Document:

EX-10.1

Exhibit 10.1

SEPARATION AGREEMENT AND GENERAL RELEASEThis SEPARATION AGREEMENT AND GENERAL RELEASE
(this “Agreement”) is entered into by and between Endeavour International Corporation (the
“Company”) and Carl D. Grenz (“Employee”). The Company and Employee are referred to herein
individually as a “Party” and collectively as the “Parties.”

WHEREAS, Employee’s employment with the Company has ended as of the Separation Date (as
defined below); and

WHEREAS, the Parties wish for Employee to receive certain separation benefits from the
Company, which benefits are conditioned upon Employee’s entry into this Agreement and
non-revocation in the time provided to do so; and

WHEREAS, the Parties wish to resolve any and all claims that Employee may have against the
Company and the other Company Parties (as defined below), including without limitation any claims
that Employee may have arising out of his employment or the end of such employment.

NOW, THEREFORE, in consideration of the promises and benefits set forth herein, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by
the Parties, the Parties agree as follows:

1. Separation from Employment. The Parties acknowledge and agree that the last day of
Employee’s employment with the Company was October 10, 2013 (the “Separation Date”) and that, as of
the Separation Date, Employee was no longer employed by the Company or any other Company Party (as
defined below).

2. Separation Payment and Benefits. Provided that Employee executes this Agreement and
returns it to the Company so that it is received no later than November 1, 2013, and does not
exercise his revocation rights pursuant to Section 10 below and abides by his continuing
obligations hereunder, then the Company shall:

(a) Provide Employee with a lump sum payment equal to $118,750, less applicable taxes
and withholdings (the “Separation Payment”);

(b) Cause a total of 32,373 restricted shares of the common stock of the Company,
$0.001 par value per share (“Common Stock”) (such restricted shares, the “Accelerated
Restricted Shares”) currently held by Employee and granted pursuant to the Endeavour
International Corporation 2010 Stock Incentive Plan (the “Plan”) (which shall include 9,860
restricted shares granted on January 3, 2011, 9,893 restricted shares granted on January 3,
2012 and 12,620 restricted shares granted on January 2, 2013) to become fully vested,
subject to applicable taxes and withholdings (such vesting of the Accelerated Restricted
Shares, the “Vesting Benefit” and, together with the Separation Payment, the “Separation
Benefits”); and

(c) for a period of twenty-four (24) months following the Separation Date, continue to
provide Employee access to U.S. and U.K. tax consultation and tax return preparation
services with respect to the tax years 2013 and 2014 consistent with such services that were
provided to Employee prior to the Separation Date.

3. Timing of Separation Benefits. Subject to the terms of this Agreement (including
Employee’s execution and non-revocation of this Agreement and Employee’s continued compliance with
Sections 7, 8, 14, 18, 19 and 20 below), the Separation Payment shall be provided to Employee on
the first regular payroll date to occur following the end of the Release Revocation Period, and the
Vesting Benefit shall be effective as of, the first business day following the three month
anniversary of the Separation Date.

4. Relocation Expenses and Vacation Pay.

(a) The Company shall reimburse Employee for the actual costs incurred by Employee for:

(i) the purchase of two business class air tickets from the United Kingdom to the
United States up to a maximum aggregate amount of $15,000 (the “Air Fare Expense
Reimbursement”); and

(ii) the cost of moving Employee’s personal possessions from the United Kingdom to the
United States up to a maximum aggregate amount of $15,000 (the “Relocation Expense
Reimbursement” and, together with the Air Fare Expense Reimbursement, the “Expense
Reimbursements”),

provided that any such costs are incurred prior to December 1, 2013 and Employee submits an
itemized claim for reimbursement, together with such supporting documentation as the Company may
reasonably require, prior to December 15, 2013. Any such reimbursement of expenses shall be made
by the Company upon or as soon as practicable following receipt of such claim and documentation
(but in any event not later than the close of Employee’s taxable year in which the Separation Date
occurs).

(b) The Company shall, within 10 days following the Separation Date, provide Employee with a
payment, less applicable taxes and withholdings, for accrued but untaken vacation pay as of the
Separation Date (the “Vacation Payment”).

5. Satisfaction of All Leaves and Payment Amounts; Prior Rights and Obligations. In entering
into this Agreement, Employee expressly acknowledges and agrees that Employee has received all
leaves (paid and unpaid) to which Employee was entitled during Employee’s employment and Employee
has received all wages and been paid all sums that Employee is owed or ever could be owed by the
Company and the other Company Parties (other than the Separation Payment, the Expense
Reimbursements and the Vacation Payment). Employee further acknowledges and agrees that, with the
exception of any amounts owed to him pursuant to this Agreement, he has no entitlement to any
further sums from the Company or any other Company Party, including, but not limited to, any
bonuses or other payments. Employee further acknowledges and agrees that, aside from the
Accelerated Restricted Shares and those certain stock options with respect to Common Stock that are
vested as of the Separation Date (the “Vested Stock Options”), he has no further rights or
interests with respect to any shares or other ownership interests in any Company Party, as it is
acknowledged and agreed that effective as of the Separation Date, Employee has forfeited all awards
or other interests in respect of the Company’s stock other than the Accelerated Restricted Shares
and the Vested Stock Options. Without limiting the generality of the foregoing, Employee expressly
acknowledges that he has forfeited all shares of restricted stock (other than the Accelerated
Restricted Shares), all cash performance awards and performance unit awards, all stock options
(other than the Vested Stock Options) and all other awards or other interests granted pursuant to
the Plan or any predecessor thereto. Subject to the terms of the Plan, Employee shall be entitled
to exercise the Vested Stock Options through November 3, 2013 in the case of all such Vested Stock
Options that were granted on November 3, 2008 and the one-year anniversary of the Separation Date
in the case of all such Vested Stock Options that were granted on January 2, 2009. Other than as
expressly set forth above, Employee expressly acknowledges that he has been provided all rights and
benefits pursuant to the Plan, all award agreements thereunder and pursuant to any other
compensation or benefit plan of any Company Party.

6. Release of Liability for Claims.

(a) For good and valuable consideration, including the Company’s agreement to provide the
consideration to Employee set forth in Section 2 of this Agreement, Employee hereby releases,
discharges and forever acquits the Company, its affiliates and subsidiaries, and their respective
past, present and future subsidiaries, affiliates, stockholders, members, partners, directors,
officers, managers, employees, agents, attorneys, heirs, successors and representatives, in their
personal and representative capacities, as well as all employee benefit plans maintained by the
Company or any of its affiliates or subsidiaries and all fiduciaries and administrators of any such
plans, in their personal and representative capacities (collectively, the “Company Parties”), from
liability for, and hereby waives, any and all claims, damages, or causes of action of any kind
related to Employee’s employment with any Company Party, the termination of such employment, and
any other acts or omissions related to any matter on or prior to the date that Employee executes
this Agreement, including without limitation any alleged violation through such date of: (i) the
Age Discrimination in Employment Act, as amended (including as amended by the Older Workers Benefit
Protection Act); (ii) Title VII of the Civil Rights Act of 1964, as amended; (iii) the Civil Rights
Act of 1991; (iv) Sections 1981 through 1988 of Title 42 of the United States Code, as amended;
(v) the Employee Retirement Income Security Act of 1974, as amended (“ERISA”); (vi) the Immigration
Reform Control Act, as amended; (vii) the Americans with Disabilities Act of 1990, as amended;
(viii) the National Labor Relations Act, as amended; (ix) the Occupational Safety and Health Act,
as amended; (x) the Family and Medical Leave Act of 1993; (xi) any foreign, federal, state or local
anti-discrimination or anti-retaliation law; (xii) any foreign, federal, state or local wage and
hour law; (xiv) any other foreign, local, state or federal law, regulation or ordinance; (xv) any
public policy, contract, tort, or common law claim or claim for fiduciary duty or breach thereof or
claim for fraud or misrepresentation or fraud of any kind; (xvi) any allegation for costs, fees, or
other expenses including attorneys’ fees incurred in these matters; (xvii) any and all rights,
benefits or claims Employee may have under any employment contract, incentive compensation plan or
equity-based plan with any Company Party or to any ownership interest in any Company Party (other
than with respect to the interests that may vest pursuant to Section 2(b) above); and (xviii) any
claim for compensation or benefits of any kind not expressly set forth in this Agreement
(collectively, the “Released Claims”).

(b) In no event shall the Released Claims include any claim which arises after the date that
Employee signs this Agreement or any claim to already vested benefits under an employee benefit
plan of the Company that is subject to ERISA.

(c) Further notwithstanding this release of liability, nothing in this Agreement prevents
Employee from filing any non-legally waivable claim (including a challenge to the validity of this
Agreement) with the Equal Employment Opportunity Commission (“EEOC”) or comparable state or local
agency or participating in any investigation or proceeding conducted by the EEOC or comparable
state or local agency; however, Employee understands and agrees that Employee is waiving any and
all rights to recover any monetary or personal relief or recover as a result of such EEOC or
comparable state or local agency or proceeding or subsequent legal actions. THIS RELEASE INCLUDES
MATTERS ATTRIBUTABLE TO THE SOLE OR PARTIAL NEGLIGENCE (WHETHER GROSS OR SIMPLE) OR OTHER FAULT,
INCLUDING STRICT LIABILITY, OF ANY OF THE COMPANY PARTIES.

7. Representation About Claims. Employee represents and warrants that as of the date on which
Employee signed this Agreement, he has not filed, and Employee covenants that he will not file, any
claims, complaints, charges, or lawsuits against any of the Company Parties with any governmental
agency or with any state, federal or foreign court, tribunal or arbitrator for or with respect to a
matter, claim, or incident, which occurred or arose out of one or more occurrences that took place
on or prior to the date on which Employee signed this Agreement. Employee further represents and
warrants that he has made no assignment, sale, delivery, transfer or conveyance of any rights
Employee has asserted or may have against any of the Company Parties with respect to any Released
Claim.

8. London Property. Employee represents and warrants that he has not : (a) agreed to or
attempted to negotiate any amendment or variation to the terms set forth in that certain Tenancy
Agreement relating to the property at 24 Thames Quay, Chelsea Harbour, London SW10 0UY (the
“Property”) between Eammon Evans and Endeavour Energy UK Limited made on June 29, 2011 (the
“Tenancy Agreement”); or (b) bound any Company Party to any terms or obligations relating to the
Property other than as expressly set forth in the Tenancy Agreement. Employee expressly covenants
that he shall take no action referenced in parts 7(a) or (b) above and Employee expressly
acknowledges and agrees that he has no such authority to undertake any such action. Employee
further represents and warrants that he has not committed, and covenants that he will not commit,
any act or omission that would cause Endeavour Energy UK Limited to be in breach of any of the
terms of the Tenancy Agreement or that would otherwise create any obligation or liability for any
Company Party pursuant to the Tenancy Agreement or relating to the Property. Employee agrees that
he shall fully vacate the Property on or before November 10, 2013 and leave the Property in good
condition. Immediately upon vacating the Property, Employee shall return to the Company all copies
of keys and security access cards relating to the Property.

9. Employee’s Acknowledgments. By executing and delivering this Agreement, Employee expressly
acknowledges that:

(a) He has carefully read this Agreement;

	 	(b)	 	He has had at least twenty-one (21) days to
consider this Agreement before the execution and delivery hereof to the
Company;

	 	(c)	 	He has been and hereby is advised in writing to
discuss this Agreement with an attorney of his choice and that he has
had adequate opportunity to do so prior to executing this Agreement;

	 	(d)	 	He fully understands the final and binding effect
of this Agreement; the only promises made to him to sign this Agreement
are those stated herein; and he is signing this Agreement knowingly,
voluntarily and of his own free will, and that he understands and agrees
to each of the terms of this Agreement;

	 	(e)	 	The only matters relied upon by him and causing
him to sign this Agreement are the provisions set forth in writing
within the four corners of this Agreement; and

	 	(f)	 	The Company has not provided any tax or legal
advice regarding this Agreement and he has had the opportunity to
receive sufficient tax and legal advice from advisors of his own
choosing such that he enters into this Agreement with full understanding
of the tax and legal implications thereof.

10. Revocation Rights. Notwithstanding the initial effectiveness of this Agreement, Employee
may revoke the delivery (and therefore the effectiveness) of this Agreement within the seven-day
period beginning on the date Employee executes this Agreement (such seven day period being referred
to herein as the “Release Revocation Period”).  To be effective, such revocation must be in writing
signed by Employee and must be received by the Company, care of Julie Ferro, Vice President, Human
Resources and/or e-mail: julie.ferro@endeavourcorp.com before 11:59 p.m., Houston, Texas
time, on the last day of the Release Revocation Period.  If an effective revocation is delivered
in the foregoing manner and timeframe, this Agreement shall be of no force or effect and shall be
null and void ab initio.  No consideration shall be provided pursuant to Section 2 of this
Agreement if this Agreement is revoked by Employee in the foregoing manner.

11. Applicable Law. This Agreement is entered into under, and shall be governed for all
purposes by, the laws of the State of Texas without reference to the principles of conflicts of law
thereof.

12. Counterparts. This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original, but all of which together will constitute one and the same
Agreement.

13. Amendment; Entire Agreement. This Agreement may not be changed orally but only by an
agreement in writing agreed to and signed by the Party to be charged. This Agreement constitutes
the entire agreement of the Parties with regard to the subject matter hereof; provided, however,
the Parties acknowledge and agree that this Agreement does not supersede, but instead complements,
all agreements between the Parties with regard to the protection of confidential information and
non-solicitation of employees (including, without limitation, all such agreements contained within
the Company’s Code of Business Conduct and the documents referenced therein).

14. Non-Disparagement. Employee agrees to refrain from making any public statements (or
authorizing any statements to be reported as being attributed to him) that are critical,
disparaging or derogatory about, or which injure the reputation of, any Company Party.

15. Third-Party Beneficiaries. Employee expressly acknowledges and agrees that each Company
Party that is not a signatory to this Agreement shall be a third-party beneficiary of Sections 5,
6, 8 14, 18, 19 and 20 of this Agreement.

16. Severability. Any term or provision of this Agreement that renders such term or provision
or any other term or provision hereof invalid or unenforceable in any respect shall be modified to
the extent necessary to avoid rendering such term or provision invalid or unenforceable, and such
modification shall be accomplished in the manner that most nearly preserves the benefit of the
Parties’ bargain hereunder.

17. Withholding of Taxes and Other Deductions. The Company may withhold from any benefits and
payments made pursuant to this Agreement all federal, state, local and other taxes and withholdings
as may be required pursuant to any law or governmental regulation or ruling.

18. Employee’s Cooperation. Employee covenants that, between the Separation Date through the
third month anniversary of the Separation Date, as may be reasonably requested by the Company from
time to time, he shall cooperate with the Company in: (a) answering questions and providing
assistance with regard to the transition of his former duties; and (b) providing support and
assistance to any Company Party with regard to any pending matters occurring on or prior to the
Separation Date.

19. Non-Solicitation. Employee acknowledges and agrees that, in awarding the restricted
stock, and in causing providing the Vesting Benefit in Section 2(b) above, the Company has linked
Employee’s interests to its long-term business interests and goodwill and, in the course of his
employment, the Company provided Employee with its confidential information. In order to protect
the Company Parties’ confidential information and goodwill, and as an incentive for the Company to
enter into this Agreement, Employee expressly promises that between the Separation Date and the
date that is one year after the Separation Date, he will not, directly or indirectly, engage or
employ, or solicit or contact with a view to the engagement or employment of, any person who is an
officer, director or employee of the Company or any other Company Party. Employee acknowledges and
agrees that the restrictions set forth in this Section 19 are reasonable in all respects and no
greater than necessary to protect the Company Parties’ legitimate business interests.
Nevertheless, if any of the restrictions set forth in this Section 19 are found by a court or
arbitrator of competent jurisdiction to be unreasonable, or overly broad, or otherwise
unenforceable, the Parties intend for the restrictions set forth in this Section 19 to be modified
by the court or arbitrator making such determination so as to be reasonable and enforceable and, as
so modified, to be fully enforced. By agreeing to this contractual modification prospectively at
this time, the Parties intend to make this Section 19 enforceable under all applicable laws so that
this section as prospectively modified shall remain in full force and effect and shall not be
rendered void or illegal. The Parties further agree and acknowledge that, in the event of a breach
or threatened breach of any of the provisions of this Section 19 or Section 20 below, the affected
Company Party shall be entitled to immediate injunctive relief, as any such breach would cause the
Company Parties irreparable injury for which it would have no adequate remedy at law. Nothing
herein shall be construed so as to prohibit any Company Party from pursuing or obtaining any other
remedies available to it hereunder, at law or in equity for any such breach or threatened breach.

20. Confidential Information; Return of Property. In addition to all other obligations that
Employee owes with regard to the protection of the Company Parties’ confidential information
(including, without limitation, such obligations as are set forth in the Company’s Code of Business
Conduct and the documents referenced therein), Employee agrees to the provisions of this Section
20. Employee expressly acknowledges, that, while performing his duties on behalf of the Company
and as a result of the nature of the Company’s business, he has had access to and come into contact
with Confidential Information (as defined below). Employee promises that, at all times after the
Separation Date, he shall protect, keep and treat as confidential all of the Confidential
Information, he shall not use or disclose any Confidential Information to anyone (other than in the
for the benefit of the Company or with the written consent of the Chief Executive Officer for the
benefit of the Company), and he shall not make any use of any Confidential Information for his own
personal purposes or for the benefit of anyone other than the Company and its affiliates. The term
“Confidential Information” means any and all information relating to the business and affairs of
the Company or any of its affiliates, including for example but not limited to, the following: (a)
technical information such as geological, geophysical, reserve, seismic, log, engineering, leasing,
well data or analyses, and environmental information and any other explorations and production
data; (b) business information such as corporate strategies, actual or proposed business
development plans, actual or proposed acquisitions or divestitures, terms of actual or proposed
financial arrangements with third parties, management discussions, financial modeling, land
schedules, leasing plans, lease analyses, asset purchase or sale agreements, joint operating
agreements, actual or proposed contracts, operations, joint venture dealings and analysis, and
negotiating strategies; (d) financial information such as costs, profits, revenues, budgets, cash
flow analysis, debt or equity analyses, proposed debt or equity offerings, business forecasts,
operating data, financing activities and terms and financial spreadsheets; (e) employee information
such as salaries, bonus compensation, skills, weaknesses and abilities; (f) joint venture
information relating to any oil and gas properties being operated jointly with third parties, which
may or may not have their own confidentiality requirements pursuant to joint operating agreements;
(g) trade secrets or information not generally known in the industry; (g) information given to the
Company or any of its affiliates in confidence by third parties pursuant to agreements or
obligations of confidentiality; (h) trade secrets or information not generally known in the
industry; (i) information relating to the business of oil and gas exploration and production; (j)
information not previously disclosed as a matter of public record by filings made by the Company
and/or its affiliates with the Securities and Exchange Commission; (k) information created by
Employee or by others; and (l) all documents, notes, memos, analyses, computer files, emails or
other records containing or derived from such Confidential Information. Notwithstanding the
foregoing, Confidential Information shall not include any information that is known to the general
public or made available to the general public other than through an action of Employee or anyone
acting at his direction. Further notwithstanding the foregoing, nothing in this Agreement shall
prevent Employee from making any disclosure that he is legally compelled to make by deposition,
interrogatory, request for documents, subpoena, civil investigative demand, order of a court of
competent jurisdiction, or similar process, or otherwise by law; provided, however, that, prior to
any such disclosure, Employee shall provide the Company with prompt notice of such requirements so
that the Company or other applicable Company Party may seek a protective order or other appropriate
remedy in order to prevent or limit such disclosure. Employee represents and warrants that he has
returned to the Company all Confidential Information in his possession, custody or control and that
he has not retained any copies thereof. Employee further represents and warrants that he has
returned to the Company all property belonging to the Company and each other Company Party,
including without limitation all computer files, electronically stored information and other
materials or other property provided to him by any Company Party in the course of his employment
including, without limitation, cell phones, mobile devices, computers/laptops, credit cards, keys
and access cards.

21. Recoupment of Separation Benefits. The promises made by Employee pursuant to Sections 7,
8, 14, 18, 19 and 20 are a material inducement for the Company to enter this Agreement. In the
event that Employee breaches any of the covenants therein, the Company shall have the right to
recover, and Employee shall be obligated to repay, all Separation Benefits (or, in the case of the
Accelerated Restricted Shares, the cash value thereof if such shares are no longer held by
Employee). The Company’s right to recover the Separation Benefits as set forth in the previous
sentence shall not be its exclusive remedy in the event of a breach by Employee, as the Company
shall also be entitled to pursue and obtain all other remedies available to it, at law and equity.

[Signature page follows]IN WITNESS WHEREOF, the Parties have executed this Agreement,
effective for all purposes as provided above.

ENDEAVOUR INTERNATIONAL, INC.

By: /s/ William L. Transier

Name: William L. Transier

Title: CEO

CARL D. GRENZ:

/s/ Carl D. Grenz

Carl D. Grenz

Date: 16th October 2013dara_ex41.htm

Exhibit 4.1

 

NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

PURSUANT TO THE TERMS OF SECTION 2 OF THIS WARRANT, ALL OR A PORTION OF THIS WARRANT MAY HAVE BEEN EXERCISED, AND THEREFORE THE ACTUAL NUMBER OF WARRANT SHARES REPRESENTED BY THIS WARRANT MAY BE LESS THAN THE AMOUNT SET FORTH ON THE FACE HEREOF.

 

COMMON STOCK PURCHASE WARRANT

 DARA BIOSCIENCES, INC.

 

 

Warrant Shares: _______                                                                                                                                                                                                 Initial Exercise Date: April ___, 2014

 

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, _____________ or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after April___, 20141 (the “Initial Exercise Date”) and on or prior to the close of business on April__, 20192 (the “Termination Date”) but not thereafter, to subscribe for and purchase from DARA Bioscience, Inc., a Delaware corporation (the “Company”), up to ______ shares (the “Warrant Shares”) of Common Stock.  The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

 

Section 1.    Definitions.  Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase Agreement (the “Purchase Agreement”), dated October 22, 2013, among the Company and the purchasers signatory thereto.

 

Section 2.     Exercise.

 

        a) Exercise of Warrant.  Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile copy of the Notice of Exercise Form annexed hereto (the date such Notice of Exercise is received by the Company, the “Warrant Exercise Date”); and, within three (3) Trading Days of the Warrant Exercise Date, the Company shall have received payment of the aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank or, if available, pursuant to the cashless exercise procedure specified in Section 2(c) below.  No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise form be required.   Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date the final Notice of Exercise is delivered to the Company.  Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased.  The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases.  The Company shall deliver any objection to any Notice of Exercise Form within one (1) Business Day of receipt of such notice.  The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

 

        b) Exercise Price.  The exercise price per share of the Common Stock under this Warrant shall be $0.56, subject to adjustment hereunder (the “Exercise Price”).

 

        c) Cashless Exercise.  If at the time of exercise hereof there is no effective registration statement registering, or the prospectus contained therein is not available for the issuance of the Warrant Shares to the Holder and all of the Warrant Shares are not then registered for resale by Holder into the market at market prices from time to time on an effective registration statement for use on a continuous basis (or the prospectus contained therein is not available for use), then this Warrant may only be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

 

	 	(A) 	 = 	the VWAP on the Trading Day immediately preceding the date on which Holder elects to exercise this Warrant by means of a “cashless exercise,” as set forth in the applicable Notice of Exercise;
	 	 	 	 
	 	(B)	 = 	the Exercise Price of this Warrant, as adjusted hereunder; and
	 	 	 	 
	 	(X)	 = 	the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

 

________________________________________

1 6 month anniversary of closing date.

2 Five and one-half year anniversary

  

  

      

       “VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time), (b)  if the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board, (c) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holders of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

          d)  Mechanics of Exercise.

 

i. Delivery of Certificates Upon Exercise.  Certificates for shares purchased hereunder shall be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s prime broker with the Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by Holder or (B) this Warrant is being exercised via cashless exercise, and otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise by the date that is three (3) Trading Days after the Warrant Exercise Date (such date, the “Warrant Share Delivery Date”) provided that the Holder has paid any required Exercise Price for the portion of this Warrant being exercised on or prior to such Warrant Share Delivery Date.  This Warrant shall be deemed to have been exercised on the Warrant Exercise Date.  The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the Warrant Exercise Date, with payment to the Company of the Exercise Price (or by cashless exercise, if permitted) and all taxes required to be paid by the Holder, if any, pursuant to Section 2(d)(vi) prior to the issuance of such shares, having been paid.

 

ii. Delivery of New Warrants Upon Exercise.  If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

 

iii. Rescission Rights.  If the Company fails to cause the Transfer Agent to transmit to the Holder a certificate or the certificates representing the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then, the Holder will have the right to rescind such exercise.

 

iv. Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Exercise.  In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder a certificate or the certificates representing the Warrant Shares pursuant to an exercise on or before the Warrant Share Delivery Date provided that the Holder has paid any required Exercise Price for the portion of this Warrant being exercised on or prior to such Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder.  For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss.  Nothing herein shall limit a 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 upon exercise of the Warrant as required pursuant to the terms hereof.

 

v. No Fractional Shares or Scrip.  No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant.  As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.

 

  

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vi. Charges, Taxes and Expenses.  Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.  The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise.

 

vii. Closing of Books.  The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

 

e) Holder’s Exercise Limitations.  The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other  Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith.   To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination.   In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.  For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing 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 Warrant, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported.  The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant.  The Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply.  Any such increase or decrease will not be effective until the 61st day after such notice is delivered to the Company.  The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

 

  

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Section 3.   Certain Adjustments.

 

a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged.  Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

 b) [RESERVED]

 

             c) Subsequent Rights Offerings.  In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares 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 Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) 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, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

             d) Pro Rata Distributions.  During such time as this Warrant is outstanding, 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 or options 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 Warrant, then, in each such case, the Holder shall be entitled following partial or complete exercise of this Warrant 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 such partial or complete exercise of this Warrant, as applicable (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of 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, to the extent that the Holder's right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).  In addition, to the extent that this Warrant has not been partially or completed exercised at the time of such Distribution, such portion of the  Distribution shall be held in abeyance for the benefit of the Holder until the Holder has exercised this Warrant.

 

  

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             e) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person (other than for the purpose of changing the name of the Company or changing the Company’s jurisdiction of incorporation to another state within the United States), (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions, effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant).  For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.  If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction.  Notwithstanding anything to the contrary, in the event of a Fundamental Transaction that is (1) an all cash transaction (meaning (x) all outstanding shares of Common Stock prior to the Fundamental Transaction are converted into or  exchanged or tendered for cash or (y) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions for all cash consideration), (2) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the Exchange Act, or (3) a Fundamental Transaction involving a person or entity not traded on a national securities exchange or other established trading market, including, but not limited to, the NYSE, the NYSE MKT, the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market, the OTC QX, the OTC QB or the Over-the-Counter Bulletin Board (a “Non-listed Company”) in which all outstanding shares of Common Stock prior to the Fundamental Transaction are converted into or  exchanged or tendered for shares of such Non-listed Company, the Company or any Successor Entity (as defined below) shall, at the Holder’s option, exercisable at any time concurrently with, or within 30 days after, the consummation of the Fundamental Transaction, purchase this Warrant from the Holder by paying to the Holder an amount of cash equal to the Black Scholes Value of the remaining unexercised portion of this Warrant on the date of the consummation of such Fundamental Transaction.  “Black Scholes Value” means the value of this Warrant based on the Black and Scholes Option Pricing Model obtained from the “OV” function on Bloomberg, L.P. (“Bloomberg”) determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (C) the underlying price per share used in such calculation shall be the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date.  The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the holder of this Warrant, 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 which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the 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 Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such 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 which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such 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.

 

  

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f) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

 

g) Notice to Holder.

 

i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.  To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K.  The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 

Section 4.   Transfer of Warrant.

 

                                                 a) Transferability.  Subject to compliance with any applicable securities laws and the conditions set forth in Section 4(d) hereof and to the provisions of Section 4.16 of the Purchase Agreement, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer.  Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled.  Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date the Holder delivers an assignment form to the Company assigning this Warrant full.  The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

 

b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney.  Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the Initial Exercise Date set forth on the first page of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.

 

c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time.  The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

 

                                                d) Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions or current public information requirements pursuant to Rule 144, the Company may require, as a condition of allowing such transfer, that the Holder or transferee of this Warrant, as the case may be, comply with the provisions of Section 5.7 of the Purchase Agreement.

 

  

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                                              e) Representation by the Holder.  The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.

 

Section 5.      Miscellaneous.

 

a) No Rights as Stockholder Until Exercise.  This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3.

 

b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

 

c) Saturdays, Sundays, Holidays, etc.  If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day.

 

d) Authorized Shares.

 

The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant.  The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant.  The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed.  The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

 

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment.  Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.

 

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

 

e) Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Purchase Agreement.

 

f) Restrictions.  The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.

 

g) Nonwaiver and Expenses.  No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies.  Without limiting any other provision of this Warrant or the Purchase Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

 

  

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h) Notices.  Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement.

 

i) Limitation of Liability.  No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

 

j) Remedies.  The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant.  The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

 

k) Successors and Assigns.  Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder.  The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.

 

l) Amendment.  This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

 

m) Severability.  Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

 

             n) Headings.  The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

 

********************

(Signature Page Follow)

 

  

8

  

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

 

	 	
DARA BIOSCIENCES, INC. 

	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	 	Name 	 
	 	 	Title 	 
	 	 	 	 

  

9

  

NOTICE OF EXERCISE

TO:           DARA BIOSCIENCES, INC.

(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

 

(2) Payment shall take the form of (check applicable box):

 

[  ] in lawful money of the United States; or

 

[  ] [if permitted] the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).

 

(3) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:

 

_______________________________

The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery of a certificate to:

_______________________________

_______________________________

_______________________________

[SIGNATURE OF HOLDER]

Name of Investing Entity: ________________________________________________________________________

Signature of Authorized Signatory of Investing Entity: _________________________________________________

Name of Authorized Signatory: ___________________________________________________________________

Title of Authorized Signatory: ____________________________________________________________________

Date: ________________________________________________________________________________________

  

  

ASSIGNMENT FORM

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

FOR VALUE RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

_______________________________________________ whose address is

_______________________________________________________________.

_______________________________________________________________

Dated:  ______________, _______

Holder’s Signature:                                _____________________________

Holder’s Address:                                _____________________________

                 _____________________________

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