Document:

Exhibit 10.5

 

PURCHASE AGREEMENT

 

THIS PURCHASE AGREEMENT (“Agreement”),
entered into as of this 7th day of January, 2016, by and between PIONEER SAVINGS BANK with an office at 21 Second Street,
Troy, NY 12180 (“Purchaser”), and HOMESTEAD FUNDING CORP., with an office at 8 Airline Drive, Albany, New York 12205
(“Seller”). When Purchaser and Seller are referred to collectively within this Agreement they will be referred to as
“Parties”.

 

WHEREAS, Seller is a New York State
licensed mortgage bank in the business of originating and selling residential mortgage loans secured by mortgages on real property
in New York State; and

 

WHEREAS, Purchaser desires to purchase
from Seller and Seller desires to sell to Purchaser certain Mortgage Loans originated within certain counties of New York pursuant
to the terms, conditions and provisions of this Agreement, and the Purchaser’s standard underwriting guidelines and other
written requirements, as they may be amended or supplemented from time to time (hereinafter “Purchaser’s Guidelines”);
and

 

WHEREAS, Seller acknowledges receipt
of the Purchaser’s Guidelines, which is attached hereto as Exhibit A;

 

NOW, THEREFORE, in consideration
of and in reliance upon the mutual covenants, representations, warranties and covenants set forth in this Agreement, and intending
to be legally bound hereby, Seller and Purchaser hereby agree as follows:

 

	I.	PURCHASE AND SALE OF MORTGAGE LOANS. In accordance with and subject to the terms, conditions,
provisions, covenants, representations, warranties and agreements set forth in this Agreement, Purchaser shall from time to time,
in its sole discretion, purchase from Seller together with all rights related thereto, including servicing rights, interest in
insurance policies and escrow account rights (hereinafter collectively referred to as “Mortgage Loans”), and all documents
related thereto including, without limitation, the Note or similar loan document which (collectively, the “Mortgage”),
and all related documents including specifically the application, verification documents, Federal and State disclosures, appraisal,
Loan Estimate and Closing Disclosure, along with all origination, underwriting, closing, sale, transfer and other documents, including
without limitation, all intervening assignments, title insurance policies and/or certificates of title and proof of hazard insurance
and flood insurance coverage, if applicable (collectively, “Loan Documents”). The primary target counties covered by
this Agreement are: Albany, Saratoga, Schenectady and Rensselaer. The secondary counties are counties that are contiguous to the
primary target counties and include, Washington, Warren, Hamilton, Fulton, Montgomery, Schoharie, Greene, and Columbia counties;
although Purchaser will consider purchasing Mortgage Loans from other counties from time to time on a case by case basis. The Parties
agree that they will work out a suitable procedure for registering Mortgage Loans to be purchased and sold pursuant to this Agreement.

 

	II.	REQUIREMENTS. Seller warrants that to the extent required, all aspects of its advertising,
origination, underwriting, closing, sale and transfer of Mortgage Loans is in compliance with all applicable federal, state and
local laws and regulations and all applicable published guidelines and guidance documents of the Federal National Mortgage Association
(“FNMA”) and Federal Home Loan Mortgage Corp. (“FHLMC”), and any successor or successors of any such entities
or agencies, and Purchaser’s Guidelines, including without limitation all announcements, circulars, mortgagee letters and
handbooks establishing requirements applicable to the Mortgage Loans (collectively, “Requirements”).

 

     

     

    

 

	III.	MORTGAGE LOAN REVIEW, DELIVERY AND PAYMENT

 

3.1          Submission
of Mortgage Package. If Seller desires to sell Mortgage Loans to Purchaser, it shall make an offer to the Purchaser in writing
prior to issuing mortgage approval in the manner determined to be appropriate by the Parties accompanied by those Loan Documents
and any other items required pursuant to Purchaser’s Guidelines as may be appropriate at that time, for Purchaser’s
inspection. In some instances, Seller may be asked by Purchaser to include in the package sent to the Purchaser property and credit
information regarding the Borrower and the Mortgaged Property including, without limitation, the 1003 application, credit report,
verification documents including the VOE, VOD, copies of pay stubs, tax returns asset account statements and fraud check/OFAC compliance,
pre-closing Federal and State disclosures including the Loan Estimate, appraisal, preliminary commitment for title insurance of
abstract of title, along with copies of all other origination and underwriting documents as specified in the Purchaser’s
Guidelines, which documents collectively will be referred to herein as a “Mortgage Loan Package”. In other instances,
Seller may be asked by Purchaser to include such property and credit information regarding the Borrowers as may be available at
that point in the mortgage process for the Purchaser’s consideration of the Mortgage Loan. In this latter case, (should Purchaser
be interested in purchasing the Mortgage Loan based upon the information submitted), Purchaser may request that a complete Mortgage
Loan Package be submitted once the additional documents are available. . Seller represents and warrants to Purchaser that all information
submitted to the Purchaser shall be, to the best of Seller’s knowledge, complete, true and accurate.

 

3.2          Approval
of Mortgage Loan by Purchaser. Upon Seller’s tender of a complete Mortgage Loan Package, (as may be required for purchase
approval of a Mortgage Loan by Purchaser), decisions as to the acceptability of Mortgage Loans for purchase by Purchaser shall
be solely at the discretion of Purchaser. Purchaser shall have no obligation to purchase a Mortgage Loan it has approved until
all closing conditions, (“Purchase Conditions”) stated in the purchase approval issued by Purchaser have been met.
Unless otherwise agreed to by the Purchaser in writing, the pricing on purchases of Mortgage Loans pursuant to this Agreement shall
be pursuant to the Purchaser’s then-current rate sheet. Purchaser shall have a reasonable time to accept each Mortgage Loan
offered and if not accepted within that time frame, the Seller shall have the right to withdraw the offer in writing. If Purchaser
agrees to purchase any Mortgage Loans offered by the Seller, the Purchaser shall provide suitable confirmation of the purchase
decision in such manner as the Parties determine to be appropriate.

 

3.3          Mortgage
Loan Delivery. Seller shall use its best efforts to close each Mortgage Loan that Purchaser has elected to purchase
pursuant to this Agreement. Seller agrees that the delivery date as agreed may only be extended by Purchaser’s written
amendment. Seller agrees that delivery of a Mortgage Loan closed after notification of Purchaser’s election to purchase
such Mortgage Loan is mandatory, unless Purchaser elects to waive its rights. If Seller does not deliver a Mortgage Loan upon
which Purchaser has elected to purchase as provided for herein, and the Mortgage Loan actually closes, Purchaser may require
that Seller pay and reimburse Purchaser for any and all losses (including lost profit), expenses and damages incurred by
Purchaser as a result of non-delivery of the Mortgage Loan. Within fifteen (15) calendar days following the closing, (or
such longer or shorter time period as may be determined by the Parties), the Mortgage Loans and Loan Documents shall be
delivered to the Purchaser, and Seller shall release and deliver to Purchaser all of the file documents relating to the
Mortgage Loans so transferred, each of which shall include: the original Note duly endorsed to Purchaser, and any
modifications or amendments thereto; the original recorded Mortgage, together with either an original assignment of the
Mortgage in favor of Purchaser in recordable form, or an appropriate registration and transfer of the Mortgage to Purchaser
through “MERS” (Mortgage Electronic Registration Systems), transmitted with a MIN Summary evidencing that
Purchaser is MERS-record Investor and Servicer, or as Purchaser may otherwise require; the original title insurance policy,
including such endorsements as Purchaser may require to evidence the transfer of the Loan Documents to Purchaser; or any
other documents which Purchaser may reasonably require.

 

     

     

    

 

3.4.          Cancellation
of Mortgage Loan Purchase. Purchaser may cancel any intended purchase of a Mortgage Loan after Purchaser has provided Seller
with confirmation of its decision to purchase it if Purchaser believes, in good faith, that Seller has breached any material term
or condition of this Agreement as to a Mortgage Loan offered by Seller for purchase. In this event, Purchaser may void the purchase
transaction by giving written notice thereof to Seller at any time prior to payment for a Mortgage Loan, which notice shall be
effective upon mailing, e-mailing or telefaxing. Seller may also cancel a purchase transaction if, within a reasonable time after
receipt, Seller does not accept the Purchase Conditions related to such Mortgage Loan, by providing written notice thereof to Seller
at any time prior to closing of the affected Mortgage Loan.

 

3.5          Payment
by Purchaser. Purchaser shall pay for approved Mortgage Loans in accordance with the deadlines and procedures set forth in
Purchaser’s Guidelines. A copy of the current version of the Purchaser’s Guidelines is attached hereto and made a part
hereof as Exhibit A. Purchaser shall be relieved of any obligation to purchase any Mortgage Loan which upon delivery, does not
meet the requirements of this Agreement.

 

3.6          Notice
of Approval or Declination. The Parties understand that Seller alone shall have the right and responsibility of providing all
Mortgage approvals and/or Adverse Action Notices to Borrowers whose application for credit may become subject to Seller’s
offer to sell Mortgage Loans to Purchaser pursuant to the terms of this Agreement. This Agreement is intended to and does govern
the Parties’ secondary market transactions with respect to Mortgage Loans, as such transactions are understood in the mortgage
banking industry and within the meaning of 12 C.F.R. §1024.5. Until required to acknowledge the transfer of Mortgage Loan
servicing from Seller to Purchaser pursuant to 12 U.S.C. §2605 and communicate with Borrowers thereafter, the Purchaser shall
have no right to contact Borrowers prior to Seller’s delivery of the Mortgage Loan to Purchaser and Purchaser’s payment
of the purchase price to Seller. Procedures regarding the foregoing may be modified in writing from time to time upon the agreement
of the Parties.

 

     

     

    

 

	IV.	SELLER’S GENERAL REPRESENTATIONS, WARRANTIES
AND COVENANTS. Seller represents, warrants and
covenants to Purchaser that as of the date of this Agreement, as of the closing date of each Mortgage Loan, and as of the date
of purchase of each and any Mortgage Loan by the Purchaser, with respect to each Mortgage Loan:

 

4.1          Organization.
Seller is and will remain duly organized, validly existing and in good standing under the laws of the state of New York and will
remain qualified to do business and in good standing in any other jurisdiction where such qualification is required.

 

4.2          Qualification.
Seller has obtained and will maintain in effect all permits, registrations, qualifications and licenses (“licenses”)
necessary to carry on its business in accordance with applicable laws and regulations. Seller is duly licensed, qualified and in
good standing to carry on the type of business conducted by Seller in all states where the property which secures the Mortgage
Loans is located, except to the extent Seller is exempt from such licensure or qualification requirements. Seller shall at all
times have on file with Purchaser a copy of each of Seller’s licenses and qualifications authorizing Seller to do business
in the jurisdictions relevant to the Mortgage Loans being offered for sale to Purchaser. Notwithstanding the foregoing, Seller
warrants and represents that it is properly licensed as a Mortgage Banker with the New York State Department of Financial Services
(NYS DFS) and will maintain such licensure with NYS DFS. Seller will notify Purchaser immediately if it ceases to maintain its
licensure with NYS DFS.

 

4.3          Authority.
Seller has the requisite power and authority to enter into this Agreement, to conduct the business and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement, the conduct of the business and the consummation of the transaction
contemplated hereby have been duly and validly authorized by all necessary corporate or other organizational action, and are not
and will not violate, be prohibited by, result in a breach of, constitute a default under, or require any additional governmental,
regulatory or other approval under Seller’s organizational documents, or otherwise, or under any regulatory order, any financing,
sale, trust, customer or other type of agreement or understanding by which Seller or any of its shareholders, directors, officers,
partners or principals is bound. This Agreement is a legally binding agreement, enforceable against the Seller in accordance with
its terms.

 

4.4          Licenses
and Approvals. All federal, State, local and agency licenses, qualifications, consents and approvals required for the execution
and delivery of this Agreement, the conduct of the business and the consummation of the transactions contemplated hereby in accordance
with applicable laws and regulations have been obtained and will be maintained in full force and effect.

 

4.5          Change
of Ownership. Not less than fifteen (15) days prior to a change in ownership of twenty-five percent (25%) or more of the ownership
interest of Seller, Seller shall notify Purchaser of such change, together with the name, address and telephone number of both
the old and new owners of such interest.

 

     

     

    

 

4.6          Mortgage
Loans. Seller has fulfilled all Requirements and has otherwise complied in all respects with the laws, regulations and licensing
requirements applicable to the Mortgage Loans and to the conduct of Seller’s business in all relevant jurisdictions, and
has filed with the proper authorities all required documents and instruments, statements, reports and returns. All Mortgage Loans
transferred to the Purchaser shall be free and clear of all liens, charges or encumbrances created by or affecting the Seller.

 

4.7          Suits
and Proceedings. Seller is not subject to any action, suit, proceeding or investigation, pending or threatened, or to any order,
judgment, decree or injunction of a court of regulatory body, which may, either individually or in the aggregate, result in any
material adverse change in the business or financial condition of Seller, draw into question the validity of this Agreement or
any action taken or to be taken by Seller hereunder, or impair the ability of the Seller to perform hereunder, or prevent or delay
any transaction contemplated by this Agreement, or call into question the validity of, encumber or otherwise adversely affect any
Mortgage Loan. In the event Seller becomes subject to any such action, suit, proceeding or investigation, order, judgment, decree
or injunction, or if Seller becomes subject to any suspension, fine or other disciplinary action, Seller must notify Purchaser
thereof within five (5) business days of the day Seller is informed thereof.

 

4.8          Seller
Solvent. Seller is solvent (meaning both that Seller’s assets exceed its liabilities, and that Seller is able to satisfy
its debts as they become due), and the execution of this Agreement and consummation of the transactions contemplated hereunder
will not render Seller insolvent. Seller will remain solvent and no sale of any Mortgage Loan will be undertaken with the intent
to hinder, delay or defraud any of Seller’s creditors.

 

4.9          Financial
Statements. Within ninety (90) days of the end of each of Seller’s fiscal years, Seller shall submit to Purchaser its
then current financial information which will include its audited financial statements for the prior year.

 

4.10        Purchaser
Not Liable. The execution of this Agreement, the conduct of the business and the consummation of the transaction contemplated
hereby will not subject Purchaser to any liability, duty or obligation arising from acts or omissions of Seller, its shareholders,
officers, directors, or partners, agents or employees, or to any liability, duty or obligation to which Seller is, or has been
or will be bound, except the duties and obligations of Seller to mortgagor under the terms of any Mortgage Loans purchased by Purchaser
and the laws and regulations applicable thereto.

 

4.11        Use
of Third Parties to Provide Core Services. If Seller engages the services of any third party who will provide significant core
services during the processing, underwriting and closing of a Mortgage Loan, which will be sold to Purchaser under this Agreement,
it shall provide Purchaser with a list of such third parties and the core services that are to be provided. Purchaser shall be
notified in writing of any material change in the third parties providing such core services for the Seller.

 

	V.	MORTGAGE LOAN REPRESENTATIONS, WARRANTIES AND COVENANTS. Seller further represents, warrants
and covenants as of the date of purchase of each Mortgage Loan by the Purchaser, with respect to each and every Mortgage Loan (and
all related Loan Documents) as follows:

 

     

     

    

 

5.1          Mortgage
Conforms. Seller has the authority under applicable law and regulations in all jurisdictions, including the state of New York,
relevant to the Mortgage Loan being offered to Purchaser to transact and do business and to make the type of Mortgage Loan at the
interest rate(s) and with the adjustments provided in the Note and Mortgage. The Mortgage Loan, including all Loan Documents related
thereto, conforms in all respects to this Agreement, including, without limitation, the Requirements.

 

5.2          Origination
and Ownership. Seller itself originated directly the Mortgage Loan offered for sale to Purchaser pursuant to this Agreement,
Seller alone holds the Mortgage Loan free and clear of any and all liens, charges, or other security interests or encumbrances
of any nature and has full right and authority to sell and assign the same pursuant to this Agreement. No sale, pledge, participation,
servicing or other agreement has been entered into with respect to the Mortgage Loan.

 

5.3          Mortgage
First Lien Status. The Mortgage for the Mortgage Loans represents a valid and subsisting first lien upon the real property
described therein, free and clear of all liens and encumbrances (except for liens for real estate taxes and special assessments
not yet due and payable), and there are no rights outstanding that would give rise to any such liens at any time throughout the
term of the Mortgage Loan.

 

5.4          Accurate
Description and Appraisal. The Mortgage Loan is secured by a parcel of property described in the appraisal included as part
of the Loan Documents, and the collateral is completely and accurately described. The improvements on the mortgaged property are
accurately reflected in such appraisal, are in existence and lie wholly within the boundaries and building restriction lines of
the mortgaged property, and no improvements on adjoining properties encroach thereupon. Each appraisal included in the Loan Documents
has been prepared by an appraiser duly licensed and certified as required under applicable law.

 

5.5          Improvements
Lawful. At origination, no improvement on all or any part of the mortgaged property was in violation of any applicable zoning
law or regulation and all inspections, licenses and certificates required with respect to the use and occupancy of the mortgaged
property had been made or obtained, and the mortgaged property was lawfully used and occupied as a 1-4 family residence under FHA,
VA, FNMA and FHLMC requirements and Purchaser’s Guidelines.

 

5.6          No
Rescission, Set-Off or Counterclaim. The Mortgage Loan is not subject to, nor has there been asserted, any right of rescission,
set-off, counterclaim or defense. Neither the operation of any of the terms of the Note, Mortgage or other documents, nor the exercise
of any right thereunder will render the Note or Mortgage or any other document unenforceable, in whole or in part, or subject to
any right of rescission, set- off, counterclaim or defense.

 

5.7          Enforceability.
Each Mortgage Loan is evidenced by a duly executed Note, one or more Mortgage instruments (including all riders and addenda) and
such other instruments, documents and agreements as are necessary to create a fully enforceable obligation secured by residential
real property, and have been duly and properly executed by the mortgagor and all other persons necessary to undertake the debt
and perfect the lien on the mortgaged property. The Note, Mortgage and other documents are genuine, and each is a bona fide,
legal, valid and binding obligation of the maker thereof, fully enforceable in accordance with its terms under applicable Federal
and state law, and each is free of fraud of any type. The Note, the Mortgage and each of the other documents has been drawn up,
executed and made in accordance with all applicable Federal, state and local laws and the Requirements, and such has been done
by one or more parties with full legal capacity to do the same.

 

     

     

    

 

5.8          Usury.
Each of the Mortgage Loans is free of usury and in compliance with applicable Federal or state law and regulations.

 

5.9          Compliance
with Laws and Regulation. A. Seller’s Compliance Certification. Seller has complied with all Federal, state and
local laws and regulations, and the Requirements, in each case as applicable to the Mortgage Loans and the Loan Documents, including
but not limited to Sections 1098 and 1100A of the Dodd Frank Act as implemented by the CFPB in 12 CFR Parts 1024 and 1026 providing
for the Integrated Mortgage Disclosures under the Real Estate Settlement Procedures Act (Reg. X) and the Truth in Lending Act (Reg.
Z), the Consumer Credit Protection Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Fair and Accurate
Credit Reporting Act, the Fair Housing Act, the Home Mortgage Disclosure Act, the National Flood Insurance Act, and all laws, regulations
or rules concerning assignment, recordation and title. Complete and accurate documentation to evidence such compliance, including
completed disclosures, notices, acknowledgements of receipt of disclosures and notices, and recorded assignments, is included among
the Loan Documents delivered to the Purchaser.

 

B. Seller agrees to permit Purchaser
to make site visits at the Seller’s principal office location to review for compliance with all federal and state compliance
requirements. Seller will also make a representative selected by Seller available to talk with one of the Purchaser’s regulators
regarding Seller’s operations and compliance procedures from time to time while this Agreement is in effect.

 

5.10        Protection
of Title to Mortgages. All documents, instruments, filings and recordings which are necessary to protect Purchaser’s
sole right, title and interest in and to the Mortgage Loans and the Loan Documents have been duly executed and made prior to the
Closing Date of each Mortgage Loan, including all assignments, showing a complete chain of title from origination to Purchaser,
with evidence of recording thereon, and all required filing fees, recording fees, taxes and other assessments, including all such
assessments as may be required by the adjustable rate or other alternative features of any Mortgage Loan have been paid.

 

5.11        Title
Standards and Insurance. Each Mortgage Loan is covered at all times by a mortgagee title insurance policy meeting FHA, VA,
FNMA and FHLMC title standards, reflects only permissible exceptions, and meets the requirements of the Purchaser’s Guidelines.
The first lien status of each Mortgage Loan is insured at the maximum loan balance permitted under the Mortgage Loan, each title
insurance policy insures the first priority of any Mortgage Loan (including alternative types of Mortgage Loans) and includes all
applicable endorsements, and otherwise meet all Requirements.

 

     

     

    

 

5.12          FNMA/FHLMC/Purchaser’s
Guidelines Documents and Standards. The Note, Mortgage and all other documents relative to the Mortgage Loan, and all aspects
of Seller’s origination, underwriting, appraisal, closing, sale, transfer and other handling of the Mortgage Loan conform
and comply with current requirements, unless otherwise agreed by the parties in writing.

 

5.13          Hazard
and Flood Insurance. All buildings upon the mortgaged property are insured at all times against loss by fire, flood, hazards
of extended coverage and such other hazards for which Purchaser may require insurance. Such insurance policies must meet all Requirements.

 

5.14          Proceeds
Disbursed. The proceeds of the Mortgage Loan has been fully disbursed and there is no requirement for future advances thereunder.
All on-site improvements are completed and related escrow funds disbursed; provided, however, that the applicable escrow account
shall have been established and maintained in accordance with applicable law and regulations and shall have been appropriately
funded. The unpaid principal balance of the Mortgage Loan is as stated, and all costs, fees and expenses incurred in originating,
closing and transferring the Mortgage Loan, including assignment and recordation costs, have been paid.

 

5.15          Customary
Provisions. The Note, the Mortgage and other documents contain customary and enforceable provisions permitting the holder thereof
rights and remedies adequate to realize against the mortgaged property the benefits of the security whether by judicial foreclosure,
trustee’s sale or otherwise. There is no homestead or other exemption available, which would interfere with the right to
foreclose upon or to sell the mortgaged property at a trustee’s sale.

 

5.17          No
Defects. There are no defects, impairments or conditions which in any way affect or diminish the legal right to enforce the
Note, the Mortgage and all other documents, or which in any way affect or impair the status of the Mortgage Loan or the collectability
thereof.

 

5.18          No
Defaults. The Mortgage Loan is not in default, nor is it fifteen (15) or more days past due. All payments due through the last
due date before the applicable Closing Date and all taxes, assessments, insurance premiums, water, sewer and municipal charges,
leasehold payments, ground rents and similar charges have been paid on a current basis. There is no default, breach or event of
acceleration existing under the Note, the Mortgage or any other document and no event which, with the passage of time and/or giving
notice would constitute a default, breach or event of acceleration, and Seller has not waived any event of a default, breach or
event of acceleration. No collateral for a Mortgage Loan and no Mortgage Loan is subject to any legal, regulatory or insurance
claim, investigation, proceeding or critique or to any threatened or actual foreclosure, bankruptcy, legal process, litigation
or other attack, nor does Seller have any information or indication, written or otherwise, that any of the foregoing may be commenced.

 

5.19          Escrow
Deposits. There exist no escrow deposit or payment deficiencies and no escrow deposits, payments or other charges or payments
have been capitalized under the Mortgage Loan.

 

     

     

    

 

5.20          No
Modifications. No modification, subordination, settlement, compromise or cancellation has been effected with respect to any
Note, Mortgage or other document and no special promise or consideration has been made to any borrower, mortgagor, guarantor or
other obligor. Seller has not acted or omitted to act in any way which would waive or estop or otherwise impair the rights or ability
of Purchaser to fully enforce the obligation or which would impair any mortgagee’s escrow account or which would otherwise
impose upon the owner of any Mortgage Loan nay responsibility in excess of those imposed by the language of the Note and Mortgage.

 

5.21          Assignment
of Mortgages. All Loan Documents related to the Mortgage Loan have been taken, issued and executed by the Seller in its own
name. The Notes, Mortgages, endorsements, assignments and other documents, instruments and agreements executed and delivered by
Seller to Purchaser to sell, assign, deliver and transfer the Mortgage Loans to Purchaser are legally sufficient and proper and
have transferred to Purchaser full, complete and continuous right, title and interest in and to the Mortgage Loans, including all
rights and documents related thereto.

 

5.22          First
Day Payment. Each Mortgage Loan is payable on the first day of each month.

 

5.23          No
Adverse Circumstances. There are no circumstances or conditions with respect to the Note, the Mortgage or any other document,
the borrower, the mortgagor, the guarantor or any other obligor that can be reasonably expected to cause FHA, FNMA, FHLMC or a
private investor, as appropriate, to regard the Mortgage Loan as unacceptable, cause the Mortgage Loan to become delinquent or
adversely affect the marketability of the Mortgage Loan.

 

	VI.	INDEMNIFICATION. Seller hereby indemnifies and agrees to defend and hold Purchaser harmless
from and against any and all claims, demands, damages, losses, liabilities, suits, actions, investigations, proceedings and expenses
(including attorney’s fees, costs and disbursements) resulting from, arising out of or otherwise related to Seller’s
negligence, willful misconduct, deception or fraud with regard to any action or inaction of Seller (including Seller’s employees
and agents) hereunder. The indemnification obligations of Seller hereunder shall survive the termination of this Agreement.

 

	VI.	PURCHASE CONDITIONS. Purchaser’s obligation to complete the purchase of any Mortgage
Loans pursuant to this Agreement shall be subject to certain conditions being fulfilled with respect to each Mortgage Loan as of
the date of purchase.

 

7.1          Seller’s
Delivery. Seller shall have delivered all Loan Documents, including without limitation, the Note, the Mortgage, all assignments
showing a complete chain of title from origination to Purchaser, with evidence of recording thereon, all escrow amounts, evidence
of insurance coverage running to Purchaser and such other documents, instruments, moneys and papers duly executed, endorsed, assigned,
or otherwise completed, including as may be prescribed in the Purchaser’s Guidelines.

 

7.2          Recording
Office Delay. In the event that Seller cannot deliver to Purchaser a duly recorded assignment of Mortgage or any other document
required to be recorded under this Agreement on the applicable Closing Date solely because of a delay cause by the public recording
office where such document(s) has been delivered for recordation, Seller shall deliver to Purchaser a copy of each such document(s)
with a statement thereon signed by an executive officer of the Seller certifying each to be a true and correct copy of document(s)
delivered to the appropriate recording official for recordation. Seller shall deliver to Purchaser such recorded documents(s) with
evidence of recording indicated thereon immediately after Seller received such documents, but in any event, no later than one hundred
twenty (120) days from the applicable Closing Date. Further, Seller shall use its best efforts to pursue delivery of any such recorded
documents that have not been delivered to Purchaser within sixty (60) days and shall copy Purchaser on any correspondence in that
regard.

 

     

     

    

 

7.3          Real
Property Taxes, Insurance and Escrows. All installments of real property taxes and assessments due and payable up to sixty
(60) days after the date of purchase shall be paid in full, and warranted by Seller as paid in full, and all escrow balances shall
be calculated pursuant to Purchaser’s formula, as set forth in the Purchaser’s Guidelines.

 

7.4          Costs
and Expenses. Seller will arrange for the payment of all costs and expenses of the sale and transfer of the Mortgage Loan and
the perfection of Purchaser’s title thereto including, without limitation, (a) costs of preparing and recording assignments,
(b) sales, transfer and other taxes, and (c) all other assessments, costs, fees and disbursements.

 

7.5          Representations,
Warranties and Covenants. All representations, warranties and covenants of Seller to Purchaser shall be true and complete.

 

	VIII.	COSTS, EXPENSES AND FEES. Except as otherwise provided in this Agreement, each party respectively
shall pay all costs, expenses, fees and commissions incurred by it in connection with performing its services and obligations under
this Agreement.

 

	IX.	PROPRIETARY INFORMATION. In fulfilling their respective obligations under this Agreement,
either party may learn trade secrets or confidential information of the other party. Each party covenants and agrees to guard such
trade secrets and other confidential information and agrees during the term of this Agreement and thereafter not to divulge such
confidential information or trade secrets to any other person or entity. However, nothing contained herein shall prevent any party
hereto from otherwise using such information for its own account, either during or after the time of performance of this Agreement.

 

	X.	TERMINATION. Either party may terminate this Agreement with or without cause upon Thirty
(30) calendar days’ prior written notice to the other; provided however, that the provisions of Articles II, IV, V, VI, VIII
and IX shall survive any such termination.

 

	XI.	GENERAL PROVISIONS.

 

11.1          No
Merger. The terms, provisions and conditions of this Agreement shall not merge upon any date of purchase, but shall continue
in full force and effect.

 

11.2          Notices.
Any demands, notices or communications required or permitted by this Agreement, including notices of changes in the Purchaser’s
Guidelines, shall be deemed to have been duly given if personally delivered at, or mailed by prepaid first class mail to, or sent
by overnight air express to, or sent by facsimile transmission to the respective parties as follows, except service of legal process
will only be accepted by delivery as outlined in the NYS Civil Practice Law and Rules:

 

     

     

    

 

	 	To Seller:	
        Homestead Funding Corp.

        8 Airline Drive

        Albany, NY 12205

        Fax: 518-464-1141

        ATTN: Michael Rutherford

        Fax: 518-292-1141

        Title: President & CEO or

        Emailed to Jane Borbee at jborbee@homesteadfunding.com

	 	 	 
	 	With a Copy to:	Law Offices of Richard C. Miller, Jr., PLLC

Post Office Box 12155

Albany, NY 12212

Fax: 518-292-1635

ATTN: Richard C. Miller, Jr., Esq.

Email: rcmiller@rcmillerjrlaw. com
	 	 	 
	 	To Purchaser:	Pioneer Savings Bank

21 Second Street

Troy, NY 12180

Fax: 518-274-1060

ATTN: Joseph Fleming

Title: Chief Lending Officer or

Emailed to Jerilee Beaudoin at beaudoinj@pioneerbanking.com
	 	 	 
	 	With a Copy to:	Frank C. Sarratori, EVP, CAO and General Counsel 

21 Second Street 

Troy, New York 12180 

sarratorif@pioneerbanking.com

 

or at such other addresses as may
from time to time be furnished by any party to other parties hereto.

 

11.3          Changes
in Purchaser’s Guidelines. Purchaser reserves the right to cancel, change, amend and/or modify any and all requirements,
specifications and policies set forth in the Purchaser’s Guidelines upon written notice to Seller, but in no event less than
thirty (30) days’ notice.

 

11.4          No
Broker. Purchaser and Seller represent that no broker’s or finder’s fee or other commission is due in connection
with the transactions evidenced hereby or described herein.

 

11.5          No
Partnership or Agency; Non-Exclusivity. Purchaser and Seller are independent contractors, and neither their relationship pursuant
to a separate Joint Marketing Agreement nor this Agreement shall not be construed to constitute a partnership, joint venture or
agency between the parties. Nothing in this Agreement shall limit the right of either party to originate, purchase, or sell or
enter in any agreement with any other party relating to the origination, purchase or sale of mortgage loans or interests therein.

 

     

     

    

 

11.6          Entire
Agreement. This Agreement supersedes any prior negotiations, offers or terms and supersedes and incorporates all representations,
promises and statements, oral or written, made in connection with the subject matter of this Agreement. Subject to Purchaser’s
right to modify the Purchaser’s Guidelines, no modification, rescission, release or amendment of any provision of this Agreement
shall be made except by a written agreement executed by duly authorized officers of Seller and Purchaser respectively.

 

11.7          Waiver.
Purchaser may waive any term or condition of this Agreement or the Purchaser’s Guidelines, but only by a written waiver specifying
the nature and terms of such waiver. No such waiver shall extend to any subsequent or other event or to any other term or condition,
nor shall any delay by Purchaser in exercising, or any failure to exercise, any right arising under the Agreement or the Purchaser’s
Guidelines adversely affect or impair Purchaser’s rights thereunder.

 

11.8          Assignment.
This Agreement or any part or interest therein shall not be assigned by Seller without the prior written consent of the Purchaser.
Purchaser may assign this Agreement without consent. Without limiting the foregoing, this Agreement shall be binding upon the parties’
successors and assigns.

 

11.9          Governing
Law. The rights and obligations of the parties under this Agreement shall be construed under and governed by the laws of the
State of New York, without application of its principles of conflicts of laws. The parties further agree that the Supreme Court
for the State of New York in Albany or Rensselaer shall have sole and exclusive jurisdiction and venue over any disputes arising
hereunder and the parties expressly consent to the jurisdiction of said courts.

 

11.10        Illegality.
Should any one or more provisions of this Agreement or the Purchaser’s Guidelines be determined to be illegal or unenforceable
by a court of competent jurisdiction, all other provisions shall remain effective.

 

11.11        Counterparts.
This Agreement may be executed in any number of counterparts and by the parties hereto on separate counterparts, each of which
when so executed shall be an original and all of which together shall constitute one and the same Agreement. The Memoranda may
be executed and delivered in facsimile or e-mail without requiring delivery of original signatures.

 

11.12        Insurance.
Seller represents that it presently maintains and will maintain during the term of this Agreement all necessary errors and omissions
insurance coverage as appropriate, d. Seller shall provide proof of such insurance coverage to Seller on the date of execution
of this Agreement, at least annually thereafter, and as reasonably requested by Purchaser.

 

     

     

    

 

11.13          Customer
Privacy, Information Security and Breach of Customer Information. Seller warrants and represents that it is familiar with the FFIEC
Interagency Guidelines Establishing Information Security Standards (Security Standards). The Parties recognize, however,
that Seller, as a mortgage bank, is not subject to the Security Standards and instead is subject to very similar information security
standards promulgated by the Federal Trade Commission (hereinafter “FTC”). Seller states that it implements and maintains
appropriate security measures designed to meet the objectives of the Information Security requirements promulgated by the FTC.
Seller agrees to protect and maintain non-public personal information as defined in and in accordance with the Gramm-Leach-Bliley
Act and the information security requirements that it is subject to as a mortgage bank. In addition, Seller agrees to promptly
notify Purchaser if it experiences a data breach incident as set forth in NYS General Business Law section 899-aa that relates
to a Mortgage Loan which is to be sold to Purchaser under this Agreement. Seller shall notify Purchaser if any data belonging to
customers of purchased loans has been breached. Such notification shall include the names of any impacted individuals and the type
of information that was breached.

 

11.14          Customer
Complaints. If Seller receives any customer complaints for a loan sold to Purchaser pursuant to this Agreement, Seller shall promptly
respond to such customer and shall provide Purchaser with a copy of the customer complaint and Seller’s response. On a quarterly
basis, Seller shall provide Purchaser with a report, summarizing such customer complaints, Seller’s response and the status
and resolution of such complaints.

 

11.15          Use
of Bank Premises. Registered Mortgage Loan Originators (MLOs) employed by Seller may utilize office space at a branch office maintained
by Purchaser, to meet with prospective borrowers referred to Seller by Purchaser. Use of such office space shall be coordinated
in advance by the MLO with the appropriate branch manager or designee. Use of such office is limited to use of the physical office,
and the MLO is not permitted to utilize Purchaser’s computers or network access, provided, however, that an MLO may make
photocopies or utilize a fax machine. An MLO may only use Purchaser’s office space to meet with a prospective Pioneer Bank
borrower’s.

 

11.16          Business
Continuity. Seller warrants and represents to Purchaser that it maintains a business continuity plan for continuing services in
the event of an operational failure, whether caused by natural or man-made disaster, and maintains appropriate protections for
backing up information. Results of testing of Seller’s business continuity plans shall be forwarded to Purchaser upon receipt
within five business days.

 

11.17          Ownership
and License. Except as otherwise set forth in the Agreement, this Agreement does not provide either party with the right to use
the other party’s property, data, equipment or software. Intellectual property belonging to each party including, but not
limited to, name, logo, trade or service mark, and any other copyrighted material, belongs to the owning party and may not be used
by the other party without specific written consent or a contractual agreement between the parties.

 

11.18          Full
Authority. The Parties represent that they are fully authorized to execute this Agreement for and as the act of the respective
parties hereto, and that all necessary corporate authorizations, resolutions, or other action has been duly taken by each of the
corporate entities signing this Agreement.

 

     

     

    

 

11.19          Full
Knowledge and Legal Representation. Each party hereto expressly warrants and represents to the other parties that before executing
this Agreement said party has fully informed itself of the terms, contents, conditions and effect; that no promises or representations
of any kind have been made to it on behalf of the other parties to this Agreement, except as expressly stated herein; that said
party has relied solely on its own judgment in executing this Agreement; and that each party hereto has had the opportunity to
seek and obtain the advice of legal counsel before entering into this Agreement.

 

11.20          Interpretation.
No provision in this Agreement shall be interpreted for or against any party because that party or that party’s legal representative
drafted the provision.

 

11.21          Cooperation
and Additional Documents. The parties hereto agree to cooperate with one another regarding the purchase and sale of Mortgage Loans
and in the event any future documentation may be necessary to implement the provisions and intent of this Agreement.

 

IN WITNESS WHEREOF, the undersigned
have caused this Agreement to be duly executed and delivered all as of the date first set forth above.

 

	HOMESTEAD FUNDING CORP.	PIONEER SAVINGS BANK
	(“Seller”)	(“Purchaser”)

 

	By:	/s/ Michael Rutherford	 	By:	/s/ Thomas L. Amell
	Name: 	Michael Rutherford	 	Name:	Thomas L. Amell
	Its:	President & CEO	 	Its:	President & CEOBlueprint

 

Exhibit
4.1

 

Warrant
Certificate No. ______

 

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

 

Issue
Date: April 26, 2019 (the “Issuance
Date”)                        
Expiration Date: __________, 2024

Warrant
No. [ ]

 

COMMON STOCK PURCHASE WARRANT

 

TRUE DRINKS HOLDINGS, INC.

 

THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that,
for value received, _____________ or its assigns (the
“Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the date
of the Authorized Share Approval, as defined below in Section
2(e)(i) (the “Initial Exercise Date”),
and on or prior to 5:00 p.m. (New York City time) on
______________1 (the “Termination Date”) but
not thereafter, to subscribe for and purchase from True Drinks
Holdings, Inc., a Nevada corporation (the “Company”), up to ______
shares (as subject to adjustment hereunder, the “Warrant Shares”) of the
Company’s common stock (the “Common Stock”). The
purchase price of one share of Common Stock under this Warrant
shall be equal to the Exercise Price, as defined in Section
2(b).

 

This
Warrant is one of a series of Warrants of like tenor being issued
pursuant to the Securities Exchange Agreement dated April __, 2019
(the “Securities Exchange
Agreement”) between the Company and certain
signatories thereto.

 

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

 

 

1 Insert the date that
is the 5 year anniversary of the Issuance Date, provided that, if
such date is not a Trading Day, insert the immediately following
Trading Day.

 

 

-1-

 

 

Section
2.                                Exercise.

 

a) Exercise
of Warrant. Exercise of the purchase rights represented by
this Warrant may be made, in whole or in part, at any time or times
on or after the Initial Exercise Date and on or before the
Termination Date by delivery to the Company of a duly executed
facsimile copy or PDF copy submitted by e-mail (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) herein) following
the date of exercise as aforesaid, the Holder shall deliver the
aggregate Exercise Price for the Warrant 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 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
on which 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 Common Stock under this Warrant shall be
$0.0044313, subject to
adjustment hereunder (the “Exercise
Price”).

 

 

 

-2-

 

 

c) Cashless Exercise. If at any
time after the six-month anniversary of the Closing Date, there is
no effective registration statement registering, or no current
prospectus available for, the resale of the Warrant Shares by 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.

 

“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 OTCQB or
OTCQX is not a Trading Market, the volume weighted average price of
the Common Stock for such date (or the nearest preceding date) on
OTCQB or OTCQX as applicable, (c) if the Common Stock is not then
listed or quoted for trading on OTCQB or OTCQX and if prices for
the Common Stock are then reported in the “Pink Sheets”
published by OTC Markets Group, Inc. (or a similar organization or
agency succeeding to its functions of reporting prices), the most
recent bid price per share of the Common Stock so reported, or (d)
in all other cases, the fair market value of a share of Common
Stock as determined by an independent appraiser selected in good
faith by the Holders of a majority in interest of the Securities
then outstanding and reasonably acceptable to the Company, the fees
and expenses of which shall be paid by the
Company.

 

“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 OTCQB or OTCQX is not a Trading Market,
the volume weighted average price of the Common Stock for such date
(or the nearest preceding date) on OTCQB or OTCQX as applicable,
(c) if the Common Stock is not then listed or quoted for trading on
OTCQB or OTCQX and if prices for the Common Stock are then reported
in the “Pink Sheets” published by OTC Markets Group,
Inc. (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share
of the Common Stock so reported, or (d) in all other cases, the
fair market value of a share of Common Stock as determined by an
independent appraiser selected in good faith by the Holders of a
majority in interest of the Securities then outstanding and
reasonably acceptable to the Company, the fees and expenses of
which shall be paid by the Company.

 

 

 

-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
characteristics of the Warrants being exercised, and the holding
period of the Warrant Shares being issued may be tacked on to the
holding period of this Warrant.  The Company agrees not
to take any position contrary to this Section 2(c).

 

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 the Holder or
(B) the Warrant Shares are eligible for resale by the Holder
without volume or manner-of-sale limitations pursuant to Rule 144
(assuming cashless exercise of the Warrants), 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 by the Warrant Share Delivery Date. 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, 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.

 

 

 

-5-

 

 

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 that
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.

 

e) Holder’s Exercise
Limitations.

 

i. Stockholder Approval.
Holder agrees and acknowledges that
the Warrants cannot be exercised for Warrant Shares unless and
until such time as the Company’s stockholders have approved
an amendment to the Company’s articles of incorporation to
increase the number of shares of Common Stock authorized thereunder
to permit the issuance of Warrant Shares upon exercise of the
Warrants (the “Authorized Share
Approval”). Holder
further agrees and acknowledges that Holder shall bear the economic
risk of loss associated with holding the Warrants pending the
satisfaction of the conditions set forth in this Section
2(e)(i).

 

 

 

-6-

 

 

ii. Beneficial Ownership
Limitation. 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, nonexercised
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 nonconverted portion of any other
securities of the Company (including, without limitation, any other
Common Stock Equivalents) subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its Affiliates or Attribution
Parties.  Except as set forth in the preceding sentence, for
purposes of this Section 2(e)(ii), 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)(ii)
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)(ii), 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 one (1) Trading Day
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% 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 prior notice to the
Company, may increase or decrease the Beneficial Ownership
Limitation provisions of this Section 2(e)(ii), 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)(ii) 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)(ii) 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.

 

 

 

-7-

 

 

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,
that 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, that 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).

 

 

 

-8-

 

 

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. The Company shall cause any successor
entity in a Fundamental Transaction in which the Company is not the
survivor (the “Successor Entity”) to
assume in writing all of the obligations of the Company under this
Warrant and the other Transaction Documents in accordance with the
provisions of this Section 3(e) pursuant to written agreements in
form and substance reasonably satisfactory to the Holder and
approved by the Holder (without unreasonable delay) prior to such
Fundamental Transaction and shall, at the option of the Holder,
deliver to the Holder in exchange for this Warrant a security of
the Successor Entity evidenced by a written instrument
substantially similar in form and substance to this Warrant which
is exercisable for a corresponding number of shares of capital
stock of such Successor Entity (or its parent entity) equivalent to
the shares of Common Stock acquirable and receivable upon exercise
of this Warrant (without regard to any limitations on the exercise
of this Warrant) prior to such Fundamental Transaction, and with an
exercise price which applies the exercise price hereunder to such
shares of capital stock (but taking into account the relative value
of the shares of Common Stock pursuant to such Fundamental
Transaction and the value of such shares of capital stock, such
number of shares of capital stock and such exercise price being for
the purpose of protecting the economic value of this Warrant
immediately prior to the consummation of such Fundamental
Transaction), and which is reasonably satisfactory in form and
substance to the Holder. Upon the occurrence of any such
Fundamental Transaction, the Successor Entity shall succeed to, and
be substituted for (so that from and after the date of such
Fundamental Transaction, the provisions of this Warrant and the
other Transaction Documents referring to the “Company”
shall refer instead to the Successor Entity), and may exercise
every right and power of the Company and shall assume all of the
obligations of the Company under this Warrant and the other
Transaction Documents with the same effect as if such Successor
Entity had been named as the Company herein.

 

 

 

-9-

 

 

e) Subsequent Equity
Sales.

 

i.

If, at any time while this Warrant is outstanding,
the Company or any Subsidiary issues additional shares of Common
Stock or rights, warrants, options or other securities or debt
convertible, exercisable or exchangeable for shares of Common Stock
or otherwise entitling any Person to acquire shares of Common Stock
(collectively, “Common Stock
Equivalents”) at an
effective net price to the Company per share of Common Stock (the
“Effective
Price”) less than the
Exercise Price (as adjusted hereunder to such date), then the
Exercise Price shall be reduced to equal the product of (A)
the Exercise Price in effect immediately prior to such issuance of
Common Stock or Common Stock Equivalents times (B) a fraction, the
numerator of which is the sum of (1) the number of shares of Common
Stock outstanding immediately prior to such issuance, plus (2) the
number of shares of Common Stock issued (or deemed to be issued) at
the Exercise Price, and the denominator of which is the aggregate
number of shares of Common Stock outstanding or deemed to be
outstanding immediately after such issuance. For purposes of this
paragraph, in connection with any issuance of any Common Stock
Equivalents, (A) the maximum number of shares of Common Stock
potentially issuable at any time upon conversion, exercise or
exchange of such Common Stock Equivalents (the “Deemed Number”) shall be deemed to
be outstanding upon issuance of such Common Stock Equivalents, (B)
the Effective Price applicable to such Common Stock shall equal the
minimum dollar value of consideration payable to the Company to
purchase such Common Stock Equivalents and to convert, exercise or
exchange them into Common Stock (net of any discounts, fees,
commissions and other expenses), divided by the Deemed Number, and
(C) no further adjustment shall be made to the Exercise Price upon
the actual issuance of Common Stock upon conversion, exercise or
exchange of such Common Stock Equivalents. 

 

ii.

If, at any time while this Warrant is outstanding,
the Company or any Subsidiary issues Common Stock Equivalents with
an Effective Price or a number of underlying shares that floats or
resets or otherwise varies or is subject to adjustment based
(directly or indirectly) on market prices of the Common Stock (a
“Floating Price
Security”), then for
purposes of applying the preceding paragraph in connection with any
subsequent exercise, the Effective Price will be determined
separately on each Exercise Date and will be deemed to equal the
lowest Effective Price at which any holder of such Floating Price
Security is entitled to acquire Common Stock on such Exercise Date
(regardless of whether any such holder actually acquires any shares
on such date).

 

iii.

Notwithstanding the foregoing, no adjustment will
be made under this paragraph (e) in respect of any issuance
of Common Stock upon exercise or conversion of any options or other
securities issued and outstanding on the date of this Warrant
(provided that such exercise or conversion occurs in accordance
with the terms thereof, without amendment or modification, or
(b) any options granted to directors, officers, employees or
other service providers of the Company pursuant to any Company
option plan then in effect and any shares of Common Stock or other
securities issuable in connection with the exercise of any such
options.

 

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

 

 

 

-10-

 

 

g) Notice to Holder.

 

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

 

 

 

-11-

 

 

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 Issue Date of this Warrant and shall be identical with
this Warrant except as to the number of Warrant Shares issuable
pursuant thereto.

 

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

 

d) Transfer Restrictions. If, at
the time of the surrender of this Warrant in connection with any
transfer of this Warrant, the transfer of this Warrant shall not be
either (i) registered pursuant to an effective registration
statement under the Securities Act and under applicable state
securities or blue sky laws or (ii) eligible for resale without
volume or manner-of-sale restrictions or current public information
requirements pursuant to Rule 144, the Company may require, as a
condition of allowing such transfer, that the Holder or transferee
of this Warrant, as the case may be, comply with the provisions of
Section 4 of the Subscription Agreement.

 

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

 

Section
5.                                Miscellaneous.

 

a) No Rights as Stockholder Until
Exercise; No
Settlement in Cash. 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. Without
limiting the rights of a Holder to receive Warrant Shares on a
“cashless exercise,” and to receive the cash payments
contemplated pursuant to Sections 2(d)(i) and 2(d)(iv), in no event
will the Company be required to net cash settle a Warrant
exercise.

 

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.

 

 

 

-12-

 

 

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, the Company shall take all action necessary
at all times after the date hereof to have authorized, and reserved
for the purpose of issuance, no less than the number of shares of
Common Stock issuable as Warrant Shares upon the exercise of any
purchase rights under this Warrant (the “Required Reserve Amount”).
If at any time the number of shares of
Common Stock authorized and reserved for issuance is not sufficient
to meet the Required Reserve Amount, 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 5(d), in
the case of an insufficient number of authorized shares, obtain the
Authorized Share Approval, and voting the management shares of the
Company in favor of the Authorized Share Approval to ensure that
the number of authorized shares is sufficient to meet the Required
Reserved Amount.

 

The
Company further covenants that, subject to obtaining the Authorized
Share Approval, 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 nonassessable and free
from all taxes, liens and charges created by the Company in respect
of the issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).

 

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

 

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

 

 

 

-13-

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

l) Amendment. This Warrant may be
modified or amended or the provisions hereof waived with the
written consent of the Company and the
Holders of not less than a majority of the outstanding Warrants
issued pursuant to the Securities Exchange
Agreement.

 

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

 

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

 

 

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

 

(Signature Page Follows)

 

 

-14-

 

 

 

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.

 

 

 

	

TRUE DRINKS HOLDINGS, INC.

 

 

	

By:__________________________________________

     Name:

     Title:

 

 

 

 

-15-

 

 

NOTICE OF EXERCISE

 

TO:            

TRUE
DRINKS HOLDINGS, 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:

 

_______________________________

 

_______________________________

 

_______________________________

 

 

(4)
Accredited
Investor. The undersigned is an “accredited
investor” as defined in Regulation D promulgated under the
Securities Act of 1933, as amended.

 

[SIGNATURE
OF HOLDER]

 

Name of
Investing Entity:
________________________________________________________________________

Signature of Authorized Signatory of Investing
Entity:
_________________________________________________

Name of
Authorized Signatory:
___________________________________________________________________

Title
of Authorized Signatory:
____________________________________________________________________

Date:
________________________________________________________________________________________

 

 

 

 

 

-16-

 

 

 

  EXHIBIT B

 

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:

	
 

	

 

 

Phone Number:

Email Address:

 

	

(Please
Print)

______________________________________

______________________________________

 

	

Dated: _______________ __, ______

 

	
 

	

Holder’s
Signature:                                                                 

 

	
 

	

Holder’s
Address:                                                                 

 

	
 

 

 

 

-17-

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