing and the provisions of
Section 3(a) 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 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.

 

(c) Application. The provisions of this Section 3 shall apply similarly and
equally to successive Fundamental Transactions and Corporate Events and shall be
applied as if this Warrant (and any such subsequent warrants) were fully
exercisable and without regard to any limitations on the exercise of this
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 Warrant (or any such other warrant)).

 

4. 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 Warrant, and will at all times in good faith carry
out all the provisions of this 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 Warrant
Preferred Shares receivable upon the exercise of this 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 Warrant Preferred Shares upon the exercise of this Warrant.

 

 7 

 

 

5. WARRANT HOLDER NOT DEEMED A SHAREHOLDER. Except as otherwise specifically
provided herein, the Holder, solely in its capacity as a holder of this 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 Warrant be construed to confer upon the Holder, solely in its capacity as
the Holder of this 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 Preferred Shares which it is then entitled to receive upon the due
exercise of this Warrant. In addition, nothing contained in this Warrant shall
be construed as imposing any liabilities on the Holder to purchase any
securities (upon exercise of this Warrant or otherwise) or as a shareholder of
the Company, except for Forced Exercise, described under Section 1(d) herein,
whether such liabilities are asserted by the Company or by creditors of the
Company. Notwithstanding this Section 5, 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.

 

6. REISSUANCE OF WARRANTS.

 

(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall
surrender this Warrant to the Company, whereupon the Company will forthwith
issue and deliver upon the order of the Holder a new Warrant (in accordance with
Section 6(d)), registered as the Holder may request, representing the right to
purchase the number of Warrant Preferred Shares being transferred by the Holder
and, if less than the total number of Warrant Preferred Shares then underlying
this Warrant is being transferred, a new Warrant (in accordance with Section
6(d)) to the Holder representing the right to purchase the number of Warrant
Preferred Shares not being transferred.

 

(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this 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 Warrant, the Company shall
execute and deliver to the Holder a new Warrant (in accordance with Section
6(d)) representing the right to purchase the Warrant Preferred Shares then
underlying this Warrant.

 

(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the
surrender hereof by the Holder at the principal office of the Company, for a new
Warrant or Warrants (in accordance with Section 6(d)) representing in the
aggregate the right to purchase the number of Warrant Preferred Shares then
underlying this Warrant, and each such new Warrant will represent the right to
purchase such portion of such Warrant Preferred Shares as is designated by the
Holder at the time of such surrender; provided, however, no warrants for
fractional Warrant Preferred Shares shall be given.

 

 8 

 

 

(d) Issuance of New Warrants. Whenever the Company is required to issue a new
Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of
like tenor with this Warrant, (ii) shall represent, as indicated on the face of
such new Warrant, the right to purchase the Warrant Preferred Shares then
underlying this Warrant (or in the case of a new Warrant being issued pursuant
to Section 6(a) or Section 6(c), the Warrant Preferred Shares designated by the
Holder which, when added to the number of Warrant Preferred Shares underlying
the other new Warrants issued in connection with such issuance, does not exceed
the number of Warrant Preferred Shares then underlying this Warrant), (iii)
shall have an issuance date, as indicated on the face of such new Warrant which
is the same as the Issuance Date, and (iv) shall have the same rights and
conditions as this Warrant.

 

7. NOTICES. Whenever notice is required to be given under this 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 Warrant (other
than the issuance of Warrant Preferred Shares 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 Preferred 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 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 a 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 

 

 

8. AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions of
this Warrant may be amended or waived 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.

 

9. SEVERABILITY. If any provision of this 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
Warrant so long as this 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).

 

10. GOVERNING LAW. This Warrant shall be governed by and construed and enforced
in accordance with, and all questions concerning the construction, validity,
interpretation and performance of this 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 WARRANT OR ANY
TRANSACTION CONTEMPLATED HEREBY.

 

 10 

 

 

11. CONSTRUCTION; HEADINGS. This 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 Warrant are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Warrant. Terms used in this 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.

 

12. DISPUTE RESOLUTION.

 

(a) Submission to Dispute Resolution.

 

(i) In the case of a dispute relating to the Exercise Price, Closing Sale Price,
the Black-Scholes Value or fair market value or the arithmetic calculation of
the number of Warrant Preferred 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 or electronic mail (A) if by the Company, within two
(2) Business Days after the Company learned 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 Black-Scholes Value or such fair market value or such
arithmetic calculation of the number of Warrant Preferred 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 or the Company, as
applicable, and as the party originally providing notice of such dispute, may,
at its sole option, select an independent, reputable investment bank to resolve
such dispute.

 

(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 12 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 or the Company, as applicable, has 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).

 

 11 

 

 

(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. Such investment bank’s resolution of such dispute
shall be final and binding upon all parties absent manifest error.

 

(iv) 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 12 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 or the Company is authorized to apply for an order to compel
arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this
Section 12, (ii) the terms of this 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, in its sole discretion, shall
have the right to submit any dispute described in this Section 12 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 12 and (iii) nothing in
this Section 12 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 12).

 

13. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE
RELIEF. The remedies provided in this Warrant shall be cumulative and in
addition to all other remedies available under this 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 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 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 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
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.

 

 12 

 

 

14. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Warrant is
placed in the hands of an attorney either (x) for collection of any cash payment
obligation arising hereunder or (y) enforcement or such collection or
enforcement occurs through any legal proceeding or the holder otherwise takes
action to collect any cash payment obligation arising hereunder or to enforce
the provisions of this 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 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.

 

15. TRANSFER. This 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.

 

16. CERTAIN DEFINITIONS. For purposes of this 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) “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.

 

 13 

 

 

(d) “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.

 

(e) “Black Scholes Value” means the value of the unexercised portion of this
Warrant (assuming, for such purpose, that this Warrant is exercisable into such
aggregate number of shares of Common Stock issuable upon conversion of such
aggregate number of Warrant Preferred Shares that are then issuable hereunder at
the Alternate Conversion Price (as defined in the Certificate of Designations)
then in effect) remaining on the date of the Holder’s request pursuant to
Section 3(b), 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 3(b) 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 Alternate Conversion Price in effect on the date of the Holder’s request
pursuant to Section 3(b), (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 Warrant as of the date of the Holder’s request pursuant to Section 3(b)
and (2) the remaining term of this 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 3(b) 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.

 

(f) “Bloomberg” means Bloomberg, L.P.

 

(g) “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.

 

 14 

 

 

(h) “Certificate of Designations” means that certain Certificate of Designation
for the Series D Convertible Preferred Stock of the Company, dated as of January
__, 2020, as amended from time to time.

 

(i) “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.

 

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

 

(k) “Equity Conditions” means, with respect to an given date of determination:
(i) on such applicable date of determination one or more Registration Statements
(each, the “Forced Exercise Registration Statement”) shall be effective and the
prospectus contained therein shall be available on such applicable date of
determination (with, for the avoidance of doubt, any Warrant Preferred Shares
previously issued pursuant to such prospectus deemed unavailable) for the resale
by the Holder of all of such Warrant Preferred Shares to be issued in connection
with the event requiring such determination and all shares of Common Stock (the
“Conversion Shares”) issuable upon conversion of such Preferred Shares and any
other Preferred Shares then outstanding, in each case, without regard to any
limitations on conversion set forth in the Certificate of Designations, at the
Alternate Conversion Price (as defined in the Certificate of Designations) then
in effect (such applicable aggregate number of Preferred Shares and shares of
Common Stock, each, a “Required Minimum Securities Amount”); (ii) on each day
during the period beginning thirty (30) calendar days prior to the applicable
date of determination and ending on and including the applicable date of
determination (the “Equity Conditions Measuring Period”), the Common Stock
(including all shares of Common Stock issuable upon conversion of the Preferred
Shares then outstanding and the Warrant Preferred Shares to be issued in the
event requiring this determination) is listed or designated for quotation (as
applicable) on an Eligible Market and shall not have been suspended from trading
on an Eligible Market (other than suspensions of not more than two (2) days and
occurring prior to the applicable date of determination due to business
announcements by the Company) nor shall delisting or suspension by an Eligible
Market have been threatened (with a reasonable prospect of delisting occurring
after giving effect to all applicable notice, appeal, compliance and hearing
periods) or reasonably likely to occur or pending as evidenced by (A) a writing
by such Eligible Market or (B) the Company falling below the minimum listing
maintenance requirements of the Eligible Market on which the Common Stock is
then listed or designated for quotation (as applicable) other than as disclosed
in the SEC Documents (as defined in the Securities Purchase Agreement) prior to
the Issuance Date; (iii) during the Equity Conditions Measuring Period, the
Company shall have delivered all Warrant Preferred Shares issuable upon exercise
of this Warrant on a timely basis as set forth in Section 1 hereof and all other
shares of capital stock required to be delivered by the Company on a timely
basis as set forth in the other Transaction Documents; (iv) any Warrant
Preferred Shares to be issued in connection with the event requiring
determination (and the Required Minimum Securities Amount of Conversion Shares
related thereto and issuable upon conversion of the Preferred Shares then
outstanding (in each case, without regard to any limitations on conversion set
forth in the Certificate of Designations and at the Alternate Conversion Price
then in effect) may be issued in full without violating the rules or regulations
of the Eligible Market on which the Common Stock is then listed or designated
for quotation (as applicable); (v) on each day during the Equity Conditions
Measuring Period, no public announcement of a pending, proposed or intended
Fundamental Transaction shall have occurred which has not been abandoned,
terminated or consummated; (vi) the Company shall have no knowledge of any fact
that would reasonably be expected to cause the applicable Forced Exercise
Registration Statement to not be effective or the prospectus contained therein
to not be available for the resale by the Holder of any Warrant Preferred Shares
to be issued in connection with the event requiring determination (and the
Required Minimum Securities Amount of Conversion Shares related thereto and
issuable upon conversion of the Preferred Shares then outstanding (in each case,
without regard to any limitations on conversion set forth in the Certificate of
Designations and at the Alternate Conversion Price then in effect) and no
Current Public Information Failure exists or is continuing; (vii) the Holder
shall not be in possession of any material, non-public information provided to
any of them by the Company, any of its Subsidiaries or any of their respective
affiliates, employees, officers, representatives, agents or the like; (viii) on
each day during the Equity Conditions Measuring Period, the Company otherwise
shall have been in compliance with each, and shall not have breached any
representation or warranty in any material respect (other than representations
or warranties subject to material adverse effect or materiality, which may not
be breached in any respect) or any covenant or other term or condition of any
Transaction Document, including, without limitation, the Company shall not have
failed to timely make any payment pursuant to any Transaction Document; (ix) on
the applicable date of determination (A) no Authorized Share Failure shall exist
or be continuing and (B) all Warrant Preferred Shares to be issued in connection
with the event requiring this determination may be issued in full without
resulting in an Authorized Share Failure (as defined in Section 1(e) above); (x)
on each day during the Equity Conditions Measuring Period, there shall not have
occurred and there shall not exist a Triggering Event (as defined in the
Certificate of Designations) or an event that with the passage of time or giving
of notice would constitute a Triggering Event; (xi) the issuance of the
Conversion Shares issuable upon conversion of such Warrant Preferred Shares and
the Preferred Shares then outstanding (assuming, for such purpose, that all the
Preferred Shares then outstanding and such Warrant Preferred Shares are
converted at the Alternate Conversion Price then in effect and without regard to
any limitations on conversion set forth in the Certificate of Designations) will
not result in an Authorized Share Failure (as defined in the Certificate of
Designations); (xii) the shares of Common Stock issuable upon conversion of all
of the Preferred Shares issued pursuant to the Securities Purchase Agreement and
issuable upon exercise of the SPA Preferred Warrants are duly authorized and
listed and eligible for trading without restriction on an Eligible Market
(assuming, for such purpose, that all the Preferred Shares then outstanding and
such Warrant Preferred Shares are converted at the Alternate Conversion Price
then in effect and without regard to any limitations on conversion set forth in
the Certificate of Designations); and (xiii) the Company shall have obtained the
Shareholder Approval (as defined in the Securities Purchase Agreement), which
shall remain in full force and effect as of such date of determination.

 

 15 

 

 

(l) “Equity Conditions Failure” means that on each day during the period
commencing twenty (20) Trading Days prior to the applicable Forced Exercise
Notice Date through and including the applicable Forced Exercise Date, the
Equity Conditions have not been satisfied (or waived in writing by the Holder).

 

(m) “Expiration Date” means the date that is the first anniversary of the
Applicable Date (as defined in the Securities Purchase Agreement) (or such later
date as extended by written consent of the Company and the Holder) 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.

 

(n) “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 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.

 

 16 

 

 

(o) “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.

 

(p) “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.

 

(q) “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.

 

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

 

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

 

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

 

(u) “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.

 

 17 

 

 

(v) “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.

 

(a) “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 12. All such determinations shall
be appropriately adjusted for any stock dividend, stock split, stock
combination, recapitalization or other similar transaction during such period.

 

[signature page follows]

 

 18 

 

 

IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Series D
Convertible Preferred 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 SERIES D CONVERTIBLE PREFERRED STOCK

 

SIGMA LABS, INC.

 

The undersigned holder hereby elects to exercise the Warrant to Purchase Series
D Convertible Preferred Stock, No. [  ] (the “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 Warrant.

 

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

 

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

 

In the event that the Holder has elected a Cashless Exercise with respect to
some or all of the Warrant Shares to be issued pursuant hereto, the Holder
hereby represents and warrants that this Exercise Notice was executed by the
Holder at __________ [a.m.][p.m.] on the date set forth below.

 

2. Delivery of Warrant Preferred Shares. The Company shall deliver to Holder, or
its designee or agent as specified below, __________ shares of Series D
Convertible Preferred Stock in accordance with the terms of the Warrant.
Delivery shall be made to Holder, or for its benefit, as a certificate to the
following name and to the following address:

 

Issue to:          

 

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

 

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