Document:

Exhibit 10.1

FIRST AMENDMENT TO FACILITY AGREEMENT

THIS FIRST AMENDMENT TO FACILITY AGREEMENT
(this “Amendment”), effective as of June 28, 2012, amends and restates Exhibit D-2 to that certain Facility
Agreement (the “Facility Agreement”) between MAKO Surgical Corp., a Delaware corporation (the “Borrower”),
and Deerfield Private Design Fund II, L.P. and Deerfield Private Design International II, L.P. (collectively, the “Lenders”).

WHEREAS, the Company
and the Lenders desire to amend and restate Exhibit D-2 to the Facility Agreement as provided herein.

 

In consideration of the premises
and mutual covenants contained herein and in the Facility Agreement, the undersigned hereby agree as follows:

 

1.    Exhibit D-2.
Exhibit D-2 of the Facility Agreement shall be amended and restated in the form set forth on Exhibit A to this Amendment.

 

2.    Effect on the Facility
Agreement. Except as amended herein, the Facility Agreement shall continue in full force and effect as originally executed
and delivered. Any reference in the Facility Agreement to “this Agreement,” “hereunder,” hereof,”
“herein,” or words of like import referring to such agreement shall refer to the Facility Agreement as amended by this
Amendment.

 

3.    Governing Law.
This Amendment shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to
the conflicts of laws principles thereof other than Sections 5 1401 and 5 1402 of the General Obligations Law of such State.

 

4.    Counterparts.
This Amendment may be executed on separate counterparts that may be transmitted via an email .pdf file or facsimile, each of which,
when so executed and delivered, shall be deemed an original and all of which counterparts, taken together, shall constitute one
and the same Amendment.

 

[SIGNATURE PAGE FOLLOWS]

 

 

 

 

    	 

    	 

    

IN WITNESS WHEREOF, the Lenders
and the Borrower have caused this Amendment to be duly executed as of the date first above written.

	BORROWER:	 
	 	 	 
	MAKO SURGICAL CORP.	 
	 	 	 
	By: 	/s/ Maurice R. Ferré	 
	Name: 	Maurice R. Ferré	 
	Title: 	President and Chief Executive Officer 	 
	 	 	 
	 	 	 
	LENDER:	 
	 	 	 
	DEERFIELD PRIVATE DESIGN FUND II, L.P.	 
	 	 	 
	
        By:

        By:
	
        Deerfield Capital, L.P., General Partner

        J. E. Flynn Capital LLC, General Partner
	 
	 	 	 
	By: 	/s/ James E. Flynn 	 
	Name: 	James E. Flynn	 
	Title: 	President	 
	 	 	 
	 	 	 
	LENDER:	 
	 	 	 
	DEERFIELD PRIVATE DESIGN INTERNATIONAL II, L.P.	 
	 	 	 
	
        By:

        By:
	Deerfield Capital, L.P., General Partner

J. E. Flynn Capital LLC, General Partner	 
	 	 	 
	By: 	/s/ James E. Flynn 	 
	Name: 	James E. Flynn	 
	Title: 	President	 

 

 

 

Signature Page to First Amendment to Facility
Agreement

    	 

    	 

    

EXHIBIT A

 

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES
LAW, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS (I) A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (II)
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH
OFFER, SALE OR TRANSFER.

AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE
OF RISK. HOLDERS MUST RELY ON THEIR OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT OF THE RISKS INVOLVED.

Warrant to Purchase

	                     shares	Warrant Number 

Warrant to Purchase Common Stock

of

MAKO Surgical Corp.

THIS CERTIFIES that ____________ or any subsequent holder
hereof (“Holder”) has the right to purchase from MAKO Surgical Corp., a Delaware corporation, (the “Company”),
________ (______) fully paid and nonassessable shares of the Company’s common stock, $0.001 par value per share (“Common
Stock”), subject to adjustment as provided herein, at a price equal to the Exercise Price as defined in Section 3 below,
at any time during the Term (as defined below).

Holder agrees with the Company that this Warrant to Purchase
Common Stock of the Company (this “Warrant” or this “Agreement”) is issued and all rights hereunder shall
be held subject to all of the conditions, limitations and provisions set forth herein.

1. Date
of Issuance and Term.

This Warrant shall be deemed to be issued on ______ (“Date
of Issuance”). The term of this Warrant begins on the Date of Issuance and ends at 5:00 p.m., New York City time, on the
date that is seven (7) years after the Date of Issuance (the “Term”). This Warrant was issued in conjunction with that
certain Facility Agreement (the “Facility Agreement”) and the Registration Rights Agreement (“Registration Rights
Agreement”) by and between the Company, Holder and __________, each dated May 7, 2012, entered into in conjunction herewith.

Notwithstanding anything herein to the contrary, the Company
shall not issue to the Holder, and the Holder may not acquire, a number of shares of Common Stock upon exercise of this Warrant
to the extent that, upon such exercise, the number of shares of Common Stock then beneficially owned by the Holder and its Affiliates
and any other persons or entities whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes
of Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (including shares held
by any “group” of which the Holder is a member, but excluding shares beneficially owned by virtue of the ownership
of securities or rights to acquire securities that have limitations on the right to convert, exercise or purchase similar to the
limitation set forth herein) would exceed 9.985% of the total number of shares of Common Stock then issued and outstanding (the
“9.985% Cap”), provided, however, that the 9.985% Cap shall not apply with respect to the issuance of shares of Common
Stock pursuant to a Cashless Major Exercise (as defined below) in connection with a Major Transaction (as defined below) covered
by the provisions of Section 5(c)(i)(A)(1) below in which the Company is not the surviving entity (a “Non-Surviving Change
of Control Transaction”) to the extent that the number of shares beneficially owned by the Holder and its affiliates in the
successor entity immediately following consummation of such Non-Surviving Change of Control Transaction does not exceed 9.985%
of the outstanding common stock of such successor entity and provided, further, that the 9.985% Cap shall only apply to the extent
that the Common Stock is deemed to constitute an “equity security” pursuant to Rule 13d-1(i) promulgated under the
Exchange Act. For purposes hereof, “group” has the meaning set forth in Section 13(d) of the Exchange Act and
applicable regulations of the Securities and Exchange Commission (the “SEC”), and the percentage held by the Holder
shall be determined in a manner consistent with the provisions of Section 13(d) of the Exchange Act. Upon the written request
of the Holder, the Company shall, within two (2) Trading Days, confirm orally and in writing to the Holder the number of shares
of Common Stock then outstanding.

    	 

    	 

    

“Affiliate” means any person or entity that,
directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a person
or entity, as such terms are used in and construed under Rule 144 under the Securities Act of 1933, as amended (the “Securities
Act”). With respect to a Holder of Warrants, any investment fund or managed account that is managed on a discretionary basis
by the same investment manager as such Holder will be deemed to be an Affiliate of such Holder.

“Holder” means ______ and any transferee or assignee
pursuant to the terms of this Warrant.

2. Exercise.

(a)
Manner of Exercise. Beginning on the Date of Issuance and continuing during the Term, this Warrant may be Exercised
as to all or any lesser number of whole shares of Common Stock covered hereby (the “Warrant Shares” or the “Shares”)
upon surrender of this Warrant, with the Exercise Form attached hereto as Exhibit A (the “Exercise Form”)
duly completed and executed, together with the full Exercise Price (as defined below, which may be satisfied by a Cash Exercise
or a Cashless Exercise, as each is defined below) for each share of Common Stock as to which this Warrant is Exercised, at the
office of the Company, 2555 Davie Road, Fort Lauderdale, FL 33317, Phone: (954) 927-2044, Fax: (954) 707-5360, electronic
mail:adminteam@makosurgical.com), or at such other office or agency as the Company may designate in writing, by overnight mail,
with an advance copy of the Exercise Form sent to the Company by facsimile or electronic mail (such surrender and payment of the
Exercise Price hereinafter called the “Exercise” of this Warrant).

(b)
Date of Exercise. The “Date of Exercise” of the Warrant shall be defined as the date that the Exercise
Form attached hereto as Exhibit A, completed and executed, is sent by facsimile or electronic mail to the Company,
provided that the original Warrant and Exercise Form are received by the Company and the Exercise Price is satisfied, each as soon
as practicable thereafter but in no event later than two (2) business days following the date of such facsimile or electronic mail.
Alternatively, the Date of Exercise shall be defined as the date the original Exercise Form is received by the Company, if Holder
has not sent advance notice by facsimile or electronic mail. Upon delivery of the Exercise Form to the Company by facsimile, electronic
mail or otherwise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares
with respect to which this Warrant has been Exercised, irrespective of the date such Warrant Shares are credited to the Holder’s
Depository Trust Company (“DTC”) account or the date of delivery of the certificates evidencing such Warrant Shares,
as the case may be; provided, however, that in the event of a Cashless Major Exercise in respect of a Non-Surviving Change of Control
Transaction, the Holder shall be deemed to have become the holder of record of the shares issuable upon such exercise immediately
prior to the consummation of such Non-Surviving Change of Control Transaction.

(c)
Delivery of Common Stock Upon Exercise. Within three (3) business days after the Date of Exercise (but, in the
case of a Cash Exercise, within two (2) business days following the Company’s receipt of the full Exercise Price, if later)
or, in the case of a Cashless Major Exercise or
a Cashless Default Exercise (each as defined in Section 5(c) below), within the period provided in Section 5(c)(iv) or Section
3(c), as applicable (the “Delivery Period”), the Company shall issue and deliver (or cause its Transfer
Agent to issue and deliver) in accordance with the terms hereof to or upon the order of the Holder that number of shares of Common
Stock (“Exercise Shares”) for the portion of this Warrant converted as shall be determined in accordance herewith.
Upon the Exercise of this Warrant or any part hereof, the Company shall, at its own cost and expense, take all necessary action,
including obtaining and delivering an opinion of counsel, to assure that the Company’s transfer agent (the “Transfer
Agent”) shall issue stock certificates in the name of Holder (or its nominee) or such other persons as designated by Holder
and in such denominations to be specified at Exercise representing the number of shares of Common Stock issuable upon such Exercise.
The Company warrants that no instructions other than these instructions have been or will be given to the Transfer Agent and that,
unless waived by the Holder, this Warrant and the Exercise Shares will be free-trading, and freely transferable, and will not contain
a legend restricting the resale or transferability of the Exercise Shares if the Unrestricted Conditions (as defined below) are
met.

 

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(d) Delivery Failure. In
addition to any other remedies which may be available to the Holder, in the event that the Company fails for any reason to effect
delivery of the Exercise Shares by the end of the Delivery Period (a “Delivery Failure”), the Holder will be entitled
to revoke all or part of the relevant Exercise Form by delivery of a notice to such effect to the Company whereupon the Company
and the Holder shall each be restored to their respective positions immediately prior to the delivery of such notice, except that
the liquidated damages described herein shall be payable through the date notice of revocation or rescission is given to the Company.

(e)
Legends.

(i) Restrictive
Legend. The Holder understands that until such time as this Warrant, the Exercise Shares and the Failure Payment Shares have
been registered under the Securities Act as contemplated by the Registration Rights Agreement or otherwise may be sold pursuant
to Rule 144 under the Securities Act or an exemption from registration under the Securities Act without any restriction as to the
number of securities as of a particular date that can then be immediately sold, this Warrant, the Exercise Shares and the Failure
Payment Shares, as applicable, may bear a restrictive legend in substantially the following form (and a stop-transfer order may
be placed against transfer of the certificates for such securities):

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SAID ACT INCLUDING, WITHOUT LIMITATION,
PURSUANT TO RULES 144 OR 144A UNDER SAID ACT OR PURSUANT TO A PRIVATE SALE EFFECTED UNDER APPLICABLE FORMAL OR INFORMAL SEC INTERPRETATION
OR GUIDANCE, SUCH AS A SO-CALLED “4(1) AND A HALF” SALE.”

“THE SALE, TRANSFER OR ASSIGNMENT OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN REGISTRATION RIGHTS AGREEMENT DATED AS OF
MAY 7, 2012, AS AMENDED FROM TIME TO TIME, AMONG THE COMPANY AND CERTAIN HOLDERS OF ITS OUTSTANDING SECURITIES. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE
COMPANY.”

(ii)
Removal of Restrictive Legends. This Warrant and the certificates evidencing the Exercise Shares and the Failure
Payment Shares, as applicable, shall not contain any legend restricting the transfer thereof (including the legend set forth above
in subsection 2(e)(i)): (A) while a registration statement (including a Registration Statement, as defined in the Registration
Rights Agreement) covering the sale or resale of such security is effective under the Securities Act, or (B) following any
sale of such Warrant, Exercise Shares and/or Failure Payment Shares pursuant to Rule 144, or (C) if such Warrant, Exercise
Shares and/or Failure Payment Shares are eligible for sale under Rule 144(b)(1), or (D) if such legend is not required under
applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the
SEC) (collectively, the “Unrestricted Conditions”). The Company shall cause its counsel to issue a legal opinion to
the Transfer Agent promptly after the Effective Date if required by the Company’s transfer agent to effect the issuance of
the Exercise Shares or the Failure Payment Shares, as applicable, without a restrictive legend or removal of the legend hereunder.
If the Unrestricted Conditions are met at the time of issuance of this Warrant, the Exercise Shares or the Failure Payment Shares,
then such Warrant, Exercise Shares or Failure Payment Shares, as applicable, shall be issued free of all legends. The Company agrees
that following the Effective Date at such time as the Unrestricted Conditions are met or such legend is otherwise no longer required
under this Section 2(e), it will, no later than three (3) Trading Days following the delivery (the “Unlegended Shares
Delivery Deadline”) by the Holder to the Company or the Transfer Agent of this Warrant and a certificate representing Exercise
Shares and/or Failure Payment Shares, as applicable, issued with a restrictive legend (such third Trading Day, the “Legend
Removal Date”), deliver or cause to be delivered to such Holder a certificate (or electronic transfer) representing such
shares that is free from all restrictive and other legends. For purposes hereof, “Effective Date” shall mean the date
that the Registration Statement that the Company is required to file pursuant to the Registration Rights Agreement has been declared
effective by the SEC.

 

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(iii) Sale
of Unlegended Shares. Holder agrees that the removal of the restrictive legend from this Warrant and any certificates representing
securities as set forth in Section 2(e) above is predicated upon the Company’s reliance that the Holder will sell this
Warrant or any Exercise Shares and/or any Failure Payment Shares, as applicable, pursuant to either the registration requirements
of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom, and that if such securities
are sold pursuant to a Registration Statement, they will be sold in compliance with the plan of distribution set forth therein.

(f)
Cancellation of Warrant. This Warrant shall be canceled upon the full Exercise, of this Warrant, and, as soon
as practical after the Date of Exercise, Holder shall be entitled to receive Common Stock for the number of shares purchased upon
such Exercise of this Warrant, and if this Warrant is not Exercised in full, Holder shall be entitled to receive a new Warrant
(containing terms identical to this Warrant) representing any unexercised portion of this Warrant in addition to such Common Stock.

(g)
Holder of Record. Each person in whose name any Warrant for shares of Common Stock is issued shall, for all purposes,
be deemed to be the Holder of record of such shares on the Date of Exercise of this Warrant, irrespective of the date of delivery
of the Common Stock purchased upon the Exercise of this Warrant. Prior to the exercise of this Warrant, nothing in this Warrant
shall be construed as conferring upon Holder any rights as a stockholder of the Company.

(h)
Delivery of Electronic Shares. In lieu of delivering physical certificates representing the Common Stock issuable
upon Exercise or legend removal, or representing Failure Payment Shares, provided the Transfer Agent is participating in the DTC
Fast Automated Securities Transfer (“FAST”) program, upon written request of the Holder, the Company shall use its
best efforts to cause its Transfer Agent to electronically transmit the Common Stock issuable upon Exercise to the Holder by crediting
the account of the Holder’s prime broker with DTC through its Deposit Withdrawal Agent Commission (DWAC) system. The time
periods for delivery and penalties described herein shall apply to the electronic transmittals described herein. Any delivery not
effected by electronic transmission shall be effected by delivery of physical certificates.

(i)
Buy-In. In addition to any other rights available to the Holder, if the Company fails to cause its Transfer Agent
to transmit to the Holder a certificate or certificates, or electronic shares through DWAC, representing the Exercise Shares pursuant
to an Exercise on or before the Delivery Period (other than a failure caused by any incorrect or incomplete information provided
by Holder to the Company hereunder), 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 Exercise Shares which the Holder anticipated receiving upon such Exercise (a “Buy-In”),
then the Company shall (1) pay in cash to 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 amount obtained by multiplying
(A) the number of Exercise Shares that the Company was required to deliver to the Holder in connection with the Exercise at
issue times and (B) the price at which the sell order giving rise to such purchase obligation was executed, and (2) at
the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Exercise Shares for which such Exercise
was not honored 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 to cover the sale of Common Stock with an aggregate
sale price giving rise to such purchase obligation of $10,000, under clause (1) 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, together with applicable confirmations and other evidence reasonably requested
by the Company. 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.

 

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3. Payment
of Warrant Exercise Price for Cash Exercise or Cashless Exercise; Cashless Major Exercise and Cashless Default Exercise.

(a)
Exercise Price. The Exercise Price (“Exercise Price”) shall initially equal 120% of the mean of the
Closing Prices (as defined below) of the Common Stock for each of the five (5) consecutive Trading Days beginning with the first
full Trading Day following receipt by the Lenders of a Disbursement Request (as such terms are defined in the Facility Agreement),
subject to adjustment pursuant to the terms hereof, including but not limited to Section 5 below. The Company’s calculation
of the Exercise Price shall be deemed to be final and binding upon the Holder unless, within two (2) business days of receipt of
such notice, the Holder sends a notice by facsimile ((954) 707-5360) to the Company disputing the calculation of the Exercise
Price. If the Holder and the Company are unable to agree upon the Exercise Price within two (2) business days following the receipt
by the Company of the Holder’s notice disputing the calculation of the exercise price, then the dispute shall be submitted
by the Company to the Company’s independent outside accountant and resolved in accordance with Section 3(d). As used herein,
the “Closing Price” for the Common Stock as of any date means the closing trade price (based on regular hours trading)
of the Common Stock on NASDAQ, as reported by Bloomberg or, if NASDAQ is not the principal trading market for the Common Stock,
the closing trade price of the Common Stock on the principal securities exchange or trading market where the Common Stock is listed
or traded as reported by Bloomberg or, if no last closing trade price is reported for the Common Stock by Bloomberg, the average
of the bid prices of any market makers for the Common Stock in the over the counter market maintained by the Financial Industry
Regulatory Authority, Inc. or in the “pink sheets” (or any successor) maintained by the OTC Markets Group, Inc.

Payment of the Exercise Price may be made by either of the
following, or a combination thereof, at the election of Holder:

(i) Cash
Exercise: The Holder, at its option, may exercise this Warrant in cash, bank or cashier’s check, wire transfer or through
a reduction of an amount of principal outstanding under any Notes (as defined in the Facility Agreement) in accordance with Section
2.3 of the Facility Agreement, then held by the Holder (a “Cash Exercise”); or

(ii)
Cashless Exercise: The Holder may exercise this Warrant in a cashless exercise transaction. In order to effect a
Cashless Exercise, the Holder shall surrender this Warrant at the principal office of the Company together with notice of cashless
election, in which event the Company shall issue Holder a number of shares of Common Stock computed using the following formula
(a “Cashless Exercise”):

X = Y (A-B)/A

where:    X = the number of shares of Common Stock to be
issued to Holder.

Y = the number of shares of Common Stock for which
this Warrant is being Exercised.

A = the Market Price of one (1) share of Common Stock
(for purposes of this Section 3(a)(ii), where “Market Price,” as of any date, means the Volume Weighted Average
Price (as defined herein) of the Company’s Common Stock for the ten (10) consecutive Trading Day period immediately preceding
the date in question.

B = the Exercise Price.

As used herein, “Volume Weighted Average Price”
for any security as of any date means the volume weighted average sale price on The NASDAQ Global Select Market (“NASDAQ”)
as reported by, or based upon data reported by Bloomberg Financial Markets or an equivalent, reliable reporting service mutually
acceptable to and hereinafter designated by holders of a majority in interest of the Warrants and the Company (“Bloomberg”)
or, if NASDAQ is not the principal trading market for such security, the volume weighted average sale price of such security on
the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg or, if no
volume weighted average sale price is reported for such security by Bloomberg, then the last closing trade price of such security
as reported by Bloomberg, or, if no last closing trade price is reported for such security by Bloomberg, the average of the bid
prices of any market makers for such security that are listed in the over the counter market by the Financial Industry Regulatory
Authority, Inc. or on the “over the counter” Bulletin Board (or any successor) or in the “pink sheets”
(or any successor) by the OTC Markets Group, Inc. If the Volume Weighted Average Price cannot be calculated for such security on
such date in the manner provided above, the Volume Weighted Average Price shall be the fair market value as mutually determined
by the Company and the Holders of a majority in interest of the Warrants being Exercised for which the calculation of the Volume
Weighted Average Price is required in order to determine the Exercise Price of such Warrants.  “Trading
Day” shall mean any day on which the Common Stock is traded for any period on NASDAQ, or on the principal securities exchange
or other securities market on which the Common Stock is then being traded. 

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For purposes of Rule 144 and sub-section (d)(3)(ii) thereof,
it is intended, understood and acknowledged that the Common Stock issuable upon Exercise of this Warrant in a Cashless Exercise
transaction shall be deemed to have been acquired at the time this Warrant was issued. Moreover, it is intended, understood and
acknowledged that the holding period for the Common Stock issuable upon Exercise of this Warrant in a Cashless Exercise transaction
shall be deemed to have commenced on the date this Warrant was issued.

(b)
Cashless Major Exercise. To the extent the Holder shall exercise this Warrant or any portion thereof as a Cashless Major
Exercise pursuant to Section 5(c)(i) below, the Holder shall surrender this Warrant at the principal office of the Company together
with the Exercise Form indicating that the Holder is exercising this Warrant (or such portion thereof) pursuant to a Cashless Major
Exercise, in which event the Company shall issue a number of shares of Common Stock equal to the Black-Scholes Value (as defined
in Section 5(c)(iii) below) of the Warrant (or such applicable portion being exercised) divided by the closing price of the Common
Stock on the principal securities exchange or other securities market on which the Common Stock is then traded on the Trading Day
immediately preceding the date on which the applicable Major Transaction is consummated.

(c)
Cashless Default Exercise. To the extent the Holder exercises this Warrant as a Cashless Default Exercise pursuant to Section
11(b)(i) below, the Holder shall surrender this Warrant to the principal office of the Company together with the Exercise Form
indicating that the Holder is exercising this Warrant pursuant to a Cashless Default Exercise, in which event the Company shall,
at the election of the Company, (i) issue to the Holder, within five (5) Trading Days of the applicable Default Notice, a number
of shares of Common Stock (which shares shall be valued at the Volume Weighted Average Price for the five (5) Trading Days prior
to the applicable Default Notice) equal to the Black-Scholes value (determined by use of the Black-Scholes Option Pricing Model
using the criteria set forth on Schedule I hereto) of the remaining unexercised portion of this Warrant on the date of such Default
Notice (the “Cashless Default Exercise Amount”), or (ii) pay the Cashless Default Exercise Amount to the Holder in
cash.

(d)
Dispute Resolution. Subject to the provisions of Section 3(a), in the case of a dispute as to the determination
of the closing price or Volume Weighted Average Price of the Company’s Common Stock or the arithmetic calculation of the
Exercise Price, Market Price or any Major Transaction Warrant Early Termination Price, the Company shall submit the disputed determinations
or arithmetic calculations via facsimile within two (2) business days of receipt, or deemed receipt, of the Exercise Notice or
Major Transaction Early Termination Notice, or other event giving rise to such dispute, as the case may be, to the Holder. If the
Holder and the Company are unable to agree upon such determination or calculation within two (2) business days of such disputed
determination or arithmetic calculation being submitted to the Holder, then the Company shall, within two (2) business days submit
via facsimile (i) the disputed determination of the closing price or the Volume Weighted Average Price of the Company’s
Common Stock to an independent, reputable investment bank selected by the Company and approved by the Holder, which approval shall
not be unreasonably withheld or (ii) the disputed arithmetic calculation of the Exercise Price, Market Price or any Major
Transaction Warrant Early Termination Price to the Company’s independent, outside accountant. The Company shall use reasonable
commercial efforts to cause the investment bank or the accountant, as the case may be, to perform the determinations or calculations
and notify the Company and the Holder of the results no later than five (5) business days from the time it receives the disputed
determinations or calculations. Such investment bank’s or accountant’s determination or calculation, as the case may
be, shall be binding upon all parties absent demonstrable error, and the Company and the Holder shall each pay one half of the
fees and costs of such investment banker or accountant.

 

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4. Transfer
and Registration.

(a)
Transfer Rights. Subject to the provisions of Section 8 of this Warrant, this Warrant may be transferred
on the books of the Company, in whole or in part, in person or by attorney, upon surrender of this Warrant properly completed and
endorsed. This Warrant shall be canceled upon such surrender and, as soon as practicable thereafter, the person to whom such transfer
is made shall be entitled to receive a new Warrant or Warrants as to the portion of this Warrant transferred, and Holder shall
be entitled to receive a new Warrant as to the portion hereof retained.

(b)
Registrable Securities. The Common Stock issuable upon the Exercise of this Warrant has registration rights pursuant
to the Registration Rights Agreement.

5. Adjustments
Upon Certain Events.

(a)
Participation. The Holder, as the holder of this Warrant, shall be entitled to receive such dividends paid and
distributions of any kind made to the holders of Common Stock of the Company to the same extent as if the Holder had Exercised
this Warrant into Common Stock (without regard to any limitations on exercise herein or elsewhere and without regard to whether
or not a sufficient number of shares are authorized and reserved to effect any such exercise and issuance) and had held such shares
of Common Stock on the record date for such dividends and distributions. Payments under the preceding sentence shall be made concurrently
with the dividend or distribution to the holders of Common Stock.

(b)
Recapitalization or Reclassification. If the Company shall at any time effect a stock split, payment of stock
dividend, recapitalization, reclassification or other similar transaction of such character that the shares of Common Stock shall
be changed into or become exchangeable for a larger or smaller number of shares, then upon the effective date thereof, the number
of shares of Common Stock which Holder shall be entitled to purchase upon Exercise of this Warrant shall be increased or decreased,
as the case may be, in direct proportion to the increase or decrease in the number of shares of Common Stock by reason of such
stock split, payment of stock dividend, recapitalization, reclassification or similar transaction, and the Exercise Price shall
be, in the case of an increase in the number of shares, proportionally decreased and, in the case of decrease in the number of
shares, proportionally increased. The Company shall give Holder the same notice it provides to holders of Common Stock of any transaction
described in this Section 5(b).

(c)
Rights Upon Major Transaction.

(i) Major
Transaction. In the event that a Major Transaction (as defined below) occurs, then
(1) in the case of a Major Transaction covered by the provisions of Section 5(c)(i)(A) below in which the Company is not the surviving
entity and in which the consideration consists solely of securities of a Publicly Traded Successor Entity, as defined below (a
“Qualified Change of Control Transaction”), the Company shall have the right to treat such Major Transaction as an
Assumption, (2) in the case of a Cash-Out Major Transaction, and in the case of a Mixed Major Transaction to the extent of the
percentage of the cash consideration in the Mixed Major Transaction (determined in accordance with the definition of a Mixed Major
Transaction below), the Holder, at its option, may require the Company to redeem the Holder’s outstanding Warrants
in accordance with Section 5(c)(iii) below and
(3) in the case of all other Major Transactions (including, without limitation, a Qualified Change of Control Transaction for which
the Company does not make an Assumption Election (as defined below)), and in the case of a Mixed Major Transaction to the extent
of the percentage of the consideration represented by securities of a Successor Entity in the Mixed Major Transaction, the Holder
shall have the right to exercise this Warrant as a Cashless Major Exercise. In the event the Holder shall not have exercised any
of its rights under clauses (2) or (3) above within the applicable time periods set forth herein, then the Major Transaction shall
be treated as an Assumption (as defined below) in accordance with Section 5(c)(ii) below. Notwithstanding anything herein to the
contrary, the Holder may waive its rights under this Section 5(c) with respect to any Major Transaction in which event
none of the provisions of this Section 5(c) shall apply with respect to such Major Transaction. In the event of a Major Transaction
in which all shares of Common Stock are cancelled and converted into the right to receive cash and/or securities of Another Entity
(as defined below), then, any portion of this Warrant that is neither redeemed, assumed or exercised pursuant to the terms of this
Warrant prior to the closing of such Major Transaction, shall automatically and immediately convert into shares of Common Stock,
and shall be deemed to have been exercised pursuant to a Cashless Exercise, immediately prior to the consummation of such Major
Transaction. Each of the following events shall constitute a “Major Transaction”.

 

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(A) a
consolidation, merger, exchange of shares, recapitalization, reorganization, business combination or other similar event, (1) following
which the holders of Common Stock immediately preceding such consolidation, merger, exchange, recapitalization, reorganization,
combination or event either (a) no longer hold a majority of the shares of Common Stock or (b) no longer have the ability
to elect a majority of the board of directors of the Company or (2) as a result of which shares of Common Stock shall be changed
into (or the shares of Common Stock become entitled to receive) a different class or classes of stock or securities of the Company
or another entity (collectively, a “Change of Control Transaction”);

(B) the
sale or transfer in one transaction or a series of related transactions of (i) all or substantially all of the assets of the Company,
or (ii) assets of the Company for a purchase price equal to more than 50% of the Enterprise Value (as defined below) of the Company.
For purposes of this clause (B), “Enterprise Value” shall mean (I) the product of (x) the number of issued and outstanding
shares of Common Stock on the date the Company delivers the Major Transaction Notice (defined below) multiplied by (y) the per
share closing price of the Common Stock on such date plus (II) the amount of the Company’s debt as shown on the latest financial
statements filed with the SEC (the “Current Financial Statements”) less (III) the amount of cash and cash equivalents
of the Company as shown on the Current Financial Statements;

(C) a
purchase, tender or exchange offer made to the holders of outstanding shares of Common Stock, such that following such purchase,
tender or exchange offer a Change of Control Transaction shall have occurred; or

(D) the
liquidation, bankruptcy, insolvency, dissolution or winding-up (or the occurrence of any analogous proceeding) of the Company.

(ii)
Assumption. The Company shall not enter into or be party to a Major Transaction that is to be treated as an Assumption
pursuant to Section 5(c)(i), unless (A) the successor entity resulting from such Major Transaction (in each case, a “Successor
Entity”), assumes in writing all of the obligations of the Company under this Warrant, the Facility Agreement (but only if
there will be an outstanding balance under the Facility Agreement immediately following the closing of the Major Transaction) and
the Registration Rights Agreement  in accordance with the provisions of this Section (ii) pursuant to written agreements in
form and substance reasonably satisfactory to the Holder and approved by the Holder prior to such Major Transaction (not to be
unreasonably withheld or delayed), including agreements to deliver to each holder of Warrants in exchange for such Warrants a security
of the Successor Entity evidenced by a written instrument substantially similar in form and substance to the Warrants, including,
without limitation, representing the appropriate number of shares of the Successor Entity, having similar exercise rights as the
Warrants (including but not limited to a similar Exercise Price and similar Exercise Price adjustment provisions based on the price
per share or conversion ratio to be received by the holders of Common Stock in the Major Transaction) and similar registration
rights as provided by the Registration Rights Agreement, reasonably satisfactory to the Holder and (B) the Successor Entity
is a Public Successor Entity. Upon the occurrence of any Major Transaction, any Successor Entity shall succeed to, and be substituted
for (so that from and after the date of such Major Transaction, the provisions of this Warrant and the Registration Rights Agreement
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 with the same effect as if such Successor
Entity had been named as the Company herein. Upon consummation of the Major Transaction, the Successor Entity shall deliver to
the Holder confirmation that there shall be issued upon exercise or redemption of this Warrant at any time after the consummation
of the Major Transaction, in lieu of the shares of Common Stock (or other securities, cash, assets or other property) issuable
upon the exercise of the Warrants prior to such Major Transaction, such shares of publicly traded common stock (or their equivalent)
of the Successor Entity, as adjusted in accordance with the provisions of this Warrant. The provisions of this Section shall apply
similarly and equally to successive Major Transactions and shall be applied without regard to any limitations on the exercise of
this Warrant other than any applicable beneficial ownership limitations. Any assumption of Company obligations under this paragraph
shall be referred to herein as an “Assumption.”

 

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(iii)
Notice; Major Transaction Early Termination Right; Notice of Cashless Major Exercise. At least thirty (30) days prior
to the consummation of any Major Transaction, but, in any event, within five (5) Business Days following the first to occur of
(x) the date of the public announcement of such Major Transaction if such announcement is made before 4:00 p.m., New York
City time, or (y) the day following the public announcement of such Major Transaction if such announcement is made on and
after 4:00 p.m., New York City time, the Company shall deliver written notice thereof via facsimile and overnight courier to the
Holder (a “Major Transaction Notice”). The Major Transaction Notice with respect to a Qualified Change of Control Transaction
shall also state whether the Company is electing to treat such Major Transaction as an Assumption (an “Assumption Election”).
At any time during the period beginning after the Holder’s receipt of a Major Transaction Notice and ending five (5) Trading
Days prior to the consummation of such Major Transaction (the “Early Termination Period”), the Holder may require the
Company to redeem (an “Early Termination Upon Major Transaction”) all or any portion of this Warrant not treated as
an Assumption and not eligible to be treated as a Cashless Major Exercise (without taking into consideration the 9.985% Cap) by
delivering written notice thereof (“Major Transaction Early Termination Notice”) to the Company, which Major Transaction
Early Termination Notice shall indicate the portion of this Warrant, measured by the number of Shares then subject to this Warrant
(the “Early Termination Principal Amount”) of the Warrant that the Holder is electing to have redeemed. The portion
of this Warrant subject to early termination pursuant to this Section 5(c)(iii) (the “Redeemable Shares”), shall
be redeemed by the Company at a price (the “Major Transaction Warrant Early Termination Price”) payable in cash equal
to the “Black Scholes Value” of the Redeemable Shares determined by use of the Black Scholes Option Pricing Model using
the criteria set forth in Schedule 1 hereto (the “Black Scholes Value”). In the event the Major Transaction Notice
relating to a Qualified Change of Control Transaction includes an Assumption Election, the Holder shall send written notice to
the Company within the Early Termination Period if the Holder elects to waive this Section 5(c) in its entirety in which event
no Assumption shall occur.

To
the extent the Holder shall elect to effect a Cashless Major Exercise in respect of a Major Transaction, the Holder shall deliver
its exercise notice in accordance with Section 3(b), within the Early Termination Period.

(iv)
Escrow; Payment of Major Transaction Warrant Early Termination Price. Following the receipt of a Major Transaction
Early Termination Notice or a Cashless Major Exercise from the Holder, the Company shall not effect a Major Transaction that is
being treated as an early termination or is eligible to be treated as a Cashless Major Exercise unless either (a) it obtains the
written agreement of the Successor Entity that payment of the Major Transaction Warrant Early Termination Price and/or issuance
of the applicable Exercise Shares shall be made to the Holder prior to consummation of such Major Transaction and such issuance
or payment shall be a condition precedent to consummation of such Major Transaction or (b) it shall first place into an escrow
account with an independent escrow agent, at least three (3) business days prior to the closing date of the Major Transaction (the
“Major Transaction Escrow Deadline”), an amount in shares of Common Stock or cash, as applicable, equal to the Major
Transaction Warrant Early Termination Price and/or applicable Exercise Shares. Concurrently upon closing of such Major Transaction,
the Company shall pay or shall instruct the escrow agent to pay the Major Transaction Warrant Early Termination Price and/or to
deliver the applicable Exercise Shares to the Holder. For purposes of determining the amount required to be placed in escrow pursuant
to the provisions of this subsection (iv) and without affecting the amount of the actual Major Transaction Warrant Early Termination
Price and/or applicable Exercise Shares, the calculation of the price referred to in clause (1) of the first column of Schedule 1
hereto with respect to Stock Price shall be determined based on the Closing Market Price (as defined on Schedule I) of the Common
Stock on the Trading Day immediately preceding the date that the funds and/or applicable Exercise Shares, as applicable, are deposited
with the escrow agent.

(v) Injunction.
Following the receipt of a Major Transaction Early Termination Notice or notice of a Cashless Major Exercise from the Holder, in
the event that the Company attempts to consummate a Major Transaction without either (1) placing the Major Transaction Warrant
Early Termination Price or applicable Exercise Shares, as applicable, in escrow in accordance with subsection (iv) above, (2) payment
of the Major Transaction Warrant Early Termination Price or issuance of the applicable Exercise Shares, as applicable, to the Holder
prior to consummation of such Major Transaction or (3) obtaining the written agreement of the Successor Entity described in subsection
(iv) above, the Holder shall have the right to apply for an injunction in any state or federal courts sitting in the City of New
York, borough of Manhattan to prevent the closing of such Major Transaction until the Major Transaction Warrant Early Termination
Price is paid to the Holder, in full or the applicable Exercise Shares are delivered or deposited in escrow, as applicable.

 

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An early termination required by this Section 5(c) shall
have priority to payments to holders of Common Stock in connection with a Major Transaction, and to the extent an early termination
required by this Section 5(c) is deemed or determined by a court of competent jurisdiction to be prepayments of the Warrant by
the Company, such early termination shall be deemed to be voluntary prepayments. Notwithstanding anything to the contrary in this
Section 5, until the Major Transaction Warrant Early Termination Price is paid in full, this Warrant may be exercised, in whole
or in part, by the Holder into shares of Common Stock, or in the event the Exercise Date is after the consummation of the Major
Transaction, shares of publicly traded common stock (or their equivalent) of the Successor Entity pursuant to Section 5(c). The
parties hereto agree that in the event of the early termination of any portion of the Warrant under this Section 5(c), the
Holder’s damages would be uncertain and difficult to estimate because of the parties’ inability to predict future interest
rates and the uncertainty of the availability of a suitable substitute investment opportunity for the Holder. Accordingly, any
premium due under this Section 5(c) is intended by the parties to be, and shall be deemed, a reasonable estimate of the Holder’s
actual loss of its investment opportunity and not as a penalty.

For purposes hereof:

“Another Entity” shall mean an entity in which
the holders of a majority of the shares of Common Stock of the Company immediately prior to the consummation of a Major Transaction
do not hold a majority of the equity securities in such entity.

“Cash-Out Major Transaction” means a Major Transaction
in which the consideration payable to holders of Common Stock in connection with the Major Transaction consists solely of cash.

“Cashless
Default Exercise” shall mean an exercise of this Warrant as a “Cashless Default Exercise” in accordance with
Section 3(c) and 11(b) hereof.

“Cashless
Major Exercise” shall mean an exercise of this Warrant or portion thereof as a “Cashless Major Exercise” in accordance
with Section 3(b) and 5(c)(i) hereof.

“Eligible Market” means the over the counter
Bulletin Board, the New York Stock Exchange, Inc., the NYSE Arca, the NASDAQ Capital Market, the NASDAQ Global Market, the NASDAQ
Global Select Market or the NYSE Alternext U.S.

“Mixed Major Transaction” means a Major Transaction
in which the consideration payable to the stockholders of the Company consists partially of cash and partially of securities of
a Successor Entity. If the Successor Entity is a Publicly Traded Successor Entity, the percentage of consideration represented
by securities of such Successor Entity shall be equal to the percentage that the value of the aggregate anticipated number of shares
of the Publicly Traded Successor Entity to be issued to holders of Common Stock of the Company represents in comparison to the
aggregate value of all consideration, including cash consideration, in such Mixed Major Transaction, as such values are set forth
in any definitive agreement for the Mixed Major Transaction that has been executed at the time of the first public announcement
of the Major Transaction or, if no such value is determinable from such definitive agreement, based on the closing market price
for shares of the Publicly Traded Successor Entity on its principal securities exchange on the Trading Day preceding the first
public announcement of the Mixed Major Transaction. If the Successor Entity is a Private Successor Entity, the percentage of consideration
represented by securities of such Successor Entity shall be determined in good-faith by the Company's Board of Directors

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

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

“Private Successor Entity” means a Successor
Entity that is not a Publicly Traded Successor Entity.

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“Publicly Traded Successor Entity” means a Successor
Entity that is a publicly traded corporation whose common stock is quoted on or listed for trading on an Eligible Market (as defined
above).

“Successor Entity” means any Person purchasing
the Company’s assets or Common Stock, or any successor entity resulting from such Major Transaction, or if the Warrant is
to be exercisable for shares of capital stock of its Parent Entity (as defined above), its Parent Entity.

(d)
Exercise Price Adjusted. As used in this Warrant, the term “Exercise Price” shall mean the purchase
price per share specified in Section 3(a) of this Warrant, until the occurrence of an event stated in this Section 5
or otherwise set forth in this Warrant, and thereafter shall mean said price as adjusted from time to time in accordance with the
provisions of said subsection. No adjustment made pursuant to any provision of this Section 5 shall have the net effect of
increasing the Exercise Price in relation to the split adjusted and distribution adjusted price of the Common Stock.

(e)
Adjustments: Additional Shares, Securities or Assets. In the event that at any time, as a result of an adjustment
made pursuant to this Section 5 or otherwise, Holder shall, upon Exercise of this Warrant, become entitled to receive shares
and/or other securities or assets (other than Common Stock) then, wherever appropriate, all references herein to shares of Common
Stock shall be deemed to refer to and include such shares and/or other securities or assets; and thereafter the number of such
shares and/or other securities or assets shall be subject to adjustment from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this Section 5.

(f)
Notice of Adjustments. Whenever the Exercise Price is adjusted pursuant to the terms of this Warrant, the Company
shall promptly mail to the Holder a notice (an “Exercise Price Adjustment Notice”) setting forth the Exercise Price
after such adjustment and setting forth a statement of the facts requiring such adjustment. The Company shall, upon the written
request at any time of the Holder, furnish to such Holder a like Warrant setting forth (i) such adjustment or readjustment,
(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 securities or property which at the time would be received upon Exercise of the Warrant. For purposes of clarification,
whether or not the Company provides an Exercise Price Adjustment Notice pursuant to this Section 5(f), upon the occurrence
of any event that leads to an adjustment of the Exercise Price, the Holder would be entitled to receive a number of Exercise Shares
based upon the new Exercise Price, as adjusted, for exercises occurring on or after the date of such adjustment, regardless of
whether the Holder accurately refers to the adjusted Exercise Price in the Exercise Form.

6. Fractional
Interests.

No fractional shares or scrip representing fractional shares
shall be issuable upon the Exercise of this Warrant, but on Exercise of this Warrant, Holder may purchase only a whole number of
shares of Common Stock. If, on Exercise of this Warrant, Holder would be entitled to a fractional share of Common Stock or a right
to acquire a fractional share of Common Stock, such fractional share shall be disregarded and the number of shares of Common Stock
issuable upon Exercise shall be the next higher whole number of shares.

7. Reservation
of Shares.

From and after the date hereof, the Company shall at all
times reserve for issuance such number of authorized and unissued shares of Common Stock (or other securities substituted therefor
as herein above provided) as shall be sufficient for the Exercise of this Warrant and payment of the Exercise Price. If at any
time the number of shares of Common Stock authorized and reserved for issuance is below the number of shares sufficient for the
Exercise of this Warrant (a “Share Authorization Failure”) (based on the Exercise Price in effect from time to time),
the Company will promptly take all corporate action necessary to authorize and reserve a sufficient number of shares, including,
without limitation, calling a special meeting of stockholders to authorize additional shares to meet the Company’s obligations
under this Section 7, in the case of an insufficient number of authorized shares, and using its best efforts to obtain stockholder
approval of an increase in such authorized number of shares. The Company covenants and agrees that upon the Exercise of this Warrant,
all shares of Common Stock issuable upon such Exercise shall be duly and validly issued, fully paid and nonassessable and not subject
to preemptive rights, rights of first refusal or similar rights of any Person.

 

    	13

    	 

    

8. Restrictions
on Transfer.

(a)
Registration or Exemption Required. This Warrant has been issued in a transaction exempt from the registration
requirements of the Securities Act by virtue of Regulation D and exempt from state registration or qualification under applicable
state laws. None of the Warrant, the Exercise Shares or Failure Payment Shares may be pledged, transferred, sold or assigned except
pursuant to an effective registration statement or an exemption to the registration requirements of the Securities Act and applicable
state laws including, without limitation, a so-called “4(1) and a half” transaction.

(b)
Assignment. Subject to Section 8(a), the Holder may sell, transfer, assign, pledge, or otherwise dispose
of this Warrant, in whole or in part. Holder shall deliver a written notice to Company, substantially in the form of the Assignment
attached hereto as Exhibit B, indicating the Person or Persons to whom the Warrant shall be assigned and the respective
number of warrants to be assigned to each assignee. The Company shall effect the assignment within three (3) business days (the
“Transfer Delivery Period”), and shall deliver to the assignee(s) designated by Holder a Warrant or Warrants of like
tenor and terms for the appropriate number of shares. This Warrant and the rights evidenced hereby shall inure to the benefit of
and be binding upon the successors and assigns of the Holder. The provisions of this Warrant are intended to be for the benefit
of all Holders from time to time of this Warrant, and shall be enforceable by any such Holder. For avoidance of doubt, in the event
Holder notifies the Company that such sale or transfer is a so called “4(1) and half” transaction, the parties hereto
agree that a legal opinion from outside counsel for the Holder delivered to counsel for the Company substantially in the form attached
hereto as Exhibit C shall be the only requirement to satisfy an exemption from registration under the Securities Act
to effectuate such “4(1) and half” transaction.

9. Noncircumvention.

The Company hereby covenants and agrees that the Company
will not, by amendment of its certificate of incorporation, bylaws or through any reorganization, transfer of assets, consolidation,
merger, scheme of arrangement, 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, and will at all times in good faith carry out all the provisions
of this Warrant and take all action as may be reasonably required to protect the rights of the Holder. Without limiting the generality
of the foregoing, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the exercise
of this Warrant above the Exercise Price then in effect, and (ii) shall take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of
this Warrant.

10. Events
of Failure; Definition of Black Scholes Value.

(a) Definition. 

The occurrence of each of the following shall be considered
to be an “Event of Failure.”

(i) A Delivery Failure occurs, where a “Delivery
Failure” shall be deemed to have occurred if the Company fails to use its best efforts to deliver Exercise Shares to the
Holder within any applicable Delivery Period (other than due to the limitation contained in the proviso in the second paragraph
of Section 1);

(ii) A Legend Removal Failure occurs, where a “Legend
Removal Failure” shall be deemed to have occurred if the Company fails to use its best efforts to issue this Warrant and/or
Exercise Shares without a restrictive legend, or fails to use it best efforts to remove a restrictive legend, when and as required
under Section 2(e) hereof;

(iii) a Transfer Delivery Failure occurs, where
a “Transfer Delivery Failure” shall be deemed to have occurred if the Company fails to use its best efforts to deliver
a Warrant within any applicable Transfer Delivery Period; and

(iv) a Registration Failure (as defined below).

 

    	14

    	 

    

For purpose hereof, “Registration Failure” means
that (A) the Company fails to file with the SEC on or before the Filing Deadline (as defined in the Registration Rights Agreement)
any Registration Statement required to be filed pursuant to Section 2(a) of the Registration Rights Agreement, (B) the
Company fails to use its reasonable commercial efforts to obtain effectiveness with the SEC, prior to the Registration Deadline
(as defined in the Registration Rights Agreement), and if such Registration Statement is not so filed prior to the Registration
Deadline, as soon as possible thereafter, of any Registration Statement (as defined in the Registration Rights Agreement) that
are required to be filed pursuant to Section 2(a) of the Registration Rights Agreement, or fails to use reasonable commercial
efforts to keep such Registration Statement current and effective as required in Section 3 of the Registration Rights Agreement,
(C) The Company fails to file any additional Registration Statements required to be filed pursuant to Section 2(a)(ii) of the Registration
Rights Agreement on or before the Additional Filing Deadline or fails to use its reasonable commercial efforts to cause such new
Registration Statement to become effective on or before the Additional Registration Deadline, and if such effectiveness does not
occur within such period, as soon as possible thereafter, (D) the Company fails to file any amendment to any Registration
Statement, or any additional Registration Statement required to be filed pursuant to Section 3(b) of the Registration Rights
Agreement within twenty (20) days of the applicable Registration Trigger Date (as defined in the Registration Rights Agreement),
or fails to use its reasonable commercial efforts to cause such amendment and/or new Registration Statement to become effective
within sixty (60) days of the applicable Registration Trigger Date, and, if such effectiveness does not occur within such
period, as soon as possible thereafter, (E) any Registration Statement required to be filed under the Registration Rights
Agreement, after its initial effectiveness and during the Registration Period (as defined in the Registration Rights Agreement),
lapses in effect or sales of all of the Registrable Securities (as defined in the Registration Rights Agreement) cannot otherwise
be made thereunder (whether by reason of the Company’s failure to amend or supplement the prospectus included therein in
accordance with the Registration Rights Agreement, the Company’s failure to file and, use reasonable commercial efforts to
obtain effectiveness with the SEC of an additional Registration Statement or amended Registration Statement required pursuant to
Sections 2(a)(ii) or 3(b) of the Registration Rights Agreement, as applicable, or otherwise), and (F) the Company fails to
provide a commercially reasonable written response to any comments to any Registration Statement submitted by the SEC within twenty
(20) days of the date that such SEC comments are received by the Company.

(b) Failure Payments; Black-Scholes Determination.
The Company understands that any Event of Failure (as defined above) could result in economic loss to the Holder. In the event
that any Event of Failure occurs, as compensation to the Holder for such loss, the Company agrees to pay (as liquidated damages
and not as a penalty) to the Holder an amount (“Failure Payments”) payable, at the Company’s option, either (i)
in cash or (ii) in shares of Common Stock that are valued for these purposes at the Volume Weighted Average Price on the date of
such calculation (“Failure Payment Shares”), in each case equal to 15% per annum (or the maximum rate permitted
by applicable law, whichever is less) of the Black-Scholes value (as determined below) of the remaining unexercised portion of
this Warrant on the date of such Event of Failure (as recalculated on the first business day of each month thereafter for as long
as Failure Payments shall continue to accrue), which shall accrue daily from the date of such Event of Failure until the Event
of Failure is cured, accruing daily and compounded monthly, provided, however, the Holder shall only receive up to such amount
of shares of Common Stock in respect of Failure Payments such that Holder and any other persons or entities whose beneficial ownership
of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act (including shares
held by any “group” of which the Holder is a member, but excluding shares beneficially owned by virtue of the ownership
of securities or rights to acquire securities that have limitations on the right to convert, exercise or purchase similar to the
limitation set forth herein) shall not collectively beneficially own greater than 9.985% of the total number of shares of Common
Stock of the Company then issued and outstanding. For purposes of clarification, it is agreed and understood that Failure Payments
shall continue to accrue following any Event of Default until the applicable Default Amount is paid in full.

Notwithstanding the above, (1) in the event that the Company
(i) has, by the Filing Deadline (as defined the Registration Rights Agreement) filed a Registration Statement (as defined
in the Registration Rights Agreement) covering the number of shares required by the Registration Rights Agreement, and (ii) has
responded in writing to any comments to the Registration Statement that the Company has received from the SEC, within seven (7) Business
Days of such receipt, and nevertheless the SEC has not declared effective a Registration Statement covering the full number of
Warrant Shares issuable upon exercise of the Warrants by the Registration Deadline (as defined in the Registration Rights Agreement)
then, the Failure Payments attributable to such late Registration Effectiveness shall be reduced from 15% per annum to 12% (calculated
as set forth above) and (2) in no event shall the aggregate Failure Payments attributable solely to the failure by the SEC to declare
a Registration Statement effective exceed 10% of the Black-Scholes value of the Warrant. The Company shall satisfy any Failure
Payments under this Section pursuant to Section 10(c) below. Failure Payments are in addition to any Shares that the Holder is
entitled to receive upon Exercise of this Warrant.

 

    	15

    	 

    

For purposes hereof, the “Black-Scholes” value
of a Warrant shall be determined by use of the Black Scholes Option Pricing Model using the criteria set forth on Schedule 1 hereto.

(c) Payment of Accrued Failure Payments. The Failure
Payment Shares representing accrued Failure Payments for each Event of Failure shall be issued and delivered on or before the fifth
(5th) business day of each month following a month in which Failure Payments accrued and shall be the sole measure of damages
for the Event of Failure to which the Failure Payments relate. Nothing herein shall limit the Holder’s right to pursue a
claim for specific performance and/or injunctive relief. Notwithstanding the above, if a particular Event of Failure results in
an Event of Default pursuant to Section 11 hereof, then the Failure Payment, for that Event of Failure only, shall be considered
to have been satisfied upon payment to the Holder of an amount equal to the greater of (i) the Failure Payment, or (ii) the
Default Amount, payable in accordance with Section 11.

(d) Maximum Interest Rate. Nothing contained herein
or in any document referred to herein or delivered in connection herewith shall be deemed to establish or require the payment of
a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest
or dividends required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of
such maximum shall be credited against amounts owed by the Company to the Holder and thus refunded to the Company.

 

11. Default.

(a) Events Of Default. Each of the following events
shall be considered to be an “Event of Default,” unless waived by the Holder:

(i) Failure
To Effect Registration. With respect to all Registration Failures, a Registration Failure occurs and remains uncured for a
period of more than forty-five (45) days (or sixty (60) days in the case where the Company (i) has, by the Filing Deadline
(as defined the Registration Rights Agreement) filed a Registration Statement (as defined in the Registration Rights Agreement)
covering the number of shares required by the Registration Rights Agreement, and (ii) has responded in writing to any comments
to the Registration Statement that the Company has received from the SEC, within seven (7) Business Days of such receipt,
and nevertheless the SEC has not declared effective a Registration Statement covering the Shares by the Registration Deadline (as
defined in the Registration Rights Agreement)), and such Registration Failure relates solely to the Company’s failure
to have the Registration Statement declared effective by the Registration Deadline (as defined in the Registration Rights Agreement)
and with respect to a Registration Failure provided in clause (E) of the definition of “Registration Failure”, such
Registration Failure occurs and remains uncured for a period of more than forty-five (45) days.

(ii)
Failure To Deliver Common Stock. A Delivery Failure (as defined above) occurs and remains uncured for a period of
more than twenty (20) days; or at any time, the Company announces or states in writing that it will not honor its obligations to
issue shares of Common Stock to the Holder upon Exercise by the Holder of the Exercise rights of the Holder in accordance with
the terms of this Warrant.

(iii)
Legend Removal Failure. A Legend Removal Failure (as defined above) occurs and remains uncured for a period of twenty
(20) days; and

(iv)
Corporate Existence; Major Transaction. (A) The Company has failed to either (1) place the Major Transaction Warrant
Early Termination Price or the Exercise Shares issuable upon exercise of a Cashless Major Exercise, as the case may be, into escrow
or (2) obtain the written agreement of the Successor Entity as described in Section 5(c)(iv), or the Company has failed to instruct
the escrow agent to release such amount or such shares, as the case may be, to the Holder pursuant to Section 5(c)(iv), or
(B) with respect to a Major Transaction that is to be treated as an Assumption under the terms hereof, the Company has failed to
meet the Assumption requirements of Section 5(c)(ii).

 

    	16

    	 

    

(b)
Mandatory Early Termination.

(i) Mandatory
Early Termination Amount; Cashless Default Exercise. If any Events of Default shall occur then, unless waived by the Holder,
upon the occurrence and during the continuation of any Event of Default, at the option of the Holder, such option exercisable through
the delivery of written notice to the Company by such Holder (the “Default Notice”), the Company shall have the right
to terminate the outstanding amount of this Warrant and pay to the Holder (a “Mandatory Early Termination”), in full
satisfaction of its obligations hereunder by delivery of a notice to such effect to the Holder within two (2) Business Days following
receipt of the Default Notice, an amount payable in cash (the “Mandatory Early Termination Amount” or the “Default
Amount”) equal to the Black-Scholes value (as determined in accordance with Section 10(b)) of the remaining unexercised
portion of this Warrant on the date of such Default Notice. In the event the Company does not exercise its right to consummate a Mandatory Early Termination,
 then the Holder shall have the right
to exercise this Warrant pursuant to a Cashless Default Exercise in accordance with Section 3(c) above.

The Mandatory Early Termination Amount shall be payable within
five (5) Business Days following the date of the applicable Default Notice.

(ii)
Liquidated Damages. The parties hereto acknowledge and agree that the sums payable as Failure Payments or pursuant
to a Mandatory Early Termination shall give rise to liquidated damages and not penalties. The parties further acknowledge that
(i) the amount of loss or damages likely to be incurred by the Holder is incapable or is difficult to precisely estimate,
(ii) the amounts specified bear a reasonable proportion and are not plainly or grossly disproportionate to the probable loss
likely to be incurred by the Holder, and (iii) the parties are sophisticated business parties and have been represented by
sophisticated and able legal and financial counsel and negotiated this Agreement at arm’s length.

(c)
Posting Of Bond. In the event that any Event of Default occurs hereunder, the Company may not raise as a legal
defense (in any Lawsuit, as defined below, or otherwise) or justification to such Event of Default any claim that such Holder or
any one associated or affiliated with such Holder has been engaged in any violation of law, unless the Company has posted a surety
bond (a “Surety Bond”) for the benefit of such Holder in the amount of 130% of the aggregate Surety Bond Value (as
defined below) of all of the Holder’s Warrants (the “Bond Amount”), which Surety Bond shall remain in effect
until the completion of litigation of the dispute and the proceeds of which shall be payable to such Holder to the extent Holder
obtains judgment.

For purposes hereof, a “Lawsuit”
shall mean any lawsuit, arbitration or other dispute resolution filed by either party herein pertaining to any of this Warrant,
the Facility Agreement and the Registration Rights Agreement.

“Surety Bond Value,” for the
Warrants shall mean 130% of the of the Black-Scholes value of the remaining unexercised portion of this Warrant on the Trading
Day immediately preceding the date that such bond goes into effect).

(d)
Remedies, Other Obligations, Breaches And Injunctive Relief. The remedies provided in this Warrant shall be cumulative
and in addition to all other remedies available under this Warrant, the Facility Agreement and the Registration Rights Agreement,
at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit
the right of the Holder to pursue actual damages for any failure by the Company to comply with the terms of this Warrant. The Company
acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at
law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach,
the holder of this Warrant shall be entitled, in addition to all other available remedies, to an injunction restraining any breach,
without the necessity of showing economic loss and without any bond or other security being required.

 

    	17

    	 

    

12. Reserved.

13. Benefits
of this Warrant.

Nothing in this Warrant shall be construed to confer upon
any person other than the Company and Holder any legal or equitable right, remedy or claim under this Warrant and this Warrant
shall be for the sole and exclusive benefit of the Company and Holder.

14. Governing
Law.

All questions concerning the construction, validity, enforcement
and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the
State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning
the interpretations, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party
hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in
the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in the City of New York, borough of Manhattan for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees
not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court,
that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably
waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect
for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted
by law. The parties hereby waive all rights to a trial by jury. If either party shall commence an action or proceeding to enforce
any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party
for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution
of such action or proceeding.

15. Loss
of Warrant.

Upon receipt by the Company of evidence of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of indemnity or security reasonably
satisfactory to the Company, and upon surrender and cancellation of this Warrant, if mutilated, the Company shall execute and deliver
a new Warrant of like tenor and date.

16. Notice
or Demands.

Except as otherwise provided herein, notices or demands pursuant
to this Warrant to be given or made by Holder to or on the Company shall be sufficiently given or made if sent by overnight delivery
with a nationally recognized overnight courier service or certified or registered mail, return receipt requested, postage prepaid,
and addressed, until another address is designated in writing by the Company, to the address set forth in Section 2(a) above.
Notices or demands pursuant to this Warrant to be given or made by the Company to or on Holder shall be sufficiently given or made
if sent by overnight delivery with a nationally recognized overnight courier service or certified or registered mail, return receipt
requested, postage prepaid, and addressed, to the address of Holder set forth in the Company’s records, until another address
is designated in writing by Holder.

17. Limitation
on Issuance of Common Stock.

Notwithstanding anything herein to the contrary, the maximum
number of shares of Common Stock issued or issuable pursuant to this Warrant and all additional Warrants issued pursuant to Section
2.10 of the Facility Agreement may not exceed the aggregate number of shares of Common Stock which the Company may issue upon exercise
of the Warrants without violating NASDAQ Rule 5635(d).

[Signature page follows]

    	18

    	 

    

IN WITNESS WHEREOF, the undersigned has
executed this Warrant as of the _____ day of ______, ____.

	 	MAKO SURGICAL CORP.	 
	 	 	 	 
	 	 	 	 
	 	By:  	 	 
	 	 	Print Name:	 
	 	 	Title:	 

 

 

 

 

 

 

 

 

 

 

 

 

 

WARRANT

 

    	 

    	 

    

EXHIBIT A

EXERCISE FORM FOR WARRANT

TO: MAKO SURGICAL CORP.

CHECK
THE APPLICABLE BOX:

	☐	
        Cash
        Exercise or Cashless Exercise

        The
        undersigned hereby irrevocably exercises the attached warrant (the “Warrant”) with respect to shares of Common Stock
        (the “Common Stock”) of MAKO Surgical Corp., a Delaware corporation (the “Company”), and, if pursuant to
        a Cashless Exercise, herewith makes payment of the Exercise Price with respect to such shares in full, all in accordance with the
        conditions and provisions of said Warrant.

        [IF
        APPLICABLE: The undersigned hereby encloses $____ as payment of the Exercise Price.]

        [IF
        APPLICABLE: The undersigned hereby agrees to cancel $____ of principal outstanding under Notes of the Company held by the Holder.]

	☐	
        Cashless
        Major Exercise

        The
        undersigned hereby irrevocably exercises the Warrant with respect to ____% of the Warrant currently outstanding pursuant to a Cashless
        Major Exercise in accordance with the terms of the Warrant.

	☐	
        Cashless
        Default Exercise

        The
        undersigned hereby irrevocably exercises the Warrant pursuant to a Cashless Default Exercise, in accordance with the terms of the
        Warrant.

 

1. The undersigned requests that any stock certificates for
such shares be issued free of any restrictive legend, if appropriate, and a warrant representing any unexercised portion hereof
be issued, pursuant to the Warrant in the name of the undersigned and delivered to the undersigned at the address set forth below.

2. Capitalized
terms used but not otherwise defined in this Exercise Form shall have the meaning ascribed thereto in the Warrant.

Dated: _______________

    

Signature

    

Print Name

    

Address

NOTICE

The signature to the foregoing Exercise Form must correspond
to the name as written upon the face of the attached Warrant in every particular, without alteration or enlargement or any change
whatsoever.

 

    	 

    	 

    

EXHIBIT B

ASSIGNMENT

(To be executed by the registered holder

desiring to transfer the Warrant)

FOR VALUE RECEIVED, the undersigned holder of the attached
warrant (the “Warrant”) hereby sells, assigns and transfers unto the person or persons below named the right to purchase
__________ shares of the Common Stock of MAKO Surgical Corp., a Delaware corporation, evidenced by the attached Warrant and does
hereby irrevocably constitute and appoint __________ attorney to transfer the said Warrant on the books of the Company, with full
power of substitution in the premises.

 

	Dated:	 	 	 
	 	 	 	Signature

 

Fill in for new registration of Warrant:

	 	 
	Name	 
	 	 
	 	 
	Address	 
	 	 
	 	 
	Please print name and address of assignee	 
	(including zip code number)	 
	 	 
	 	 

NOTICE

The signature to the foregoing Assignment must correspond
to the name as written upon the face of the attached Warrant in every particular, without alteration or enlargement or any change
whatsoever.

 

 

 

 

    	 

    	 

    

EXHIBIT C

FORM OF OPINION

 

______, 20__

[___________]

Re:    MAKO Surgical Corp. (the “Company”)

Dear Sir:

[___________] (“[__________]”) intends to transfer
_______ Warrants (the “Warrants”) of the Company to __________ (“________”) without registration under
the Securities Act of 1933, as amended (the “Securities Act”). In connection therewith, we have examined and relied
upon the truth of representations contained in an Investor Representation Letter attached hereto and have examined such other documents
and issues of law as we have deemed relevant.

Based on and subject to the foregoing, we are of the opinion
that the transfer of the Warrants by _______ to ______ may be effected without registration under the Securities Act, provided,
however, that the Warrants to be transferred to _______ contain a legend restricting its transferability pursuant to the Securities
Act and that transfer of the Warrants is subject to a stop order.

The foregoing opinion is furnished only to ____________ and
may not be used, circulated, quoted or otherwise referred to or relied upon by you for any purposes other than the purpose for
which furnished or by any other person for any purpose, without our prior written consent.

Very truly yours,

 

 

 

 

    	 

    	 

    

[FORM OF INVESTOR REPRESENTATION LETTER]

_____, 20__

[_________________]

Gentlemen:

_________ (“___”) has agreed to purchase _________
Warrants (the “Warrants”) of MAKO Surgical Corp. (the “Company”) from [___________] (“[_________]”).
We understand that the Warrants are “restricted securities.” We represent and warrant that ______ is a sophisticated
institutional investor that would qualify as an “Accredited Investor” as defined in Rule 501 of Regulation D under
the Securities Act of 1933, as amended (the “Securities Act”).

________ represents and warrants as of the date hereof as
follows:

1. That it is acquiring the Warrants and the shares
of common stock, $0.001 par value per share underlying such Warrants (the “Exercise Shares”) solely for its account
for investment and not with a view to or for sale or distribution of said Warrants or Exercise Shares or any part thereof. ________
also represents that the entire legal and beneficial interests of the Warrants and Exercise Shares _________ is acquiring is being
acquired for, and will be held for, its account only;

2. That the Warrants and the Exercise Shares have not
been registered under the Securities Act on the basis that no distribution or public offering of the stock of the Company is to
be effected. _______ realizes that the basis for the exemption may not be present if, notwithstanding its representations, _______
has a present intention of acquiring the securities for a fixed or determinable period in the future, selling (in connection with
a distribution or otherwise), granting any participation in, or otherwise distributing the securities. _______ has no such present
intention;

3. That the Warrants and the Exercise Shares must be
held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available.
________ recognizes that the Company has no obligation to register the Warrants, or to comply with any exemption from such registration;

4. That neither the Warrants nor the Exercise Shares
may be sold pursuant to Rule 144 adopted under the Securities Act unless certain conditions are met, including, among other things,
the existence of a public market for the shares, the availability of certain current public information about Company, the resale
following the required holding period under Rule 144 and the number of shares being sold during any three month period not exceeding
specified limitations;

5. That it will not make any disposition of all or
any part of the Warrants or Exercise Shares in any event unless and until:

(i)    The Company shall have received a letter secured
by _________ from the Securities and Exchange Commission stating that no action will be recommended to the Securities and Exchange
Commission with respect to the proposed disposition;

(ii)    There is then in effect a registration statement
under the Securities Act covering such proposed disposition and such disposition is made in accordance with said registration statement;
or

(iii)    _________ shall have notified the Company of
the proposed disposition and, in the case of a sale or transfer in a so called “4(1) and a half” transaction, shall
have furnished counsel to the Company with an opinion of counsel, reasonably satisfactory to counsel to the Company.

    	 

    	 

    
We acknowledge that the Company will place stop orders with
respect to the Warrants and the Exercise Shares, and if a registration statement is not effective, the Exercise Shares shall bear
the following restrictive legend:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SAID ACT INCLUDING, WITHOUT LIMITATION,
PURSUANT TO RULES 144 OR 144A UNDER SAID ACT OR PURSUANT TO A PRIVATE SALE EFFECTED UNDER APPLICABLE FORMAL OR INFORMAL SEC INTERPRETATION
OR GUIDANCE, SUCH AS A SO-CALLED “4(1) AND A HALF” SALE.”

“THE SALE, TRANSFER OR ASSIGNMENT OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN REGISTRATION RIGHTS AGREEMENT DATED AS OF
MAY 7, 2012, AS AMENDED FROM TIME TO TIME, AMONG THE COMPANY AND CERTAIN HOLDERS OF ITS OUTSTANDING SECURITIES. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE
COMPANY.”

At any time and from time to time after the date hereof,
_________ shall, without further consideration, execute and deliver to [________] or the Company such other instruments or documents
and shall take such other actions as they may reasonably request to carry out the transactions contemplated hereby.

Very truly yours,

 

 

 

 

 

 

    	 

    	 

    

Schedule 1

Black-Scholes Value

	 	Calculation Under Section 5(c)(iii)	Calculation Under Section 10(b) or 11(b)
	Remaining Term	Number of calendar days from date of public announcement of the Major Transaction until the last date on which the Warrant may be exercised.	Number of calendar days from date of the determination until the last date on which the Warrant may be exercised.
	Interest Rate	A risk-free interest rate corresponding to the US$ LIBOR/Swap rate for a period equal to the Remaining Term.	A risk-free interest rate corresponding to the US$ LIBOR/Swap rate for a period equal to the Remaining Term (rounded to the nearest year).
	Volatility	
        If the first public announcement of the Major Transaction is made
        at or prior to 4:00 p.m., New York City time, the arithmetic mean of the historical volatility for the 10, 30 and 50 Trading Day
        periods ending on the date of such first public announcement, obtained from the HVT or similar function on Bloomberg.

         

        If the first public announcement of the Major Transaction
        is made after 4:00 p.m., New York City time, the arithmetic mean of the historical volatility for the 10, 30 and 50 Trading Day
        periods ending on the next succeeding Trading Day following the date of such first public announcement, obtained from the HVT or
        similar function on Bloomberg.
	Historic volatility of the Company’s stock price for the preceding year ending on the date of exercise
	Stock Price	The last closing price of the Common Stock on NASDAQ, or, if that is not the principal trading market for the Common Stock, such principal market on which the Common Stock is traded or listed, prior to the consummation of the Major Transaction.	The closing price on the date of exercise or other event requiring calculation.
	Dividends	Zero.	Zero.
	Strike Price	Exercise Price as defined in section 3(a).	Exercise Price as defined in section 3(a).w7823457c.htm

 

 

EXHIBIT 10.1

 

 

MANAGEMENT AGREEMENT

 

AGREEMENT effective as of the 24th day of July, 2011 among CERES MANAGED FUTURES LLC, a Delaware limited liability company (“CMF” or the “General Partner”), WARRINGTON FUND L.P., a New York limited partnership (the “Partnership”) and WARRINGTON ASSET MANAGEMENT, LLC, a Delaware limited liability company (the “Advisor”).

 

W I T N E S S E T H :

 

WHEREAS, CMF is the general partner of Warrington Fund L.P. (formerly, Smith Barney Warrington Fund L.P.), a limited partnership organized for the purpose of speculative trading of commodity interests, including futures contracts, options, swaps and forward contracts on U.S. and non-U.S. markets with the objective of achieving substantial capital appreciation; and

 

WHEREAS, the Limited Partnership Agreement establishing the Partnership (the “Limited Partnership Agreement”) permits CMF to delegate to one or more commodity trading advisors CMF’s authority to make trading decisions for the Partnership; and

 

WHEREAS, prior to January 30, 2012, the Advisor was exempt from registration as a commodity trading advisor with the Commodity Futures Trading Commission (“CFTC”) pursuant to Section 4m(1) of the Commodity Exchange Act, as interpreted by CFTC Rule 4.14(a)(10); and

 

WHEREAS, on January 30, 2012, the Advisor registered as a commodity trading advisor with the CFTC and became a member of the National Futures Association (“NFA”); and

 

WHEREAS, CMF is registered as a commodity pool operator with the CFTC and is a member of the NFA; and

 

WHEREAS, CMF, the Partnership and Warrington Mgt., L.P. (“Warrington Mgt.”), a Delaware limited partnership, entered into a management agreement dated as of December 31, 2005, (the “Initial Advisory Agreement”), pursuant to which Warrington Mgt. agreed to render and implement advisory services to the Partnership; and

 

WHEREAS, Warrington Mgt. transferred all of its rights and obligations under the Initial Advisory Agreement to Warrington Advisors, LLC (“Warrington Advisors”), a Nevada limited liability company, and Warrington Advisors assumed all of such rights and obligations of Warrington Mgt. under the Initial Advisory Agreement; and

 

WHEREAS, the Advisor, Warrington Mgt., and Warrington Advisors all have the same direct or indirect beneficial ownership; and

 

WHEREAS, Warrington Advisors wishes to transfer all of its rights and obligations with respect to the Partnership to the Advisor, and the Advisor wishes to assume all of such rights and obligations of Warrington Advisors; and

 

 

  

  

  

 

WHEREAS, CMF, the Partnership and the Advisor wish to enter into this Agreement in order to set forth the terms and conditions upon which the Advisor will (i) render and implement advisory services in connection with the conduct by the Partnership of its commodity trading activities during the term of this Agreement and (ii) assume the rights and obligations of Warrington Advisors with respect to the Partnership.

 

NOW, THEREFORE, the parties agree as follows:

 

1. DUTIES OF THE ADVISOR.  (a) For the period and on the terms and conditions of this Agreement, the Advisor shall have sole authority and responsibility, as one of the Partnership’s agents and attorneys-in-fact, for directing the investment and reinvestment of the assets and funds of the Partnership allocated to it from time to time by the General Partner in commodity interests, including commodity futures contracts, options and forward contracts.  The Advisor may also engage in swaps transactions and other derivative transactions on behalf of the Partnership with the prior approval of CMF.  All such trading on behalf of the Partnership shall be in accordance with the trading strategies and trading policies set forth in the Partnership’s Private Placement Offering Memorandum and Disclosure Document dated June 15, 2011, as supplemented (the “Memorandum”), and as such trading policies may be changed from time to time upon receipt by the Advisor of prior written notice of such change and pursuant to the trading strategy selected by CMF to be utilized by the Advisor in managing the Partnership’s assets.  CMF has initially selected the Advisor’s Core Trading Program (the “Program”), as described in the Disclosure Document (defined below), to manage the Partnership’s assets allocated to it.  Any open positions or other investments at the time of receipt of such notice of a change in trading policy shall not be deemed to violate the changed policy and shall be closed or sold in the ordinary course of trading.  The Advisor may not deviate from the trading policies set forth in the Memorandum without the prior written consent of the Partnership given by CMF.  The Advisor makes no representation or warranty that the trading to be directed by it for the Partnership will be profitable or will not incur losses.

 

(b) CMF acknowledges receipt of the Advisor’s Disclosure Document dated March 30, 2012, as filed with the NFA.  All trades made by the Advisor for the account of the Partnership shall be made through such commodity broker or brokers as CMF shall direct, and the Advisor shall have no authority or responsibility for selecting or supervising any such broker in connection with the execution, clearance or confirmation of transactions for the Partnership or for the negotiation of brokerage rates charged therefor.  However, the Advisor, with the prior written permission (by original, fax copy or email copy) of CMF, may direct any and all trades in commodity futures and options to a futures commission merchant or independent floor broker it chooses for execution with instructions to give-up the trades to the broker designated by CMF, provided that the futures commission merchant or independent floor broker and any give-up or floor brokerage fees are approved in advance by CMF.  All give-up or similar fees relating to the foregoing shall be paid by the Partnership after all parties have executed the relevant give-up agreements (by original, fax copy or email copy).

 

(c) The initial allocation of the Partnership’s assets to the Advisor will be made to the Program.  In the event the Advisor wishes to use a trading system or methodology other than or in addition to the system or methodology outlined in the Memorandum in connection with its trading for the Partnership, either in whole or in part, it may not do so unless the Advisor gives CMF prior written

 

 

 

  

- 2 -

  

 

 

notice of its intention to utilize such different trading system or methodology and CMF consents thereto in writing.  CMF shall, within a reasonable time, change the name of the Partnership in the event that the Advisor no longer acts as the sole advisor to the Partnership.  In addition, the Advisor will provide five days’ prior written notice to CMF of any change in the trading system or methodology to be utilized for the Partnership which the Advisor deems material.  If the Advisor deems such change in system or methodology or in markets traded to be material, the changed system or methodology or markets traded will not be utilized for the Partnership without the prior written consent of CMF.  In addition, the Advisor will notify CMF of any changes to the trading system or methodology that would require a change in the description of the trading strategy or methods described in the Disclosure Document or the Memorandum, as applicable.  Further, the Advisor will provide the Partnership with a current list of all commodity interests to be traded for the Partnership’s account and the Advisor will not trade any additional commodity interests for such account without providing notice thereof to CMF and receiving CMF’s written approval.  The Advisor also agrees to provide CMF, on a monthly basis, with a written report of the assets under the Advisor’s management together with all other matters deemed by the Advisor to be material changes to its business not previously reported to CMF.  The Advisor further agrees that it will convert foreign currency balances (not required to margin positions denominated in a foreign currency) to U.S. dollars no less frequently than monthly.  U.S. dollar equivalents in individual foreign currencies of more than $100,000 will be converted to U.S. dollars within one business day after such funds are no longer needed to margin foreign positions.

 

(d) The Advisor agrees to make all material disclosures to the Partnership regarding itself and its principals as defined in Part 4 of the CFTC’s regulations (“principals”), shareholders, directors, officers and employees, their trading performance and general trading methods, its customer accounts (but not the identities of or identifying information with respect to its customers) and otherwise as are required in the reasonable judgment of CMF to be made in any filings required by Federal or state law or NFA rule or order.  Notwithstanding Paragraphs 1(d) and 4(d) of this Agreement, the Advisor is not required to disclose the actual trading results of proprietary accounts of the Advisor or its principals unless CMF reasonably determines that such disclosure is required in order to fulfill its fiduciary obligations to the Partnership or the reporting, filing or other obligations imposed on it by Federal or state law or NFA rule or order.  The Partnership and CMF acknowledge that the trading advice to be provided by the Advisor is a property right belonging to the Advisor and that they will keep all such advice confidential.  Further, CMF agrees to treat as confidential any results of proprietary accounts and/or proprietary information with respect to the Advisor’s trading systems obtained from the Advisor.

 

(e) The Advisor understands and agrees that CMF may designate other trading advisors for the Partnership and apportion or reapportion to such other trading advisors the management of an amount of Net Assets (as defined in Paragraph 3(b) hereof) as it shall determine in its absolute discretion.  The designation of other trading advisors and the apportionment or reapportionment of Net Assets to any such trading advisors pursuant to this Paragraph 1 shall neither terminate this Agreement nor modify in any regard the respective rights and obligations of the parties hereunder.

 

(f) CMF may, from time to time, in its absolute discretion, select additional trading advisors and reapportion funds among the trading advisors for the Partnership as it deems appropriate.  CMF shall use its best efforts to make reapportionments, if any, as of the first day of a month.  The Advisor agrees that it may be called upon at any time promptly to liquidate positions in CMF’s

 

 

  

- 3 -

  

 

sole discretion so that CMF may reallocate the Partnership’s assets, meet margin calls on the Partnership’s account, fund redemptions, or for any other reason, except that CMF will not require the liquidation of specific positions by the Advisor.  CMF will use its best efforts to give two business days’ prior notice to the Advisor of any reallocations or liquidations.

 

(g) The Advisor shall assume financial responsibility for any errors committed or caused by it in transmitting orders for the purchase or sale of commodity interests for the Partnership’s account including payment to the brokers of the floor brokerage commissions, exchange, NFA fees, and other transaction charges and give-up charges incurred by the brokers on such trades.  The Advisor’s errors shall include, but not be limited to, inputting improper trading signals or communicating incorrect orders to the commodity brokers.  The Advisor shall have an affirmative obligation to promptly notify CMF in accordance with the provisions of Paragraph 8(a)(iii) of any errors with respect to the account, and the Advisor shall use its best efforts to identify and promptly notify CMF of any order or trade which the Advisor reasonably believes was not executed in accordance with its instructions to any broker utilized to execute orders for the Partnership.

 

2. INDEPENDENCE OF THE ADVISOR.  For all purposes herein, the Advisor shall be deemed to be an independent contractor and, unless otherwise expressly provided or authorized, shall have no authority to act for or represent the Partnership in any way and shall not be deemed an agent, promoter or sponsor of the Partnership, CMF, or any other trading advisor.  The Advisor shall not be responsible to the Partnership, the General Partner, any trading advisor or any limited partners for any acts or omissions of any other trading advisor to the Partnership.

 

3. COMPENSATION.  (a) In consideration of and as compensation for all of the services to be rendered by the Advisor to the Partnership under this Agreement, the Partnership shall (i) pay the Advisor a monthly fee for professional management services equal to 1/6 of 1% (2% per year) of the month-end Net Assets of the Partnership allocated to the Advisor; and (ii) allocate to the Advisor a quarterly profit share allocation (a “Profit Share”) to its capital account in the Partnership equal to 20% of New Trading Profits (as such term is defined in the Limited Partnership Agreement) earned by the Advisor for the Partnership during each calendar quarter in the form of Units of Limited Partnership Interest (as such term is defined in the Limited Partnership Agreement).

 

(b) “Net Assets” shall have the meaning set forth in Section 7(d)(1) of the Limited Partnership Agreement dated as of May 11, 2012 and without regard to further amendments thereto, provided that in determining the Net Assets of the Partnership on any date, no adjustment shall be made to reflect any distributions, redemptions or Profit Shares allocable as of the date of such determination.

 

(c) Monthly management fees shall be paid within twenty (20) business days following the end of the period for which such fee is payable.  In the event of the termination of this Agreement as of any date which shall not be the end of a calendar month the monthly management fee shall be prorated to the effective date of termination.  If, during any month, the Partnership does not conduct

 

 

 

  

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business operations or the Advisor is unable to provide the services contemplated herein for more than two successive business days, the monthly management fee shall be prorated by the ratio which the number of business days during which CMF conducted the Partnership’s business operations or utilized the Advisor’s services bears in the month to the total number of business days in such month.

 

(d) The provisions of this Paragraph 3 shall survive the termination of this Agreement.

 

4. RIGHT TO ENGAGE IN OTHER ACTIVITIES.  (a) The services provided by the Advisor hereunder are not to be deemed exclusive.  CMF on its own behalf and on behalf of the Partnership acknowledges that, subject to the terms of this Agreement, the Advisor and its officers, directors, employees and shareholder(s), may render advisory, consulting and management services to other clients and accounts.  The Advisor and its officers, directors, employees and shareholder(s) shall be free to trade for their own accounts and to advise other investors and manage other commodity accounts during the term of this Agreement and to use the same information, computer programs and trading strategies, programs or formulas which they obtain, produce or utilize in the performance of services to CMF for the Partnership.  However, the Advisor represents, warrants and agrees that it believes the rendering of such consulting, advisory and management services to other accounts and entities will not require any material change in the Advisor’s basic trading strategies and will not affect the capacity of the Advisor to continue to render services to CMF for the Partnership of the quality and nature contemplated by this Agreement.

 

(b) If, at any time during the term of this Agreement, the Advisor is required to aggregate the Partnership’s commodity positions with the positions of any other person for purposes of applying CFTC- or exchange-imposed speculative position limits, the Advisor agrees that it will promptly notify CMF in writing if the Partnership’s positions are included in an aggregate amount which exceeds the applicable speculative position limit.  The Advisor agrees that, if its trading recommendations are altered because of the application of any speculative position limits, it will not modify the trading instructions with respect to the Partnership’s account in such manner as to affect the Partnership substantially disproportionately as compared with the Advisor’s other accounts.  The Advisor further represents, warrants and agrees that under no circumstances will it knowingly or deliberately use trading strategies or methods for the Partnership that are inferior to strategies or methods employed for any other client or account and that it will not knowingly or deliberately favor any client or account managed by it over any other client or account in any manner, it being acknowledged, however, that different trading strategies or methods may be utilized for differing sizes of accounts, accounts with different trading policies, accounts experiencing differing inflows or outflows of equity, accounts which commence trading at different times, accounts which have different portfolios or different fiscal years, accounts utilizing different executing brokers and accounts with other differences, and that such differences may cause divergent trading results.

 

(c) It is acknowledged that the Advisor and/or its officers, employees, directors and shareholder(s) presently act, and it is agreed that they may continue to act, as advisor for other accounts managed by them, and may continue to receive compensation with respect to services for such accounts in amounts which may be more or less than the amounts received from the Partnership.

 

 

  

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(d) The Advisor agrees that it shall make such information available to CMF respecting the performance of the Partnership’s account as compared to the performance of other accounts managed by the Advisor or its principals as shall be reasonably requested by CMF.  The Advisor presently believes and represents that existing speculative position limits will not materially adversely affect its ability to manage the Partnership’s account given the potential size of the Partnership’s account and the Advisor’s and its principals’ current accounts and all proposed accounts for which they have contracted to act as trading advisor.

 

5. TERM.  (a) This Agreement shall continue in effect until June 30, 2013.  CMF may, in its sole discretion, renew this Agreement for additional one-year periods upon notice to the Advisor not less than 30 days prior to the expiration of the previous period.  After June 30, 2013, CMF may terminate this Agreement at any month-end upon 30 days’ notice to the Advisor.  At any time during the term of this Agreement, CMF may elect to immediately terminate this Agreement upon 5 days’ notice to the Advisor if (i) the Net Asset Value per Unit of Limited Partnership Interest shall decline as of the close of business on any day to $400 or less; (ii) the Net Assets allocated to the Advisor (adjusted for redemptions, distributions, withdrawals or reallocations, if any) decline by 50% or more as of the end of a trading day from such Net Assets’ previous highest value; (iii) limited partners owning at least 50% of the outstanding Units of Limited Partnership Interest shall vote to require CMF to terminate this Agreement; (iv) the Advisor fails to comply with the terms of this Agreement; (v) CMF, in good faith, reasonably determines that the performance of the Advisor has been such that CMF’s fiduciary duties to the Partnership require CMF to terminate this Agreement; (vi) CMF reasonably believes that the application of speculative position limits will substantially affect the performance of the Partnership; or (vii) the Advisor fails to conform to the trading policies set forth in the Limited Partnership Agreement or the Memorandum as they may be changed from time to time.  At any time during the term of this Agreement, CMF may elect immediately to terminate this Agreement if (i) the Advisor merges, consolidates with another entity, sells a substantial portion of its assets, or becomes bankrupt or insolvent, (ii) Scott C. Kimple dies, becomes incapacitated, leaves the employ of the Advisor, ceases to control the Advisor or is otherwise not managing the trading programs or systems of the Advisor, (iii) the Advisor’s registration as a commodity trading advisor with the CFTC or its membership in the NFA or any other regulatory authority, is terminated or suspended; or (iv) CMF reasonably believes that the Advisor has or may contribute to any material operational, business or reputational risk to CMF or CMF’s affiliates.  This Agreement will immediately terminate upon dissolution of the Partnership or upon cessation of trading by the Partnership prior to dissolution.

 

(b) The Advisor may terminate this Agreement by giving not less than 30 days’ notice to CMF (i) in the event that the trading policies of the Partnership as set forth in the Memorandum are changed in such manner that the Advisor reasonably believes will adversely affect the performance of its trading strategies; (ii) after June 30, 2013; or (iii) in the event that the General Partner or Partnership fails to comply with the terms of this Agreement.  The Advisor may immediately terminate this Agreement if CMF’s registration as a commodity pool operator or its membership in the NFA is terminated or suspended.

 

 

  

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(c) Except as otherwise provided in this Agreement, any termination of this Agreement in accordance with this Paragraph 5 or Paragraph 1(e) shall be without penalty or liability to any party, except for any fees due to the Advisor pursuant to Paragraph 3 hereof.

 

6. INDEMNIFICATION.  (a)(i) In any threatened, pending or completed action, suit, or proceeding to which the Advisor was or is a party or is threatened to be made a party arising out of or in connection with this Agreement or the management of the Partnership’s assets by the Advisor or the offering and sale of units in the Partnership, CMF shall, subject to subparagraph (a)(iii) of this Paragraph 6, indemnify and hold harmless the Advisor against any loss, liability, damage, fine, penalty, obligation, cost, expense (including, without limitation, attorneys’ and accountants’ fees collection fees, court costs and other legal expenses), judgments, awards and amounts paid in settlement actually and reasonably incurred by it in connection with such action, suit, or proceeding if the Advisor acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the Partnership, and provided that its conduct did not constitute negligence, intentional misconduct, or a breach of its fiduciary obligations to the Partnership as a commodity trading advisor, unless and only to the extent that the court or administrative forum in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all circumstances of the case, the Advisor is fairly and reasonably entitled to indemnity for such expenses which such court or administrative forum shall deem proper; and further provided that no indemnification shall be available from the Partnership if such indemnification is prohibited by Section 16 of the Limited Partnership Agreement.  The termination of any action, suit or proceeding by judgment, order or settlement shall not, of itself, create a presumption that the Advisor did not act in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the Partnership.

 

(ii) Without limiting subparagraph (i) above, to the extent that the Advisor has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subparagraph (i) above, or in defense of any claim, issue or matter therein, CMF shall indemnify the Advisor against the expenses (including, without limitation, attorneys’ and accountants’ fees) actually and reasonably incurred by it in connection therewith.

 

(iii) Any indemnification under subparagraph (i) above, unless ordered by a court or administrative forum, shall be made by CMF only as authorized in the specific case and only upon a determination by independent legal counsel in a written opinion that such indemnification is proper in the circumstances because the Advisor has met the applicable standard of conduct set forth in subparagraph (i) above.  Such independent legal counsel shall be selected by CMF in a timely manner, subject to the Advisor’s approval, which approval shall not be unreasonably withheld.  The Advisor will be deemed to have approved CMF’s selection unless the Advisor notifies CMF in writing, received by CMF within five days of CMF’s telecopying to the Advisor of the notice of CMF’s selection, that the Advisor does not approve the selection.

 

(iv) In the event the Advisor is made a party to any claim, dispute or litigation or otherwise incurs any loss or expense as a result of, or in connection with, the Partnership’s or CMF’s activities or claimed activities unrelated to the Advisor, CMF shall indemnify, defend and hold harmless the Advisor against any loss, liability, damage, fine, penalty, obligation, cost or expense (including, without limitation, attorneys’ and accountants’ fees, collection fees, court costs and other legal expenses, judgments, awards and amounts including amounts paid in settlement) incurred in connection therewith.

 

 

  

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(v) As used in this Paragraph 6(a), the term “Advisor” shall include the Advisor, its principals, officers, directors, stockholders and employees and the term “CMF” shall include the Partnership.

 

(b) (i) The Advisor agrees to indemnify, defend and hold harmless CMF, the Partnership and their affiliates against any loss, liability, damage, fine, penalty, obligation, cost or expense (including, without limitation, attorneys’ and accountants’ fees, collection fees, court costs and other legal expenses), judgments, awards and amounts paid in settlement reasonably incurred by them (A) as a result of the breach of any representations and warranties or covenants made by the Advisor in this Agreement, (B) as a result of the breach of any representation, warranty or covenant made by Warrington Mgt. or Warrington Advisors, or (C) as a result of any act or omission of the Advisor, Warrington Mgt. or Warrington Advisors relating to the Partnership if (i) there has been a final judicial or regulatory determination, or a written opinion of an arbitrator pursuant to Paragraph 14 hereof, to the effect that such acts or omissions violated the terms of this Agreement in any material respect or involved negligence, bad faith, recklessness or intentional misconduct on the part of the Advisor, Warrington Mgt. or Warrington Advisors (except as otherwise provided in Paragraph 1(g)), or (ii) there has been a settlement of any action or proceeding with the Advisor’s prior written consent..

 

(ii) In the event CMF, the Partnership or any of their affiliates is made a party to any claim, dispute or litigation or otherwise incurs any loss or expense as a result of, or in connection with, the activities or claimed activities of the Advisor or its principals, officers, directors, shareholder(s) or employees unrelated to CMF’s or the Partnership’s business, the Advisor shall indemnify, defend and hold harmless CMF, the Partnership or any of their affiliates against any loss, liability, damage, fine, penalty, obligation, cost or expense (including, without limitation, attorneys’ and accountants’ fees, collection fees, court costs and other legal expenses, judgments, awards and amounts including amounts paid in settlement) incurred in connection therewith.

 

(c) In the event that a person entitled to indemnification under this Paragraph 6 is made a party to an action, suit or proceeding alleging both matters for which indemnification can be made hereunder and matters for which indemnification may not be made hereunder, such person shall be indemnified only for that portion of the loss, liability, damage, cost or expense incurred in such action, suit or proceeding which relates to the matters for which indemnification can be made.

 

(d) None of the indemnifications contained in this Paragraph 6 shall be applicable with respect to default judgments, confessions of judgment or settlements entered into by the party claiming indemnification without the prior written consent, which shall not be unreasonably withheld, of the party obligated to indemnify such party.

 

(e) The provisions of this Paragraph 6 shall survive the termination of this Agreement.

 

 

  

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7. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.

 

(a) The Advisor represents and warrants that:

 

(i) All references to the Advisor and its principals in the Memorandum, if any, are accurate in all material respects and as to them the Memorandum does not contain any untrue statement of a material fact or omit to state a material fact which is necessary to make the statements therein not misleading, except that with respect to Table B and other pro forma or hypothetical performance information in the in the Memorandum, if any, this representation and warranty extends only to the underlying data made available by the Advisor for the preparation thereof and not to any hypothetical or pro forma adjustments.  Subject to such exception, all references to the Advisor and its principals in the Memorandum will, after review and approval of such references by the Advisor prior to the use of such Memorandum in connection with the offering of the Partnership’s units, be accurate in all material respects.

 

(ii) The information with respect to the Advisor set forth in the actual performance tables in the Memorandum, if any, is based on all of the customer accounts managed on a discretionary basis by the Advisor’s principals and/or the Advisor during the period covered by such tables and required to be disclosed therein.  The Advisor’s performance tables have been examined by an independent certified public accountant and the report thereon has been provided to CMF.  The Advisor will have its performance tables so examined no less frequently than annually during the term of this Agreement and will provide the report thereon to CMF.

 

(iii) The Advisor will be acting as a commodity trading advisor with respect to the Partnership and not as a securities investment adviser.  As of January 30, 2012, the Advisor is duly registered with the CFTC as a commodity trading advisor, is a member of the NFA.  Prior to January 30, 2012, the Advisor was exempt from registration with the CFTC as a commodity trading advisor pursuant to Section 4m(1) of the Commodity Exchange Act, as interpreted by CFTC Rule 4.14(a)(10).  The Advisor is in compliance with such other registration and licensing requirements as shall be necessary to enable it to perform its obligations hereunder, and agrees to maintain and renew such registrations and licenses during the term of this Agreement.

 

(iv) The Advisor is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware and has full limited partnership power and authority to enter into this Agreement and to provide the services required of it hereunder.

 

(v) The Advisor will not, by acting as a commodity trading advisor to the Partnership, breach or cause to be breached any undertaking, agreement, contract, statute, rule or regulation to which it is a party or by which it is bound.

 

(vi) This Agreement has been duly and validly authorized, executed and delivered by the Advisor and is a valid and binding agreement enforceable in accordance with its terms.

 

  

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(vii) At any time during the term of this Agreement that an offering memorandum or prospectus relating to the units is required to be delivered in connection with the offer and sale thereof, the Advisor agrees upon the request of CMF to provide the Partnership with such information as shall be necessary so that, as to the Advisor and its principals, such offering memorandum or prospectus is accurate.

 

(viii) In the event that the Advisor forms another commodity pool unrelated to CMF with substantially similar investors, whether or not the Advisor terminates this Agreement or continues trading for the Partnership, the Advisor shall pay to CMF all expenses incurred by CMF, Citigroup Global Markets Inc. (“CGM”) and the Partnership in connection with the organization and offering of the Partnership, including but not limited to attorneys’, accountants’ and filing fees, to the extent that CMF and CGM  have not previously been reimbursed by the Partnership.

 

(ix) The Advisor will make no representations, other than those contained in the Memorandum, to investors or prospective investors in the Partnership with respect to the offering and sale of Units in the Partnership without the prior written approval of CMF.

 

(x) The Advisor agrees that it shall be responsible for any liability of Warrington Advisors or Warrington Mgt. that arises in connection with the advisory services they provided to the Partnership;

 

(b) CMF represents and warrants for itself and the Partnership that:

 

(i) The Memorandum (as from time to time amended or supplemented, which amendment or supplement is approved by the Advisor as to descriptions of itself and its actual performance) does not contain any untrue statement of a material fact or omit to state a material fact which is necessary to make the statements therein not misleading, except that the foregoing representation does not apply to any statement or omission concerning the Advisor in the Memorandum, made in reliance upon, and in conformity with, information furnished to CMF by or on behalf of the Advisor expressly for use in the Memorandum (it being understood that the hypothetical and pro forma adjustments in Table B, if any, were not furnished by the Advisor).

 

(ii) CMF is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and has full limited liability company power and authority to perform its obligations under this Agreement.

 

(iii) CMF and the Partnership have the capacity and authority to enter into this Agreement on behalf of the Partnership.

 

(iv) This Agreement has been duly and validly authorized, executed and delivered on CMF’s and the Partnership’s behalf and is a valid and binding agreement of CMF and the Partnership enforceable in accordance with its terms.

 

(v) CMF will not, by acting as the general partner to the Partnership and the Partnership will not, breach or cause to be breached any undertaking, agreement, contract, statute, rule or regulation to which it is a party or by which it is bound which would materially limit or affect the performance of its duties under this Agreement.

 

 

 

  

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(vi) CMF is registered as a commodity pool operator and is a member of the NFA, and it will maintain and renew such registration and membership during the term of this Agreement.

 

(vii) The Partnership is a limited partnership duly organized and validly existing under the laws of the State of New York and has full power and authority to enter into this Agreement and to perform its obligations under this Agreement.

 

 

8. COVENANTS OF THE ADVISOR, CMF AND THE PARTNERSHIP.

 

(a)  The Advisor agrees as follows:

 

(i) In connection with its activities on behalf of the Partnership, the Advisor will comply with all applicable laws, including rules and regulations of the CFTC, NFA and/or the commodity exchange on which any particular transaction is executed.

 

(ii) The Advisor will promptly notify CMF of the commencement of any investigation, suit, action or proceeding involving the Advisor or any of its affiliates, officers, manager(s), employees, agents or representatives; regardless of whether such investigation, suit, action or proceeding also involves CMF.  The Advisor will provide CMF with copies of any correspondence (including but not limited to, any notice or correspondence regarding the violation, or potential violation, of position limits) from or to the CFTC, NFA or any commodity exchange in connection with an investigation or audit of the Advisor’s business activities.

 

(iii) In the placement of orders for the Partnership’s account and for the accounts of any other client, the Advisor will utilize a pre-determined, systematic, fair and reasonable order entry system, which shall, on an overall basis, be no less favorable to the Partnership than to any other account managed by the Advisor.  The Advisor acknowledges its obligation to review the Partnership’s positions, prices and equity in the account managed by the Advisor daily and within two business days to notify, in writing, the broker and CMF and the Partnership’s brokers of (i) any error committed by the Advisor or its principals or employees; (ii) any trade which the Advisor believes was not executed in accordance with its instructions; and (iii) any discrepancy with a value of $10,000 or more (due to differences in the positions, prices or equity in the account) between its records and the information reported on the account’s daily and monthly broker statements.

 

(iv) The Advisor will maintain a net worth of not less than $500,000 during the term of this Agreement.

 

(v) The Advisor intends to use its best efforts to close out all futures positions prior to any applicable delivery period, and will use its best efforts to avoid causing the Partnership to take delivery of any commodity.

 

 

  

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(b) CMF agrees for itself and the Partnership that:

 

(i) CMF and the Partnership will comply with all applicable laws, including rules and regulations of the CFTC, NFA and/or the commodity exchange on which any particular transaction is executed.

 

(ii) CMF will promptly notify the Advisor of the commencement of any material suit, action or proceeding involving it or the Partnership, whether or not such suit, action or proceeding also involves the Advisor.

 

(iii) CMF will be responsible for compliance with the USA Patriot Act and related anti-money-laundering regulations with respect to the Partnership and its limited partners.

 

9. COMPLETE AGREEMENT.  This Agreement constitutes the entire agreement between the parties pertaining to the subject matter hereof.

 

10. ASSIGNMENT.  This Agreement may not be assigned by any party without the express written consent of the other parties.

 

11. AMENDMENT.  This Agreement may not be amended except by the written consent of the parties.

 

12. NOTICES.  All notices, demands or requests required to be made or delivered under this Agreement shall be effective upon actual receipt and shall be made either by electronic mail (email) copy or in writing and delivered personally or by registered or certified mail or expedited courier, return receipt requested, postage prepaid, to the addresses below or to such other addresses as may be designated by the party entitled to receive the same by notice similarly given:

 

If to CMF or to the Partnership:

 

Ceres Managed Futures LLC

522 Fifth Avenue, 14th Floor

New York, New York  10022

Attention:  Walter Davis

 

Email: walter.davis@morganstanleysmithbarney.com

 

If to the Advisor:

 

Warrington Asset Management, LLC

200 Crescent Court, Suite 900

Dallas, Texas  75201

Attention: Scott C. Kimple

 

Email:  scott.c.kimple@morganstanleysmithbarney.com

 

 

  

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13. GOVERNING LAW.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York.

 

14. ARBITRATION.  The parties agree that any dispute or controversy arising out of or relating to this Agreement or the interpretation thereof, shall be settled by arbitration in accordance with the rules, then in effect, of the NFA or, if the NFA shall refuse jurisdiction, then in accordance with the rules, then in effect, of the American Arbitration Association; provided, however, that the power of the arbitrator shall be limited to interpreting this Agreement as written and the arbitrator shall state in writing his reasons for his award, and further provided, that any such arbitration shall occur within the Borough of Manhattan in New York City.  Judgment upon any award made by the arbitrator may be entered in any court of competent jurisdiction.

 

15. NO THIRD PARTY BENEFICIARIES.  There are no third  party beneficiaries to this Agreement, except that certain persons not parties to this Agreement may have rights under Paragraph 6 hereof

 

16. COUNTERPARTS.  This Agreement may be executed in any number of counterparts, including via facsimile, each of which is an original and all of which when taken together evidence the same agreement.

 

 

[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]

 

  

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IN WITNESS WHEREOF, this Agreement has been executed for and on behalf of the undersigned.

 

	  	
CERES MANAGED FUTURES LLC

	  	  
	  	
By

	
/s/ Walter Davis                                                   

	  	  	
Walter Davis

	  	  	
President and Director

	  	  	
Dated:  June 18, 2012

	  	  
	  	  
	  	
WARRINGTON FUND L.P.

	  	
By:  Ceres Managed Futures LLC (General Partner)

	  	  
	  	
By

	
/s/ Walter Davis                                                   

	  	  	
Walter Davis

	  	  	
President and Director

	  	  	
Dated:  June 18, 2012

	  	
 

	  	  
	  	
WARRINGTON ASSET MANAGEMENT, LLC

	  	  
	  	  	  
	  	
By

	
/s/ Scott C. Kimple                                               

	  	  	
Scott C. Kimple

	  	  	
President

	  	  	
Dated:  May 30, 2012

	  	  
	
Acknowledged and agreed to by:

	  
	  	  
	
WARRINGTON ADVISORS, LLC

	  
	  	  
	
By

	
/s/ Scott C. Kimple                                    

	  
	  	
Scott C. Kimple

	  
	  	
President

	  
	  	
Dated:  May 30, 2012

	  
	  	  
	
WARRINGTON MGT., L.P.

	  
	  	  
	
By

	
/s/ Scott C. Kimple                                     

	  
	  	
Scott C. Kimple

	  
	  	
President

	  
	  	
Dated:  May 30, 2012

	  
	  	  

 

 

 

 

 

 

 

 

 

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