Document:

ex106-phunware2020master

                                                                    EXECUTION COPY                                   MASTER NETTING AGREEMENT                  MASTER NETTING AGREEMENT (the “Agreement”), dated as of July __. 2020, by           and  among Phunware,  Inc.,  a Delaware corporation  with  offices  located  at 7800  Shoal  Creek           Blvd, Suite 230-S, Austin, Texas 78757 (the “Company”) and the investor signatory hereto (the           “Investor”, and together with the Company, the “Parties” and each a “Party”).                  WHEREAS,   prior  to  the  date  hereof,  (i)  the  Parties  have  entered  into  that  certain           Securities Purchase Agreement, dated July 14. 2020, pursuant to which, among other things, the           Investor  shall,  among  other  things, acquire  a  senior  secured  convertible  note  (the  “Series  B           Note”) issued by the Company (the “Securities Purchase Agreement”), which is secured by a           first  priority  perfected  lien  in  the  Investor  Note  (as  defined  below)  and  (ii)  the  Parties  have           entered  into  that  certain Note  Purchase  Agreement,  dated July 14.  2020,  pursuant  to  which,           among other things, the Company shall acquire a certain secured promissory note (the “Investor           Note”) issued by the Investor (the “Note Purchase Agreement”), which is secured by certain           Eligible Assets (as defined in the Investor Note), as payment of the purchase price of the Series           B  Note  pursuant  to  the  Securities  Purchase  Agreement.   The  Note  Purchase  Agreement,  the           Investor Note, the Series B Note and the Securities Purchase Agreement are collectively referred           to herein as the “Underlying Agreements”;                 WHEREAS, each Party desires  to  provide in  this  Agreement for, among other things,           when  the  Parties  shall  be  required  to  Net  (as  defined  below) Obligations  (as  defined  below)           arising under the Underlying Agreements upon the occurrence of one or more Netting Events (as           defined below) and recover against the other Party under and across the Underlying Agreements           as  herein  specified  and  to  treat  this  Agreement  and  the  Underlying  Agreements  as  a  single           agreement for the purposes set forth herein and the Note Purchase Agreement and the Securities           Purchase  Agreement  each as  a  “securities  contract”  (11  U.S.C.  §  741),  or  other  similar           agreements; and                   WHEREAS, the Parties desire that the provisions of each Underlying Agreement remain           in  force  under  each  applicable  Underlying  Agreement  to  the  extent  such  provisions  are  not           expressly superseded or amended hereby.                  NOW THEREFORE, in consideration of the mutual agreements herein made and other           good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,           each Party agrees as follows:                  1.    Single Agreement.  This  Agreement  is  entered  into  in  reliance  on  the  Parties'           agreement that, for the purposes set forth herein, this Agreement and the Underlying Agreements           form  a  single  integrated  agreement  between  the  Parties,  and  the  Parties  would  not  otherwise           enter  into  this  Agreement  and  the  Underlying  Agreements.  The  Company  and  the  Investor           hereby acknowledge and agree (a) that the Note Purchase Agreement and the Securities Purchase           Agreement each are a “securities contract” as defined in 11 U.S.C. § 741 and that Investor shall           have all rights in respect of the Underlying Agreements as are set forth in 11 U.S.C. § 555 and 11           U.S.C. § 362(b)(6), and (b) that this Agreement is a “master netting agreement” as that term is           used in 11 U.S.C. § 362(b)(27) and 11 U.S.C. § 561 and is a “master agreement” as that term is           used in 11 U.S.C. § 362(b)(6) and that Investor shall have all rights in respect of this Agreement           (and  in  respect  of  the  Underlying  Agreements  as  incorporated  herein)  as  are  set  forth  in  11    Error! Unknown document property name. 

 

                     U.S.C. § 362(b)(27), 11 U.S.C. § 561, and 11 U.S.C. § 362(b)(6), including in respect of both the           foregoing  clause  (a)  and  the foregoing  clause  (b),  without  limitation,  all  rights  of  credit,           deduction, setoff, offset, recoupment, and netting (collectively, “Netting” or “Net”) as set forth           in this Agreement, the Investor Note and the Series B Note.                                  2.    Definitions.   Terms  capitalized herein  but  not  defined  herein  shall  have  the           meanings given to such terms in the Securities Purchase Agreement.  In the event of any conflict           or inconsistency between a term defined herein and in any of the Underlying Agreements, such           term  as  used  in  this Agreement  shall  govern  and  have  the  meaning  ascribed  to  it  in  this           Agreement for the purposes of this Agreement.  All references to “$” shall be to lawful currency           of the United States of America, unless otherwise specified.  All references to Sections, Exhibits,           and  other  provisions  are  to  Sections,  Exhibits  and  other  provisions  of  this  Agreement  unless           otherwise expressly stated.  The following terms used in this Agreement are defined as follows:                                   “Acceleration”  means  the  acceleration,  exercise  of  redemption  rights, required           redemption, exercise of prepayment rights or the occurrence of the Maturity Date (as defined in           the Series B Note or Investor Note, as applicable), in whole or in part, of the Series B Note or the           Investor  Note,  as  applicable,  in  accordance  with  this  Agreement  or  the  applicable  Underlying           Agreement.                  “Bankruptcy Code” means Title 11 of the U.S. Bankruptcy Code.                  “Default” means, as applicable, a Default (as defined in the Investor Note) or an Event of           Default (as defined in the Series B Note).                   “Netting Party” means the Party exercising the right to effect any Netting hereunder or           under the applicable Underlying Agreement.                  “Other Party” means the Party other than the Netting Party.                  “Obligation” or “Obligations” means, with respect to a Party, each and every present or           future payment or performance obligation or liability of such Party under this Agreement or an           Underlying Agreement, whether fixed, matured, unmatured, liquidated, or unliquidated.                  “Remaining Investor Note Principal Amount” means, as of any time of determination,           the  aggregate  amount  of  Principal  (as  defined  in  the  Investor  Note)  outstanding under  the           Investor Note as of such time of determination.                  “Unpaid Amounts” means, as of any date of determination, the Obligations owed by one           Party to the other under such Underlying Agreements that have not been paid as of the date of           determination, whether or not such amounts are then due and payable and without regard to the           fair market value of the Series B Note or the Investor Note at such time, as applicable.                    3.    Netting.                            (a)   Event of Default Netting.  At any time on or after the occurrence of any Event of           Default under the Series B Note,  regardless of whether the Holder has submitted an Event of           Default Redemption Notice (as defined in the Series B Note) and whether such Event of Default                                                 - 2 -  Error! Unknown document property name. 

 

                     (as  defined  in  the  Series  B  Note) has  been  subsequently cured,  the  Investor  may,  at  its  sole           discretion, by written notice to the Company, Net (each, an “Event of Default Netting”) all, or           any part, of the outstanding obligations under the Series B Note (and/or other Unpaid Amounts           (as  elected  by  the  Investor  in  such  written  notice)) by  the  cancellation  of such  portion  of  the           outstanding obligations under the Series B Note (and/or other Unpaid Amounts (as elected by the           Investor in such written notice)) as set forth in such written notice in exchange for the surrender           and concurrent  cancellation  of an equal amount  of Principal (as defined  in  the  Investor Note)           then  outstanding  under  the  Investor  Note (each,  an  “Event  of  Default  Netting  Principal           Amount”).  Upon any Event of Default Netting, any accrued and unpaid Interest (as defined in           the Investor Note) then  outstanding  under  the  Investor  Note with  respect  to  such Event  of           Default  Netting  Principal  Amount being  satisfied  in  such  Event  of  Default  Netting  shall  be           automatically  cancelled  as  of  the  date  of  such  Event  of  Default  Netting and,  thereafter,  such           Event of Default Netting Principal Amount of the Investor Note (together with any accrued and           unpaid Interest (as defined in the Investor Note) thereon then outstanding) shall be deemed to be           paid in full.  Each Event of Default Netting shall be effective upon the date the Investor delivers           notice to the Company of the Investor’s election to effect such Event of Default Netting.                  (b)   Automatic Netting at Redemption Date.  With respect to any redemption of all, or           any part, of the Series B Note, solely to the extent such portion of the Conversion Amount (as           defined  in  the  Series  B  Note)  subject  to  such  redemption  includes  Restricted  Principal (as           defined  in  the  Series  B  Note) (such  aggregate  amount  of  Restricted  Principal,  each,  a           “Redemption  Restricted  Amount”),  on the  applicable  Redemption  Date  (as  defined  in  the           Series B Note), such portion of the outstanding obligations under the Series B Note equal to such           Redemption Restricted Amount shall automatically Net (each, a “Redemption Netting”) by the           cancellation  of  the  Redemption  Restricted  Amount  of  the  outstanding  obligations  under  the           Series B Note in exchange for the surrender and concurrent cancellation of such portion of the           Investor  Note with  an  amount  of  aggregate  Principal (as  defined  in  the  Investor  Note)           outstanding  under  the  Investor  Note equal  to  such  Redemption  Restricted  Amount (each  a           “Redemption Netting Principal Amount”) and any related Restricted OID (as defined in the           Series B Note) shall be automatically cancelled in connection therewith.  Upon any Redemption           Netting, any accrued and unpaid Interest (as defined in the Investor Note) then outstanding under           the Investor Note with respect to such Redemption Netting Principal Amount being cancelled in           such  Redemption  Netting  shall  be  automatically  cancelled  as  of  the  date  of  such  Redemption           Netting  and,  thereafter,  such  Redemption  Netting  Principal  Amount  of  the Investor  Note           (together  with  any  accrued  and  unpaid  Interest (as  defined  in  the  Investor  Note) thereon  then           outstanding) shall be deemed to be paid in full.  For the avoidance of doubt, if prior to the date of           the  applicable  Redemption  Netting  all,  or  any  portion,  of  a  Redemption  Restricted  Amount           becomes  Unrestricted  Principal  (as  defined  in  the  Series  B  Note) or,  with  respect  to  an           Installment Amount (as defined in the Series B Note), subject to a Deferral (as defined in the           Series B Note) or a waiver of an Equity Conditions Failure or such other event occurs whereafter           such  portion  of  the  Redemption  Restricted  Amount  is  not  required  to  be  redeemed  on  the           Redemption Date in accordance with the terms of the Series B Note (as amended, modified or           waived on or prior to such date)(each a “Reversed Redemption Restricted Amount”), solely           with respect to such Redemption Date, no Redemption Netting shall occur with respect to such           Reversed Redemption Restricted Amount and any related Restricted OID shall not be cancelled           in connection therewith.                                                  - 3 -  Error! Unknown document property name. 

 

                           (c)   Automatic  Netting  Upon  any  Bankruptcy  Event  of  Default.  Upon  any           Bankruptcy Event of Default under the Series B Note, the Remaining Principal Amount as of           such time of determination, such portion of the outstanding obligations under the Series B Note           equal  to  the  Remaining  Investor  Note  Principal  Amount  shall  automatically  Net  by  the           cancellation of such portion of the outstanding obligations under the Series B Note in exchange           for the surrender and concurrent cancellation of the entire Investor Note (each, a “Bankruptcy           Event  of  Default  Netting”) and  any  related  Restricted  OID  shall  be  cancelled  in  connection           therewith.  For  the  avoidance  of  doubt,  upon  any  Bankruptcy  Event  of  Default  Netting, all           accrued and unpaid Interest (as defined in the Investor Note) then outstanding under the Investor           Note shall be automatically cancelled as of the date of such Bankruptcy Event of Default Netting           and, thereafter, the Investor Note shall be deemed to be paid in full and shall be null and void.            Each  Bankruptcy  Event  of  Default  Netting  shall  be  effective  upon  the  date  of  the  earliest           occurrence of a Bankruptcy Event (as defined in the Series B Note) under the Series B Note.                  (d)   Automatic Netting  Upon Prohibited Transfers of the Series B Note.   If  for any           reason, the Series B Note or any interest in the Investor Note is pledged, assigned or transferred           to any Person other than the Company without the prior written consent of the Investor, whether           by contract, operation of law, court order or otherwise (each, a “Prohibited Transfer”), such           portion of the outstanding obligations under the Series B Note equal to 75% of the remaining           Restricted Principal (as defined in the Series B Note) (together with any related Restricted OID           with respect thereto) then outstanding under the Series B Note (with the remaining 25% of the           Restricted Principal (together with any related Restricted OID with respect thereto) of the Series           B  Note  automatically  becoming Unrestricted Principal (as  defined  in  the  Series  B  Note)           thereunder) in exchange for the surrender and concurrent cancellation of the entire Investor Note.            For the avoidance of doubt,  upon any Prohibited Transfer, all accrued and unpaid  Interest  (as           defined  in  the  Investor  Note)  then  outstanding  under  the  Investor  Note shall  be  automatically           cancelled as of the date of such Prohibited Transfer and, thereafter, the Investor Note shall be           deemed to be paid in full and shall be null and void.                  (e)   Automatic Default  Netting.  Upon the  occurrence  of  any  Investor  Note           Acceleration (as defined in the Investor Note), such portion of the outstanding obligations under           the Series B Note equal to the Remaining Investor Note Principal Amount shall automatically           Net  by  the  cancellation  of  such  portion  of  the Restricted  Principal under  the  Series  B  Note           (together with any related Restricted OID with respect thereto) in exchange for the surrender and           concurrent cancellation of the entire Investor Note (each, a “Default Netting”, and together with           the Bankruptcy  Event  of  Default  Netting, Redemption  Netting  and  Event  of  Default  Netting,           collectively,  the  “Netting  Events”).   Each  Default  Netting  shall  occur  on the  date  of  such           Investor Note Acceleration.  For the avoidance of doubt, upon any Default Netting, all accrued           and unpaid Interest (as defined in the Investor Note) then outstanding under the Investor Note           shall  be  automatically  cancelled  as  of  the  date  of  such  Default  Netting and,  thereafter,  the           Investor Note shall be deemed to be paid in full and shall be null and void.                  (f)   Miscellaneous.                                   (i)   If  an  Unpaid  Amount  is  unascertainable,  the  Investor  may, acting  in  a                 commercially reasonable manner, estimate the Unpaid Amount thereof and Net in respect                 of  the  estimate, subject  to  accounting  to  the  Company  when  the  Unpaid  Amount  is                                                 - 4 -  Error! Unknown document property name. 

 

                           ascertained.  For the avoidance of doubt, except with the written consent of the Investor                 to  a  different  application  of  Netting  against  any  Unpaid  Amounts,  if  Unpaid  Amounts                 exist  with  respect  to  both  the  Series  B  Notes  and  other  Underlying  Agreements,  the                 Netting  shall  be  applied  first  to  obligations  under  such  other  Underlying  Agreements                 (until such obligations are satisfied in full) and thereafter to obligations under the Series                 B Notes.                                              (ii)  All Netting provisions of the Investor Note, including without limitation                 the provisions set forth in Section 7 of the Investor Note, are hereby incorporated in this                 Agreement and made a part hereof as if such provisions were set forth herein.                                              (iii) The  right  of  Netting  provided  for  in  this  Section  3  is  in addition  to  but                 without duplication of, and not in limitation of, any other right or remedy available to the                 Parties, whether arising under this Agreement or any Underlying Agreement, or any other                 agreement, under applicable law, in equity, or otherwise.  The Netting provided in this                 Section 3 shall be permitted without regard to fair market value of the Series B Note or                 the  Investor  Note  at  any  given  time  of  determination  and  without  giving  effect  to                 equitable  subordination  or  any  other  condition  effecting the  rank  or  priority  of  any                 Obligations under any Underlying Agreement.                                              (iv)  The  Netting  Party  shall  give  the  Other  Party  notice  of  any  Netting                 pursuant to this Section 3, as soon as practicable thereafter, provided that failure to give                 such notice shall not affect the validity of the Netting.                                  4.    Representations  and Warranties.  As  of  the  later  of  (x)  the  Closing  Date  (as           defined in the Securities Purchase Agreement) and (y) the Closing Date (as defined in the Note           Purchase Agreement) (such later date, the “Effective Date”), each Party represents and warrants           to the other Party that (i) it is duly organized, validly existing, and in good standing under the           laws  of  the  jurisdiction  of  its  incorporation,  formation,  or  organization  and  any  other           jurisdictions where its activities so require, has all necessary power and authority to execute and           deliver  this  Agreement  and  to  perform  its  obligations  hereunder  and  has  taken  all  necessary           actions  to  authorize  such  execution,  delivery,  and  performance;  (ii)  the  person signing  this           Agreement on its behalf was duly authorized to do so on its behalf on the Effective Date; (iii)           this Agreement and the Underlying Agreements to which it is a party constitute its legal, valid,           and  binding  obligations,  enforceable  against  it  in  accordance  with  their  terms,  subject  to           applicable bankruptcy, reorganization, insolvency, conservatorship, receivership, moratorium, or           other  similar  laws  affecting  creditors'  rights  generally  and  subject,  as  to  enforceability,  to           equitable  principles  of  general  application  (regardless  of  whether  enforcement  is  sought  in  a           proceeding  in  equity  or  at  law);  (iv)  its  execution  and  delivery  of  this  Agreement  does  not           contravene,  or  constitute  a  default  under,  any  provision  of  applicable  law  or  regulation           (including,  without  limitation,  any  order,  decree,  judgment,  injunction,  or  other  judicial  or           governmental  restriction  applicable  to  such  Party  or  any  portion  of  its  assets)  or  of  the           organizational  documents  of  such  Party,  or  of  any  material  agreement,  judgment,  injunction,           order, decree or other instrument binding upon such Party or result in the creation or imposition           of any lien on any asset of such Party other than as provided herein; and (v) the jurisdiction of                                                  - 5 -  Error! Unknown document property name. 

 

                     the Company’s incorporation, formation, or organization and the location of its chief executive           office are correctly set forth in the Underlying Agreements.                                  5.    Interpretation.   The  Parties  intend  that  (a)  this  Agreement  constitute  and  be           deemed  to  be  a  “master  netting  agreement”  (or  any  substantially similar  term)  and  that  the           Parties  be  deemed  to  be  “master  netting  agreement  participants”  (or  any  substantially  similar           term) within the meaning of, and as such terms are used in, any law, rule, regulation, statute, or           order  applicable  to  the  Parties'  rights  herein,  whether  now  or  hereafter  enacted  or  made           applicable, including, but not limited to, the Bankruptcy Code at 11 U.S.C. §§ 101(25), 101(47),           101(53B), 741(7) and 761(4); and (b) all Netting effectuated pursuant to this Agreement or any           Underlying Agreement, be governed by the following Bankruptcy Code sections in the event of           the bankruptcy of either Party:  (i) Sections  555, 556, 559  and 560;  (ii)  Section 362(b)(6), (7)           and/or (17); (iii) Sections 546(e)-(g); and (iv) Section 548(d)(2).  The Parties also agree that such           Netting  contemplated  hereunder  or  under  any  Underlying  Agreement  arise  under  “securities           contracts”  and  constitute  “settlement  payments”  as  set  forth  in  Sections  101  and  741  of  the           Bankruptcy  Code.   The  Parties  further  intend  that  the  Underlying  Agreements  constitute           “securities contracts” as such term is defined in the Bankruptcy Code.  Moreover, with respect to           any Underlying Agreement, each Party thereto constitutes a “stockbroker”, “financial institution”           or  “securities  clearing agency”  within  the  meaning  of,  and  as  such  terms  are  used  in  the           Bankruptcy  Code  and/or  any  law,  rule,  regulation,  statute,  or  order  applicable  to  the  Parties'           rights herein, whether now or hereafter enacted or made applicable.                                  6.    Conflicts  and  Inconsistencies.  In  the  event  of  any  conflict  or  inconsistency           between  any  provision  of  this  Agreement  and  any  provision  of  any  Underlying  Agreement           concerning  the  matters  set  forth  in  this  Agreement,  the  provisions  of  this  Agreement  shall           govern.                                  7.    Miscellaneous.                            (a)   Governing  Law;  Jurisdiction;  Jury  Trial.  All  questions  concerning  the           construction, validity, enforcement and interpretation of this Agreement shall be governed by the           internal laws of the State of New York, without giving effect to any choice of law or conflict of           law provision or rule (whether of the State of New York or any other jurisdictions) that would           cause the application of the laws of any jurisdictions other than the State of New York. Each           party  hereby  irrevocably  submits  to  the  exclusive  jurisdiction  of  the  state  and  federal  courts           sitting  in  The  City  of  New  York,  Borough  of  Manhattan,  for  the  adjudication  of  any  dispute           hereunder or in connection herewith or with any transaction contemplated hereby or discussed           herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding,           any claim that it is not  personally subject to the jurisdiction of any such court, that such suit,           action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or           proceeding is improper. Each party hereby irrevocably waives personal service of process and           consents to process being served in any such suit, action or proceeding by mailing a copy thereof           to  such  party  at  the  address  for  such  notices  to  it  under  this  Agreement  and  agrees  that  such           service  shall  constitute  good  and  sufficient  service  of  process  and  notice  thereof.   Nothing           contained herein shall be deemed to limit in any way any right to serve process in any manner           permitted  by  law.  EACH  PARTY  HEREBY  IRREVOCABLY  WAIVES  ANY  RIGHT  IT                                                  - 6 -  Error! Unknown document property name. 

 

                     MAY  HAVE  TO,  AND  AGREES  NOT  TO  REQUEST,  A  JURY  TRIAL  FOR  THE           ADJUDICATION  OF  ANY  DISPUTE  HEREUNDER  OR  IN  CONNECTION  WITH  OR           ARISING  OUT  OF  THIS  AGREEMENT  OR  ANY  TRANSACTION  CONTEMPLATED           HEREBY.                   (b)   Counterparts.  This  Agreement  may  be  executed  in  two  or  more  identical           counterparts,  all  of  which  shall  be  considered  one  and  the  same  agreement  and  shall  become           effective when counterparts have been signed by each party and delivered to the other party. In           the event that any signature is delivered by facsimile transmission or by an e-mail which contains           a portable document format (.pdf) file of an executed signature page, such signature page shall           create a valid and binding obligation of the party executing (or on whose behalf such signature is           executed) with the same force and effect as if such signature page were an original thereof.                  (c)   Headings;  Gender.  The  headings  of  this  Agreement  are  for  convenience  of           reference and shall not form part of, or affect the interpretation of, this Agreement. Unless the           context  clearly  indicates  otherwise,  each  pronoun  herein  shall  be  deemed  to  include  the           masculine,  feminine,  neuter,  singular  and  plural  forms  thereof.  The  terms  “including,”           “includes,” “include” and words of like import shall be construed broadly as if followed by the           words “without limitation.”  The terms “herein,” “hereunder,” “hereof” and words of like import           refer to this entire Agreement instead of just the provision in which they are found.                  (d)   Severability.   If  any  provision  of  this  Agreement  shall  be  invalid  or           unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity           or  enforceability  of  the  remainder  of  this  Agreement  in  that  jurisdiction  or  the  validity  or           enforceability of any provision of this Agreement in any other jurisdiction.  The Parties intend           that this Agreement be construed to give full effect to the intent of the Parties with respect to the           Netting provisions contained herein.  If any portion of the Netting contemplated herein shall be           in any respect deemed or held to be invalid, illegal, or unenforceable, all other provisions of this           Agreement shall survive.                                    (e)   Amendments. No provision of this Agreement may be amended or waived other           than by an instrument in writing signed by the Company and the Investor.                  (f)   Notices.  Any  notices,  consents,  waivers  or  other  communications  required  or           permitted to be given under the terms of this Agreement shall be governed by the provisions of           Section 9(f) of the Securities Purchase Agreement.                  (g)   Successors and Assigns. This Agreement shall be binding upon and inure to the           benefit  of  the  parties  and  their  respective  successors  and  assigns.  No  party  may  assign  this           Agreement or any rights or obligations hereunder without the prior written consent of the other           party.                  (h)   No Third Party Beneficiaries. This Agreement is intended for the benefit of the           parties hereto and their respective permitted successors and assigns, and is not for the benefit of,           nor may any provision hereof be enforced by, any other Person.                  (i)   Survival. The representations, warranties, agreements and covenants shall survive                                                  - 7 -  Error! Unknown document property name. 

 

                     the Effective Date. The Investor shall be responsible only for its own representations, warranties,           agreements and covenants hereunder.                  (j)   Further Assurances. Each party shall do and perform, or cause to be done and           performed,  all  such  further  acts  and  things,  and  shall  execute  and  deliver  all  such  other           agreements, certificates, instruments and documents, as any other party may reasonably request           in  order  to  carry  out  the  intent  and  accomplish  the  purposes  of  this  Agreement  and  the           consummation of the transactions contemplated hereby.                  (k)   Construction.  The  language  used  in  this  Agreement  will  be  deemed  to  be  the           language chosen by the parties to express their mutual intent, and no rules of strict construction           will be applied against any party.                  (l)   No  Waiver.  A  failure  or  delay  in  exercising  any  right,  power,  or  privilege  in           respect of any Underlying Agreement or this Agreement will not be presumed to operate as a           waiver of that right, power, or privilege, and a single or partial exercise of any right, power, or           privilege  will  not  be  presumed  to  preclude  any  subsequent  or  further  exercise  of  that  right,           power, or privilege, or the exercise of any other right, power, or privilege.                  (m)   Term.  This  Agreement  shall  continue  in  effect  from  the  Effective  Date  until           terminated  by  agreement  of  the  Parties  or,  if  earlier,  such  time  as  no  Investor  Note  remains           outstanding.                                         [Signature Page Follows]                                                  - 8 -  Error! Unknown document property name. 

 

                                       IN WITNESS WHEREOF, the Investor and the Company have caused their respective           signature page to this Master Netting Agreement to be duly executed as of the date first written           above.                                                            COMPANY:                                                PHUNWARE, INC.                                                 By:                                                                                 Name:                                                     Title:                                                                   Error! Unknown document property name. 

 

                              IN  WITNESS  WHEREOF,   the  Investor  and  the  Company  have  caused  their           respective signature page to this Master Netting Agreement to be duly executed as of the           date first written above.                                                            INVESTORS:                                                ALTO OPPORTUNITY MASTER FUND, SPC -                                               SEGREGATED MASTER PORTFOLIO B                                                                                                By:                                                                                 Name:                                                    Title:                                                                                                                                         1               Error! Unknown document property name.ex107-phunware2020warran

                                                                                 NEITHER  THE  ISSUANCE    AND  SALE  OF  THE  SECURITIES  REPRESENTED      BY  THIS WARRANT    NOR THE SECURITIES     INTO WHICH THESE SECURITIES ARE  EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,  AS  AMENDED,  OR  APPLICABLE  STATE  SECURITIES  LAWS.   THE  SECURITIES  MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN  THE  ABSENCE  OF  (A)  AN  EFFECTIVE  REGISTRATION  STATEMENT  FOR  THE  SECURITIES  UNDER  THE   SECURITIES  ACT  OF  1933,  AS  AMENDED,  OR  (B)  AN  OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN  A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION  IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE  SOLD  PURSUANT  TO  RULE  144         OR  RULE  144A     UNDER  SAID  ACT.   NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN  CONNECTION  WITH  A  BONA  FIDE  MARGIN  ACCOUNT  OR  OTHER  LOAN  OR  FINANCING ARRANGEMENT SECURED BY THE SECURITIES.  THE NUMBER OF  SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT  MAY  BE  LESS  THAN  THE    AMOUNTS  SET  FORTH  ON  THE  FACE  HEREOF  PURSUANT TO SECTION 1(a) OF THIS WARRANT.                                  PHUNWARE, INC.                        WARRANT TO PURCHASE COMMON STOCK   Warrant No.:   Date of Issuance: July __, 2020 (“Issuance Date”)         Phunware, Inc., a Delaware corporation (the “Company”), hereby certifies that, for good  and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Alto  Opportunity Master Fund, SPC - Segregated Master Portfolio B, the registered holder hereof or its  permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchase from  the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant  to  Purchase  Common  Stock  (including  any  Warrants  to  Purchase  Common  Stock  issued  in  exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the  Issuance Date, but not after 11:59 p.m., New York time, on the Expiration Date (as defined below),  2,160,000 (subject  to  adjustment  as  provided  herein)  fully  paid  and  non-assessable  shares  of  Common Stock (as defined below) (the “Warrant Shares”, and such number of Warrant Shares,  the “Warrant Number”).  Except as otherwise defined herein, capitalized terms in this Warrant  shall have the meanings set forth in Section 19.  This Warrant is one of the Warrants to Purchase  Common  Stock  (the  “SPA  Warrants”)  issued  pursuant  to  Section 1 of  that certain  Securities  Purchase Agreement, dated as of July 14, 2020 (the “Subscription Date”), by and among the  Company and the investors (the “Buyers”) referred to therein, as amended from time to time (the  “Securities Purchase Agreement”).   1.    EXERCISE OF WARRANT.         (a)   Mechanics  of  Exercise.   Subject  to  the  terms  and  conditions  hereof  (including,  without limitation, the limitations set forth in Section 1(f)), this Warrant may be exercised by the  Holder on any day on or after the Issuance Date (an “Exercise Date”), in whole or in part, by     Error! Unknown document property name. 

 

    delivery (whether via facsimile or otherwise) of a written notice, in the form attached hereto as  Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant.  Within one  (1)  Trading  Day  following  an  exercise  of  this  Warrant  as  aforesaid,  the  Holder  shall  deliver  payment to the Company of an amount equal to the Exercise Price in effect on the date of such  exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised  (the “Aggregate Exercise Price”) in cash or via wire transfer of immediately available funds if  the  Holder  did  not  notify  the  Company  in  such  Exercise  Notice  that  such  exercise  was  made  pursuant to a Cashless Exercise (as defined in Section 1(d)).  The Holder shall not be required to  deliver the original of this Warrant in order to effect an exercise hereunder.  Execution and delivery  of an Exercise Notice with respect to less than all of the Warrant Shares shall have the same effect  as cancellation of the original of this Warrant and issuance of a new Warrant evidencing the right  to  purchase the  remaining number of Warrant  Shares.  Execution and delivery of an Exercise  Notice for all of the then-remaining Warrant Shares shall have the same effect as cancellation of  the original of this Warrant after delivery of the Warrant Shares in accordance with the terms  hereof.  On or before the first (1st) Trading Day following the date on which the Company has  received  an  Exercise  Notice,  the  Company  shall  transmit  by  facsimile or  electronic  mail an  acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached hereto  as Exhibit B, to the Holder and the Company’s transfer agent (the “Transfer Agent”), which  confirmation shall constitute an instruction to the Transfer Agent to process such Exercise Notice  in accordance with the terms herein.  On or before the second (2nd) Trading Day following the  date on which the Company has received such Exercise Notice (or such earlier date as required  pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of  such Warrant Shares initiated on the applicable Exercise Date), the Company shall (X) provided  that  the  Transfer  Agent  is  participating  in  The  Depository  Trust  Company  (“DTC”)  Fast  Automated Securities Transfer Program, upon the request of the Holder, credit such aggregate  number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to  the  Holder’s  or  its  designee’s  balance  account  with  DTC  through  its  Deposit/Withdrawal  at  Custodian system, or (Y) if the Transfer Agent is not participating in the DTC Fast Automated  Securities  Transfer  Program, upon  the  request  of  the  Holder,  issue  and  deliver  (via  reputable  overnight courier) to the address as specified in the Exercise Notice, a certificate, registered in the  name of the Holder or its designee, for the number of shares of Common Stock to which the Holder  shall be entitled pursuant to such exercise.  Upon delivery of an Exercise Notice, the Holder shall  be deemed for all corporate purposes to have become the holder of record of the Warrant Shares  with respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares  are credited to the Holder’s DTC account or the date of delivery of the certificates evidencing such  Warrant Shares (as the case may be).  If this Warrant is submitted in connection with any exercise  pursuant  to  this  Section 1(a) and  the  number  of  Warrant  Shares  represented  by  this  Warrant  submitted  for  exercise  is  greater  than  the  number  of  Warrant  Shares  being  acquired  upon  an  exercise and upon surrender of this Warrant to the Company by the Holder, then, at the request of  the Holder, the Company shall as soon as practicable and in no event later than two (2) Business  Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a  new Warrant (in accordance with Section 7(d)) representing the right to purchase the number of  Warrant  Shares  purchasable  immediately  prior  to  such  exercise  under  this  Warrant,  less  the  number of Warrant Shares with respect to which this Warrant is exercised.  No fractional shares  of Common Stock are to be issued upon the exercise of this Warrant, but rather the number of  shares of Common Stock to be issued shall be rounded up to the nearest whole number.  The                                        2   Error! Unknown document property name. 

 

    Company shall pay any and all transfer, stamp, issuance and similar taxes, costs and expenses  (including, without limitation, fees and expenses of the Transfer Agent) that may be payable with  respect  to  the  issuance  and  delivery  of  Warrant  Shares  upon  exercise  of  this  Warrant.   Notwithstanding the foregoing, except in the case where an exercise of this Warrant is validly  made pursuant to a Cashless Exercise, the Company’s failure to deliver Warrant Shares to the  Holder on or prior to the later of (i) two (2) Trading Days after receipt of the applicable Exercise  Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or  regulation for the settlement of a trade of such Warrant Shares initiated on the applicable Exercise  Date) and (ii) one (1) Trading Day after the Company’s receipt of the Aggregate Exercise Price  (or valid notice of a Cashless Exercise) (such later date, the “Share Delivery Date”) shall not be  deemed to be a breach of this Warrant.  Notwithstanding anything to the contrary contained in this  Warrant  or  the  Registration  Rights  Agreement,  after  the  effective  date  of  the  Registration  Statement (as defined in the Registration Rights Agreement) and prior to the Holder’s receipt of  the notice of a Grace Period (as defined in the Registration Rights Agreement), the Company shall  cause the Transfer Agent to deliver unlegended shares of Common Stock to the Holder (or its  designee) in connection with any sale of Registrable Securities (as defined in the Registration  Rights  Agreement)  with  respect  to  which  the  Holder  has  entered  into  a  contract  for  sale,  and  delivered a copy of the prospectus included as part of the particular Registration Statement to the  extent applicable, and for which the Holder has not yet settled.  From the Issuance Date through  and including the Expiration Date, the Company shall maintain a transfer agent that participates in  the DTC’s Fast Automated Securities Transfer Program.           (b)   Exercise  Price.   For  purposes  of  this  Warrant,  “Exercise  Price”  means  $4.00,  subject to adjustment as provided herein.         (c)   Company’s Failure to Timely Deliver Securities.  If the Company shall fail, for any  reason or for no reason, on or prior to the Share Delivery Date, either (I) if the Transfer Agent is  not participating in the DTC Fast Automated Securities Transfer Program, to issue and deliver to  the Holder (or its designee) a certificate for the number of Warrant Shares to which the Holder is  entitled and register such Warrant Shares on the Company’s share register or, if the Transfer Agent  is participating in the DTC Fast Automated Securities Transfer Program, to credit the balance  account of the Holder or the Holder’s designee with DTC for such number of Warrant Shares to  which the Holder is entitled upon the Holder’s exercise of this Warrant (as the case may be) or (II)  if a Registration Statement covering the resale of the Warrant Shares that are the subject of the  Exercise  Notice  (the  “Unavailable  Warrant  Shares”)  is  not  available  for  the  resale  of  such  Unavailable  Warrant  Shares  and the Company fails  to  promptly, but  in no event  later than as  required pursuant to the Registration Rights Agreement (x) so notify the Holder and (y) deliver  the  Warrant  Shares  electronically  without  any  restrictive  legend  by  crediting  such  aggregate  number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the Holder’s  or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system  (the event described in the immediately foregoing clause (II) is hereinafter referred as a “Notice  Failure” and together with the event described in clause (I) above, a “Delivery Failure”), then, in  addition to all other remedies available to the Holder, (X) the Company shall pay in cash to the  Holder on each day after the Share Delivery Date and during such Delivery Failure an amount  equal to 2% of the product of (A) the sum of the number of shares of Common Stock not issued to  the Holder on or prior to the Share Delivery Date and to which the Holder is entitled, multiplied                                         3   Error! Unknown document property name. 

 

    by (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any  time during the period beginning on the applicable Exercise Date and ending on the applicable  Share  Delivery  Date,  and  (Y)  the  Holder,  upon  written  notice  to  the  Company,  may  void  its  Exercise Notice with respect to, and retain or have returned, as the case may be, any portion of this  Warrant that has not been exercised pursuant to such Exercise Notice; provided that the voiding  of an Exercise Notice shall not affect the Company’s obligations to make any payments which  have accrued prior to the date of such notice pursuant to this Section 1(c) or otherwise.  In addition  to the foregoing, if on or prior to the Share Delivery Date either (I) the Transfer Agent is not  participating in the DTC Fast Automated Securities Transfer Program, the Company shall fail to  issue and deliver to the Holder (or its designee) a certificate and register such shares of Common  Stock on the Company’s share register or, if the Transfer Agent is participating in the DTC Fast  Automated Securities Transfer Program, the Transfer Agent shall fail to credit the balance account  of the Holder or the Holder’s designee with DTC for the number of shares of Common Stock to  which the Holder is entitled upon the Holder’s exercise hereunder or pursuant to the Company’s  obligation pursuant to clause (ii) below or (II) a Notice Failure occurs, and if on or after such Share  Delivery  Date the  Holder  purchases  (in  an  open  market  transaction  or  otherwise)  shares  of  Common Stock corresponding to all or any portion of the number of shares of Common Stock  issuable upon such exercise that the Holder is entitled to receive from the Company and has not  received  from  the  Company  in  connection  with  such Delivery Failure  or  Notice  Failure,  as  applicable (a  “Buy-In”),  then,  in  addition  to  all  other  remedies  available  to  the  Holder, the  Company  shall,  within two  (2) Business Days  after  the  Holder’s  request  and  in  the  Holder’s  discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price  (including  brokerage  commissions  and  other  out-of-pocket  expenses,  if  any)  for the  shares  of  Common Stock so purchased (including, without limitation, by any other Person in respect, or on  behalf, of the Holder) (the “Buy-In Price”), at which point the Company’s obligation to so issue  and deliver such certificate (and to issue such shares of Common Stock) or credit the balance  account of such Holder or such Holder’s designee, as applicable, with DTC for the number of  Warrant Shares to which the Holder is entitled upon the Holder’s exercise hereunder (as the case  may be) (and to issue such Warrant Shares) shall terminate, or (ii) promptly honor its obligation  to so issue and deliver to the Holder a certificate or certificates representing such Warrant Shares  or credit the balance account of such Holder or such Holder’s designee, as applicable, with DTC  for  the  number  of  Warrant  Shares  to  which  the  Holder  is  entitled  upon  the  Holder’s  exercise  hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if  any) of the Buy-In Price over the product of (A) such number of Warrant Shares multiplied by (B)  the  lowest  Closing  Sale  Price  of  the  Common  Stock  on  any  Trading  Day  during  the  period  commencing on the date of the applicable Exercise Notice and ending on the date of such issuance  and payment under this clause (ii) (the “Buy-In Payment Amount”).  Nothing shall limit the  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  (or  to  electronically deliver such shares of Common Stock) upon the exercise of this Warrant as required  pursuant to the terms hereof.  While this Warrant is outstanding, the Company shall cause its  transfer agent to participate in the DTC Fast Automated Securities Transfer Program.  In addition  to the foregoing rights, (i) if the Company fails to deliver the applicable number of Warrant Shares  upon an exercise pursuant to Section 1 by the applicable Share Delivery Date, then the Holder  shall have the right to rescind such exercise in whole or in part and retain and/or have the Company                                        4   Error! Unknown document property name. 

 

    return, as the case may be, any portion of this Warrant that has not been exercised pursuant to such  Exercise  Notice;  provided  that  the  rescission  of  an  exercise  shall  not  affect  the  Company’s  obligation to make any payments that have accrued prior to the date of such notice pursuant to this  Section Error! Reference source not found. or otherwise, and (ii) if a registration statement  covering the issuance or resale of the Warrant Shares that are subject to an Exercise Notice is not  available for the issuance or resale, as  applicable, of such Warrant  Shares  and the Holder has  submitted an Exercise Notice prior to receiving notice of the non-availability of such registration  statement and the Company has not already delivered the Warrant Shares underlying such Exercise  Notice electronically without any restrictive legend by crediting such aggregate number of Warrant  Shares to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s  balance account with DTC through its Deposit / Withdrawal At Custodian system, the Holder shall  have the option, by delivery of notice to the Company, to (x) rescind such Exercise Notice in whole  or in part and retain or have returned, as the case may be, any portion of this Warrant that has not  been exercised pursuant to such Exercise Notice; provided that the rescission of an Exercise Notice  shall not affect the Company’s obligation to make any payments that have accrued prior to the date  of such notice pursuant to this Section Error! Reference source not found. or otherwise, and/or  (y) switch some or all of such Exercise Notice from a cash exercise to a Cashless Exercise.         (d)   Cashless  Exercise.  Notwithstanding  anything  contained  herein  to  the  contrary  (other  than  Section 1(f) below),  if  at  the  time  of  exercise  hereof  a  Registration  Statement  (as  defined in the Registration Rights Agreement) is not effective (or the prospectus contained therein  is not available for use) for the resale by the Holder of all of the Warrant Shares, then the Holder  may, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash  payment otherwise contemplated to be made to the Company upon such exercise in payment of  the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of  Warrant Shares determined according to the following formula (a “Cashless Exercise”):                     Net Number = (A x B) - (A x C)                                      D                     For purposes of the foregoing formula:               A= the total number of shares with respect to which this Warrant is then being              exercised.               B = the quotient of (x) the sum of the VWAP of the Common Stock of each of the              twenty (20) Trading Days ending at the close of business on the Principal Market              immediately prior to the time of exercise as set forth in the applicable Exercise              Notice, divided by (y) twenty (20).               C = the Exercise Price then in effect for the applicable Warrant Shares at the time              of such exercise.               D = as applicable:  (i) the Closing Sale Price of the Common Stock on the Trading              Day  immediately  preceding  the  date  of  the  applicable  Exercise  Notice  if  such              Exercise Notice is (1) both executed and delivered pursuant to Section 1(a) hereof              on a day that is not a Trading Day or (2) both executed and delivered pursuant to                                        5   Error! Unknown document property name. 

 

                Section 1(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) the Bid Price of the Common Stock as of              the  time  of  the  Holder’s  execution  of  the  applicable  Exercise  Notice  if  such              Exercise Notice is executed during “regular trading hours” on a Trading Day and              is delivered within two (2) hours thereafter pursuant to Section 1(a) hereof, or (iii)              the Closing Sale Price of the Common Stock on the date of the applicable Exercise              Notice  if  the  date  of  such  Exercise  Notice  is  a  Trading  Day  and  such  Exercise              Notice is both executed and delivered pursuant to Section 1(a) hereof after the close              of “regular trading hours” on such Trading Day.               If the Warrant Shares are issued in a Cashless Exercise, the parties acknowledge  and agree that in accordance with Section 3(a)(9) of the 1933 Act, the Warrant Shares take on the  registered  characteristics  of  the  Warrants  being  exercised.  For  purposes  of Rule  144(d)  promulgated under the 1933 Act,  as  in  effect  on the Subscription Date, it is  intended that the  Warrant Shares issued in a Cashless Exercise shall be deemed to have been acquired by the Holder,  and the holding period for the Warrant Shares shall be deemed to have commenced, on the date  this Warrant was originally issued pursuant to the Securities Purchase Agreement.         (e)   Disputes.  In the case of a dispute as to the determination of the Exercise Price or  the arithmetic calculation of the number of Warrant Shares to be issued pursuant to the terms  hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are not  disputed and resolve such dispute in accordance with Section 15.         (f)   Limitations on Exercises.                 (i)   Beneficial Ownership.  The Company shall not effect the exercise of any        portion of this Warrant, and the Holder shall not have the right to exercise any portion of        this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise        shall be null and void and treated as if never made, to the extent that after giving effect to        such exercise, the Holder together with the other Attribution Parties collectively would        beneficially  own  in  excess  of  4.99%  (the  “Maximum  Percentage”)  of  the  shares  of        Common Stock outstanding immediately after giving effect to such exercise.  For purposes        of the foregoing sentence, the aggregate number of shares of Common Stock beneficially        owned by the Holder and the other Attribution Parties shall include the number of shares        of Common Stock held by the Holder and all other Attribution Parties plus the number of        shares of Common Stock issuable upon exercise of this Warrant with respect to which the        determination of such sentence is being made, but shall exclude shares of Common Stock        which would be issuable upon (A) exercise of the remaining, unexercised portion of this        Warrant beneficially owned by the Holder or any of the other Attribution Parties and (B)        exercise or conversion of the unexercised or unconverted portion of any other securities of        the Company (including, without limitation, any convertible notes or convertible preferred        stock or warrants, including other SPA Warrants) beneficially owned by the Holder or any        other Attribution Party subject to a limitation on conversion or exercise analogous to the        limitation contained in this Section 1(f)(i).  For purposes of this Section 1(f)(i), beneficial        ownership  shall  be  calculated  in  accordance  with  Section  13(d)  of  the  1934  Act.   For        purposes of determining the number of outstanding shares of Common Stock the Holder                                        6   Error! Unknown document property name. 

 

          may  acquire  upon  the  exercise of  this  Warrant  without  exceeding  the  Maximum        Percentage, the Holder may rely on the number of outstanding shares of Common Stock as        reflected in (x) the Company’s most recent Annual Report on Form 10-K, Quarterly Report        on Form 10-Q, Current Report on Form 8-K or other public filing with the SEC, as the case        may be, (y) a more recent public announcement by the Company or (z) any other written        notice by the Company or the Transfer Agent, if any, setting forth the number of shares of        Common  Stock  outstanding  (the  “Reported  Outstanding  Share  Number”).   If  the        Company receives an Exercise Notice from the Holder at a time when the actual number        of  outstanding  shares  of  Common  Stock  is  less  than  the  Reported  Outstanding  Share        Number, the Company shall (i) notify the Holder in writing of the number of shares of        Common  Stock  then  outstanding  and,  to  the  extent  that  such  Exercise  Notice  would        otherwise cause the Holder’s beneficial ownership, as determined pursuant to this Section        1(f)(i),  to  exceed  the  Maximum  Percentage,  the  Holder  must  notify  the  Company  of  a        reduced number of Warrant Shares to be acquired pursuant to such Exercise Notice (the        number of shares by which such purchase is reduced, the “Reduction Shares”) and (ii) as        soon as reasonably practicable, the Company shall return to the Holder any exercise price        paid by the Holder for the Reduction Shares.  For any reason at any time, upon the written        or oral request of the Holder, the Company shall within one (1) Business Day confirm        orally and in writing or by electronic mail 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 and any other Attribution Party since the        date as of which the Reported Outstanding Share Number was reported.  In the event that        the issuance of shares of Common Stock to the Holder upon exercise of this Warrant results        in the Holder and the other Attribution Parties being deemed to beneficially own, in the        aggregate, more than the Maximum Percentage of the number of outstanding shares of        Common Stock (as determined under Section 13(d) of the 1934 Act), the number of shares        so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficial        ownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null        and void and shall be cancelled ab initio, and the Holder shall not have the power to vote        or to transfer the Excess Shares.  As soon as reasonably practicable after the issuance of        the Excess Shares has been deemed null and void, the Company shall return to the Holder        the exercise price paid by the Holder for the Excess Shares.  Upon delivery of a written        notice to the Company, the Holder may from time to time increase (with such increase not        effective  until  the  sixty-first  (61st)  day  after  delivery  of  such  notice)  or  decrease  the        Maximum Percentage to any other percentage not in excess of 9.99% as specified in such        notice; provided that (i) any such increase in the Maximum Percentage will not be effective        until the sixty-first (61st) day after such notice is delivered to the Company and (ii) any        such increase or decrease will apply only to the Holder and the other Attribution Parties        and not to any other holder of SPA Warrants that is not an Attribution Party of the Holder.         For purposes of clarity, the shares of Common Stock issuable pursuant to the terms of this        Warrant  in  excess  of  the  Maximum  Percentage  shall  not  be  deemed  to  be  beneficially        owned by the Holder for any purpose including for purposes of Section 13(d) or Rule 16a-       1(a)(1)  of  the  1934  Act.   No  prior  inability  to  exercise  this  Warrant  pursuant  to  this        paragraph shall have any effect on the applicability of the provisions of this paragraph with        respect to any subsequent determination of exercisability.  The provisions of this paragraph                                        7   Error! Unknown document property name. 

 

          shall be construed and implemented in a manner otherwise than in strict conformity with        the terms of this Section 1(f)(i) to the extent necessary to correct this paragraph or any        portion  of  this  paragraph  which  may  be  defective  or  inconsistent  with  the  intended        beneficial  ownership  limitation  contained  in  this  Section 1(f)(i) or  to  make  changes  or        supplements  necessary  or  desirable  to  properly  give  effect  to  such  limitation.   The        limitation contained in this paragraph may not be waived and shall apply to a successor        holder of this Warrant.               (ii)  Principal Market Regulation.  The Company shall not issue any shares of        Common Stock upon the exercise of this Warrant if the issuance of such shares of Common        Stock  (taken  together  with  the  issuance  of  such  shares  upon  the  exercise  of  the  SPA        Warrants and the conversion of the Notes or otherwise pursuant to the terms of the Notes        or the SPA Warrants) would exceed the aggregate number of shares of Common Stock        which the Company may issue upon exercise or conversion or otherwise pursuant to the        terms of the Notes or the SPA Warrants (as the case may be) of the Warrants and the Notes        without breaching the Company’s obligations under the rules or regulations of the Principal        Market  (the  number  of  shares  which  may  be  issued  without  violating  such  rules  and        regulations, the “Exchange Cap”), except that such limitation shall not apply in the event        that the Company (A) obtains the approval of its stockholders as required by the applicable        rules of the Principal Market for issuances of shares of Common Stock in excess of such        amount or (B) obtains a written opinion from outside counsel to the Company that such        approval  is  not  required,  which  opinion  shall  be  reasonably  satisfactory  to  the  Holder.         Until such approval or such written opinion is obtained, no Buyer shall be issued in the        aggregate, upon conversion or exercise (as the case may be) of any Notes or any of the        SPA Warrants or otherwise pursuant to the terms of the Notes or the SPA Warrants, shares        of Common Stock in an amount greater than the product of (i) the Exchange Cap as of the        Issuance Date multiplied by (ii) the quotient of (1) the original principal amount of Notes        issued to such Buyer pursuant to the Securities Purchase Agreement on the Closing Date        (as defined in the Securities Purchase Agreement) divided by (2) the aggregate original        principal amount of all  Notes  issued to  the Buyers pursuant  to  the Securities Purchase        Agreement  on  the  Closing  Date  (with  respect  to  each  Buyer,  the  “Exchange  Cap        Allocation”).   In  the  event  that  any  Buyer  shall  sell  or  otherwise  transfer  any  of  such        Buyer’s SPA Warrants, the transferee shall be allocated a pro rata portion of such Buyer’s        Exchange Cap Allocation with respect to such portion of such SPA Warrants so transferred,        and the restrictions of the prior sentence shall apply to such transferee with respect to the        portion of the Exchange Cap Allocation so allocated to such transferee.  Upon conversion        and exercise in full of a holder’s Notes and SPA Warrants, the difference (if any) between        such  holder’s  Exchange  Cap  Allocation  and the  number  of  shares  of  Common  Stock        actually issued to such holder upon such holder’s conversion in full of such Notes and such        holder’s  exercise  in  full  of  such  SPA  Warrants  shall  be  allocated,  to  the  respective        Exchange Cap Allocations of the remaining holders of Notes and related SPA Warrants on        a pro rata basis in proportion to the shares of Common Stock underlying the Notes and        related SPA Warrants then held by each such holder of Notes and related SPA Warrants.         In the event that the Company is then prohibited from issuing any shares of Common Stock        pursuant  to  this  Section 1(f)(ii) (the  “Exchange  Cap  Shares”),  in  lieu  of  issuing  and        delivering such Exchange Cap Shares to the Holder, the Company shall pay cash to the                                        8   Error! Unknown document property name. 

 

          Holder in exchange for the cancellation of such portion of this Warrant exercisable into        such Exchange Cap Shares (the “Exchange Cap Payment Amount”) at a price equal to        the sum of (x) the product of (A) such number of Exchange Cap Shares and (B) the greatest        Closing  Sale  Price  of  the  Common  Stock  on  any  Trading  Day  during  the  period        commencing on the date the Holder delivers the applicable Exercise Notice with respect to        such Exchange Cap Shares to the Company and ending on the date of such payment under        this  Section 1(f)(ii) and  (y)  to  the  extent  the  Holder  purchases  (in  an  open  market        transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the        Holder  of  Exchange  Cap  Shares,  any  brokerage  commissions  and  other  out-of-pocket        expenses, if any, of the Holder incurred in connection therewith.               (iii) Investor Prepayment Limitations.  Notwithstanding  any provision  of this        Warrant  to  the  contrary,  as  of  any  time  of  determination,  no  more  than  the  Maximum        Eligibility Number of Warrant Shares as of such time of determination shall be exercisable        hereunder.          (g)   Reservation of Shares.                 (i)   Required Reserve Amount.  So long as this Warrant remains outstanding,        the Company shall at all times keep reserved for issuance under this Warrant a number of        shares of Common Stock at least equal to 100% of the maximum number of shares of        Common Stock as shall be necessary to satisfy the Company’s obligation to issue shares        of  Common  Stock  under  the  SPA  Warrants  then  outstanding  (without  regard  to  any        limitations on exercise) (the “Required Reserve Amount”); provided that at no time shall        the number of shares of Common Stock reserved pursuant to this Section 1(g)(i) be reduced        other than proportionally in connection with any exercise or redemption of SPA Warrants        or  such  other  event  covered  by  Section 2(a) below.   The  Required  Reserve  Amount        (including, without limitation, each increase in the number of shares so reserved) shall be        allocated pro rata among the holders of the SPA Warrants based on number of shares of        Common Stock issuable upon exercise of SPA Warrants held by each holder on the Closing        Date (without regard to any limitations on exercise) or increase in the number of reserved        shares, as the case may be (the “Authorized Share Allocation”).  In the event that a holder        shall sell or otherwise transfer any of such holder’s SPA Warrants, each transferee shall be        allocated a pro rata portion of such holder’s Authorized Share Allocation.  Any shares of        Common  Stock  reserved  and  allocated  to  any  Person  which  ceases  to  hold  any  SPA        Warrants shall be allocated to the remaining holders of SPA Warrants, pro rata based on        the number of shares of Common Stock issuable upon exercise of the SPA Warrants then        held by such holders (without regard to any limitations on exercise).               (ii)  Insufficient Authorized Shares.  If, notwithstanding Section 1(g)(i) above,        and  not  in  limitation  thereof,  at  any  time  while  any  of  the  SPA  Warrants  remain        outstanding, the Company does not have a sufficient number of authorized and unreserved        shares of Common Stock to satisfy its obligation to reserve the Required Reserve Amount        (an “Authorized Share Failure”), then the Company shall immediately take all action        necessary to increase the Company’s authorized shares of Common Stock to an amount        sufficient to allow the Company to reserve the Required Reserve Amount for all the SPA        Warrants then outstanding.  Without limiting the generality of the foregoing sentence, as                                        9   Error! Unknown document property name. 

 

          soon as practicable after the date of the occurrence of an Authorized Share Failure, but in        no event later than sixty (60) days after the occurrence of such Authorized Share Failure,        the Company shall hold a meeting of its stockholders for the approval of an increase in the        number of authorized shares of Common Stock.  In connection with such meeting, the        Company  shall  provide  each  stockholder  with  a  proxy  statement  and  shall  use  its  best        efforts  to  solicit  its  stockholders’  approval  of  such  increase  in  authorized  shares  of        Common Stock and to cause its board of directors to recommend to the stockholders that        they approve such proposal.  In the event that the Company is prohibited from issuing        shares  of  Common  Stock  upon  an  exercise  of  this  Warrant  due  to  the  failure  by  the        Company to have sufficient shares of Common Stock available out of the authorized but        unissued shares of Common Stock (such unavailable number of shares of Common Stock,        the  “Authorization  Failure  Shares”),  in  lieu  of  delivering  such  Authorization  Failure        Shares to the Holder, the Company shall pay cash in exchange for the cancellation of such        portion of this Warrant exercisable into such Authorization Failure Shares at a price equal        to the sum of (i) the product of (x) such number of Authorization Failure Shares and (y)        the greatest Closing Sale Price of the Common Stock on any Trading Day during the period        commencing on the date the Holder delivers the applicable Exercise Notice with respect to        such Authorization Failure Shares to the Company and ending on the date of such issuance        and payment under this Section 1(f); and (ii) to the extent the Holder purchases (in an open        market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a        sale  by  the  Holder  of  Authorization  Failure  Shares,  any  Buy-In  Payment  Amount,        brokerage commissions and other out-of-pocket expenses, if any, of the Holder incurred in        connection therewith.  Nothing contained in this Section Error! Reference source not        found. shall limit any obligations of the Company under any provision of the Securities        Purchase Agreement.         (h)   Right of Alternate Exercise.                 (i)   Eligibility for an Alternate Exercise.  Notwithstanding anything herein to        the contrary, at any time after the occurrence of an Event of Default (as defined in the        Notes) under the Notes (assuming, for such purpose, that the Notes remain outstanding as        of such time of determination and regardless of whether such Event of Default has been        cured or if the Holder has delivered an Event of Default Redemption Notice (as defined in        the  Notes)  to  the  Company)  (each,  an  “Alternate  Exercise  Eligibility  Date”),  the        Company shall within one (1) Business Day deliver written notice thereof via facsimile        and overnight courier (with next day delivery specified) (each, an “Alternate Exercise        Eligibility Notice”) to the Holder.                 (ii)  Alternate  Exercise  Mechanics.   At  any  time  after  the  occurrence  of  any        Alternate  Exercise  Eligibility  Date,  the  Holder  may,  at  such  Holder’s  option,  exercise        (each,  a  “Alternate  Exercise”)  all,  or any  part  of,  this  Warrant  (such  portion  of  this        Warrant being exercised, the “Alternate Exercise Amount”) into Common Stock at the        Alternate Exercise Price (with “Alternate Exercise Price” replacing “Exercise Price” for        all  purposes  hereunder  with  respect to  such  Alternate  Exercise)  by  designating  in  the        Exercise Notice delivered pursuant to Section 1(a) that the Holder is electing to use the        Alternate Exercise Price for such exercise.  Notwithstanding anything to the contrary in                                         10   Error! Unknown document property name. 

 

          this Section 1(h), but subject to Section Error! Reference source not found., until the        Company  delivers  Common  Stock  representing  the  Alternate  Exercise  Amount  to  the        Holder, such Alternate Exercise Amount may be exercised by the Holder into Common        Stock pursuant to Section 1(a) without regard to this Section 1(h).     2.    ADJUSTMENT  OF  EXERCISE  PRICE  AND  NUMBER OF  WARRANT  SHARES.  The  Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject  to adjustment from time to time as set forth in this Section 2.         (a)   Stock  Dividends  and  Splits.   Without  limiting  any  provision  of  Section 2(b),  Section 3 or Section 4, if the Company, at any time on or after the Subscription Date, (i) pays a  stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise  makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii)  subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes  of its then outstanding shares of Common Stock into a larger number of shares or (iii) combines  (by combination, reverse stock split or otherwise) one or more classes of its then outstanding shares  of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall  be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock  outstanding immediately before such event and of which the denominator shall be the number of  shares  of  Common  Stock  outstanding  immediately  after  such  event.   Any  adjustment  made  pursuant to clause (i) of this paragraph shall become effective immediately after the record date  for the determination of stockholders entitled to receive such dividend or distribution, and any  adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately  after the effective date of such subdivision or combination.  If any event requiring an adjustment  under this paragraph occurs during the period that an Exercise Price is calculated hereunder, then  the calculation of such Exercise Price shall be adjusted appropriately to reflect such event.         (b)   Adjustment Upon Issuance of Shares of Common Stock.  If and whenever on or  after the Subscription Date, the Company grants issues or sells (or enters into any agreement to  grant, issue or sell), or in accordance with this Section 2 is deemed to have granted, issued or sold,  any shares of Common Stock (including the issuance or sale of shares of Common Stock owned  or held by or for the account of the Company, but excluding any Excluded Securities granted  issued or sold or deemed to have been granted issued or sold) for a consideration per share (the  “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to  such granting, issuance or sale or deemed granting issuance or sale (such Exercise Price then in  effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then  immediately after such Dilutive Issuance, the Exercise Price then in effect shall be reduced to an  amount equal to the New Issuance Price.  For all purposes of the foregoing (including, without  limitation,  determining  the  adjusted  Exercise  Price  and  the  New  Issuance  Price  under  this  Section 2(b)), the following shall be applicable:               (i)   Issuance of Options.  If the Company in any manner grants, issues or sells        (or enters into any agreement to grant, issue or sell) any Options and the lowest price per        share for which one share of Common Stock is at any time issuable upon the exercise of        any such Option or upon conversion, exercise or exchange of any Convertible Securities        issuable upon exercise of any such Option or otherwise pursuant to the terms thereof is less        than  the  Applicable  Price,  then  such  share  of  Common  Stock  shall  be  deemed  to  be                                        11   Error! Unknown document property name. 

 

          outstanding and to have been issued and sold by the Company at the time of the granting ,        issuance or sale (or the  time of execution of such agreement to  grant,  issue or sell,  as        applicable) of such Option for such price per share.  For purposes of this Section Error!        Reference source not found., the “lowest price per share for which one share of Common        Stock is at any time issuable upon the exercise of any such Options or upon conversion,        exercise or exchange of any Convertible Securities issuable upon exercise of any such        Option or otherwise pursuant to the terms thereof”  shall be equal to (1) the lower of (x)        the  sum  of  the  lowest  amounts  of  consideration  (if  any)  received  or  receivable  by  the        Company with respect to any one share of Common Stock upon the granting, issuance or        sale (or pursuant to the agreement to grant, issue or sell, as applicable) of such Option,        upon  exercise  of  such  Option  and  upon  conversion,  exercise  or  exchange  of  any        Convertible Security issuable upon exercise of such Option or otherwise pursuant to the        terms thereof and (y) the lowest exercise price set forth in such Option for which one share        of  Common  Stock  is  issuable  (or  may  become  issuable  assuming  all  possible  market        conditions)  upon  the  exercise  of  any  such  Options  or  upon  conversion,  exercise  or        exchange  of  any  Convertible  Securities  issuable  upon  exercise  of  any  such  Option  or        otherwise pursuant to the terms thereof minus (2) the sum of all amounts paid or payable        to the holder of such Option (or any other Person) upon the granting , issuance or sale (or        the agreement to grant, issue or sell, as applicable) of such Option, upon exercise of such        Option and upon conversion, exercise or exchange of any Convertible Security issuable        upon exercise of such Option or otherwise pursuant to the terms thereof plus the value of        any other consideration received or receivable by, or benefit conferred on, the holder of        such Option (or any other Person).  Except as contemplated below, no further adjustment        of the Exercise Price shall be made upon the actual issuance of such shares of Common        Stock or of such Convertible Securities upon the exercise of such Options or otherwise        pursuant to the terms of or upon the actual issuance of such shares of Common Stock upon        conversion, exercise or exchange of such Convertible Securities.               (ii)  Issuance of Convertible Securities.  If the Company in any manner issues        or sells (or enters into any agreement to issue or sell) any Convertible Securities and the        lowest price per share for which one share of Common Stock is at any time issuable upon        the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof is        less than the Applicable Price, then such share of Common Stock shall be deemed to be        outstanding and to have been issued and sold by the Company at the time of the issuance        or sale (or the time of execution of such agreement to issue or sell, as applicable) of such        Convertible Securities for such price per share.  For the purposes of this Section 2(b)(ii),        the “lowest price per share for which one share of Common Stock is at any time issuable        upon  the  conversion,  exercise  or  exchange  thereof  or  otherwise  pursuant  to  the  terms        thereof”  shall  be  equal  to  (1)  the  lower  of  (x)  the  sum  of  the  lowest  amounts  of        consideration (if any) received or receivable by the Company with respect to one share of        Common Stock upon the issuance or sale (or pursuant to the agreement to issue or sell, as        applicable) of the Convertible Security and upon conversion, exercise or exchange of such        Convertible  Security  or  otherwise  pursuant  to  the  terms  thereof  and  (y)  the  lowest        conversion price set forth in such Convertible Security for which one share of Common        Stock is issuable (or may become issuable assuming all possible market conditions) upon        conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof minus                                        12   Error! Unknown document property name. 

 

          (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or        any other Person) upon the issuance or sale (or the agreement to issue or sell, as applicable)        of  such  Convertible  Security  plus  the  value  of  any  other  consideration  received  or        receivable by, or benefit conferred on, the holder of such Convertible Security (or any other        Person).  Except as contemplated below, no further adjustment of the Exercise Price shall        be  made  upon  the  actual  issuance  of  such  shares  of  Common  Stock  upon  conversion,        exercise or exchange of such Convertible Securities or otherwise pursuant to the terms        thereof,  and  if  any such  issuance  or  sale  of  such  Convertible  Securities  is  made  upon        exercise of any Options for which adjustment of this Warrant has been or is to be made        pursuant to other provisions of this Section 2(b), except as contemplated below, no further        adjustment of the Exercise Price shall be made by reason of such issuance or sale.               (iii) Change in Option Price or Rate of Conversion.  If the purchase or exercise        price provided for in any Options, the additional consideration, if any, payable upon the        issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which        any Convertible Securities are convertible into or exercisable or exchangeable for shares        of Common Stock increases or decreases at any time (other than proportional changes in        conversion or exercise prices,  as  applicable, in  connection with  an event  referred to  in        Section 2(a)), the Exercise Price in effect at the time of such increase or decrease shall be        adjusted  to  the  Exercise  Price  which  would  have  been  in  effect  at  such  time  had  such        Options or Convertible Securities provided for such increased or decreased purchase price,        additional consideration or increased or decreased conversion rate, as the case may be, at        the time initially granted, issued or sold.  For purposes of this Section 2(b)(i), if the terms        of any Option or Convertible Security that was outstanding as of the Subscription Date are        increased or decreased in the manner described in the immediately preceding sentence,        then such Option or Convertible Security and the shares of Common Stock deemed issuable        upon exercise, conversion or exchange thereof shall be deemed to have been issued as of        the date of such increase or decrease.  No adjustment pursuant to this Section 2(b) shall be        made if such adjustment would result in an increase of the Exercise Price then in effect.               (iv)  Calculation of Consideration Received.  If any Option and/or Convertible        Security  and/or  Adjustment  Right  is  issued  in  connection  with  the  issuance  or  sale  or        deemed issuance or sale of any other securities of the Company (as determined by the        Holder,  the  “Primary  Security”,  and  such  Option  and/or  Convertible  Security  and/or        Adjustment  Right,  the  “Secondary  Securities”),  together  comprising  one  integrated        transaction, (or one or more transactions if such issuances or sales or deemed issuances or        sales of securities of the Company either (A) have at least one investor or purchaser in        common,  (B)  are  consummated  in  reasonable  proximity  to  each  other  and/or  (C)  are        consummated under the same plan of financing) the aggregate consideration per share of        Common Stock with respect to such Primary Security shall be deemed to be equal to the        difference of (x) the lowest price per share for which one share of Common Stock was        issued (or was deemed to  be issued pursuant  to  Section Error!  Reference source not        found. or 2(b)(ii) above, as applicable) in such integrated transaction solely with respect        to such Primary Security, minus (y) with respect to such Secondary Securities, the sum of        (I) the Black Scholes Consideration Value of each such Option, if any, (II) the fair market        value  (as  determined  by  the  Holder in  good  faith)  or  the  Black  Scholes  Consideration                                         13   Error! Unknown document property name. 

 

          Value, as applicable, of such Adjustment Right, if any, and (III) the fair market value (as        determined by the Holder) of such Convertible Security, if any, in each case, as determined        on a per share basis in accordance with this Section 2(b)(iv).  If any shares of Common        Stock, Options or Convertible Securities are issued or sold or deemed to have been issued        or sold for cash, the consideration received therefor (for the purpose of determining the        consideration paid for such Common Stock, Option or Convertible Security, but not for the        purpose of the calculation of the Black Scholes Consideration Value) will be deemed to be        the  net  amount  of  consideration  received  by  the  Company  therefor.   If  any  shares  of        Common Stock, Options or Convertible Securities are issued or sold for a consideration        other  than  cash,  the  amount  of  such  consideration  received  by  the  Company  (for  the        purpose  of  determining  the  consideration  paid  for  such  Common  Stock,  Option  or        Convertible  Security,  but  not  for  the  purpose  of  the  calculation  of  the  Black  Scholes        Consideration  Value) will  be  the  fair  value  of  such  consideration,  except  where  such        consideration  consists  of  publicly  traded  securities,  in  which  case  the  amount  of        consideration received by the Company for such securities will be the arithmetic average        of the VWAPs of such security for each of the five (5) Trading Days immediately preceding        the date of receipt.  If any shares of Common Stock, Options or Convertible Securities are        issued to the owners of the non-surviving entity in connection with any merger in which        the Company is the surviving entity, the amount of consideration therefor (for the purpose        of  determining  the  consideration  paid  for  such  Common  Stock,  Option  or  Convertible        Security, but not for the purpose of the calculation of the Black Scholes Consideration        Value) will be deemed to be the fair value of such portion of the net assets and business of        the non-surviving entity as is attributable to such shares of Common Stock, Options or        Convertible Securities (as the case may be).  The fair value of any consideration other than        cash  or  publicly  traded  securities  will  be  determined  jointly  by  the  Company  and  the        Holder.   If  such  parties  are  unable  to  reach  agreement  within  ten  (10)  days  after  the        occurrence of an event requiring valuation (the “Valuation Event”), the fair value of such        consideration will be determined within five (5) Trading Days after the tenth (10th) day        following such Valuation Event by an independent, reputable appraiser jointly selected by        the  Company  and  the  Holder.   The  determination  of  such appraiser  shall  be  final  and        binding upon all parties absent manifest error and the fees and expenses of such appraiser        shall be borne by the Company.               (v)   Record Date.  If the Company takes a record of the holders of shares of        Common  Stock  for  the  purpose  of  entitling  them  (A) to  receive  a  dividend  or  other        distribution payable in shares of Common Stock, Options or in Convertible Securities or        (B) to  subscribe  for  or  purchase  shares  of  Common  Stock,  Options  or  Convertible        Securities, then such record date will be deemed to be the date of the issuance or sale of        the shares of Common Stock deemed to have been issued or sold upon the declaration of        such dividend or the making of such other distribution or the date of the granting of such        right of subscription or purchase (as the case may be).         (c)   Number of Warrant Shares.  Simultaneously with any adjustment to the Exercise  Price  pursuant  to  this Section 2,  the  number  of  Warrant  Shares  that  may  be  purchased  upon  exercise  of  this  Warrant  shall  be  increased  or  decreased  proportionately,  so  that  after  such  adjustment the aggregate Exercise Price payable hereunder for the adjusted number of Warrant                                         14   Error! Unknown document property name. 

 

    Shares  shall  be  the  same  as  the  aggregate  Exercise  Price  in  effect  immediately  prior  to  such  adjustment (without regard to any limitations on exercise contained herein).         (d)   Holder’s Right of Alternative Exercise Price Following Issuance of Certain Options  or  Convertible  Securities.   In  addition  to  and  not  in  limitation  of  the  other  provisions  of  this  Section 2, if the Company in any manner issues or sells or enters into any agreement to issue or  sell, any Common Stock, Options or Convertible Securities (any such securities, “Variable Price  Securities”) after the Subscription Date that are issuable pursuant to such agreement or convertible  into or exchangeable or exercisable for shares of Common Stock at a price which varies or may  vary with the market price of the shares of Common Stock, including by way of one or more  reset(s)  to  a  fixed  price,  but  exclusive  of  such  formulations  reflecting  customary  anti-dilution  provisions  (such  as  share  splits,  share  combinations,  share  dividends  and  similar  transactions)  (each of the formulations for such variable price being herein referred to as, the “Variable Price”),  the Company shall provide written notice thereof via facsimile and overnight courier to the Holder  on the date of such agreement and the issuance of such Convertible Securities or Options.  From  and  after  the  date  the  Company  enters  into  such  agreement  or  issues  any  such  Variable  Price  Securities, the Holder shall have the right, but not the obligation, in its sole discretion to substitute  the  Variable  Price  for  the  Exercise  Price  upon  exercise  of  this  Warrant  by  designating  in  the  Exercise  Notice  delivered  upon  any  exercise  of  this  Warrant  that  solely  for  purposes  of  such  exercise the Holder is relying on the Variable Price rather than the Exercise Price then in effect.   The Holder’s election to rely on a Variable Price for a particular exercise of this Warrant shall not  obligate the Holder to rely on a Variable Price for any future exercises of this Warrant.         (e)   Stock Combination Event Adjustment.  If at any time and from time to time on or  after  the  Issuance  Date  there  occurs  any  stock  split,  stock  dividend,  stock combination  recapitalization  or  other  similar  transaction involving  the  Common  Stock  (each,  a  “Stock  Combination Event”, and such date thereof, the “Stock Combination Event Date”) and the  Event  Market  Price  is  less  than  the  Exercise  Price  then  in  effect  (after  giving  effect  to  the  adjustment in clause 2(a) above), then on the sixteenth (16th) Trading Day immediately following  such Stock Combination Event, the Exercise Price then in effect on such sixteenth (16th) Trading  Day (after giving effect to the adjustment in clause 2(a) above) shall be reduced (but in no event  increased)  to  the  Event  Market  Price.   For  the  avoidance  of  doubt,  if  the  adjustment  in  the  immediately  preceding  sentence  would  otherwise  result  in  an  increase  in  the  Exercise  Price  hereunder, no adjustment shall be made.         (f)   Other Events.  In the event that the Company (or any Subsidiary (as defined in the  Securities  Purchase  Agreement))  shall  take  any  action  to  which  the  provisions  hereof  are  not  strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any  event occurs of the type contemplated by the provisions of this Section 2 but not expressly provided  for by such provisions (including, without limitation, the granting of stock appreciation rights,  phantom stock rights or other rights with equity features), then the Company’s board of directors  shall in good faith determine and implement an appropriate adjustment in the Exercise Price and  the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that  no such adjustment pursuant to this Section 2(f) will increase the Exercise Price or decrease the  number of Warrant Shares as otherwise determined pursuant to this Section 2, provided further  that  if  the  Holder  does  not  accept  such  adjustments  as  appropriately  protecting  its  interests                                         15   Error! Unknown document property name. 

 

    hereunder against such dilution, then the Company’s board of directors and the Holder shall agree,  in good faith, upon an independent investment bank of nationally recognized standing to make  such appropriate adjustments, whose determination shall be final and binding absent manifest error  and whose fees and expenses shall be borne by the Company.         (g)   Calculations.  All calculations under this Section 2 shall be made by rounding to  the nearest cent or the nearest 1/100th of a share, as applicable.  The number of shares of Common  Stock outstanding at any given time shall not include shares owned or held by or for the account  of the Company, and the disposition of any such shares shall be considered an issuance or sale of  Common Stock.         (h)   Voluntary Adjustment By Company.  Subject to the rules and regulations of the  Principal Market, the Company may at any time during the term of this Warrant, with the prior  written consent of the Required Holders (as defined in the Securities Purchase Agreement), reduce  the then current Exercise Price and increase the then number of Warrant Shares to any amount and  for any period of time deemed appropriate by the board of directors of the Company.   3.    RIGHTS UPON DISTRIBUTION OF ASSETS.  In addition to any adjustments pursuant  to Section 2 above, 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, options, evidence of indebtedness or any other assets 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 or  restrictions on exercise of this Warrant, including without limitation, the Maximum Percentage)  immediately before the date on 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 and the other Attribution  Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in  such Distribution to the extent of the Maximum Percentage (and shall not be entitled to beneficial  ownership  of  such  shares  of  Common  Stock  as  a  result  of  such  Distribution  (and beneficial  ownership) to the extent of any such excess) and the portion of such Distribution shall be held in  abeyance for the benefit of the Holder until such time or times, if ever, as its right thereto would  not result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, at  which time or times the Holder shall be granted such Distribution (and any Distributions declared  or made on such initial Distribution or on any subsequent Distribution held similarly in abeyance)  to the same extent as if there had been no such limitation).   4.    PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.         (a)   Purchase Rights.  In addition to any adjustments pursuant to Section 2 above, if at  any  time  the  Company  grants,  issues  or  sells  any  Options,  Convertible  Securities  or  rights  to  purchase stock, warrants, securities or other property pro rata to the record holders of any class of                                        16   Error! Unknown document property name. 

 

    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 or restrictions on exercise of  this Warrant, including without limitation, the Maximum Percentage) 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, issuance 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  and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be  entitled to participate in such Purchase Right to the extent of the Maximum Percentage (and shall  not  be  entitled  to  beneficial  ownership  of  such  shares  of  Common  Stock  as  a  result  of  such  Purchase Right (and beneficial ownership) to the extent of any such excess) and such Purchase  Right to such extent shall be held in abeyance up to ninety (90) Trading Days for the benefit of the  Holder until such time or times during such extended period, as its right thereto would not result  in the Holder and the other Attribution Parties exceeding the Maximum Percentage, at which time  or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on  such initial Purchase Right or on any subsequent Purchase Right held similarly in abeyance) to the  same extent as if there had been no such limitation). The Holder shall be deemed to have waived  the right to receive any such Purchase Rights that remain held in abeyance at the end of such  abeyance period if not granted prior to such time.         (b)   Fundamental  Transactions.   The  Company  shall  not  enter  into  or  be  party  to  a  Fundamental Transaction unless (i)  the Successor Entity assumes in writing all of the obligations  of  the  Company  under  this  Warrant  and  the  other  Transaction  Documents  (as  defined  in  the  Securities Purchase Agreement) in accordance with the provisions of this Section 4(b) pursuant to  written agreements in form and substance satisfactory to the Holder and approved by the Holder  prior to such Fundamental Transaction, including agreements to deliver to the Holder in exchange  for this Warrant a security of the Successor Entity evidenced by a written instrument substantially  similar in form and substance to this Warrant, including, without limitation, which is exercisable  for a corresponding number of shares of capital stock 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 adjustments to the 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 (ii) the Successor  Entity (including its Parent Entity) is a publicly traded corporation whose common stock is quoted  on or listed for trading on an Eligible Market.  Upon the consummation of each Fundamental  Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after  the date of the applicable 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.  Upon consummation  of each                                        17   Error! Unknown document property name. 

 

    Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there  shall be issued upon exercise of this Warrant at any time after the consummation of the applicable  Fundamental Transaction, in lieu of the shares of Common Stock (or other securities, cash, assets  or other property (except such items still issuable under Sections 3 and 4(a) above, which shall  continue  to  be  receivable  thereafter)) issuable  upon  the  exercise  of  this Warrant prior  to  the  applicable  Fundamental  Transaction, such  shares  of  publicly  traded  common  stock  (or  its  equivalent) of the Successor Entity (including its Parent Entity) which the Holder would have been  entitled to receive upon the happening of the applicable Fundamental Transaction had this Warrant  been exercised immediately prior to the applicable Fundamental Transaction (without regard to  any limitations on the exercise of this Warrant), as adjusted in accordance with the provisions of  this Warrant.  Notwithstanding the foregoing, and without limiting Section 1(f) hereof, the Holder  may elect, at its sole option, by delivery of written notice to the Company to waive this Section 4(b)  to permit the Fundamental Transaction without the assumption of this Warrant.  In addition to and  not in substitution for any other rights hereunder, prior to the consummation of each Fundamental  Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities  or other assets with respect to or in exchange for shares of Common Stock (a “Corporate Event”),  the Company shall make appropriate provision to insure that the Holder will thereafter have the  right  to  receive  upon  an  exercise  of  this  Warrant at  any  time  after  the  consummation  of  the  applicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the  Common Stock (or other securities, cash, assets or other property (except such items still issuable  under Sections 3 and 4(a) above, which shall continue to be receivable thereafter)) issuable upon  the exercise of the Warrant prior to such Fundamental Transaction, such shares of stock, securities,  cash, assets or any other property whatsoever (including warrants or other purchase or subscription  rights) which the Holder would have been entitled to receive upon the happening of the applicable  Fundamental  Transaction had this  Warrant  been exercised immediately prior to  the applicable  Fundamental  Transaction (without  regard  to  any  limitations  on  the  exercise  of  this  Warrant).   Provision made pursuant to the preceding sentence shall be in a form and substance reasonably  satisfactory to the Holder.         (c)   Black Scholes Value.                 (i)   Fundamental Transaction Redemption.  Notwithstanding the foregoing and        the provisions of Section 4(b) above, at the request of the Holder delivered at any time        commencing  on  the  earliest  to  occur  of  (x)  the  public  disclosure  of  any  Fundamental        Transaction, (y) the consummation of any Fundamental Transaction and (z) the Holder first        becoming  aware  of  any  Fundamental  Transaction (“Fundamental  Transaction  Start        Date”) through the date that is the later of (a) ninety (90) days after the public disclosure        of  the  consummation  of  such  Fundamental  Transaction  by  the  Company  pursuant  to  a        Current  Report  on  Form  8-K  filed  with  the  SEC or  (b)  ninety  (90)  days  after  the        Fundamental Transaction Start Date), the Company or the Successor Entity (as the case        may be) shall purchase this Warrant from the Holder on the date of such request by paying        to  the  Holder cash  in  an  amount  equal  to  the  Black  Scholes Value.  Payment  of  such        amounts shall be made by the Company (or at the Company’s direction) to the Holder on        or prior to the later of (x) the second (2nd) Trading Day after the date of such request and        (y) the date of consummation of such Fundamental Transaction.                                         18   Error! Unknown document property name. 

 

                (ii)  Event  of  Default  Redemption.   Notwithstanding  the  foregoing  and  the        provisions of Section 4(b) above, at the request of the Holder delivered at any time after        the occurrence of an Event of Default (as defined in the Notes)(assuming for such purpose        that the Notes remain outstanding and regardless of whether the Holder has delivered to        the Company an Event of Default Redemption Notice (as defined in the Notes) with respect        thereto or such Event of Default was subsequently cured), the Company or the Successor        Entity (as the case may be) shall purchase this Warrant from the Holder on the date of such        request by paying to the Holder cash in an amount equal to the Event of Default Black        Scholes Value.         (d)   Application.  The provisions of this Section 4 shall apply similarly and equally to  successive Fundamental Transactions and Corporate Events and shall be applied as if this Warrant  (and any such subsequent warrants) were fully exercisable and without regard to any limitations  on the exercise of this Warrant (provided that the Holder shall continue to be entitled to the benefit  of the Maximum Percentage, applied however with respect to shares of capital stock registered  under the 1934 Act and thereafter receivable upon exercise of this Warrant (or any such other  warrant)).   5.    NONCIRCUMVENTION.  The Company hereby covenants and agrees that the Company  will not, by amendment of its Certificate of Incorporation (as defined in the Securities Purchase  Agreement),  Bylaws  (as  defined  in  the  Securities  Purchase  Agreement)  or  through  any  reorganization,  transfer  of  assets,  consolidation,  merger,  scheme  of  arrangement,  dissolution,  issuance or sale of securities, or any other voluntary action,  avoid or seek to avoid the observance  or performance of any of the terms of this Warrant, and will at all times in good faith carry out all  the provisions of this Warrant and take all action as may be required to protect the rights of the  Holder.  Without limiting the generality of the foregoing, the Company (a) shall not increase the  par value of any shares of Common Stock receivable upon the exercise of this Warrant above the  Exercise Price then in effect, and (b) shall take all such actions as may be necessary or appropriate  in order that the Company may validly and legally issue fully paid and non-assessable shares of  Common  Stock  upon  the  exercise  of  this  Warrant.  Notwithstanding  anything  herein  to  the  contrary, if after the sixty (60) calendar day anniversary of the Issuance Date, the Holder is not  permitted to exercise this Warrant in full for any reason (other than pursuant to restrictions set  forth in Section 1(f) hereof), the Company shall use its best efforts to promptly remedy such failure,  including, without limitation, obtaining such consents or approvals as necessary to permit such  exercise into shares of Common Stock.   6.    WARRANT  HOLDER  NOT  DEEMED  A  STOCKHOLDER.  Except  as  otherwise  specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not  be entitled to vote or receive dividends or be deemed the holder of share capital of the Company  for any purpose, nor shall anything contained in this Warrant be construed to confer upon the  Holder, solely in its capacity as the Holder of this Warrant, any of the rights of a stockholder of  the Company or any right to vote, give or withhold consent to any corporate action (whether any  reorganization,  issue  of  stock,  reclassification  of  stock,  consolidation,  merger,  conveyance  or  otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior  to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the  due exercise of this Warrant.  In addition, nothing contained in this Warrant shall be construed as                                         19   Error! Unknown document property name. 

 

    imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or  otherwise)  or  as  a  stockholder  of  the  Company,  whether  such  liabilities  are  asserted  by  the  Company or by creditors of the Company.  Notwithstanding this Section 6, the Company shall  provide the Holder with copies of the same notices and other information given to the stockholders  of the Company generally, contemporaneously with the giving thereof to the stockholders.   7.    REISSUANCE OF WARRANTS.         (a)   Transfer of Warrant.  If this Warrant is to be transferred, the Holder shall surrender  this Warrant to the Company, whereupon the Company will forthwith issue and deliver upon the  order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may  request, representing the right to purchase the number of Warrant Shares being transferred by the  Holder and, if less than the total number of Warrant Shares then underlying this Warrant is being  transferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right  to purchase the number of Warrant Shares not being transferred.         (b)   Lost,  Stolen  or  Mutilated  Warrant.   Upon  receipt  by  the  Company  of  evidence  reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant  (as to which a written certification and the indemnification contemplated below shall suffice as  such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking  by the Holder to the Company in customary and reasonable form and, in the case of mutilation,  upon surrender and cancellation of this Warrant, the Company shall execute and deliver to the  Holder a new Warrant (in accordance with Section 7(d)) representing the right to purchase the  Warrant Shares then underlying this Warrant.         (c)   Exchangeable  for  Multiple  Warrants.   This  Warrant  is  exchangeable,  upon  the  surrender  hereof  by  the  Holder  at  the  principal  office  of  the  Company,  for  a  new  Warrant  or  Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the  number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent  the right to purchase such portion of such Warrant Shares as is designated by the Holder at the  time of such surrender; provided, however, no warrants for fractional shares of Common Stock  shall be given.         (d)   Issuance of New Warrants.  Whenever the Company is required to issue a new  Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this  Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase  the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued  pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when  added to the number of shares of Common Stock underlying the other new Warrants issued in  connection with such issuance, does not exceed the number of Warrant Shares then underlying this  Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is  the same as the Issuance Date, and (iv) shall have the same rights and conditions as this Warrant.   8.    NOTICES.  Whenever notice is required to be given under this Warrant, unless otherwise  provided  herein,  such  notice  shall  be  given  in  accordance  with  Section 9(f)  of  the  Securities  Purchase Agreement.  The Company shall provide the Holder with prompt written notice of all  actions taken pursuant to this Warrant (other than the issuance of shares of Common Stock upon                                        20   Error! Unknown document property name. 

 

    exercise in accordance with the terms hereof), including in reasonable detail a description of such  action and the reason therefor.  Without limiting the generality of the foregoing, the Company will  give written notice to the Holder (i) immediately upon each adjustment of the Exercise Price and  the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of  such adjustment(s), (ii) at least fifteen (15) days prior to the date on which the Company closes its  books or takes a record (A) with respect to any dividend or distribution upon the shares of Common  Stock, (B) with respect to any grants, issuances or sales of any Options, Convertible Securities or  rights to purchase stock, warrants, securities or other property to holders of shares of Common  Stock  or  (C)  for  determining  rights  to  vote  with  respect  to  any  Fundamental  Transaction,  dissolution or liquidation, provided in each case that such information shall be made known to the  public prior to or in conjunction with such notice being provided to the Holder, (iii) at least ten  (10) Trading Days prior to the consummation of any Fundamental Transaction and (iv) within one  (1) Business Day of the occurrence of an Event of Default (as defined in the Notes), setting forth  in reasonable detail any material events with respect to such Event of Default and any efforts by  the Company to cure such Event of Default.  To the extent that any notice provided hereunder  constitutes, or contains,  material, non-public information regarding the Company or any of its  Subsidiaries, the Company shall simultaneously file such notice with the SEC (as defined in the  Securities Purchase Agreement) pursuant to a Current Report on Form 8-K.  If the Company or  any  of  its  Subsidiaries  provides  material  non-public  information  to  the  Holder  that  is  not  simultaneously filed in a Current Report on Form 8-K and the Holder has not agreed to receive  such material non-public information, the Company hereby covenants and agrees that the Holder  shall not have any duty of confidentiality to the Company, any of its Subsidiaries or any of their  respective officers, directors, employees, affiliates or agents with respect to, or a duty to any of the  foregoing  not to  trade  on  the  basis  of,  such  material  non-public  information.  It  is  expressly  understood and agreed that the time of execution specified by the Holder in each Exercise Notice  shall be definitive and may not be disputed or challenged by the Company.   9.    DISCLOSURE.  Upon delivery by the Company to the Holder (or receipt by the Company  from the Holder) of any notice in accordance with the terms of this Warrant, unless the Company  has in good faith determined that the matters relating to such notice do not constitute material,  non-public information relating to the Company or any of its Subsidiaries, the Company shall on  or prior to 9:00 am, New York city time on the Business Day immediately following such notice  delivery date, publicly disclose such material, non-public information on a Current Report on Form  8-K or otherwise.  In the event that the Company believes that a notice contains material, non- public  information  relating  to  the  Company  or  any  of  its  Subsidiaries,  the  Company  so  shall  indicate to the Holder explicitly in writing in such notice (or immediately upon receipt of notice  from the Holder, as applicable), and in the absence of any such written indication in such notice  (or notification from the Company immediately upon receipt of notice from the Holder), the Holder  shall be entitled to presume that information contained in the notice does not constitute material,  non-public information relating to the Company or any of its Subsidiaries.  Nothing contained in  this Section 9 shall limit any obligations of the Company, or any rights of the Holder, under Section  4(i) of the Securities Purchase Agreement.   10.   ABSENCE  OF  TRADING  AND  DISCLOSURE  RESTRICTIONS.   The  Company  acknowledges and agrees that the Holder is not a fiduciary or agent of the Company and that the  Holder shall have no obligation to (a) maintain the confidentiality of any information provided by                                         21   Error! Unknown document property name. 

 

    the Company or (b) refrain from trading any securities while in possession of such information in  the absence of a written non-disclosure agreement signed by an officer of the Holder that explicitly  provides for such confidentiality and trading restrictions.  In the absence of such an executed,  written non-disclosure agreement, the Company acknowledges that the Holder may freely trade in  any  securities  issued  by  the  Company,  may  possess  and  use  any  information  provided  by  the  Company in connection with such trading activity, and may disclose any such information to any  third party.   11.   AMENDMENT AND WAIVER.  Except as otherwise provided herein, the provisions of  this Warrant (other than Section 1(f)) may be amended and the Company may take any action  herein prohibited, or omit to perform any act herein required to be performed by it, only if the  Company has obtained the written consent of the Holder.  No waiver shall be effective unless it is  in writing and signed by an authorized representative of the waiving party.   12.   SEVERABILITY.   If  any  provision  of  this  Warrant  is  prohibited  by  law  or  otherwise  determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that  would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the  broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of  such provision shall not affect the validity of the remaining provisions of this Warrant so long as  this Warrant as so modified continues to express, without material change, the original intentions  of  the  parties  as  to  the  subject  matter  hereof  and  the  prohibited  nature,  invalidity  or  unenforceability  of  the  provision(s)  in  question  does  not  substantially  impair  the  respective  expectations or reciprocal obligations of the parties or the practical realization of the benefits that  would  otherwise  be  conferred  upon  the  parties.   The  parties  will  endeavor  in  good  faith  negotiations  to  replace  the  prohibited,  invalid  or  unenforceable  provision(s)  with  a  valid  provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or  unenforceable provision(s).   13.   GOVERNING LAW.  This Warrant shall be governed by and construed and enforced in  accordance  with,  and  all  questions  concerning  the  construction,  validity,  interpretation  and  performance of this Warrant shall be governed by, the internal laws of the State of New York,  without giving effect to any choice of law or conflict of law provision or rule (whether of the State  of  New  York  or  any  other  jurisdictions)  that  would  cause  the  application  of  the  laws  of  any  jurisdictions other than the State of New York.  The Company hereby irrevocably waives personal  service of process and consents to process being served in any such suit, action or proceeding by  mailing a copy thereof to the Company at the address set forth in Section 9(f) of the Securities  Purchase Agreement and agrees that such service shall constitute good and sufficient service of  process and notice thereof.  The Company hereby irrevocably submits to the exclusive jurisdiction  of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the  adjudication  of  any  dispute  hereunder  or  in  connection  herewith or  with  any  transaction  contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert  in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of  any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the  venue of such suit, action or proceeding is improper.  Nothing contained herein shall be deemed  to limit in any way any right to serve process in any manner permitted by law.  Nothing contained  herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal                                         22   Error! Unknown document property name. 

 

    action against the Company in any other jurisdiction to collect on the Company’s obligations to  the Holder, to realize on any collateral or any other security for such obligations, or to enforce a  judgment  or  other  court  ruling  in  favor  of  the  Holder.  THE  COMPANY  HEREBY  IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO  REQUEST,  A  JURY  TRIAL  FOR  THE  ADJUDICATION  OF  ANY  DISPUTE  HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT  OR ANY TRANSACTION CONTEMPLATED HEREBY.   14.   CONSTRUCTION; HEADINGS.  This Warrant shall be deemed to be jointly drafted by  the Company and the Holder and shall not be construed against any Person as the drafter hereof.   The headings of this Warrant are for convenience of reference and shall not form part of, or affect  the interpretation of, this Warrant.  Terms used in this Warrant but defined in the other Transaction  Documents shall have the meanings ascribed to such terms on the Closing Date (as defined in the  Securities Purchase Agreement) in such other Transaction Documents unless otherwise consented  to in writing by the Holder.   15.   DISPUTE RESOLUTION.           (a)   Submission to Dispute Resolution.               (i)   In the case of a dispute relating to the Exercise Price, the Closing Sale Price,        the Bid Price, Black Scholes Consideration Value, Event of Default Black Scholes Value,        Black Scholes Value or fair market value or the arithmetic calculation of the number of        Warrant Shares (as the case may be) (including, without limitation, a dispute relating to the        determination of any of the foregoing), the Company or the Holder (as the case may be)        shall submit the dispute to the other party via facsimile (A) if by the Company, within two        (2) Business Days after the occurrence of the circumstances giving rise to such dispute or        (B) if by the Holder, at any time after the Holder learned of the circumstances giving rise        to such dispute.  If the Holder and the Company are unable to promptly resolve such dispute        relating to such Exercise Price, such Closing Sale Price, such Bid Price, such Black Scholes        Consideration Value, Event of Default Black Scholes Value, Black Scholes Value or such        fair market value or such arithmetic calculation of the number of Warrant Shares (as the        case may be), at any time after the second (2nd) Business Day following such initial notice        by the Company or the Holder (as the case may be) of such dispute to the Company or the        Holder (as the case may be), then the Holder may, at its sole option, select an independent,        reputable investment bank to resolve such dispute.               (ii)  The Holder and the Company shall each deliver to such investment bank        (A)  a  copy  of  the  initial  dispute  submission  so  delivered  in  accordance  with  the  first        sentence of this  Section 15 and (B) written documentation supporting  its position with        respect to such dispute, in each case, no later than 5:00 p.m. (New York time) by the fifth        (5th)  Business  Day  immediately  following  the  date  on  which  the  Holder  selected  such        investment bank (the “Dispute Submission Deadline”) (the documents referred to in the        immediately  preceding  clauses  (A)  and  (B)  are  collectively  referred  to herein  as  the        “Required Dispute Documentation”) (it being understood and agreed that if either the        Holder or the Company fails to so deliver all of the Required Dispute Documentation by        the Dispute Submission Deadline, then the party who fails to so submit all of the Required                                        23   Error! Unknown document property name. 

 

          Dispute  Documentation  shall  no  longer  be  entitled  to  (and  hereby  waives  its  right  to)        deliver or submit any written documentation or other support to such investment bank with        respect to such dispute and such investment bank shall resolve such dispute based solely        on the Required Dispute Documentation that was delivered to such investment bank prior        to the Dispute Submission Deadline).  Unless otherwise agreed to in writing by both the        Company  and  the  Holder  or  otherwise  requested  by  such  investment  bank,  neither  the        Company nor the Holder shall be entitled to deliver or submit any written documentation        or other support to such investment bank in connection with such dispute (other than the        Required Dispute Documentation).               (iii) The Company and the Holder shall cause such investment bank to determine        the resolution of such dispute and notify the Company and the Holder of such resolution        no  later  than  ten  (10)  Business  Days  immediately  following  the  Dispute  Submission        Deadline.  The fees and expenses of such investment bank shall be borne solely by the        Company, and such investment bank’s resolution of such dispute shall be final and binding        upon all parties absent manifest error.         (b)   Miscellaneous.   The  Company  expressly  acknowledges  and  agrees  that (i)  this  Section  13  constitutes  an  agreement  to  arbitrate  between  the  Company  and  the  Holder  (and  constitutes an arbitration agreement) under the rules then in effect under § 7501, et seq.  of the  New York Civil Practice Law and Rules (“CPLR”) and that the Holder is authorized to apply for  an order to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with  this Section 15, (ii) a dispute relating to the Exercise Price includes, without limitation, disputes  as to (A) whether an issuance or sale or deemed issuance or sale of Common Stock occurred under  Section 2(b), (B) the consideration per share at which an issuance or deemed issuance of Common  Stock occurred, (C) whether any issuance or sale or deemed issuance or sale of Common Stock  was  an  issuance  or  sale  or  deemed  issuance  or  sale  of  Excluded  Securities,  (D)  whether  an  agreement, instrument, security or the like constitutes and Option or Convertible Security and (E)  whether a Dilutive Issuance occurred, (iii) the terms of this Warrant and each other applicable  Transaction Document shall serve as the basis for the selected investment bank’s resolution of the  applicable dispute, such investment bank shall be entitled (and is hereby expressly authorized) to  make all findings, determinations and the like that such investment bank determines are required  to be made by such investment bank in connection with its resolution of such dispute (including,  without limitation, determining (A) whether an issuance or sale or deemed issuance or sale of  Common Stock occurred under Section 2(b), (B) the consideration per share at which an issuance  or deemed issuance of  Common Stock occurred, (C) whether any issuance or sale or deemed  issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded  Securities, (D) whether an agreement, instrument, security or the like constitutes and Option or  Convertible Security and (E) whether a Dilutive Issuance occurred) and in resolving such dispute  such investment bank shall apply such findings, determinations and the like to the terms of this  Warrant and any other applicable Transaction Documents, (iv) the Holder (and only the Holder),  in its sole discretion, shall have the right to submit any dispute described in this Section 15 to any  state or federal court sitting in The City of New York, Borough of Manhattan in lieu of utilizing  the procedures set forth in this Section 15 and (v) nothing in this Section 15 shall limit the Holder  from obtaining any injunctive relief or other equitable remedies (including, without limitation,  with respect to any matters described in this Section 15).                                         24   Error! Unknown document property name. 

 

    16.   REMEDIES,  CHARACTERIZATION,  OTHER  OBLIGATIONS,  BREACHES  AND  INJUNCTIVE  RELIEF.   The  remedies  provided  in  this  Warrant  shall  be  cumulative  and  in  addition to all other remedies available under this Warrant and the other Transaction Documents,  at law or in equity (including a decree of specific performance and/or other injunctive relief), and  nothing herein shall limit the right of the Holder to pursue actual and consequential damages for  any failure by the Company to comply with the terms of this Warrant.  The Company covenants  to  the  Holder  that  there  shall  be  no  characterization  concerning  this  instrument  other  than  as  expressly provided herein.  Amounts set forth or provided for herein with respect to payments,  exercises and the like (and the computation thereof) shall be the amounts to be received by the  Holder and shall not, except as expressly provided herein, be subject to any other obligation of the  Company (or the performance thereof).  The Company acknowledges that a breach by it of its  obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any  such breach may be inadequate.  The Company therefore agrees that, in the event of any such  breach or threatened breach, the holder of this Warrant shall be entitled, in addition to all other  available  remedies,  to specific  performance  and/or  temporary,  preliminary  and  permanent  injunctive  or  other  equitable  relief  from  any  court  of  competent  jurisdiction  in  any  such  case  without the necessity of proving actual damages and without posting a bond or other security.  The  Company shall provide all information and documentation to the Holder that is requested by the  Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions  of this Warrant (including, without limitation, compliance with Section 2 hereof).  The issuance  of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall  be made without charge to the Holder or such shares for any issuance tax or other costs in respect  thereof, provided that the Company shall not be required to pay any tax which may be payable in  respect of any transfer involved in the issuance and delivery of any certificate in a name other than  the Holder or its agent on its behalf.   17.   PAYMENT  OF  COLLECTION,  ENFORCEMENT  AND  OTHER  COSTS.   If  (a)  this  Warrant  is  placed  in  the  hands  of  an  attorney  for  collection  or  enforcement  or  is  collected  or  enforced through any legal proceeding or the holder otherwise takes action to collect amounts due  under this Warrant or to enforce the provisions of this Warrant or (b) there occurs any bankruptcy,  reorganization, receivership of the company or other proceedings affecting company creditors’  rights and involving a claim under this Warrant, then the Company shall pay the costs incurred by  the  Holder  for  such  collection,  enforcement  or  action  or  in  connection  with  such  bankruptcy,  reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and  disbursements.    18.   TRANSFER.  This Warrant may be offered for sale, sold, transferred or assigned without  the consent of the Company, except as may otherwise be required by Section 2(g) of the Securities  Purchase Agreement.   19.   CERTAIN DEFINITIONS.  For purposes of this Warrant, the following terms shall have  the following meanings:         (a)   “1933  Act”  means  the  Securities  Act  of  1933,  as  amended,  and  the  rules  and  regulations thereunder.                                         25   Error! Unknown document property name. 

 

          (b)   “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules  and regulations thereunder.         (c)   “Adjusted Share Amount” means, with respect to any given Investor Prepayment  (as defined in the Series B Note) at such corresponding Investor Prepayment Time, 30% of the  quotient of (i) the sum of the aggregate amount of Restricted Principal (as defined in the Series B  Note) and Restricted OID (as defined in the Series B Note) becoming Unrestricted Principal (as  defined in the Series B Note) in connection with such Investor Prepayment, divided by (ii) $3.00  (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations and similar  events).         (d)   “Adjustment Right” means any right granted with respect to any securities issued  in  connection  with,  or  with  respect  to,  any  issuance  or  sale  (or  deemed  issuance  or  sale  in  accordance with Section 2) of shares of Common Stock (other than rights of the type described in  Section 3 and 4 hereof) that could result in a decrease in the net consideration received by the  Company in connection with, or with respect to, such securities (including, without limitation, any  cash settlement rights, cash adjustment or other similar rights).         (e)   “Affiliate” means, with respect to any Person, any other Person that directly or  indirectly  controls, is  controlled  by,  or  is  under  common  control  with,  such  Person,  it  being  understood for purposes of this definition that “control” of a Person means the power directly or  indirectly either to vote 10% or more of the stock having ordinary voting power for the election of  directors of such Person or direct or cause the direction of the management and policies of such  Person whether by contract or otherwise.         (f)   “Alternate Exercise Price” means, with respect  to any Alternate Exercise with  respect to any Alternate Exercise that price which shall be the lowest of (i) the applicable Exercise  Price as in effect on the applicable Exercise Date of the applicable Alternate Exercise,  and (ii) the  greater of (x) the Floor Price and (y) 85% of the price computed as the lowest VWAP of the  Common Stock  during  the  ten  (10)  consecutive  Trading  Day  period  ending  and  including  the  Trading Day immediately preceding the delivery or deemed delivery of the applicable Exercise  Notice (such period, the “Alternate Exercise Measuring Period”).  All such determinations to  be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification  or similar transaction that proportionately decreases or increases the Common Stock during such  Alternate Exercise Measuring Period.         (g)    “Approved  Stock  Plan”  means  any  employee  benefit  plan  which  has  been  approved  by  the  board  of  directors  of  the  Company  prior  to  or  subsequent  to  the  date  hereof  pursuant to which shares of Common Stock and standard options to purchase Common Stock may  be  issued  to  any  employee,  officer  or  director  for  services  provided  to  the  Company  in  their  capacity as such.          (h)   “Attribution Parties” means, collectively, the following Persons and entities: (i)  any investment vehicle, including, any funds, feeder funds or managed accounts, currently, or from  time to time after the Issuance Date, directly or indirectly managed or advised by the Holder’s  investment manager or any of its Affiliates or principals, (ii) any direct or indirect Affiliates of the  Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a                                        26   Error! Unknown document property name. 

 

    Group together with the Holder or any of the foregoing and (iv) any other Persons whose beneficial  ownership of the Company’s Common Stock would or could be aggregated with the Holder’s and  the other Attribution Parties for purposes of Section 13(d) of the 1934 Act.  For clarity, the purpose  of  the  foregoing  is  to  subject  collectively  the  Holder  and  all  other  Attribution  Parties  to  the  Maximum Percentage.           (i)   “Bid Price” means, for any security as of the particular time of determination, the  bid price for such security on the Principal Market as reported by Bloomberg as of such time of  determination, or, if the Principal Market is not the principal securities exchange or trading market  for such security, the bid price of such security on the principal securities exchange or trading  market  where  such  security  is  listed  or  traded  as  reported  by  Bloomberg  as  of  such  time  of  determination, or if the foregoing does not apply, the bid price of such security in the over-the- counter market on the electronic bulletin board for such security as reported by Bloomberg as of  such time of determination, or, if no bid price is reported for such security by Bloomberg as of  such time of determination, the average of the bid prices of any market makers for such security  as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of  such time of determination.  If the Bid Price cannot be calculated for a security as of the particular  time of determination on any of the foregoing bases, the Bid Price of such security as of such time  of determination shall be the fair market value as mutually determined by the Company and the  Holder.  If the Company and the Holder are unable to agree upon the fair market value of such  security, then such dispute shall be resolved in accordance with the procedures in Section 15.  All  such  determinations  shall  be  appropriately  adjusted  for  any  stock  dividend,  stock  split,  stock  combination or other similar transaction during such period.         (j)   “Black Scholes Consideration Value” means the value of the applicable Option,  Convertible Security or Adjustment Right  (as the case may be) as of the date of issuance thereof  calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on  Bloomberg  utilizing  (i)  an  underlying  price  per  share  equal  to  the  Closing  Sale  Price  of  the  Common  Stock  on  the  Trading  Day  immediately  preceding  the  public  announcement  of  the  execution  of  definitive  documents  with  respect  to  the  issuance  of  such  Option  or  Convertible  Security (as the case may be), (ii) a risk-free interest rate corresponding to the U.S. Treasury rate  for a period equal to the remaining term of such Option, Convertible Security or Adjustment Right  (as the case may be) as of the date of issuance of such Option, Convertible Security or Adjustment  Right (as the case may be), (iii) a zero cost of borrow and (iv) an expected volatility equal to the  greater  of  100%  and  the  30  day  volatility  obtained  from  the  “HVT”  function  on  Bloomberg  (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following  the date of issuance of such Option, Convertible Security or Adjustment Right (as the case may  be).         (k)   “Black Scholes Value” means the value of the unexercised portion of this Warrant  remaining on the date of the Holder’s request pursuant to Section 4(c)(i), which value is calculated  using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg  utilizing (i) an underlying price per share equal to the greater of (1) the highest Closing Sale Price  of the Common Stock during the period beginning on the Trading Day immediately preceding the  announcement of the applicable Fundamental Transaction (or the consummation of the applicable  Fundamental  Transaction,  if  earlier)  and  ending  on  the  Trading  Day  of  the  Holder’s  request                                         27   Error! Unknown document property name. 

 

    pursuant to Section 4(c)(i), (2) the highest Closing Sale Price of the Common Stock during the  period beginning on the Trading Day immediately preceding the announcement of the applicable  Fundamental  Transaction (or the  consummation  of the applicable  Fundamental  Transaction, if  earlier) and ending on the date of consummation of such Fundamental Transaction and (3) the sum  of the price per share being offered in cash in the applicable Fundamental Transaction (if any) plus  the value of the non-cash consideration being offered in the applicable Fundamental Transaction  (if any), (ii) a strike price equal to the Exercise Price in effect on the date of the Holder’s request  pursuant to Section 4(c)(i), (iii) a risk-free interest rate corresponding to the U.S. Treasury rate for  a period equal to the greater of (1) the remaining term of this Warrant as of the date of the Holder’s  request pursuant to Section 4(c)(i) and (2) the remaining term of this Warrant as of the date of  consummation of the applicable Fundamental Transaction or as of the date of the Holder’s request  pursuant to Section 4(c)(i) if such request is prior to the date of the consummation of the applicable  Fundamental Transaction, (iv) a zero cost of borrow and (v) an expected volatility equal to the  greater  of  100%  and  the  30  day  volatility  obtained  from  the “HVT”  function  on  Bloomberg  (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following  the earliest to occur of (A) the public disclosure of the applicable Fundamental Transaction, (B)  the consummation of the applicable Fundamental Transaction and (C) the date on which the Holder  first became aware of the applicable Fundamental Transaction.         (l)   “Bloomberg” means Bloomberg, L.P.         (m)   “Business Day” means any day other than Saturday, Sunday or other day on which  commercial banks in The City of New York are authorized or required by law to remain closed;  provided, however, for clarification, commercial banks shall not be deemed to be authorized or  required  by  law  to  remain  closed  due  to  “stay  at  home”,  “shelter-in-place”,  “non-essential  employee”  or  any  other  similar  orders  or  restrictions  or  the  closure  of  any  physical  branch  locations at the direction of any governmental authority so long as the electronic funds transfer  systems (including for wire transfers) of commercial banks in The City of New York generally are  open for use by customers on such day.         (n)   “Closing Sale Price” means, for any security as of any date, the last closing trade  price for such security on the Principal Market, as reported by Bloomberg, or, if the Principal  Market begins to operate on an extended hours basis and does not designate the closing trade price,  then the last trade price of such security prior to 4:00:00 p.m., New York time, as reported by  Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market  for such security, the last trade price of such security on the principal securities exchange or trading  market where such security is listed or traded as reported by Bloomberg, or if the foregoing does  not apply, the last trade price of such security in the over-the-counter market on the electronic  bulletin board for such security as reported by Bloomberg, or, if no last trade price is reported for  such security by Bloomberg, the average of the ask prices of any market makers for such security  as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC).  If the  Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing  bases,  the  Closing  Sale  Price  of  such  security  on  such  date  shall  be  the  fair  market  value  as  mutually determined by the Company and the Holder.  If the Company and the Holder are unable  to  agree  upon  the  fair  market  value  of  such  security,  then  such  dispute  shall  be  resolved  in  accordance with  the  procedures  in  Section 15.  All  such  determinations  shall  be  appropriately                                         28   Error! Unknown document property name. 

 

    adjusted for any stock dividend, stock split, stock combination or other similar transaction during  such period.         (o)   “Common Stock” means (i) the Company’s shares of common stock, $0.0001 par  value per share, and (ii) any capital stock into which such common stock shall have been changed  or any share capital resulting from a reclassification of such common stock.         (p)   “Convertible Securities” means any stock or other security (other than Options)  that is at any time and under any circumstances, directly or indirectly, convertible into, exercisable  or  exchangeable  for,  or  which  otherwise  entitles  the  holder  thereof  to  acquire,  any  shares  of  Common Stock.         (q)   “Eligible Market” means The New York Stock Exchange, the NYSE American,  the Nasdaq Global Select Market, the Nasdaq Global Market or the Principal Market.         (r)   “Event Market Price” means, with respect to any Stock Combination Event Date,  85% of the quotient determined by dividing (x) the sum of the VWAP of the Common Stock for  each of the three (3) lowest Trading Days during the fifteen (15) consecutive Trading Day period  ending and including the Trading Day immediately preceding the sixteenth (16th) Trading Day  after such Stock Combination Event Date, divided by (y) three (3).  All such determinations shall  be appropriately adjusted for any stock dividend, stock split, stock combination, recapitalization  or other similar transaction during such period.         (s)    “Event  of Default Black  Scholes  Value”  means  the  value  of  the  unexercised  portion of this Warrant remaining on the date of the Holder’s request pursuant to Section 4(c)(ii),  which value is calculated using the Black Scholes Option Pricing Model obtained from the “OV”  function on Bloomberg utilizing (i) an underlying price per share equal to the highest Closing Sale  Price of the Common Stock during the period beginning on the date of the occurrence of the Event  of Default through the Trading Day of the Holder’s request pursuant to Section 4(c)(ii), (ii) a strike  price equal to the Alternate Exercise Price in effect on the date of the Holder’s request pursuant to  Section 4(c)(ii), (iii) a risk-free interest rate corresponding to the U.S. Treasury rate for a period  equal to the greater of (1) the remaining term of this Warrant as of the date of the Holder’s request  pursuant  to  Section 4(c)(ii) and  (2)  the  remaining  term  of  this  Warrant  as  of  the  date  of  the  occurrence of such Event of Default, (iv) a zero cost of borrow and (v) an expected volatility equal  to the greater of 100% and the 30 day volatility obtained from the “HVT” function on Bloomberg  (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following  later of (x) the date of the occurrence of such Event of Default and (y) the date of the public  announcement of such Event of Default.         (t)    “Excluded  Securities” shall  have the  meaning  as  set  forth  in  the  Securities  Purchase Agreement.           (u)   “Expiration Date” means the date that is the third (3rd) anniversary of the Issuance  Date or, if such date falls on a day other than a Trading Day or on which trading does not take  place on the Principal Market (a “Holiday”), the next date that is not a Holiday.         (v)   “Floor Price” means $0.26.                                        29   Error! Unknown document property name. 

 

          (w)   “Fundamental  Transaction”  means  (A)  that  the  Company  shall,  directly  or  indirectly, including  through  subsidiaries,  Affiliates  or  otherwise,  in one  or  more  related  transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving  corporation) another Subject Entity, or (ii) sell, assign, transfer, convey or otherwise dispose of all  or substantially all of the properties or assets of the Company or any of its “significant subsidiaries”  (as defined in Rule 1-02 of Regulation S-X) to one or more Subject Entities, or (iii) make, or allow  one or more Subject Entities to make, or allow the Company to be subject to or have its Common  Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange  offer that is accepted by the holders of at least either (x) 50% of the outstanding shares of Common  Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common  Stock held by all Subject Entities making or party to, or Affiliated with any Subject Entities making  or party to, such purchase, tender or exchange offer were not outstanding; or (z) such number of  shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any  Subject Entity making or party to, such purchase, tender or exchange offer, become collectively  the  beneficial  owners  (as  defined  in  Rule  13d-3  under  the  1934  Act)  of  at  least  50%  of  the  outstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or  other business combination (including, without limitation, a reorganization, recapitalization, spin- off or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities,  individually  or  in  the  aggregate,  acquire,  either (x)  at  least  50%  of  the  outstanding  shares  of  Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as if any  shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any  Subject Entity making or party to, such stock purchase agreement or other business combination  were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities  become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least  50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize or reclassify its  Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries,  Affiliates or otherwise, in one or more related transactions, allow any Subject Entity individually  or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule  13d-3  under  the  1934  Act),  directly  or  indirectly,  whether  through  acquisition,  purchase,  assignment,  conveyance,  tender,  tender  offer,  exchange,  reduction  in  outstanding  shares  of  Common  Stock,  merger,  consolidation,  business  combination,  reorganization,  recapitalization,  spin-off, scheme of arrangement, reorganization, recapitalization or reclassification or otherwise  in  any  manner  whatsoever,  of  either  (x)  at  least  50%  of the  aggregate  ordinary  voting  power  represented by issued and outstanding Common Stock, (y) at least 50% of the aggregate ordinary  voting power represented by issued and outstanding Common Stock not held by all such Subject  Entities as of the date of this Warrant calculated as if any shares of Common Stock held by all  such Subject Entities were not outstanding, or (z) a percentage of the aggregate ordinary voting  power represented by issued and outstanding shares of Common Stock or other equity securities  of the Company sufficient to allow such Subject Entities to effect a statutory short form merger or  other  transaction  requiring  other  shareholders  of  the  Company  to  surrender  their  shares  of  Common Stock without approval of the shareholders of the Company or (C) directly or indirectly,  including through subsidiaries, Affiliates or otherwise, in one or more related transactions, the  issuance  of  or  the  entering  into  any  other  instrument  or  transaction  structured  in  a  manner  to  circumvent, or that circumvents, the intent of this definition in which case this definition shall be  construed and implemented in a manner otherwise than in strict conformity with the terms of this                                         30   Error! Unknown document property name. 

 

    definition to the extent necessary to correct this definition or any portion of this definition which  may be defective or inconsistent with the intended treatment of such instrument or transaction.         (x)   “Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and  as defined in Rule 13d-5 thereunder.         (y)   “Investor  Prepayment  Time”  means,  with  respect  to  any  given  Investor  Prepayment, the time the Company receives such Investor Prepayment.         (z)   “Maximum Eligibility Number” means initially 432,000 and shall be increased at  each Investor Prepayment Time by an amount equal to the applicable Adjusted Share Amount as  of such applicable Investor Prepayment Time.         (aa)  “Notes”  has  the  meaning  ascribed  to  such  term  in  the  Securities  Purchase  Agreement, and shall include all notes issued in exchange therefor or replacement thereof.         (bb)  “Options” means any rights, warrants or options to subscribe for or purchase shares  of Common Stock or Convertible Securities.         (cc)  “Parent Entity” of a Person means an entity that, directly or indirectly, controls  the applicable Person and whose common stock or equivalent equity security is quoted or listed  on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or  Parent Entity with the largest public market capitalization as of the date of consummation of the  Fundamental Transaction.         (dd)  “Person” means an individual, a limited liability company, a partnership, a joint  venture, a corporation, a trust, an unincorporated organization, any other entity or a government  or any department or agency thereof.         (ee)  “Principal Market” means the Nasdaq Capital Market.         (ff)  “Registration  Rights  Agreement”  means  that  certain  registration  rights  agreement, dated as of the Closing Date, by and among the Company and the initial holders of the  Notes relating to, among other things, the registration of the resale of the Common Stock issuable  upon conversion of the Notes or otherwise pursuant to the terms of the Notes and exercise of the  SPA Warrants, as may be amended from time to time.         (gg)  “SEC”  means  the  United  States  Securities  and  Exchange  Commission  or  the  successor thereto.         (hh)  “Subject Entity” means any Person, Persons or Group or any Affiliate or associate  of any such Person, Persons or Group.         (ii)  “Successor Entity” means the Person (or, if so elected by the Holder, the Parent  Entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if  so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have  been entered into.                                         31   Error! Unknown document property name. 

 

          (jj)  “Trading Day” means, as applicable, (x) with respect to all price or trading volume  determinations relating to the Common Stock, any day on which the Common Stock is traded on  the Principal Market, or, if the Principal Market is not the principal trading market for the Common  Stock, then on the principal securities exchange or securities market on which the Common Stock  is then traded, provided that “Trading Day” shall not include any day on which the Common Stock  is  scheduled  to  trade  on  such  exchange  or  market  for  less  than  4.5  hours  or  any  day  that  the  Common Stock is suspended from trading during the final hour of trading on such exchange or  market (or if such exchange or market does not designate in advance the closing time of trading  on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time) unless  such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to  all  determinations  other  than  price or  trading  volume determinations  relating  to  the  Common  Stock, any day on which The New York Stock Exchange (or any successor thereto) is open for  trading of securities.          (kk)  “VWAP”  means,  for  any  security  as  of  any  date,  the  dollar  volume-weighted  average price for such security  on the Principal  Market  (or, if the Principal  Market  is  not  the  principal trading market for such security, then on the principal securities exchange or securities  market on which such security is then traded), during the period beginning at 9:30 a.m., New York  time, and ending  at  4:00  p.m.,  New York time,  as  reported by Bloomberg through its  “VAP”  function (set to 09:30 start time and 16:00 end time) or, if the foregoing does not apply, the dollar  volume-weighted average price of such security in the over-the-counter market on the electronic  bulletin board for such security during the period beginning at 9:30 a.m., New York time, and  ending at 4:00 p.m., New York time, as reported by Bloomberg, or, if no dollar volume-weighted  average price is reported for such security by Bloomberg for such hours, the average of the highest  closing bid price and the lowest closing ask price of any of the market makers for such security as  reported in the “pink sheets” by OTC Markets Group Inc.  (formerly Pink Sheets LLC).  If the  VWAP cannot be calculated for such security on such date on any of the foregoing bases, the  VWAP of such security on such date shall be the fair market value as mutually determined by the  Company and the Holder.  If the Company and the Holder are unable to agree upon the fair market  value of such security, then such dispute shall be resolved in accordance with the procedures in  Section 15.  All such determinations shall be appropriately adjusted for any stock dividend, stock  split, stock combination, recapitalization or other similar transaction during such period.                                [signature page follows]                                         32   Error! Unknown document property name. 

 

          IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common  Stock to be duly executed as of the Issuance Date set out above.                                       PHUNWARE, INC.                                        By: _________________________________                                         Name:                                          Title:                                    NY01\AdelM\3821933.10   Error! Unknown document property name. 

 

                                                                       EXHIBIT A                                EXERCISE NOTICE        TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS                    WARRANT TO PURCHASE COMMON STOCK                                 PHUNWARE, INC.          The undersigned holder hereby elects to exercise the Warrant to Purchase Common Stock  No. _______ (the “Warrant”) of Phunware, Inc., a Delaware corporation (the “Company”) as  specified below.  Capitalized terms used herein and not otherwise defined shall have the respective  meanings set forth in the Warrant.         1.    Form  of  Exercise  Price.   The  Holder  intends  that  payment  of  the  Aggregate  Exercise Price shall be made as:                     a “Cash Exercise” with respect to _________________ Warrant Shares; and/or                     a “Cashless Exercise” with respect to _______________ Warrant Shares.         In the event that the Holder has elected a Cashless Exercise with respect to some or all of the  Warrant Shares to be issued pursuant hereto, the Holder hereby represents and warrants that (i) this  Exercise Notice was executed by the Holder at __________ [a.m.][p.m.] on the date set forth below  and (ii) if applicable, the Bid Price as of such time of execution of this Exercise Notice was $________.         2.    Payment of Exercise Price.  In the event that the Holder has elected a Cash Exercise  with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holder shall pay the  Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with  the terms of the Warrant.               If this Exercise Notice is being delivered with respect to an Alternate Exercise, check              here  if  Holder  is  electing  to  use  the  following  Alternate  Exercise  Price  in  this              exercise:____________.         3.    Delivery of Warrant Shares.  The Company shall deliver to Holder, or its designee or  agent as specified below, __________ shares of Common Stock in accordance with the terms of the  Warrant.  Delivery shall be made to Holder, or for its benefit, as follows:               Check here if requesting delivery as a certificate to the following name and to the  following address:         Issue to:                                                       Error! Unknown document property name. 

 

                Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:          DTC Participant:          DTC Number:               Account Number:                                                Date: _____________ __,                                    Name of Registered Holder    By:                             Name:      Title:           Tax ID:____________________________      Facsimile:__________________________      E-mail Address:_____________________                 Error! Unknown document property name. 

 

                                                                       EXHIBIT B                               ACKNOWLEDGMENT         The Company hereby acknowledges this Exercise Notice and hereby directs ______________  to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent  Instructions  dated  _________,  202_,  from  the  Company  and  acknowledged  and  agreed  to  by  _______________.                                         PHUNWARE, INC.                                         By:  _________________________________                                          Name:                                          Title:                                            Error! Unknown document property name.

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