Document:

Exhibit 10.2 IAA FINAL

INVESTMENT ADVISORY AGREEMENT

among

DME ADVISORS, LP,

THE VENTURE AMONG
GREENLIGHT REINSURANCE, LTD.,
GREENLIGHT REINSURANCE IRELAND, LTD. AND
DME ADVISORS, LLC,

GREENLIGHT REINSURANCE, LTD.,

GREENLIGHT REINSURANCE IRELAND, LTD.

and

DME ADVISORS, LLC

January 1, 2014

IAA between DMELP and Venture (1/2014)

INVESTMENT ADVISORY AGREEMENT (the “Agreement”), dated as of January 1, 2014, by and among DME ADVISORS, LP, a Delaware limited partnership (the “Investment Advisor”), and the VENTURE AMONG GREENLIGHT REINSURANCE, LTD., GREENLIGHT REINSURANCE IRELAND, LTD. AND DME ADVISORS, LLC (the “Venture”),  GREENLIGHT REINSURANCE, LTD., GREENLIGHT REINSURANCE IRELAND, LTD. and DME ADVISORS, LLC (each, a “Participant”, and collectively, the “Participants”).

RECITALS:

The Venture desires to retain the Investment Advisor to provide certain discretionary advisory services relating to the assets and liabilities of the Venture, and the Investment Advisor desires to accept such appointment, all subject to the terms and conditions hereinafter set forth.  

AGREEMENT:

In consideration of the premises and the mutual covenants and the agreements herein set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

1.    Investment Program; Authority and Duties of the Investment Advisor.

		
	(a)
	Investment Program.  Subject to the provisions of clauses (e), (f) and (h) below and in accordance with the investment objectives, policies, guidelines and restrictions that from time to time are set forth in the Second Amended and Restated Agreement (the “Venture Agreement”, capitalized terms used but not otherwise defined herein have the meanings given to them in the Venture Agreement) by and among Greenlight Reinsurance, Ltd., Greenlight Reinsurance Ireland, Ltd., Greenlight Capital Re, Ltd. (for limited purposes) and DME Advisors, LLC (“DME”), or that are otherwise communicated to the Investment Advisor by DME (and subject, in each case, to any limitations otherwise set forth in this Agreement), the Investment Advisor shall be empowered, on a non-exclusive basis, to (i) formulate the overall investment strategy to be carried out by the Venture (and the limited related borrowing activities of the Venture in order to implement such strategy) and (ii) exercise full discretion in the management of the trading, investment transactions and related borrowing activities of the Venture in order to implement such strategy.

		
	(b) 
	Authority of Investment Advisor.  Subject to the limitations contained elsewhere in this Agreement and in the Venture Agreement, Investment Advisor may execute, deliver and perform all contracts, agreements and other undertakings and engage in all activities and transactions as may, in the reasonable discretion of Investment Advisor, be necessary or advisable to carry out the objectives of this Agreement and the Venture Agreement (including without limitation all federal securities filings relating to any of the investment activities set forth in this Section 1), provided, however, that if a contract, agreement or other undertaking 

IAA between DMELP and Venture (1/2014)

is or is to be made by Investment Advisor on behalf of Greenlight Re and/or GRIL that could reasonably be expected to require disclosure on a Form 8-K pursuant to Section 13 or 15(d) of the United States Securities Exchange Act of 1934, as amended, or other applicable law, Investment Advisor shall promptly notify Greenlight Re and/or GRIL and cooperate with Greenlight Re and/or GRIL to allow a timely and proper disclosure to be made.

		
	(c) 
	Power of Attorney.  Subject to the provisions of clauses (d), (e), (f) and (h) below, in furtherance of the foregoing, the Venture hereby designates and appoints Investment Advisor as agent and attorney-in-fact, with full power and authority and without the need for further approval of the Venture or any Participant (except as may be required by applicable law) to have the exclusive power on behalf of the Venture and the Participants to:

		
	(i) 
	effect any and all transactions in equity and debt securities (including derivatives thereon), currencies and commodities (and options, futures, derivatives, swaps, and forward contracts thereon), trade and other claims, arbitrages, loans, break-ups, consolidations, reorganizations and similar securities of non-United States issuers, and everything connected therewith in the broadest sense (“Securities”);

		
	(ii) 
	determine all matters relating to the manner, method and timing of investment transactions and to engage consultants and analysts in connection therewith; 

		
	(iii) 
	select brokers (including prime brokers), custodians, dealers, banks and other intermediaries by or through whom such investment transactions will be executed or carried out;

		
	(iv) 
	make short sales;

		
	(v) 
	purchase or write options (including uncovered options);

		
	(vi) 
	trade on margin;

		
	(vii) 
	draw funds and direct banks, brokers or other custodians to effect deliveries of funds or assets, but only in the course of effecting investment transactions for the account of the Venture and its Participants; 

		
	(viii) 
	exercise all voting and other powers and privileges attributable to any Securities or other property held for the account of the Venture and its Participants hereunder; and

		
	(ix) 
	make and execute all such documents and to take all such other actions as Investment Advisor considers necessary or appropriate to carry out its investment advisory duties hereunder, including, without limitation, opening brokerage (including prime brokerage) accounts, bank accounts, futures accounts, custody accounts and other similar accounts, and any other required documentation including, without limitation, swaps, securities, lending arrangements and similar agreements on behalf of the Venture and its Participants.

		
	(d) 
	Creation of Entities.  Investment Advisor may, with the prior consent of Greenlight Re or GRIL, as applicable (which consent may not be unreasonably withheld), effectuate the foregoing through one or more corporations, 

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partnerships, limited liability companies or other entities formed on behalf of the Venture (an "Entity").  For purposes of providing such consent, Greenlight Re or GRIL, as applicable, shall designate an authorized representative (and a substitute authorized representative in the event that the first authorized representative is unavailable) each of whom have the authority to provide such consent.  A failure of an authorized representative to consent or reject the formation and use of an Entity in connection with a proposed transaction within twenty-four (24) hours of receipt of a written request (via electronic mail or otherwise) for approval from Investment Advisor shall be deemed consent.

		
	(e) 
	Exclusive Delegation of Certain Rights.  Notwithstanding any provision of this Agreement to the contrary, it is the express intention of the parties, and the parties acknowledge and agree, that until the termination of this Agreement for any reason as provided in Section 9 hereof:

		
	(i)  
	Investment Advisor shall have, to the exclusion of the Venture and the Participants, sole voting power with respect to the Securities;

		
	(ii)  
	in no event shall the Venture or any Participant have any right, power, authority or ability, whether direct or indirect, to vote or act by consent with respect to any Security, or to direct or influence any such vote or action by consent;

		
	(iii)  
	Investment Advisor shall have, to the exclusion of the Venture and the Participants, sole investment and dispositive power with respect to the Securities; and

		
	(iv)  
	in no event shall the Venture or any Participant have any right, power, authority or ability, whether direct or indirect, to invest in or dispose of any Security, or to direct or influence any such investment or disposition.

		
	(f) 
	Certain Limitations.  Notwithstanding anything to the contrary in this Agreement, Investment Advisor shall use commercially reasonable efforts to avoid engaging in any activity or taking any action that would cause Greenlight Re or GRIL to be treated as engaged in a U.S. trade or business for U.S. federal income tax purposes, including investing in any asset that (i) does not qualify for the trading safe harbor provided in Section 864(b)(2) of the Code and the Treasury Regulations promulgated thereunder, or (ii) would be considered a United States real property interest for purposes of Section 897 of the Code.  

		
	(g) 
	Certain Considerations in Selecting Brokers, Etc.  In connection with the transactions contemplated by this Agreement, the Venture and the Participants acknowledge and agree that in the course of selecting brokers, dealers, banks and financial intermediaries to effect such transactions, Investment Advisor may agree to such commissions, fees and other charges as it shall deem reasonable under the circumstances, taking into consideration all such factors as Investment Advisor deems relevant, including the following:  the ability to effect prompt and reliable executions at favorable prices; the operational efficiency with which transactions are effected; the financial strength, integrity and stability of the broker; the quality, comprehensiveness and frequency of available research and other services 

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considered to be of value (even if such research and other services are not for the exclusive benefit of the accounts of the Venture and its Participants); and the competitiveness of commission rates in comparison with other brokers satisfying Investment Advisor’s other selection criteria.  It is understood that the costs of such services will not necessarily represent the lowest costs available and that Investment Advisor is under no obligation to combine or arrange orders so as to obtain reduced charges.

		
	(h) 
	Guidelines.  Notwithstanding any provision of this Agreement to the contrary, Investment Advisor hereby agrees to follow:

		
	(i) 
	the investment guidelines of Greenlight Re attached to the Venture Agreement from time to time as Exhibit A-1 (the “Greenlight Re Guidelines”), solely with respect to Assets in which Greenlight Re has an interest, and only to the extent of Greenlight Re’s interest in each such Asset, as the Greenlight Re Guidelines may be amended from time to time by the Board of Greenlight Re, and provided in writing to Investment Advisor or DME; and 

		
	(ii) 
	the investment guidelines of GRIL attached to the Venture Agreement from time to time as Exhibit A-2 (the “GRIL Guidelines”, and together with the Greenlight Re Guidelines, the “Guidelines”), solely with respect to Assets in which GRIL has an interest, and only to the extent of GRIL’s interest in each such Asset, as the GRIL Guidelines may be amended from time to time by the Board of GRIL and provided in writing to Investment Advisor or DME.  

For the avoidance of doubt, the Parties hereby acknowledge and agree that (x) the Greenlight Re Guidelines do not apply to any Assets in which Greenlight Re does not have an interest, and (y) the GRIL Guidelines do not apply to any Assets in which GRIL does not have an interest.  Investment Advisor shall not, except as otherwise approved by Greenlight Re or GRIL in writing, effect any investment transactions for the accounts of such Participant that are inconsistent with the Guidelines applicable to such Participant or other investment restrictions from time to time imposed by applicable regulation (as determined in good faith by the applicable Board) or adopted by the applicable Board; provided that such Guidelines and investment restrictions are communicated in writing to Investment Advisor or DME.  Investment Advisor may designate certain investments as Designated Securities in order to comply with the applicable Guidelines and investment restrictions.

2.    Fees and Expenses.

Investment Advisor shall be entitled to fees and to reimbursement of expenses in accordance with the Fee Schedule annexed hereto.

3.    Other Activities and Investments.

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	(a)
	Investment Advisor is not required to devote its full time to its duties under this Agreement, but must devote such of its time to such duties as it, in its discretion exercised in good faith, determines to be necessary to conduct the affairs contemplated by this Agreement.  

		
	(b) 
	This Agreement shall not restrict in any way the ability of Investment Advisor or any of its Affiliates to engage in any other business or investment activities.  It is expressly understood that Investment Advisor and its Affiliates may effect investment transactions for their own account and for Managed Accounts which may or may not be affiliated with any Participant, and the Venture and the Participants further understand and agree that nothing herein shall restrict the ability of Investment Advisor or its Affiliates to engage in any such transactions notwithstanding the fact that the Venture or Participants may have, by virtue of this Agreement or otherwise, or may take a position of any kind; provided, however, that Investment Advisor shall not, without the prior written consent of the applicable Board, purchase pursuant to this Agreement any Asset from, or sell pursuant to this Agreement, any Asset to, Investment Advisor or any Managed Account which Investment Advisor or any of its Affiliates is the investment advisor to or is otherwise a beneficial owner of; provided further, however, that failure to obtain such prior written consent shall not be deemed a breach of this Agreement if the applicable Board ratifies such purchase or sale after the fact.  Notwithstanding the foregoing, Investment Advisor may cause the Venture and Managed Accounts that invest in parallel therewith to enter into book account trades in the ordinary course of business transferring portions of investments among the Venture and all such Managed Accounts in order to reflect changes in the size of the Venture relative to the size of such Managed Accounts without the need for consent or ratification by the Board of any such trades. 

 
		
	(c)
	It is understood that when Investment Advisor determines that it would be appropriate for the Venture and one or more of Investment Advisor’s (or its Affiliates’) other Managed Accounts to participate in an investment opportunity, Investment Advisor will seek to execute orders for, or otherwise allocate such opportunities to, the Venture and such Managed Accounts on an equitable basis.  In such situations, Investment Advisor may place orders for the Venture and each Managed Account simultaneously and if all such orders are not filled at the same price, Investment Advisor may cause the Venture and each Managed Account to pay or receive the average of the prices at which such orders were filled for the Venture and all other Managed Accounts.  If all such orders cannot be fully executed under prevailing market conditions, Investment Advisor may allocate among the Venture and the Managed Accounts the securities traded in a manner which Investment Advisor considers in its reasonable discretion equitable, taking into account the size of the order placed for the Venture and each such Managed Account as well as any other factors which Investment Advisor deems relevant.  However, Investment Advisor is not obligated to devote any specific amount of time to its duties under this Agreement and is not required to accord exclusivity or priority to the Venture or the Participants in the event of limited investment 

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opportunities arising from the application of speculative position limits or other factors.

4.    Account and Other Information.

Investment Advisor shall furnish to DME such information concerning activities undertaken for the Venture’s account pursuant to this Agreement as may reasonably be required in order for DME to comply with its obligations under Section 7.1 of the Venture Agreement.  

5.    Scope of Liability.

The Venture and each Participant agrees that none of Investment Advisor, the general partner of Investment Advisor, or their respective members, partners, managers, directors, officers, employees and agents, and any person or entity who controls Investment Advisor or its general partner (each such person or entity being a “Covered Person”) shall be liable to the Venture or to any of the Participants or their shareholders for any liabilities, obligations, losses, costs, damages, expenses, claims, judgments and reasonable attorney’s fees and expenses (collectively, “Losses”) occasioned by any act or omission of any Covered Person in connection with the performance of such Covered Person’s services hereunder, except that Investment Advisor shall be liable to the Participants:  (a) for any misstatement or omission of material fact contained in a filing made by or on behalf of a Participant under the United States Securities and Exchange Act of 1934 or other federal law or other public disclosure in so far as such losses, damages, expenses or claims arise out of or are based upon any written information provided by such Covered Person regarding the Participants or the Venture expressly for use in such filing or other public disclosure, to the extent (and only to the extent) that such misstatement or omission of a material fact contained in such filing occurs in reliance upon and in conformity with the written information furnished by the Covered Person; (b) for acts or omissions by it which constitute gross negligence, willful misconduct or reckless disregard of Investment Advisor’s obligations under this Agreement; or (c) for breaches of the applicable Guidelines by Investment Advisor which are not cured within 15 days of the earlier of (i) the date on which Investment Advisor becomes aware of such breach, and (ii) the date on which Investment Advisor receives a written notice of such breach from a Participant or an authorized representative of a Participant, in each case as finally determined by a court having proper jurisdiction and after all appeals are resolved or exhausted.

6.    Indemnification.

		
	(a)
	The Venture, and each Participant, to the extent of its interest in the Assets only, shall indemnify and hold harmless each Covered Person from and against any Losses arising out of any claim asserted or threatened to be asserted in connection with any matter arising out of or in connection with this Agreement or the Venture’s business or affairs; provided, however, that no Covered Person shall be entitled to any such indemnification with respect to any expense, loss, liability or 

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damage which was caused by (i) any misstatement or omission of material fact contained in a filing made by or on behalf of a Participant under the United States Securities and Exchange Act of 1934 or other federal law or other public disclosure in so far as such losses, damages, expenses or claims arise out of or are based upon any written information provided by such Covered Person regarding the Participants or the Venture expressly for use in such filing or other public disclosure, to the extent (and only to the extent) that such misstatement or omission of a material fact contained in such filing occurs in reliance upon and in conformity with the written information furnished by the Covered Person, (ii) any Covered Person’s gross negligence, willful misconduct or reckless disregard of any of the its obligations under this Agreement, or (iii) for breaches of the applicable Guidelines by Investment Advisor in connection with its actions under this Agreement which breaches are not cured within 15 days of the earlier of (x) the date on which Investment Advisor becomes aware of such breach, and (y) the date on which Investment Advisor receives a written notice of such breach from a Participant.  The Venture shall advance to any Covered Person the reasonable costs and expenses of investigating and/or defending such claim subject to receiving a written undertaking from the Covered Person to repay such amounts if and to the extent of any subsequent determination by a court or other tribunal of competent jurisdiction that the Covered Person was not entitled to indemnification hereunder.  Notwithstanding the foregoing, no Participant shall be liable hereunder for any settlement of any action or claim effected without its consent thereto, which will not be unreasonably withheld.

		
	(b)
	All transactions effected pursuant to this Agreement by Investment Advisor shall be for the Participants’ accounts and risk.  Investment Advisor has not made and makes no guarantee whatsoever as to the success or profitability of Investment Advisor’s trading methods and strategies, and the Participants each acknowledge that it has received no such guarantee from Investment Advisor or any Covered Person, and has not entered into this Agreement in consideration of or in reliance upon any such guarantee or similar representation from Investment Advisor or any Covered Person.

		
	(c)
	Investment Advisor shall indemnify and hold harmless the Venture and each of the Participants against any Losses which were caused by:  (i) any misstatement or omission of material fact contained in a filing made by or on behalf of a Participant under the United States Securities and Exchange Act of 1934 or other federal law or other public disclosure in so far as such losses, damages, expenses or claims arise out of or are based upon any written information provided by Investment Advisor regarding the Participants or the Venture expressly for use in such filing or other public disclosure, to the extent (and only to the extent) that such misstatement or omission of a material fact contained in such filing occurs in reliance upon and in conformity with the written information furnished by Investment Advisor; (ii) Investment Advisor’s fraud, gross negligence, willful misconduct or reckless disregard of any of Investment Advisor’s obligations under this Agreement; (iii) for breaches of the applicable Guidelines by 

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Investment Advisor in connection with its duties under this Agreement which breaches are not cured within 15 days of the earlier of (x) the date on which Investment Advisor becomes aware of such breach, and (y) the date on which Investment Advisor receives a notice of such breach from a Participant.

		
	(d)
	The amount which any indemnifying party is required to pay to, or for the benefit of, an indemnified person under this Section 6 will be reduced (including, without limitation, retroactively) by any insurance proceeds which are actually paid by, or on behalf of, the indemnified party in reduction of the related Losses. 

		
	(e)
	If the indemnity provided for in this Section 6 and to which a Covered Person is otherwise entitled is unavailable to such Covered Person in respect of any Losses referred to therein, then the Venture, and each Participant, to the extent of its interest in the Assets only, in lieu of indemnifying such Covered Person, shall contribute to the amount paid or payable by such Covered Person as a result of such Losses in the proportion the total capital of the Participants in the Venture (exclusive of the balance in the Covered Person’s Capital Account (or the Capital Account of DME if the Covered Person is not DME)) bears to the total capital of the Venture (including the balance in Covered Person’s Capital Account (or the Capital Account of DME if the Covered Person is not DME), which contribution shall be treated as an expense of the Venture calculated as if the DME’s Capital Account balance was equal to zero.

7.     Fiduciary Duties; Discretion

		
	(a) 
	To the extent that, at law or in equity, a Covered Person has duties (including fiduciary duties) and liabilities relating thereto to the Venture or to any Participant, such Covered Person acting under this Agreement is not liable to the Venture or to any Participant for its good faith reliance on the provisions of this Agreement.  The provisions of this Agreement, to the extent that they restrict the duties and liabilities of a Covered Person otherwise existing at law or in equity, are agreed by the parties hereto to replace such other duties and liabilities of such Covered Person.

		
	(b) 
	To the fullest extent permitted by law, unless otherwise expressly provided for herein, (i) whenever a conflict of interest exists or arises between Investment Advisor or any of its Affiliates, on the one hand, and the Venture or any of the other Participants on the other hand, or (ii) whenever this Agreement or any other agreement contemplated herein or therein provides that Investment Advisor must act in a manner which is, or provide terms which are, fair and reasonable, Investment Advisor must resolve such conflict of interest, take such action or provide such terms, considering in each case the relative interest of each party, including its own interest, to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interests, any customary or accepted industry practices, and any applicable generally accepted accounting practices or principles.  In the absence of bad faith by Investment Advisor, the resolution, 

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action or terms so made, taken or provided by Investment Advisor do not constitute a breach of this Agreement or any other agreement contemplated herein or of any duty or obligation of Investment Advisor at law or in equity or otherwise.

		
	(c) 
	To the fullest extent permitted by law, except as provided elsewhere in this Agreement, whenever in this Agreement a Person is permitted or required to make a decision (i) in its “sole discretion” or under a grant of similar authority or latitude, such Person is entitled to consider only such interests and factors as it desires, including its own interests, and has no duty or obligation to give any consideration to any interest of or factors affecting the Venture or the Participants, or (ii) in its “good faith” or under another express standard, then such Person acts under such express standard and is not subject to any other or different standards imposed by this Agreement or any other agreement contemplated herein or by relevant provisions of law or in equity or otherwise.

8.    Board of Directors Meetings.

At the request of a Participant and subject to reasonable prior notice, Investment Advisor shall endeavor to make one of Investment Advisor’s representatives available to attend the meetings of the Board of such Participant to report on Investment Advisor’s activities and on other matters pertaining to Investment Advisor’s engagement hereunder.

9.    Term; Termination; Renewal.

This Agreement has a term beginning on the date of this Agreement and expiring on the date on which the term of the Venture Agreement expires or terminates for any reason.  Upon any termination of this Agreement or upon a termination of the Venture Agreement for Greenlight Re Cause or GRIL Cause, the Investment Advisor will use all commercially reasonable efforts to follow the direction of the Greenlight Re Board or the GRIL Board, as applicable, with respect to the disposition of the applicable Assets necessary to satisfy Greenlight Re’s or GRIL’s withdrawal; provided, however, that neither the Investment Advisor or nor DME makes any guarantee that they can comply with such directions.

10.    Amendment; Modification; Waiver.

This Agreement may be amended, in whole or in part, with the written consent of the Investment Advisor and all of the Participants.

11.    Binding Effect; Assignment.

This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, but the rights and obligations hereunder shall not, except as otherwise expressly provided herein, be assignable, transferable or delegable without the written consent of the other party hereto and any attempted assignment, transfer or 

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delegation thereof without such consent shall be void.  The foregoing shall not prevent an assignment by Investment Advisor in connection with any transaction that does not result in a change of its actual control or management.

12.    Governing Law; Submission to Jurisdiction.

		
	(a)
	This Agreement shall be governed by and construed in accordance with the substantive laws of the State of New York which are applicable to contracts made and entirely to be performed therein, without regard to the place of performance hereunder.

		
	(b)
	Each party hereto submits to the jurisdiction of any state or federal court sitting in New York, New York in any action arising out of or relating to this Agreement and agrees that all claims in respect of any such action may be heard and determined in any such court.  Each party hereto agrees that a final judgment in any action so brought will be conclusive and may be enforced by action on the judgment or in any other manner provided at law or in equity.  Each party hereto waives any defense of inconvenient forum to the maintenance of any action so brought and waives any bond, surety, or other security that might be required of any other party with respect thereto.

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In witness whereof, the parties have executed this Agreement as of the day and year first above written.

THE VENTURE FORMED BY GREENLIGHT REINSURANCE, LTD., GREENLIGHT REINSURANCE IRELAND, LTD. AND DME ADVISORS, LLC

By: DME Advisors, LLC, authorized signatory
	
			
	By: /s/ Harry Brandler
	 
	By: /s/ Daniel Roitman

	Name: Harry Brandler
	 
	Name: Daniel Roitman

	Title: CFO
	 
	Title: COO

GREENLIGHT REINSURANCE, LTD.
	
			
	By: /s/ Barton Hedges
	 
	By: /s/ Tim Courtis

	Name: Barton Hedges
	 
	Name: Tim Courtis

	Title: CEO
	 
	Title: CFO

GREENLIGHT REINSURANCE IRELAND, LTD.
	
			
	By: /s/ Barton Hedges
	 
	By: /s/ Tim Courtis

	Name: Barton Hedges
	 
	Name: Tim Courtis

	Title: CEO
	 
	Title: CFO

DME ADVISORS, LLC
	
			
	By: /s/ Harry Brandler
	 
	By: /s/ Daniel Roitman

	Name: Harry Brandler
	 
	Name: Daniel Roitman

	Title: CFO
	 
	Title: COO

DME ADVISORS, LP
	
			
	By: /s/ Harry Brandler
	 
	By: /s/ Daniel Roitman

	Name: Harry Brandler
	 
	Name: Daniel Roitman

	Title: CFO
	 
	Title: COO

    

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FEE SCHEDULE

1.    Definitions

Capitalized terms used but not otherwise defined in this Fee Schedule shall have the meanings set forth in the Venture Agreement.  

2.    Management Fee

		
	(a)
	As of the first day of each month, the Management Fee for such month shall be debited against the Capital Account of each Participant (other than DME) and paid in cash to Investment Advisor.

		
	(b)
	All applicable Management Fee accrues from the Commencement Date with respect to each Participant and is payable monthly in advance on the first day of the month, based on the Capital Account balance of each such Participant as of the beginning of such month (or on the Commencement Date with respect to such Participant in the case of the first month of this Agreement).  If this Agreement is terminated in accordance with its terms as of a date other than the last day of a month, the Management Fee for the final month shall be prorated to the date of termination.  All payments of the Management Fee to Investment Advisor shall be made without any reduction, deduction or withholding for or on account of any tax (including without limitation, any value added tax), unless required by law.  If reduction, deduction or withholding of any tax (including without limitation, any value added tax) is required by law from any such payment, the sum payable shall be increased as necessary so that after making all required deductions and withholdings, Investment Advisor receives an amount equal to the amount that it would have received had no such deductions or withholdings been made.

(c)    The Venture shall pay all Management Fee to the order of Investment Advisor, via cash payment or wire transfer of immediately available funds.

		
	3.
	Expenses.

		
	(a)
	All expenses incurred directly in connection with transactions effected or positions held for the account of the Venture and its Participants (including, without limitation, custodial fees, brokerage commissions, research costs, market data fees, legal, consulting and auditing fees, interest on debit balances, withholding or transfer taxes) shall be paid or reimbursed by the Venture.  In addition, Investment Advisor shall be entitled to be paid or reimbursed for other out-of pocket expenses (other than its own salary, office rent and other customary general administrative, overhead costs and the costs of maintaining books and records pursuant to Section 7.4 of the Venture Agreement) incurred in the performance of its duties pursuant to this Agreement.  

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	(b)
	Investment Advisor shall be entitled to use “soft dollars” generated by investments to pay for certain of its own operating and overhead costs, including payment of all or a portion of its costs and expenses of operation to the extent that Investment Advisor, in its reasonable discretion, determines that any such costs and expenses are reasonably related to the investment decision-making process.  Use of “soft dollars” by Investment Advisor as described herein shall not constitute a breach by it of any fiduciary or other duty which Investment Advisor may be deemed to owe to the Venture or any Participant or any Affiliate thereof.

		
	(c)
	If Investment Advisor shall incur any of the expenses for the account or benefit of, or in connection with its activities or those of its Affiliates on behalf of, both the Venture and any Managed Account, Investment Advisor, as appropriate, will allocate such expense among the Venture and each such Managed Account in proportion to the size of the investment made by each of the Venture and each Managed Account in the activity or entity to which the expense relates, or in such other manner as Investment Advisor in good faith considers fair and reasonable.

(d)    Except as provided in paragraphs (a), (b) and (c) of this Section 3, Investment Advisor shall provide its advisory services hereunder at its own expense.

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Exhibit 4.1

 

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

 

COMMON STOCK PURCHASE WARRANT

 

FLUOROPHARMA MEDICAL, INC.

 

	Warrant Shares: [_______] 	Initial Exercise Date: December 31, 2013

 

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

 

Section 1.                       Definitions.  Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase Agreement (the “Purchase Agreement”), dated December 31, 2013, among the Company and the purchasers signatory thereto.

 

Section 2.                       Exercise.

 

a) Exercise of Warrant.  Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile copy of the Notice of Exercise form annexed hereto and within five (5) Trading Days of the date said Notice of Exercise is delivered to the Company, the Company shall have received payment of the aggregate Exercise Price of the shares thereby purchased payable at the Holder’s election (i) by certified or official bank check or by wire transfer to an account designated by the Company, or (ii) by “cashless exercise” in accordance with the provisions of subsection (b) below. 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 five (5) Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased.  The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall use its commercially reasonable efforts to deliver any objection to any Notice of Exercise Form within two (2) Business Days 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.

  

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b) Cashless Exercise. Notwithstanding any provision herein to the contrary, if the Per Share Market Value (as defined below) of one share of Common Stock is greater than the Exercise Price (at the date of calculation as set forth below), in lieu of exercising this Warrant by payment of cash, the Holder may exercise this Warrant by a cashless exercise by surrender of this Warrant at the principal office of the Company together with the properly endorsed Notice of Exercise, in which event the Company shall issue to the Holder a number of shares of Common Stock computed using the following formula:

 

X = Y - (A)(Y)

                  B

 

Where X = the number of Warrant Shares to be issued to the Holder.

 

Y = the number of Warrant Shares purchasable upon exercise of all of the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised.

 

A = the Exercise Price.

 

B = the Per Share Market Value of one share of Common Stock.

 

For purposes hereof, “Per Share Market Value” means on any particular date (a) the last closing bid price per share of the Common Stock on such date on the OTC Bulletin Board or another registered national stock exchange on which the Common Stock is then listed, or if there is no such price on such date, then the closing bid price on such exchange or quotation system on the date nearest preceding such date, or (b) if the Common Stock is not listed then on the OTC Bulletin Board or any registered national stock exchange, the last closing bid price for a share of Common Stock in the over the counter market, as reported by the OTC Bulletin Board or by Pink OTC Markets Inc. or similar organization or agency succeeding to its functions of reporting prices) at the close of business on such date, or (c) if the Common Stock is not then reported by the OTC Bulletin Board or by Pink OTC Markets Inc. (or similar organization or agency succeeding to its functions of reporting prices), then the average of the “Pink Sheet” quotes for the five (5) Trading Days preceding such date of determination, or (d) if the Common Stock is not then publicly traded the fair market value of a share of Common Stock as determined by the Company’s board of directors.

 

c) Exercise Price.  The exercise price per share of the Common Stock under this Warrant shall be $0.83, subject to adjustment hereunder (the “Exercise Price”).

 

d) Mechanics of Exercise.

 

i. Delivery of Certificates Upon Exercise.  Certificates for shares purchased hereunder shall be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s prime broker with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by the Holder and in connection with such issuance or resale such Warrant shares are sold by the Holder, and otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise by the date that is five (5) Trading Days after the latest of (A) the delivery to the Company of the Notice of Exercise, (B) surrender of this Warrant (if required), and (C) payment of the aggregate Exercise Price as set forth above (such date, the “Warrant Share Delivery Date”).The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised, with payment to the Company of the Exercise Price and all taxes required to be paid by the Holder, if any, pursuant to Section 2(d)(vi) prior to the issuance of such Warrant Shares, having been paid.

  

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ii. Delivery of New Warrants Upon Exercise.  If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to 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 a certificate or the certificates representing the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.

 

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

 

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

 

vi. Charges, Taxes and Expenses.  The Company shall pay any and all issue and other taxes, excluding federal, state or local income taxes, that may be payable in respect of any issue or delivery of the Warrant Shares upon exercise of this Warrant; provided, however, that the Company shall not be obligated to pay any transfer taxes resulting from any transfer requested by any holder in connection with any such exercise.

  

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

 

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

  

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Section 3.                       Certain Adjustments.

 

a) Adjustments for Stock Splits, Combinations, Certain Dividends and Distributions.  If the Company shall, at any time or from time to time after the Initial Exercise Date, effect a split of the outstanding Common Stock (or any other subdivision of its shares of Common Stock into a larger number of shares of Common Stock), combine the outstanding shares of Common Stock into a smaller number of shares of Common Stock, or make or issue or set a record date for the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in shares of Common Stock, then, in each event (i) the number of shares of Common Stock for which this Warrant shall be exercisable immediately after the occurrence of any such event shall be adjusted to equal the number of shares of Common Stock that a record holder of the same number of shares of Common Stock for which this Warrant is exercisable immediately prior to the occurrence of such event would own or be entitled to receive after the happening of such event, and (ii) the Exercise Price then in effect shall be adjusted to equal (A) the Exercise Price then in effect multiplied by the number of shares of Common Stock for which this Warrant is exercisable immediately prior to the adjustment divided by (B) the number of shares of Common Stock for which this Warrant is exercisable immediately after such adjustment.

 

b) Adjustment for Other Dividends and Distributions. If the Company shall, at any time or from time to time after the Initial Exercise Date, make or issue or set a record date for the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in (i) cash, (ii) any evidences of indebtedness, or any other securities of the Company or any property of any nature whatsoever, other than, in each case, shares of Common Stock; or (iii) any warrants or other rights to subscribe for or purchase any evidences of indebtedness, or any other securities of the Company or any property of any nature whatsoever, other than, in each case, shares of Common Stock, then, and in each event, (A) the number of shares of Common Stock for which this Warrant shall be exercisable shall be adjusted to equal the product of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such adjustment multiplied by a fraction (1) the numerator of which shall be the last closing bid price per share of the Common Stock at the date of taking such record and (2) the denominator of which shall be such last closing bid price per share of the Common Stock minus the amount allocable to one share of Common Stock of any such cash so distributable and of the fair value (as determined in good faith by the Board) of any and all such evidences of indebtedness, shares of stock, other securities or property or warrants or other subscription or purchase rights so distributable, and (B) the Exercise Price then in effect shall be adjusted to equal (1) the Exercise Price then in effect multiplied by the number of shares of Common Stock for which this Warrant is exercisable immediately prior to the adjustment divided by (2) the number of shares of Common Stock for which this Warrant is exercisable immediately after such adjustment. A reclassification of the Common Stock (other than a change in par value, or from par value to no par value or from no par value to par value) into shares of Common Stock and shares of any other class of stock shall be deemed a distribution by the Company to the holders of its Common Stock of such shares of such other class of stock within the meaning of this Section 3(b) and, if the outstanding shares of Common Stock shall be changed into a larger or smaller number of shares of Common Stock as a part of such reclassification, such change shall be deemed a subdivision or combination, as the case may be, of the outstanding shares of Common Stock within the meaning of Section 3(a).

 

c) Adjustments for Reclassification, Exchange or Substitution. If the Common Stock for which this Warrant is exercisable at any time or from time to time after the Initial Exercise Date shall be changed to the same or different number of shares of any class or classes of stock, whether by reclassification, exchange, substitution or otherwise (other than by way of a stock split or combination of shares or stock dividends provided for in Section 3(a), Section 3(b), or a reorganization, merger, consolidation, or sale of assets provided for in Section 3(d)), then, and in each event, an appropriate revision to the Exercise Price shall be made and provisions shall be made (by adjustments of the Exercise Price or otherwise) so that, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, in lieu of Warrant Stock, the kind and amount of shares of stock and other securities receivable upon reclassification, exchange, substitution or other change, by holders of the number of shares of Common Stock for which this Warrant was exercisable immediately prior to such reclassification, exchange, substitution or other change, all subject to further adjustment as provided herein.

  

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d) Adjustments for Reorganization, Merger, Consolidation or Sales of Assets. If at any time or from time to time after the Initial Exercise Date there shall be a capital reorganization of the Company (other than by way of a stock split or combination of shares or stock dividends or distributions provided for in Section 3(a), and Section 3(b), or a reclassification, exchange or substitution of shares provided for in Section 3(c)), or a merger or consolidation of the Company with or into another corporation, or the sale of all or substantially all of the Company’s properties or assets to any other person (an “Organic Change”), then as a part of such Organic Change an appropriate revision to the Exercise Price shall be made if necessary and provision shall be made if necessary (by adjustments of the Exercise Price or otherwise) so that, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, in lieu of Warrant Stock, the kind and amount of shares of stock and other securities or property of the Company or any successor corporation resulting from the Organic Change. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 3(d) with respect to the rights of the Holder after the Organic Change to the end that the provisions of this Section 3(d) (including any adjustment in the Exercise Price then in effect and the number of shares of stock or other securities deliverable upon exercise of this Warrant) shall be applied after that event in as nearly an equivalent manner as may be practicable.

 

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

 

f) Notice to Holder.

 

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

 

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

  

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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 4.1 of the Purchase Agreement, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer.  Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations reasonably requested in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled.  The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

 

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

 

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

 

Section 5.                       Miscellaneous.

 

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

  

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

 

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

 

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

 

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be reasonably 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 reasonably 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, reasonably 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 reasonably necessary from any public regulatory body or bodies having jurisdiction thereof.

 

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

 

f) Restrictions.  The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant will have restrictions upon resale imposed by state and federal securities laws.

  

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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 all rights hereunder terminate on the Termination Date.

 

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

 

i) Limitation of Liability.  No provision hereof, in the absence of any affirmative action by 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 prior written consent of the Company and the holders of a majority of the then outstanding warrants issued pursuant to the Purchase 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.

 

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(Signature Page Follows)

  

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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.

 

	 	
FLUOROPHARMA MEDICAL, INC.

 

By: ___________________________

    Name:  Johan M. (Thijs) Spoor

    Title:    CEO and President

  

-10-

  

 

NOTICE OF EXERCISE

 

To:           FLUOROPHARMA MEDICAL, 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) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:

 

___________________________

___________________________

___________________________

 

 

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

___________________________

___________________________

___________________________

 

 

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

 

(4) The undersigned intends that payment of the Exercise Price shall be made as (check one):

 

Cash Exercise                                                     

 

Cashless Exercise                                                     

 

If the Holder has elected a Cash Exercise, the Holder shall pay the sum of $________ by certified or official bank check (or via wire transfer) to the Company in accordance with the terms of the Warrant.

 

If the Holder has elected a Cashless Exercise, a certificate shall be issued to the Holder for the number of shares equal to the whole number portion of the product of the calculation set forth below, which is ___________. The Company shall pay a cash adjustment in respect of the fractional portion of the product of the calculation set forth below in an amount equal to the product of the fractional portion of such product and the Per Share Market Value on the date of exercise, which product is ____________.

 

X = Y - (A)(Y)

                 B

 

Where:

 

The number of shares of Common Stock to be issued to the Holder is (“X”).

 

The number of shares of Common Stock purchasable upon exercise of all of the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised is (“Y”).

 

The Exercise Price is (“A”).

 

The Per Share Market Value of one share of Common Stock is (“B”).

  

-11-

  

 

[SIGNATURE OF HOLDER]

 

Name of Investing Entity:                                                      

 

Signature of Authorized Signatory of Investing Entity:                                                             

 

Name of Authorized Signatory:                                                               

 

Title of Authorized Signatory:                                                               

 

Date:                                                                          

  

-12-

  

 

ASSIGNMENT FORM

 

(To assign the foregoing warrant, execute

 

this form and supply required information.

 

Do not use this form to exercise the warrant.)

 

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

                                                                                                                whose address is

_________________________________________________________________________.

_________________________________________________________________________

 

Dated: ,                                                                   

 

Holder’s Signature:                                              

 

Holder’s Address:                                                 

 

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

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