Document:

Exhibit 10.1

 

October 15, 2018

 

Fred’s, Inc.

4300 New Getwell Road

Memphis, Tennessee 38116

Attention: Chief Financial Officer

 

		RE:	Third Amendment to Amended and Restated Addendum to Credit Agreement

 

Ladies and Gentlemen:

 

Reference is made to
(i) that certain Credit Agreement dated as of April 9, 2015 (as amended, restated, supplemented or otherwise modified from time
to time, the “Credit Agreement”) by and among FRED’S, INC., a Tennessee corporation (“Parent”),
certain Subsidiaries of Parent as borrowers (each of such Subsidiaries, together with Parent, jointly and severally, “Borrowers”
and, each, a “Borrower”); certain Subsidiaries of Parent as guarantors (each of such Subsidiaries, jointly and
severally, “Guarantors” and, each, a “Guarantor”; it being understood that, as of the date
hereof, there are no Guarantors); the Lenders party thereto; the Co-Collateral Agents party thereto; and REGIONS BANK, an
Alabama bank, in its capacity as administrative agent for Lenders, LC Issuer and other Secured Parties (as defined therein) (in
such capacity, “Administrative Agent” or “Agent”); and (ii) that certain Amended and Restated
Addendum to Credit Agreement dated as of January 27, 2017 (as amended, restated, supplemented or otherwise modified from time to
time, the “Addendum”) by and among Borrowers, Guarantors, Lenders, Co-Collateral Agents and Administrative Agent.
Unless otherwise specifically defined herein, each term used herein which is defined in the Credit Agreement or the Addendum shall
have the meaning assigned to such term in the Credit Agreement or the Addendum, as applicable.

 

Borrowers have requested
that Administrative Agent and Lenders amend certain provisions of the Addendum as set forth herein. Administrative Agent and Lenders
have agreed to such amendments, subject to the terms and conditions hereof.

 

NOW, THEREFORE, for
TEN DOLLARS ($10.00) in hand paid and other good and valuable consideration, the receipt and sufficiency of which are hereby severally
acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:

 

1.              Amendments
to Addendum. By their execution of this letter agreement and subject to the terms and conditions contained herein, the
parties hereto hereby agree that the Addendum is hereby amended as follows:

 

(a)             Section
2 of the Addendum is hereby amended by adding the following new definition in appropriate alphabetical order:

 

“Subject
Period” means the period beginning on October 15, 2018 and ending on the earlier of (i) any Tuesday that Borrowers fail
to comply with Section 8 and (ii) November 30, 2018. 

 

(b)            Section
2 of the Addendum is hereby amended by deleting the following definitions therein in their entirety and substituting the following
in lieu thereof, respectively:

 

“Account
Control Event” means (a) the occurrence of an Event of Default or (b) at any time of determination that Excess Availability
is less than (i) during the Subject Period, the greater of (x) seven percent (7%) of the Commitments and (y) $14,700,000 and (ii)
at any other time, the greater of (x) twelve and one-half percent (12.5%) of the Commitments and (y) $26,250,000. 

 

     

     

    

 

“Pharmacy
Scripts Availability” means, at any time, (x) during the Subject Period, thirty percent (30%) and (y) at any other time,
twenty percent (20%) of (i) the product of the average per-Pharmacy Script NOLV of Pharmacy Scripts based on the most recent Qualified
Appraisal thereof, multiplied by (ii) the number of Eligible Pharmacy Scripts for the period of twelve (12) calendar months
most recently ended.

 

(c)            Section
8 of the Addendum is hereby amended by deleting such section in its entirety and substituting the following in lieu thereof:

 

Section
8.            Subject Period Reporting. Without
limitation of the reports and other information required to be delivered under Section 7, during the Subject Period,
Borrowers shall deliver to Administrative Agent, no later than the Tuesday of each week, (i) a fully completed and
executed Borrowing Base Certificate, prepared as of the end of the immediately preceding week, and (ii) a 13-week
rolling cash flow forecast, including a variance report, in form satisfactory to Administrative Agent and prepared in good
faith by Borrowers.

 

(d)            Section
10 of the Addendum is hereby amended by deleting such section in its entirety and substituting the following in lieu thereof:

 

Section 10.         Financial
Covenant. Until Payment in Full of the Obligations, Borrowers shall maintain at all times Excess Availability of at least
(i) during the Subject Period, the greater of (x) $14,700,000 and (y) seven percent (7%) of the Aggregate Revolving Commitments
and (ii) at any other time, the greater of (x) $21,000,000 and (y) ten percent (10%) of the Aggregate Revolving Commitments.

 

2.              Conditions
Precedent. This letter agreement shall become effective only upon satisfaction of the following conditions precedent:

 

(a)            Administrative
Agent shall have received this letter agreement, duly executed and delivered by Borrowers and Lenders;

 

(b)            Administrative
Agent shall have received, each in form and substance satisfactory to Required Lenders, (i) a fully completed and executed Borrowing
Base Certificate, prepared as of the end of the immediately preceding week, and (ii) a 13-week rolling cash flow forecast, commencing
with the week ending on October 6, 2018;

 

(c)            Borrowers
shall have received the fee letter agreement among Administrative Agent and Borrowers dated as of the date hereof, duly executed
and delivered by Borrowers, and Borrowers shall have paid all expenses to be paid to Administrative Agent; and

 

(d)            Administrative
Agent shall have received all other documents, instruments, certificates and agreements (if any) as Administrative Agent shall
have reasonably requested in connection with the foregoing, each in form and substance satisfactory to Administrative Agent.

 

     

     

    

 

3.              Effect
of Amendment; No Novation or Mutual Departure. Except as otherwise may be set forth expressly hereinabove, nothing in this
letter agreement shall be deemed to amend or modify any provision of the Credit Agreement, the Addendum or any of the other Loan
Documents, and all terms of the Credit Agreement, the Addendum and the other Loan Documents shall be and remain in full force and
effect and shall constitute the legal, valid, binding, and enforceable obligations of Borrowers. Borrowers expressly acknowledge
and agree that (i) there has not been, and this letter agreement does not constitute or establish, a novation with respect to the
Credit Agreement or any of the other Loan Documents, or a mutual departure from the strict terms, provisions, and conditions thereof,
and (ii) nothing in this letter agreement shall affect or limit Administrative Agent’s or Lenders’ right to demand
payment of liabilities owing from Borrowers to Administrative Agent or Lenders under, or to demand strict performance of the terms,
provisions and conditions of, the Credit Agreement, the Addendum and the other Loan Documents, to exercise any and all rights,
powers, and remedies under the Credit Agreement, the Addendum or the other Loan Documents or at law or in equity, or to do any
and all of the foregoing, immediately at any time after the occurrence of a Default or an Event of Default under the Credit Agreement,
the Addendum or the other Loan Documents.

 

4.              Governing
Law. THIS LETTER AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF GEORGIA, WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAW PRINCIPLES OR OTHER RULE OF LAW WHICH WOULD CAUSE THE APPLICATION OF THE
LAW OF ANY JURISDICTION OTHER THAN THE LAWS OF THE STATE OF GEORGIA (BUT GIVING EFFECT TO FEDERAL LAWS RELATING TO NATIONAL BANKS).

 

5.              Miscellaneous.
This letter agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and
assigns. This letter agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed an original and all of which counterparts, taken together, shall constitute
but one and the same instrument. Delivery by one or more parties hereto of an executed counterpart of this letter agreement via
facsimile, telecopy, or other electronic method of transmission pursuant to which the signature of such party can be seen (including,
without limitation, Adobe Corporation’s Portable Document Format) shall have the same force and effect as the delivery of
an original executed counterpart of this letter agreement. Section titles and references used in this letter agreement shall be
without substantive meaning or content of any kind whatsoever and are not a part of the agreements among the parties hereto evidenced
hereby.

 

5REMAINDER OF THIS PAGE LEFT BLANK
INTENTIONALLY.]

 

     

     

    

 

If this letter agreement
is acceptable to Borrowers, please evidence Borrowers’ agreement with the terms hereof by executing and returning this letter
agreement to Administrative Agent.

 

	 	Very truly yours,
	 	 	 
	 	REGIONS BANK, as “Administrative Agent” and a “Lender”
	 	 	 
	 	By:	/s/ Daniel J. Wells
	 	Name:	Daniel J. Wells
	 	Title:	Director

 

[Signatures continued on following pages.]

 

Third Amendment to Amended and Restated Addendum to Credit Agreement (Fred’s)

 

     

     

    

 

	 	BANK OF AMERICA, N.A., as a “Lender”
	 	 	 
	 	By:	/s/ Roger Malouf
	 	Name:	Roger Malouf
	 	Title:	Director

 

[Signatures continued on following page.]

 

Third Amendment to Amended and Restated Addendum to Credit Agreement (Fred’s)

 

     

     

    

 

 

Acknowledged and Agreed:

 

FRED’S, INC., a Tennessee corporation,
as a “Borrower”

 

	By:	/s/ Joseph Anto	 
	Name:	Joseph Anto	 
	Title:	Interim Chief Executive Officer and	 
	 	Chief Financial Officer	 

 

[CORPORATE SEAL]

 

FRED’S STORES OF TENNESSEE,
INC., 
 a Delaware corporation, as a “Borrower”

 

	By:	/s/ Joseph Anto	 
	Name:	Joseph Anto	 
	Title:	Interim Chief Executive Officer and	 
	 	Chief Financial Officer	 

 

[CORPORATE SEAL]

 

NATIONAL PHARMACEUTICAL NETWORK, INC.,

a Florida corporation, as a “Borrower”

 

	By:	/s/ Joseph Anto	 
	Name:	Joseph Anto	 
	Title:	Interim Chief Executive Officer and	 
	 	Chief Financial Officer	 

 

[CORPORATE SEAL]

 

REEVES-SAIN DRUG STORE, INC.,

a Tennessee corporation, as a “Borrower”

 

	By:	/s/ Joseph Anto	 
	Name:	Joseph Anto	 
	Title:	Interim Chief Executive Officer and	 
	 	Chief Financial Officer	 

 

[CORPORATE SEAL]

 

Third Amendment to Amended and Restated Addendum to Credit Agreement (Fred’s)Ex 4-1

 

Exhibit
4.1

 

COMMON STOCK PURCHASE WARRANT

 

BRIDGELINE DIGITAL, INC.

 

 

	

Warrant
Shares:_____________________

	

 Initial
Exercise Date: October 19, 2018

Issue
Date: October 19, 2018

 

THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that,
for value received, _____________ or its assigns (the
“Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after October
19, 2018 (the “Initial Exercise Date”)
and on or prior to the close of business on the five (5) year
anniversary of the Initial Exercise Date (the “Termination Date”) but
not thereafter, to subscribe for and purchase from Bridgeline
Digital, Inc., a Delaware corporation (the “Company”), up to ______
shares (as subject to adjustment hereunder, the “Warrant Shares”) of
Common Stock. The purchase price of one share of Common Stock under
this Warrant shall be equal to the Exercise Price, as defined in
Section 2(b).

 

Section 1. Definitions. In addition to the
terms defined elsewhere in this Warrant, the following terms have
the meanings indicated in this Section 1:

 

“Affiliate” means any
Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 under the Securities Act.

 

“Bid Price” means, for any
date, the price determined by the first of the following clauses
that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the bid price of the Common Stock for the time in
question (or the nearest preceding date) on the Trading Market on
which the Common Stock is then listed or quoted as reported by
Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York
City time) to 4:02 p.m. (New York City time)), (b)  if the
Common Stock is not then listed or quoted for trading on a Trading
Market and if the Common Stock is then quoted on the OTC Pink
Market (or any successor thereto) the most recent bid price per
share of the Common Stock so reported, or (c) in all other
cases, the fair market value of a share of Common Stock as
determined by an independent appraiser selected in good faith by
the Holders of a majority in interest of the Warrants then
outstanding and reasonably acceptable to the Company, the fees and
expenses of which shall be paid by the Company.

 

“Business Day” means any
day except any Saturday, any Sunday, any day which is a federal
legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by
law or other governmental action to close.

 

“Change of Control” means
any Fundamental Transaction other than (i) any reorganization,
recapitalization or reclassification of the Common Stock in which
holders of the Company's voting power immediately prior to such
reorganization, recapitalization or reclassification continue after
such reorganization, recapitalization or reclassification to hold
publicly traded securities and, directly or indirectly, are, in all
material respect, the holders of the voting power of the surviving
entity (or entities with the authority or voting power to elect the
members of the board of directors (or their equivalent if other
than a corporation) of such entity or entities) after such
reorganization, recapitalization or reclassification, (ii) pursuant
to a migratory merger effected solely for the purpose of changing
the jurisdiction of incorporation of the Company or (iii) a merger
in connection with a bona fide acquisition by the Company of any
Person in which (x) the gross consideration paid, directly or
indirectly, by the Company in such acquisition is not greater than
20% of the Company's market capitalization as calculated on the
date of the consummation of such merger and (y) such merger does
not contemplate a change to the identity of a majority of the board
of directors of the Company. Notwithstanding anything herein to the
contrary, any transaction or series of transaction that, directly
or indirectly, results in the Company or the Successor Entity not
having Common Stock or common stock, as applicable, registered
under the 1934 Act and listed on an Eligible Market shall be deemed
a Change of Control.

 

 

-1-

 

 

 

             
“Commission” means the
United States Securities and Exchange Commission.

 

“Common Stock” means the
common stock of the Company, par value $0.001 per share, and any
other class of securities into which such securities may hereafter
be reclassified or changed.

 

“Common Stock Equivalents”
means any securities of the Company or the Subsidiaries which would
entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, right,
option, warrant or other instrument that is at any time convertible
into or exercisable or exchangeable for, or otherwise entitles the
holder thereof to receive, Common Stock.

 

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

 

“Parent Entity” of a
Person means an entity that, directly or indirectly, controls the
applicable Person, including such entity whose common stock or
equivalent equity security is quoted or listed on a Trading Market
(or, if so elected by the Holder, any other market, exchange or
quotation system), or, if there is more than one such Person or
such entity, the Person or such entity designated by the Holder or
in the absence of such designation, such Person or entity with the
largest public market capitalization as of the date of consummation
of the Change of Control.

 

“Person” means an
individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.

 

“Proceeding” means an
action, claim, suit, investigation or proceeding (including,
without limitation, an informal investigation or partial
proceeding, such as a deposition), whether commenced or
threatened.

 

“Registration Statement”
means the Company's registration statement on Form S-1 (File No.
333-227430).

 

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

 

“Subsidiaries” means any
of the Company’s direct or indirect
subsidiaries.

 

“Successor Entity” means
one or more Person or Persons (or, if so elected by the Holder, the
Company or Parent Entity) formed by, resulting from or surviving
any Change of Control or one or more Person or Persons (or, if so
elected by the Holder, the Company or the Parent Entity) with which
such Change of Control shall have been entered into.

 

“Trading Day” means a day
on which the Common Stock is traded on a Trading
Market.

 

“Trading Market” means any
of the following markets or exchanges on which the Common Stock is
listed or quoted for trading on the date in question: the Nasdaq
Capital Market, the Nasdaq Global Market, the Nasdaq Global Select
Market, the NYSE American, the New York Stock Exchange, OTCQB or
OTCQX (or any successors to any of the foregoing).

 

“Transfer Agent” means
American Stock Transfer & Trust
Company, LLC, with a mailing address of 6201 15th Avenue,
Brooklyn, NY 11219, and any successor transfer agent of the
Corporation.

 

“Warrants” means this
Warrant and other Common Stock Purchase Warrants issued by the
Company pursuant to the Registration Statement.

 

 

-2-

 

 

 

             

Section 2. Exercise.

 

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

 

b)
Exercise Price. The
exercise price per share of the Common Stock under this Warrant
shall be $0.50, subject to
adjustment hereunder (the “Exercise
Price”).

 

c)
Cashless Exercise.
If at the time of exercise hereof there is no effective
registration statement registering, or the prospectus contained
therein is not available for the issuance of the Warrant Shares to
the Holder, then this Warrant may also be exercised, in whole or in
part, at such time by means of a “cashless exercise” in
which the Holder shall be entitled to receive a number of Warrant
Shares equal to the quotient obtained by dividing [(A-B) (X)] by
(A), where:

 

(A) =
as applicable: (i) the VWAP on the Trading Day immediately
preceding the date of the applicable Notice of Exercise if such
Notice of Exercise is (1) both executed and delivered pursuant to
Section 2(a) hereof on a day that is not a Trading Day or (2) both
executed and delivered pursuant to Section 2(a) hereof on a Trading
Day prior to the opening of “regular trading hours” (as
defined in Rule 600(b)(64) of Regulation NMS promulgated under the
federal securities laws) on such Trading Day, (ii) at the option of
the Holder, either (y) the VWAP on the Trading Day immediately
preceding the date of the applicable Notice of Exercise or (z) the
Bid Price of the Common Stock on the principal Trading Market as
reported by Bloomberg L.P. as of the time of the Holder’s
execution of the applicable Notice of Exercise if such Notice of
Exercise is executed during “regular trading hours” on
a Trading Day and is delivered within two (2) hours thereafter
(including until two (2) hours after the close of “regular
trading hours” on a Trading Day) pursuant to Section 2(a)
hereof or (iii) the VWAP on the date of the applicable Notice of
Exercise if the date of such Notice of Exercise is a Trading Day
and such Notice of Exercise is both executed and delivered pursuant
to Section 2(a) hereof after the close of “regular trading
hours” on such Trading Day;

 

(B) = the
Exercise Price of this Warrant, as adjusted hereunder;
and

 

(X) =
the number of Warrant Shares that would be issuable upon exercise
of this Warrant in accordance with the terms of this Warrant if
such exercise were by means of a cash exercise rather than a
cashless exercise.

 

 

-3-

 

 

 

             
If Warrant Shares are
issued in such a cashless exercise, the parties acknowledge and
agree that in accordance with Section 3(a)(9) of the Securities
Act, the Warrant Shares shall take on the registered
characteristics of the Warrants being exercised. The Company agrees
not to take any position contrary to this Section 2(c).
Notwithstanding anything herein to the contrary but without
limiting the rights of the Holder to receive Warrant Shares on a
“cashless exercise” and without limiting the liquidated
damages provision in section 2(d)(i) and the Buy-In provision in
Section 2(d)(iv), in the event
there is no effective registration statement registering, or the
prospectus contained therein is not available for the issuance of
the Warrant Shares to the Holder, under no circumstance will the
Company be required to net cash settle
the warrants.

 

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

 

Notwithstanding
anything herein to the contrary, on the Termination Date, this
Warrant shall be automatically exercised via cashless exercise
pursuant to this Section 2(c).

 

d)
Mechanics of
Exercise.

 

i.
Delivery of Warrant Shares
Upon Exercise. The Company shall cause the Warrant Shares
purchased hereunder to be transmitted by the Transfer Agent to the
Holder by crediting the account of the Holder’s or its
designee’s balance account with The Depository Trust Company
through its Deposit or Withdrawal at Custodian system
(“DWAC”) if the Company is
then a participant in such system and either (A) there is an
effective registration statement permitting the issuance of the
Warrant Shares to or resale of the Warrant Shares by Holder or (B)
this Warrant is being exercised via cashless exercise, and
otherwise by physical delivery of a certificate, registered in the
Company’s share register in the name of the Holder or its
designee, for the number of Warrant Shares to which the Holder is
entitled pursuant to such exercise to the address specified by the
Holder in the Notice of Exercise by the date that is the earliest
of (i) two (2) Trading Days after the delivery to the Company of
the Notice of Exercise, (ii) one (1) Trading Day after delivery of
the aggregate Exercise Price to the Company and (iii) the number of
Trading Days comprising the Standard Settlement Period after the
delivery to the Company of the Notice of Exercise (such date, the
“Warrant Share
Delivery Date”). Upon delivery of the Notice of
Exercise, 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
of delivery of the Warrant Shares, provided that payment of the
aggregate Exercise Price (other than in the case of a cashless
exercise) is received within the earlier of (i) two (2) Trading
Days and (ii) the number of Trading Days comprising the Standard
Settlement Period following delivery of the Notice of Exercise. If
the Company fails for any reason to deliver to the Holder the
Warrant Shares subject to a Notice of Exercise by the Warrant Share
Delivery Date, the Company shall pay to the Holder, in cash, as
liquidated damages and not as a penalty, for each $1,000 of Warrant
Shares subject to such exercise (based on the VWAP of the Common
Stock on the date of the applicable Notice of Exercise), $10 per
Trading Day (increasing to $20 per Trading Day on the fifth Trading
Day after such liquidated damages begin to accrue) for each Trading
Day after such Warrant Share Delivery Date until such Warrant
Shares are delivered or Holder rescinds such exercise. The Company
agrees to maintain a transfer agent that is a participant in the
FAST program so long as this Warrant remains outstanding and
exercisable. As used herein, “Standard Settlement
Period” means the standard settlement period,
expressed in a number of Trading Days, on the Company’s
primary Trading Market with respect to the Common Stock as in
effect on the date of delivery of the Notice of
Exercise.

  

 

-4-

 

 

 

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

 

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

 

iv.
Compensation for Buy-In on
Failure to Timely Deliver Warrant Shares Upon Exercise. In
addition to any other rights available to the Holder, if the
Company fails to cause the Transfer Agent to transmit to the Holder
the Warrant Shares in accordance with the provisions of Section
2(d)(i) above pursuant to an exercise on or before the Warrant
Share Delivery Date, and if after such date the Holder is required
by its broker to purchase (in an open market transaction or
otherwise) or the Holder's brokerage firm otherwise purchases,
shares of Common Stock to deliver in satisfaction of a sale by the
Holder of the Warrant Shares which the Holder anticipated receiving
upon such exercise (a “Buy-In”), then the
Company shall (A) pay in cash to the Holder the amount, if any, by
which (x) the Holder's total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased
exceeds (y) the amount obtained by multiplying (1) the number of
Warrant Shares that the Company was required to deliver to the
Holder in connection with the exercise at issue times (2) the price
at which the sell order giving rise to such purchase obligation was
executed, and (B) at the option of the Holder, either reinstate the
portion of the Warrant and equivalent number of Warrant Shares for
which such exercise was not honored (in which case such exercise
shall be deemed rescinded) or deliver to the Holder the number of
shares of Common Stock that would have been issued had the Company
timely complied with its exercise and delivery obligations
hereunder. For example, if the Holder purchases Common Stock having
a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted exercise of shares of Common Stock with an aggregate
sale price giving rise to such purchase obligation of $10,000,
under clause (A) of the immediately preceding sentence the Company
shall be required to pay the Holder $1,000. The Holder shall
provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In and, upon request of the
Company, evidence of the amount of such loss. Nothing herein shall
limit a Holder's right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief with
respect to the Company's failure to timely deliver shares of Common
Stock upon exercise of the Warrant as required pursuant to the
terms hereof.

 

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

 

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

 

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

 

 

-5-

 

 

 

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

 

 

-6-

 

 

 

Section 3. Certain
Adjustments.

 

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

 

b)
Subsequent Rights
Offerings. In addition to any adjustments pursuant to
Section 3(a) above, if at any time the Company grants, issues or
sells any Common Stock Equivalents or rights to purchase stock,
warrants, securities or other property pro rata to the record
holders of any class of shares of Common Stock (the
“Purchase
Rights”), then the Holder will be entitled to acquire,
upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder
had held the number of shares of Common Stock acquirable upon
complete exercise of this Warrant (without regard to any
limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date on
which a record is taken for the grant, issuance or sale of such
Purchase Rights, or, if no such record is taken, the date as of
which the record holders of shares of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights
(provided, however, to the extent that the Holder's right to
participate in any such Purchase Right would result in the Holder
exceeding the Beneficial Ownership Limitation, then the Holder
shall not be entitled to participate in such Purchase Right to such
extent (or beneficial ownership of such shares of Common Stock as a
result of such Purchase Right to such extent) and such Purchase
Right to such extent shall be held in abeyance for the Holder until
such time, if ever, as its right thereto would not result in the
Holder exceeding the Beneficial Ownership Limitation).

 

c)
Pro Rata
Distributions. During such time as this Warrant is
outstanding, if the Company shall declare or make any dividend or
other distribution of its assets (or rights to acquire its assets)
to holders of shares of Common Stock, by way of return of capital
or otherwise (including, without limitation, any distribution of
cash, stock or other securities, property or options by way of a
dividend, spin off, reclassification, corporate rearrangement,
scheme of arrangement or other similar transaction) (a
“Distribution”), at any
time after the issuance of this Warrant, then, in each such case,
the Holder shall be entitled to participate in such Distribution to
the same extent that the Holder would have participated therein if
the Holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Warrant (without regard to any
limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date of
which a record is taken for such Distribution, or, if no such
record is taken, the date as of which the record holders of shares
of Common Stock are to be determined for the participation in such
Distribution (provided, however, to the extent that the
Holder's right to participate in any such Distribution would result
in the Holder exceeding the Beneficial Ownership Limitation, then
the Holder shall not be entitled to participate in such
Distribution to such extent (or in the beneficial ownership of any
shares of Common Stock as a result of such Distribution to such
extent) and the portion of such Distribution shall be held in
abeyance for the benefit of the Holder until such time, if ever, as
its right thereto would not result in the Holder exceeding the
Beneficial Ownership Limitation).

 

 

-7-

 

 

 

d)
Fundamental
Transaction. If, at any time while this Warrant is
outstanding, (i) the Company, directly or indirectly, in one or
more related transactions effects any merger or consolidation of
the Company with or into another Person, (ii) the Company, directly
or indirectly, effects any sale, lease, license, assignment,
transfer, conveyance or other disposition of all or substantially
all of its assets in one or a series of related transactions, (iii)
any, direct or indirect, purchase offer, tender offer or exchange
offer (whether by the Company or another Person) is completed
pursuant to which holders of Common Stock are permitted to sell,
tender or exchange their shares for other securities, cash or
property and has been accepted by the holders of 50% or more of the
outstanding Common Stock, (iv) the Company, directly or indirectly,
in one or more related transactions effects any reclassification,
reorganization or recapitalization of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash
or property, or (v) the Company, directly or indirectly, in one or
more related transactions consummates a stock or share purchase
agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme
of arrangement) with another Person or group of Persons whereby
such other Person or group acquires more than 50% of the
outstanding shares of Common Stock (not including any shares of
Common Stock held by the other Person or other Persons making or
party to, or associated or affiliated with the other Persons making
or party to, such stock or share purchase agreement or other
business combination) (each a “Fundamental
Transaction”), then, upon any subsequent exercise of
this Warrant, the Holder shall have the right to receive, for each
Warrant Share that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental
Transaction, at the option of the Holder (without regard to any
limitation in Section 2(e) on the exercise of this Warrant), the
number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder
of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such Fundamental Transaction
(without regard to any limitation in Section 2(e) on the exercise
of this Warrant). For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted
to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall
apportion the Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property
to be received in a Fundamental Transaction, then the Holder shall
be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such
Fundamental Transaction. Notwithstanding anything to the contrary,
in the event of a Fundamental Transaction, the Company or any
Successor Entity (as defined below) shall, at the Holder’s
option, exercisable at any time concurrently with, or within 30
days after, the consummation of the Fundamental Transaction (or, if
later, the date of the public announcement of the applicable
Fundamental Transaction), purchase
this Warrant from the Holder by paying to the Holder an
amount of cash equal to the Black Scholes Value of the remaining
unexercised portion of this Warrant on the date of the consummation
of such Fundamental Transaction; provided, however, that, if the
Fundamental Transaction is not within the Company's control,
including not approved by the Company’s board of directors,
Holder shall only be entitled to receive from the Company or any
Successor Entity, as of the date of consummation of such
Fundamental Transaction, the same type or form of consideration
(and in the same proportion), at the Black Scholes Value (as
defined below) of the unexercised portion of this Warrant, that is
being offered and paid to the holders of Common Stock of the
Company in connection with the Fundamental Transaction, whether
that consideration be in the form of cash, stock or any combination
thereof, or whether the holders of Common Stock are given the
choice to receive from among alternative forms of consideration in
connection with the Fundamental Transaction. 
“Black Scholes
Value” means the value of this Warrant based on the
Black and Scholes Option Pricing Model obtained from the
“OV” function on Bloomberg, L.P. (“Bloomberg”) determined as
of the day of consummation of the applicable Fundamental
Transaction for pricing purposes and reflecting (A) a risk-free
interest rate corresponding to the U.S. Treasury rate for a period
equal to the time between the date of the public announcement of
the applicable Fundamental Transaction and the Termination Date,
(B) an expected volatility equal to the greater of 100% and the 100
day volatility obtained from the HVT function on Bloomberg as of
the Trading Day immediately following the public announcement of
the applicable Fundamental Transaction, (C) the underlying price
per share used in such calculation shall be the greater of (i) the
sum of the price per share being offered in cash, if any, plus the
value of any non-cash consideration, if any, being offered in such
Fundamental Transaction and (ii) the greater of (x) the last VWAP
immediately prior to the public announcement of such Fundamental
Transaction and (y) the last VWAP immediately prior to the
consummation of such Fundamental Transaction and (D) a remaining
option time equal to the time between the date of the public
announcement of the applicable Fundamental Transaction and the
Termination Date, and (E) a zero cost of borrow.  The payment of the Black Scholes Value will be
made by wire transfer of immediately available funds (or such other
consideration) within five Business Days of the Holder’s
election (or, if later, on the effective date of the Fundamental
Transaction).  The
Company shall cause any successor entity in a Fundamental
Transaction in which the Company is not the survivor (the
“Successor
Entity”) to assume in writing all of the obligations
of the Company under this Warrant in accordance with the provisions
of this Section 3(d) pursuant to written agreements in form and
substance reasonably satisfactory to the Holder and approved by the
Holder (without unreasonable delay) prior to such Fundamental
Transaction and shall, at the option of the Holder, deliver to the
Holder in exchange for this Warrant a security of the Successor
Entity evidenced by a written instrument substantially similar in
form and substance to this Warrant which is exercisable for a
corresponding number of shares of capital stock of such Successor
Entity (or its parent entity) equivalent to the shares of Common
Stock acquirable and receivable upon exercise of this Warrant
(without regard to any limitations on the exercise of this Warrant)
prior to such Fundamental Transaction, and with an exercise price
which applies the exercise price hereunder to such shares of
capital stock (but taking into account the relative value of the
shares of Common Stock pursuant to such Fundamental Transaction and
the value of such shares of capital stock, such number of shares of
capital stock and such exercise price being for the purpose of
protecting the economic value of this Warrant immediately prior to
the consummation of such Fundamental Transaction), and which is
reasonably satisfactory in form and substance to the Holder. Upon
the occurrence of any such Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of
this Warrant 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.

 

 

-8-

 

 

 

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

 

f)
Notice to
Holder.

 

i.
Adjustment to Exercise
Price. Whenever the Exercise Price is adjusted pursuant to
any provision of this Section 3, the Company shall promptly deliver
to the Holder by facsimile or email a notice setting forth the
Exercise Price after such adjustment and any resulting adjustment
to the number of Warrant Shares and setting forth a brief statement
of the facts requiring such adjustment.

 

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

 

Section 4. Transfer of
Warrant.

 

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

 

-9-

 

 

 

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

  

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

 

Section 5. Miscellaneous.

 

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

 

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

 

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

 

d)
Authorized
Shares.

 

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

 

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

  

 

-10-

 

 

 

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

 

e)
Governing Law. All
questions concerning the construction, validity, enforcement and
interpretation of this Warrant 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 conflict of laws
thereof. Each party agrees that all legal Proceedings concerning
the interpretation, enforcement and defense of this Warrant shall
be commenced in the state and federal courts sitting in the City of
New York, Borough of Manhattan (the “New York Courts”). Each
party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any
dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to
the enforcement of any provision hereunder), 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
such New York Courts, or such New York Courts are improper or
inconvenient venue for such Proceeding. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal Proceeding
arising out of or relating to this Warrant. If any party shall
commence an action or Proceeding to enforce any provisions of this
Warrant, then the prevailing party in such action or Proceeding
shall be reimbursed by the other party for its attorneys' fees and
other costs and expenses incurred in the investigation, preparation
and prosecution of such action or Proceeding.

 

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

 

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

 

h)
Notices. Any and
all notices or other communications or deliveries to be provided by
the Holders hereunder including, without limitation, any Notice of
Exercise, shall be in writing and delivered personally, by e-mail,
or sent by a nationally recognized overnight courier service,
addressed to the Company, at 80 Blanchard Road, Burlington, MA
01803, Attention: Chief Executive Officer, email address:
akahn@bridgeline.com, or such other email address or address as the
Company may specify for such purposes by notice to the Holders. Any
and all notices or other communications or deliveries to be
provided by the Company hereunder shall be in writing and delivered
personally, by facsimile, or sent by a nationally recognized
overnight courier service addressed to each Holder at the facsimile
number or address of such Holder appearing on the books of the
Company. Any notice or other communication or deliveries hereunder
shall be deemed given and effective on the earliest of (i) the time
of transmission, if such notice or communication is delivered via
facsimile at the facsimile number or e-mail at the e-mail address
set forth in this Section prior to 5:30 p.m. (New York City time)
on any date, (ii) the next Trading Day after the date of
transmission, if such notice or communication is delivered via
facsimile at the facsimile number or e-mail at the e-mail address
set forth in this Section on a day that is not a Trading Day or
later than 5:30 p.m. (New York City time) on any Trading Day, (iii)
the second Trading Day following the date of mailing, if sent by
U.S. nationally recognized overnight courier service, or (iv) upon
actual receipt by the party to whom such notice is required to be
given.

 

i)
Reserved.

 

 

-11-

 

 

 

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

 

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

 

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

 

m)
Amendment. This
Warrant may be modified or amended or the provisions hereof waived
with the written consent of the Company, on the one hand, and the
Holder or the beneficial owner of this Warrant, on the other
hand.

 

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

 

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

 

p)
Variable Rate
Transactions. From the date hereof until the Termination
Date and so long as at least twenty-five percent (25%) of the
Warrants remain outstanding, the Company shall be prohibited from
effecting or entering into an agreement to effect any issuance by
the Company or any of its Subsidiaries of Common Stock or Common
Stock Equivalents (or a combination of units thereof) involving a
Variable Rate Transaction. For the purposes hereof,
“Variable Rate
Transaction” means a transaction in which the Company
(i) issues or sells any debt or equity securities that are
convertible into, exchangeable or exercisable for, or include the
right to receive, additional shares of Common Stock either (A) at a
conversion price, exercise price or exchange rate or other price
that is based upon, and/or varies with, the trading prices of or
quotations for the Common Stock at any time after the initial
issuance of such debt or equity securities or (B) with a
conversion, exercise or exchange price that is subject to being
reset at some future date after the initial issuance of such debt
or equity security or upon the occurrence of specified or
contingent events directly or indirectly related to the business of
the Company as currently carried on and as described in the
Registration Statement or the market for the Common Stock or (ii)
enters into any agreement, including, but not limited to, an equity
line of credit, whereby the Company may issue securities at a
future determined price that varies with the market per the terms
of such agreement; provided however that the foregoing does not
apply to any existing agreements or outstanding securities on the
date hereof. The Holder shall be entitled to obtain injunctive
relief against the Company to preclude any such issuance, which
remedy shall be in addition to any right to collect damages.
Notwithstanding the foregoing, this Section 5(p) will may be
amended or waived upon written consent of the holders of at least
eighty percent (80%) of the Warrants then outstanding.

 

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

 

(Signature Page Follows)

 

 

 

 

-12-

 

 

 

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

 

BRIDGELINE
DIGITAL, INC.

 

By:
__________________________

Name:  Roger
Kahn

Title:    Chief
Executive Officer

 

 

 

 

 

 

 

 

 

-13-

 

 

 

NOTICE OF EXERCISE

 

TO:
BRIDGELINE DIGITAL, INC.

 

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

 

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

 

[  
]  in lawful money of the United States; or

 

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

 

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

 

___________________________________

 

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

 

___________________________________                                                                           

 

____________________________________

 

____________________________________

 

 

[SIGNATURE
OF HOLDER]

 

Name of
Investing Entity:
________________________________________________________  

 

Signature of Authorized Signatory of Investing
Entity:__________________________________  

 

Name of
Authorized
Signatory:____________________________________________________ 

 

Title
of Authorized Signatory:
______________________________________________________

 

Date:__________________________________________________________________________

 

 

 

 

 

 

 

 

-14-

 

 

 

ASSIGNMENT
FORM

 

(To assign the foregoing Warrant, execute this form and supply
required information. Do not use this form to purchase
shares.)

 

FOR
VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to

 

Name:

(Please
Print)

 

 

Address:

(Please
Print)

 

 

Phone
Number:

 

Email
Address:

 

Dated:
_____________________ __, ______

 

Holder's
Signature:

 

Holder's
Address:

 

 

 

 

 

 

 

 

-15-

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