Document:

EX-10.10

 Exhibit 10.10 
  

 
 INDUSTRIES INC. 

FISCAL YEAR 20[    ] 

MANAGEMENT INCENTIVE PLAN 

 AEP INDUSTRIES INC. 

FISCAL YEAR 20[    ] MANAGEMENT INCENTIVE PLAN 

ADMINISTRATION 
 The Fiscal Year
20[    ] Management Incentive Plan (the “MIP” or “Plan”) will be administered by the Compensation Committee of the Board of Directors (the “Compensation Committee); provided, that,
the Compensation Committee may delegate any of the foregoing powers to the Chief Executive Officer (CEO) or the Chief Financial Officer (CFO) of the Company or the Board of Directors, if (i) such delegation would not limit the deductibility of
Plan awards under Section 162(m) of the Internal Revenue Code of 1986, as amended, or any successor law (“Section 162(m)”) or (ii) the Compensation Committee determines it is in the best interests of the Company not to
comply with the performance-based exception specified in Section 162(m) (the Compensation Committee, together with the CEO, CFO or Board to the extent delegated such powers pursuant to this section, the “Administrator”). 

The awards payable under the Plan may qualify as “performance-based compensation” within the meaning of Section 162(m), in which case the
Company’s payment of awards under the Plan are tax deductible. 
 Subject to the terms of the Plan, applicable law and the listing standards of the
Nasdaq Global Stock Market (or other national securities exchange, as applicable), the Administrator is authorized to interpret the Plan, to make, amend and rescind any rules and regulations relating to the Plan and to make all other determinations
necessary or advisable for the Plan’s administration, including, without limitation in order to comply with the performance-based exception of Section 162(m). Interpretation and construction of any provision of the Plan by the
Administrator will be final and conclusive. 
 PLAN OVERVIEW 

Subject to the Administrative Guidelines set forth herein, all employees of the Company are eligible to participate in the Plan and the Administrator will
determine which employees will be participants in the Plan (each employee so selected, a “Participant”). 
 Each Participant will have a
target incentive opportunity, stated as a percentage of salary (a “bonus target”). An earned bonus will be 0% to 200% of the individual’s bonus target based on MIP Adjusted EBITDA compared to the MIP Earnings Target. 

The performance goal for each Participant is dependent upon job classification, with the intent to capture that portion of the Company’s business the
performance of which a Participant can reasonably influence. Certain executive officers will have a performance goal related to the Company as a whole, while other Participants will have a performance goal related to various segments or divisions of
the Company’s operations. 

  
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 MIP EARNINGS TARGET AND MIP ADJUSTED EBITDA DEFINED 

The MIP Earnings Target is based upon budgeted MIP Adjusted EBITDA, plus an additional dollar amount (recommended by management based on subjective factors) to
further motivate MIP Participants. 
 MIP Adjusted EBITDA is defined as net income before interest expense, income taxes, depreciation and amortization,
discontinued operations, non-core business operating income, annual change in LIFO reserve, gain or loss on disposal of property, plant and equipment, non-operating income (expense) and share-based compensation expense, all as adjusted to remove
foreign exchange effect. 
 CALCULATION PROCEDURES FOR MIP ADJUSTED EBITDA 

The following procedures will be utilized in calculating MIP Adjusted EBITDA: 
  

	 	•	 	Extraordinary items outside the ordinary course of business, such as a gain (provision) for the sale or acquisition of assets or a business, will be excluded from MIP Adjusted EBITDA to the extent not included in the
MIP Earnings Target; provided, however, extraordinary items will be included in MIP Adjusted EBITDA to the extent of cash received. In addition, professional and legal fees and severance related to completed acquisitions and dispositions will be
excluded from MIP Adjusted EBITDA to the extent not contemplated by the MIP Earnings Target. 

  

	 	•	 	Amounts will be calculated in the business unit’s primary currency. In cases where “currency exchange rates” have an impact on business unit earnings, the exchange rate used to calculate the MIP Earnings
Target will be used to calculate MIP Adjusted EBITDA in order to eliminate the effect of currency exchange rate variations. 

  

	 	•	 	Accounting policy changes required by the U.S. Securities and Exchange Commission or the U.S. Financial Accounting Standards Board that are approved by such parties following the approval of the MIP Earnings Target will
not be utilized to calculate MIP Adjusted EBITDA. 

  

	 	•	 	Inter-unit management fees in effect on the date the MIP Earnings Target is approved by the Administrator will be included in MIP Adjusted EBITDA. 

 

	 	•	 	Inter-unit royalty fees in effect on the date the MIP Earnings Target is approved by the Administrator will be excluded from MIP Adjusted EBITDA. 

 

	 	•	 	Vendor pricing credits will be included in MIP Adjusted EBITDA in the fiscal year in which credits are earned, provided that the Company provides the Committee with sufficient and quantifiable support relating to such
credit amounts if such credits are not included in the fiscal year-end financial statements. Any vendor pricing credits included in MIP Adjusted EBITDA for a fiscal year will be excluded from MIP Adjusted EBITDA in the following fiscal year.

  
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 EARNED BONUS DETERMINATION 

An earned bonus will be 0% to 200% of the individual’s bonus target based on MIP Adjusted EBITDA compared to the MIP Earnings Target, as shown below: 

 
  
 

 
  

	 	•	 	The bonus target is earned for achieving 100% of the applicable MIP Earnings Target. 

  

	 	•	 	No bonus is earned for achieving less than 80% of the applicable MIP Earnings Target. 

  

	 	•	 	50% of the bonus target is earned for achieving 80% of the applicable MIP Earnings Target. 

  

	 	•	 	The maximum of 200% of the bonus target is earned for achieving 120% or more of the applicable MIP Earnings Target. 

  

	 	•	 	There is a linear increase in the earned bonus from threshold to budget and from budget to maximum, each based on the above graph. 

  

	 	•	 	Performance will be treated on an absolute basis (i.e., if the applicable MIP Earnings Target is a loss of $100, then MIP Adjusted EBITDA of a loss of $90 would be deemed the achievement of 110% of MIP Earnings Target).

  
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 The following sets forth a sample calculation if a Participant has a salary of $70,000 and a bonus target of 20%,
and the MIP Adjusted EBITDA is 110% of the MIP Earnings Target: 
  

					
	 Salary
	  	$	70,000	  
	 Bonus Target
	  	20%, or $	14,000	  
	 MIP Adjusted EBITDA as a % of MIP Earnings Target
	  	 	110	% 
	 % of Bonus Target Earned
	  	 	150	% 
	 Earned Bonus in $
	  	$	21,000	  
		  	  
	  
	 

 The maximum amount payable to any Participant with respect to an award under the Plan in any fiscal year is
$4,000,000. 
 NO SEPARATE INCENTIVE COMPONENTS FOR PARTICIPANTS 

In your prior employment or otherwise, you may have participated in an incentive program that included other subjective or critical performance measures such
as: 
  

			
	 •   Market Share
	  	 •   Sale of assets at an attractive price

		
	 •   Number or type of customers
	  	 •   Health and safety improvements

		
	 •   Quality
	  	 •   New sales/promotion tracking system

		
	 •   Customer satisfaction
	  	 •   New financial control system

		
	 •   New product introduction
	  	 •   Improved distribution system

 AEP believes that everyone in the Company should be motivated to perform in the best interests of the Company and that
additional, subjective performance measures are not necessary or appropriate for MIP purposes. 
 However, officers of the Company and the Administrator are
authorized under the Plan to reduce the earned bonus of any individual within a business unit whose activities during the period has been counterproductive to the efforts of the business unit or who has not, for other reasons, added to the
profit making goals of the Plan. 
 If you have any questions concerning the Plan, contact your manager or your Human Resources Manager. 

  
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 ADMINISTRATIVE GUIDELINES 

1. Base Salary for Bonus Calculations. Except as set forth in Sections 3, 4, 5, 6 and 7 below, a Participant’s annual Base Salary in effect for
fiscal 20[    ], as reflected in the Company’s payroll records on October 31, 20[    ], will be used to calculate the earned bonus. For purposes of clarity, no changes in annual Base Salary for
fiscal 20[    ], whether implemented on or prior to October 31, 20[    ], will be used to calculate the earned bonus. 

2. Eligibility. Except as specified in Section 6(b)(ii) and 7 below, a Participant must be an active employee as of October 31,
20[    ] and on the bonus payout date to be eligible to receive payment for an earned bonus under the Plan. 
 3. Pro Rata Bonus
Eligibility. Eligibility for a pro rata bonus is detailed in Sections 4, 5, 6, and 7 below. A pro rata bonus will apply changes in bonus targets and changes in performance goals on a pro rata basis. Further, a pro rata bonus will be earned only
if the applicable performance goal is satisfied for the applicable fiscal year. 
 4. New Employee Added During the Plan Period. For a new employee
who becomes a Participant in connection with such hire, the pro rata period will begin from the date of hire. 
  

	5.	Transfer or Promotion or Salary Adjustments During the Plan Period. 

 (a) Transfer of
Existing Employee. For an existing employee who is transferred to a new position which results in such employee becoming a Participant, the pro rata period will begin from the date of transfer. 

(b) Promotion or Salary Adjustment of Existing Employee. For an existing employee who was a Participant prior to a promotion or salary
adjustment and who continues to be a Participant thereafter, the earned bonus will be based on two pro rata periods: (i) from the beginning of the Plan period through the date immediately preceding such promotion or salary adjustment, and
(ii) from the date of such promotion or salary adjustment until the end of the Plan period, in each case based on the base salary, bonus targets and performance goals in effect as of the end of the applicable period. 

(c) Demotion of Existing Employee. For an existing employee who was a Participant and who is demoted such that the employee is no longer
a Participant thereafter, the pro rata period will end on the date immediately preceding such demotion based on the bonus target and performance goal in effect as of the end of the applicable period. 

6. Termination During the Plan Period. 

(a) Voluntary Termination. If a Participant’s employment is terminated due to a voluntary termination, including retirement, no
bonus will be earned by or paid to the Participant. 

  
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 (b) Involuntary Termination. (i) If a Participant’s employment is terminated due
to an involuntary termination (including, but not limited to, due to unsatisfactory performance or cause as determined by officers of the Company or the Administrator) other than due to job elimination or reorganization (as determined by officers of
the Company or the Administrator) or due to death or disability (as set forth in Section7 below), no bonus will be earned by or paid to the Participant. For purposes of the Plan, “cause” for termination means any violation of laws or
regulations or material violation of Company policies and procedures. 
 (ii) If a Participant’s employment is terminated due to an
involuntary termination due to job elimination or reorganization (as determined by officers of the Company or the Administrator), the bonus will be earned and paid on a pro rata basis. The pro rata period will be from the beginning of the Plan
period until the termination date. 
 7. Death or Disability During the Plan Period. If a Participant’s employment is terminated due to death,
the bonus will be earned and paid (to the estate of the Participant) on a pro rata basis. The pro rata period will be from the beginning of the Plan period until the date of death. 

A Participant’s disability of 30 calendar days or less will not have an impact on the Participant’s eligibility to earn a full bonus
under the Plan. 
 If a Participant’s disability lasts more than 30 calendar days, then a bonus may be earned only for fiscal quarters
in which the Participant works more than 60 calendar days and will be earned on a pro rata basis for days worked in the applicable fiscal quarter. 
 8.
Adding Participants to the Plan. New Participants may be added to the Plan during the fiscal year as recommended by the appropriate Vice President/Group Manager and with the approval of the CEO and/or CFO (although new officers of the Company
may only be added to the Plan by the Administrator). The criteria for participation will be based on both similar job classification as the list of current Participants in the Plan and a responsibility level commensurate with the Participant’s
ability to influence goal outcomes. Approval will be required for both the addition of a Participant to the Plan and the proposed participant’s bonus target. 

9. Timing of Payments. Financial results must be finalized as appropriate by the Company’s Vice President, Controller (or other person having
similar responsibilities) and the independent auditors before bonuses can be calculated and paid. Further, no payments will be made unless and until (i) for awards generally payable under the Plan, the Administrator certifies in writing or
resolves to approve payments generally in accordance with the Plan and (ii) for awards intended to qualify as performance-based compensation within the meaning of Section 162(m), the Committee certifies in writing that the applicable
performance goals were met for fiscal 20[    ]. 
 Earned bonuses will be paid in local currency as soon as possible
after the end of fiscal 20[    ], but no later than January 15, 20[    ]. 

  
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 For earned bonuses under Sections 5(c), 6(b)(ii) and 7, bonus payments will be made to such
Participants approximately at the same time as they are made to other Participants who continue to work for the Company through the end of the Plan period. 

10. All Plan Payments Subject to Discretion. Notwithstanding the attainment of financial results, all earned bonuses under the Plan are subject to
reduction or elimination by the Administrator prior to payment. For example, a reduction in any and all earned bonuses may be made if earnings are achieved in ways that are considered undesirable (such as reducing budgeted advertising expenditures
to the detriment of the business); see also, “—No Separate Incentive Components for Participants.” 

  
 - 7 -Exhibit 4.1

 

FORM OF FIRST CLOSING WARRANT

THIS WARRANT AND ANY COMMON STOCK ISSUED UPON THE EXERCISE OF THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM, AS EVIDENCED BY A LEGAL OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY TO SUCH EFFECT. NOTWITHSTANDING THE FOREGOING, THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.

COMMON STOCK PURCHASE WARRANT

Z TRIM HOLDINGS, INC.

 

	
Warrant Shares: _______

	
Initial Exercise Date:_______________:

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 the date hereof (the “Initial Exercise Date”) and on or prior to the close of business on the five (5) year anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from Z Trim Holdings, Inc., an Illinois corporation (the “Company”), up to ______ shares (as subject to adjustment hereunder, the “Warrant Shares”) of common stock, par value $0.0005 per share, of the Company (the “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).

This Warrant is being issued on the Initial Exercise Date pursuant to that certain Securities Purchase Agreement by and among the Company and the parties identified on the signature pages thereto, as amended, modified or supplemented from time to time, originally dated ___________, 2014 (the “Purchase Agreement”) and is one of a series of similar Warrants issued in connection with the Company’s Offering (as defined in the Purchase Agreement).

Section 1.           Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in the Purchase Agreement.

Section 2.           Exercise.

 

a)         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 (a “Notice of Exercise”). Within three (3) Trading Days following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is available and specified in the applicable Notice of Exercise. 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; provided that the records of the Company, absent manifest error, will be conclusive with respect to the number of Warrant Shares purchasable from time to time hereunder. The Company shall deliver any objection to any Notice of Exercise form within three (3) 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 $0.64, subject to adjustment hereunder (the “Exercise Price”). Except as where otherwise permitted in accordance with Section 2(c), this Warrant may only be exercised by means of payment by wire transfer or cashier’s check drawn on a United States bank.

c)         Cashless Exercise. If at the time of exercise hereof there is not in effect a registration statement covering the resale of the Warrant Shares, then the Holder may elect to exercise this Warrant in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a 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, in effect at the time of exercise; 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.

“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 principal Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (“Bloomberg”) (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 the OTC Markets Group, 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 Board of Directors of the Company and reasonably acceptable to the Holders of a simple majority of the Securities (on an as-converted basis), the fees and expenses of which shall be paid by the Company.

 

d)         Mechanics of Exercise.

i.           Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to 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 registering the resale of the Warrant Shares by Holder or (B) this Warrant is being exercised via cashless exercise (or if either of the conditions set forth in Section 2(d)(i)(A) or (B) are not met, then 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 latest of (I) the delivery to the Company of the Notice of Exercise, (II) surrender of this Warrant (if required by the Company’s Transfer Agent) and (III) payment of the aggregate Exercise Price as set forth above (except if exercised by cashless exercise pursuant hereto) (such date, the “Warrant Share Delivery 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 date the Warrant Share Delivery Date.

ii.          Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the 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 its Transfer Agent to transmit to the Holder 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 Warrant Shares Upon Exercise.  In addition to any other rights available to the Holder, if the Company fails for any reason to deliver to the Holder any Warrant Shares (without restrictive  legend if an Unrestricted Condition (as defined Section 4.1(c) of the Purchase Agreement) is met) pursuant Section 2(d)(i) on or before the Warrant Share Delivery Date, and if after such date at any time the Warrant Shares are eligible for quotation  or are listed for trading on the Trading Market, and if after such Warrant Share Delivery Date and continued failure to deliver the Warrant Shares (without restrictive legend if an Unrestricted Condition is met), the Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm purchases, shares of Common Stock to deliver in satisfaction of a sale by such Holder of the Warrant Shares which the Holder was entitled to receive upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder (in addition to any remedies available to or elected by the Holder) the amount 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 product of (1) the aggregate number of Warrant Shares that such Holder was entitled to receive from the exercise at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including brokerage commissions, if any) giving rise to such purchase obligation 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 the exercise will be deemed rescinded) or deliver to the Holder the number of Warrant Shares that would have been issued had the Company timely complied with its delivery requirements under Section 2(d)(i). For example, if the Holder (or his brokerage firm) purchases Common Stock in the open market having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of this Warrant with respect to which the actual aggregate sale price (including any brokerage commissions) giving rise to such purchase obligation was $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.  Such funds shall be provided to the Holder by the Company within five (5) Trading Days from receipt by the Company of proof by the Holder of funds owned to the Holder resulting from a Buy-In.  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 the Warrant Shares (without restrictive legend if an Unrestricted Condition is met).

 

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.

vi.         Charges, Taxes and Expenses. Issuance of 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 Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares 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 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.

viii.           Partial Liquidated Damages.  The Company understands and agrees that a delay in the delivery of Warrant Shares beyond the Warrant Share Delivery Date (free from any restrictive legend if an Unrestricted Condition is met), could result in economic loss to the Holder.  If in the case of an exercise of this Warrant, such DWAC transfer or certificate(s) are not delivered to or as directed by the then Holder (without restrictive legend if an Unrestricted Condition is met), by the Warrant Share Delivery Date for the number of Warrant Shares such Holder is entitled to receive pursuant to a Notice of Exercise, the Company shall pay to such Holder, in cash, an amount per Trading Day for each Trading Day during a Failure to Deliver Warrant Shares Period (as defined below), equal to the greater of (I) (A) 1% of the VWAP for the Warrant Shares sought to by the Holder hereof to be purchased by exercise of this Warrant pursuant to the Notice of Exercise for each of the first five (5) Trading Days after the Warrant Share Delivery Date, and (B) 2% of such amount for each Trading Day thereafter, and (II) $1,500 per Trading Day (which amount shall constitute as partial liquidated damages and not a penalty) (“Partial Liquidated Damages”).  Notwithstanding anything to the contrary contained herein or elsewhere, the Holder shall be entitled to withdraw a Notice of Exercise, and upon such withdrawal, the Company shall only be obligated to pay the Partial Liquidated Damages through and including the date the Notice of Exercise is withdrawn.  “A Failure to Deliver Warrant Shares Period” shall mean each and every Trading Day commencing on the first (1st) Trading Day after the Warrant Share Delivery Date that any Warrant Shares required to be delivered to the Holder pursuant to a Notice of Exercise are either not received by such Holder and/or are received but have a restrictive legend on any certificate representing the Warrant Shares if an Unrestricted Condition is met, through and including the Trading Day on which such Holder receives the all (i) Warrant Shares such Holder is entitled to receive based upon its Notice of Exercise without any restrictive (provided an Unrestricted Condition is met).  Partial Liquidated Damages shall be paid to the Holder no later than the fifth (5th) calendar day of the month following the month in which they accrue.

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)         Anti-Dilution. If, at any time during while this Warrant is outstanding,  the Company sells or grants any option to purchase, or sells or grants any right to reprice or otherwise dispose of or issue (or announces any offer, sale, grant or any option to purchase or dispose of) any Common Stock or Common Stock Equivalents, (i) at an effective price per share less than the Exercise Price then in effect (such lower price, the “Base Share Price,” and each such issuance during the Adjustment Period collectively, a “Dilutive Issuance”) (it being understood and agreed that if the holder of the Common Stock or Common Stock Equivalents so issued during the Adjustment Period shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance at such effective price) then simultaneously with the consummation of each Dilutive Issuance the Exercise Price shall be reduced to equal the Base Share Price and the number of Warrant Shares issuable hereunder shall be increased such that the aggregate Exercise Price payable hereunder, after taking into account the decrease in the Exercise Price, shall be equal to the aggregate Exercise Price prior to such adjustment. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued during the Adjustment Period. Notwithstanding the foregoing, no adjustments shall be made, paid or issued under this Section 3(b) in respect of an Exempt Issuance (defined below). The Company shall notify the Holder, in writing, no later than the Trading Day following the issuance or deemed issuance of any Common Stock or Common Stock Equivalents subject to this Section 3(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “Dilutive Issuance Notice”). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 3(b), upon the occurrence of any Dilutive Issuance, the Holder is entitled to exercise the Warrant at the reduced Exercise Price and to receive a number of Warrant Shares based upon the reduced Exercise Price regardless of whether the Holder accurately refers to the adjusted Exercise Price in the Notice of Exercise. “Exempt Issuance” means the issuance of (i) shares of Common Stock or options to employees, officers, directors, consultants or advisors of the Company pursuant to any stock or option plan duly adopted for such purpose by a majority of the non-employee members of the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose, (ii) Preferreds and Warrants in connection with the Offering (as defined in the Purchase Agreement), including upon conversion of any existing notes and securities upon the exercise, exchange, conversion or adjustment of such Preferreds and Warrants pursuant to the terms thereof, (iii) shares of Common Stock issued and outstanding on the Initial Exercise Date or issuable upon conversion of convertible securities outstanding on the Initial Exercise Date or securities issuable pursuant to agreements to which the Company is a party as of the Initial Exercise Date (and including any issuances of securities pursuant to antidilution provisions of any such securities), provided that such securities and such agreements to issue securities have not been amended since the Initial Exercise Date to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities, (iv) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided that any such issuance shall only be to a Person (or to the equityholders of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Company and shall provide to the Company additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities, (v) restricted securities for fair market value, from time to time, for the payment of services or to vendors who are not Affiliates of the Company and (vi) shares of Common Stock issued in connection with a one-time warrant exchange at par value to be offered to all existing warrant holders with warrants outstanding prior to this Offering (the “Warrant Exchange”).

 

c)         Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time during which this Warrant is outstanding the Company grants, issues or sells any Common Stock Equivalents or other 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, any limitation in Section 2(e)) 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 any limitation in Section 2(e), 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 any limitation in Section 2(e)).  The provisions of this Section 3(c) will not apply to any grant, issuance or sale of Common Stock Equivalents or other rights to purchase stock, warrants, securities or other property of the Company which is not made pro rata to the record holders of any class of shares of Common Stock.

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 to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof) 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.

 

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, (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, or (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) 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, (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, including, but not limited to, the NYSE MKT, the Nasdaq Global Select Market, the Nasdaq Global Market, or the Nasdaq Capital Market, the Company or any Successor Entity (as defined below) shall, at the option of the Holder or the Company or any Successor Entity, 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 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 in accordance with the provisions of this Section 3(e), and 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 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). 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.

 

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 any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.  The Company shall, upon the written request at any time of any Holder of a Warrant, furnish or cause to be furnished to such Holder a certificate setting forth (i) such adjustments and readjustments, (ii) the Exercise Price at the time in effect, and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the exercise of the Warrant.

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 10 Business 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, 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.           Compliance with Securities Laws.

The Holder of this Warrant acknowledges that this Warrant is being acquired solely for the Holder’s own account and not as a nominee for any other party, and for investment and not with a view to the distribution hereof. This Warrant and any Warrant issued in substitution or replacement therefor shall be stamped or imprinted with a legend in substantially the following form:

“THIS WARRANT AND ANY COMMON SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM, AS EVIDENCED BY A LEGAL OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY TO SUCH EFFECT. NOTWITHSTANDING THE FOREGOING, THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS WARRANT MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.”

 

Section 5.           Transfer of Warrant.

a)         Transferability. Subject to compliance with applicable securities laws and the conditions set forth in Section 5(d) hereof and to the provisions of Section 4.1 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. 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.  Any such transfer/assign requested by a Holder of this Warrant shall be made by the Company to the transferee/assignee within five (5) Trading Days from the date the Company is deemed to have received the required and completed transfer form annexed to this Warrant.

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 5(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 issuance date 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 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 the transferee of this Warrant, as the case may be, comply with the provisions of Section 6.6 of the Purchase Agreement.

e)              Representation by the Holder.  The Holder by acceptance hereof, represents and warrants that is acquiring the 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 Warrants Shares or any part thereof in violation of the Securities Act or any applicable state securities law.

 

Section 6.           Miscellaneous.

a)         No Rights as Stockholder Until Exercise. This Warrant does not entitle the Holder to any voting rights, dividend rights or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d), 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 shall at all times during the period this Warrant is outstanding, reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of issuing Warrant Shares, free from preemptive rights or any other contingent purchase rights of persons other than the Holders, not less than the product of (i) 2.5, multiplied by (ii) the aggregate number of Warrant Shares issuable upon exercise of this Warrant, taking into account the adjustments provided for under Section 3 hereof and excluding the restrictions on exercise pursuant to Section 2(e) hereof.  The Company further covenants that its issuance of this Warrant shall constitute the grant of full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates representing Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company shall, from time to time in accordance with Illinois law and the federal securities laws, increase its authorized shares of Common Stock if at any time the unissued number of authorized shares of Common Stock shall not be sufficient to satisfy the Company’s obligations under this Section 6(d).  The Company will take all 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 at the time of exercise. 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 and restrictions imposed by applicable securities laws).

 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. This Warrant shall be governed by and construed solely and exclusively in accordance with the internal laws of the State of New York without regard to the conflicts of laws principles thereof. The parties hereto hereby expressly and irrevocably agree that any suit or proceeding arising directly and/or indirectly pursuant to or under this Warrant shall be brought solely in a federal or state court located in the City, County and State of New York. By its execution hereof, the parties hereby covenant and irrevocably submit to the in personam jurisdiction of the federal and state courts located in the City, County and State of New York and agree that any process in any such action may be served upon any of them personally, or by certified mail or registered mail upon them or their agent, return receipt requested, with the same full force and effect as if personally served upon them in New York City. The parties hereto expressly and irrevocably waive any claim that any such jurisdiction is not a convenient forum for any such suit or proceeding and any defense or lack of in personam jurisdiction with respect thereto. In the event of any such action or proceeding, the party prevailing therein shall be entitled to payment from the other party hereto of all of its reasonable counsel fees and disbursements.

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 the Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant or the Purchaser 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 the 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 the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

h)         Notices.

(i)             Any notice, demand, request, waiver or other communication required or permitted to be given hereunder, including, without limitation, any Notice of Exercise, shall be in writing and shall be delivered personally, by facsimile, or sent by a nationally recognized overnight courier service, addressed to the Company at the address set forth in the Purchase Agreement, facsimile number (847) 549-6028, Attn: Steven J. Cohen, or such other address or facsimile number as the Company may specify for such purposes by written notice to the Holders delivered in accordance with this Section.  Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number or address of such Holder appearing on the books and records of the Company, or if no such facsimile number or address appears, at the principal place of business of the Holder.  Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 5:30 p.m. (eastern standard time), (ii) the date after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section later than 5:30 p.m. (eastern standard time) on any date and earlier than 11:59 p.m. (eastern standard time) on such date (iii) the second Trading Day following the date of mailing, if sent by nationally recognized overnight courier services, or (iv) upon actual receipt by the party to whom such notice is required to be given.  The Company shall give the Holder notice in the same manner and same procedures set forth herein to the address, facsimile, number and/or email address set forth in the Purchase Agreement, any of which may be amended by the Holder by delivery of written notice to the Company as provided above.

 

(ii)            The Company will give written notice to the Holder at least ten (10) days prior to the date on which the Company takes a record (a) with respect to any dividend or distribution upon the Common Shares, (b) with respect to any pro rata subscription offer to holders of shares of Common Stock or (c) for determining rights to vote with respect to any Organic Change, dissolution, liquidation or winding-up, but in no event shall such notice be provided to the Holder prior to such information being made known to the public.  The Company also will give written notice to the Holder at least twenty (20) days prior to the date on which any dissolution, liquidation or winding-up will take place, but in no event shall such notice be provided to the Holder prior to such information being made known to the public.  Notwithstanding anything herein to the contrary, neither the failure to deliver such notice nor any defect therein or in the delivery thereof shall affect the validity of the corporate action required to be specified in such notice.

i)          Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the 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 express 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.

 

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

	 	
Z TRIM HOLDINGS, INC.

	 	 
	 	
By:

	 
	 	 	
Name:

	 		
	 	 	
Title:

NOTICE OF EXERCISE

TO:       Z TRIM HOLDINGS, INC.

  (1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant, dated ________, 2014, 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 by wire transfer or cashier’s check drawn on a United States bank; or

☐ if permitted by the terms of the Warrant, 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 said Warrant Shares in the name of the undersigned or in such other name as is specified below:

 

	 	   	 

  (4) The Warrant Shares shall be delivered to the following DWAC Account Number:

 

	 	   	 
	 	   	 
	 	   	 

  (5) Accredited Investor.  The undersigned hereby is an “accredited investor” as defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended.

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, [_______________________] hereby transfers and/or assigns all (or ______ Warrant Shares issuable upon conversion of the Warrant), and all rights evidenced thereby (including, but not limited to all registration rights) to

 

	
 

	
whose address is

	
 

	
 

	
     

	
.

	
 

	
 

	
   

	
 

 

	
 

	
Date:

	
 ,

	
 

	

	

 

	
Holder’s Signature:

	
   

	
	
 

	
 

	
	
Holder’s Address:

	
   

	
	
 

	
 

	
	
 

	
   

	

 

	
Signature Guaranteed:

	
    

	

 

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

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