NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE
IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE
UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.
COMMON STOCK PURCHASE WARRANT
RETAIL PRO, INC.
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Warrant
Shares: 1,000,000
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Initial
Exercise Date: June 13, 2008
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THIS
COMMON STOCK PURCHASE WARRANT (the “ Warrant
”) certifies that, for value received, Midsummer
Investment Ltd. (the “ Holder
”) is entitled, upon the terms and subject to the
limitations on exercise and the conditions hereinafter set
forth, at any time on or after the date hereof (the “
Initial Exercise
Date ”) and on or prior to the close of business
on the 4 year anniversary of the Initial Exercise Date (the
“ Termination
Date ”) but not thereafter, to subscribe for and
purchase from Retail Pro, Inc., a Delaware corporation (the
“ Company
”), up to 1,000,000 shares (the “ Warrant
Shares ”) of Common Stock. The
purchase price of one share of Common Stock under this Warrant
shall be equal to the Exercise Price, as defined in Section
2(b). This Warrant is being
issued pursuant to Sections 3(a)(9) and 18(b)(4)(C) of the
Securities Act and, as such, pursuant to Rule 144, the holding
period of the Warrants and the Warrant Shares solely upon
cashless exercise pursuant to Section 2(c) herein shall tack
back to the initial issuance date of the Original
Notes.
Section 1 . Definitions
. Capitalized terms used and not otherwise defined
herein shall have the meanings set forth in that certain Securities
Exchange Agreement (the “ Exchange
Agreement ”), dated June 13, 2008, among the Company
and the purchasers signatory thereto.
Section 2 . Exercise
.
a)
Exercise of Warrant . Exercise of the purchase
rights represented by this Warrant may be made, in whole or in
part, at any time or times on or after the Initial Exercise Date
and on or before the Termination Date by delivery to the Company
(or such other office or agency of the Company as it may designate
by notice in writing to the registered Holder at the address of the
Holder appearing on the books of the Company) of a duly executed
facsimile copy of the Notice of Exercise Form annexed hereto; and,
within 3 Trading Days of the date said Notice of Exercise is
delivered to the Company, the Company shall have received payment
of the aggregate Exercise Price of the shares thereby purchased by
wire transfer or cashier’s check drawn on a United States
bank. Notwithstanding anything herein to the contrary,
the Holder shall not be required to physically surrender this
Warrant to the Company until the Holder has purchased all of the
Warrant Shares available hereunder and the Warrant has been
exercised in full, in which case, the Holder shall surrender this
Warrant to the Company for cancellation within 3 Trading Days of
the date the final Notice of Exercise is delivered to the
Company. Partial exercises of this Warrant resulting in
purchases of a portion of the total number of Warrant Shares
available hereunder shall have the effect of lowering the
outstanding number of Warrant Shares purchasable hereunder in an
amount equal to the applicable number of Warrant Shares
purchased. The Holder and the Company shall maintain
records showing the number of Warrant Shares purchased and the date
of such purchases. The Company shall deliver any
objection to any Notice of Exercise Form within 1 Business Day of
receipt of such notice. In the event of any dispute or
discrepancy, the records of the Holder shall be controlling and
determinative in the absence of manifest error. The Holder and any assignee,
by acceptance of this Warrant, acknowledge and agree that, by
reason of the provisions of this paragraph, following the purchase
of a portion of the Warrant Shares hereunder, the number of Warrant
Shares available for purchase hereunder at any given time may be
less than the amount stated on the face hereof.
b)
Exercise Price . The exercise price per share of
the Common Stock under this Warrant shall be $0.08 , subject to
adjustment hereunder (the “ Exercise Price
”).
c)
Cashless Exercise . If at any time after the date
hereof, there is no effective registration statement registering,
or no current prospectus available for, the resale of the Warrant
Shares by the Holder, then this Warrant may also be exercised at
such time by means of a “cashless exercise” in which
the Holder shall be entitled to receive a certificate for the
number of Warrant Shares equal to the quotient obtained by dividing
[(A-B) (X)] by (A), where:
(A)
= the VWAP on the Trading Day immediately preceding the date
of such election;
(B)
= the Exercise Price of this Warrant, as adjusted;
and
(X)
= the number of Warrant Shares issuable upon exercise of this
Warrant in accordance with the terms of this Warrant by means
of a cash exercise rather than a cashless exercise, or if only
a portion of this Warrant is being exercised, the number of
Warrant Shares issuable upon such partial
exercise.
Notwithstanding
anything herein to the contrary, on the Termination Date, this
Warrant shall be automatically exercised via cashless exercise
pursuant to this Section 2(c).
d)
Exercise Limitations .
i.
Holder’s Restrictions . The Company shall
not effect any exercise of this Warrant, and a Holder shall not
have the right to exercise any portion of this Warrant, pursuant to
Section 2 or otherwise, to the extent that after giving effect to
such issuance after exercise as set forth on the applicable Notice
of Exercise, the Holder (together with the Holder’s
Affiliates, and any other person or entity acting as a group
together with the Holder or any of the Holder’s Affiliates),
would beneficially own in excess of the Beneficial Ownership
Limitation (as defined below). For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned
by the Holder and its Affiliates shall include the number of shares
of Common Stock issuable upon exercise of this Warrant with respect
to which such determination is being made, but shall exclude the
number of shares of Common Stock which would be issuable upon (A)
exercise of the remaining, nonexercised portion of this Warrant
beneficially owned by the Holder or any of its Affiliates and (B)
exercise or conversion of the unexercised or nonconverted portion
of any other securities of the Company (including, without
limitation, any other Common Stock Equivalents) subject
to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by the Holder or any
of its affiliates. Except as set forth in the preceding
sentence, for purposes of this Section 2(d)(i), beneficial
ownership shall be calculated in accordance with Section 13(d) of
the Exchange Act and the rules and regulations promulgated
thereunder, it being acknowledged by the Holder that the Company is
not representing to the Holder that such calculation is in
compliance with Section 13(d) of the Exchange Act and the Holder is
solely responsible for any schedules required to be filed in
accordance therewith. To the extent that the limitation
contained in this Section 2(d)(i) applies, the determination of
whether this Warrant is exercisable (in relation to other
securities owned by the Holder together with any Affiliates) and of
which portion of this Warrant is exercisable shall be in the sole
discretion of the Holder, and the submission of a Notice of
Exercise shall be deemed to be the Holder’s determination of
whether this Warrant is exercisable (in relation to other
securities owned by the Holder together with any Affiliates) and of
which portion of this Warrant is exercisable, in each case subject
to the Beneficial Ownership Limitation, and the Company shall have
no obligation to verify or confirm the accuracy of such
determination. In addition, a determination as to any
group status as contemplated above shall be determined in
accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated
thereunder. For
purposes of this Section 2(d)(i), in determining the number of
outstanding shares of Common Stock, a Holder may rely on the
number of outstanding shares of Common Stock as reflected in
(A) the Company’s most recent periodic or annual report,
as the case may be, (B) a more recent public announcement by
the Company or (C) any other notice by the Company or the
Transfer Agent setting forth the number of shares of Common
Stock outstanding. Upon the written or oral request of a
Holder, the Company shall within two Trading Days confirm
orally and in writing to the Holder the number of shares of
Common Stock then outstanding. In any case, the number
of outstanding shares of Common Stock shall be determined
after giving effect to the conversion or exercise of
securities of the Company, including this Warrant, by the
Holder or its Affiliates since the date as of which such
number of outstanding shares of Common Stock was
reported. The “ Beneficial
Ownership Limitation ” shall be 4.99% of the
number of shares of the Common Stock outstanding immediately
after giving effect to the issuance of shares of Common Stock
issuable upon exercise of this Warrant. The Holder,
upon not less than 61 days’ prior notice to the Company,
may increase or decrease the Beneficial Ownership Limitation
provisions of this Section 2(d)(i), provided that the
Beneficial Ownership Limitation in no event exceeds 9.99% of
the number of shares of the Common Stock outstanding
immediately after giving effect to the issuance of shares of
Common Stock upon exercise of this Warrant held by the Holder
and the provisions of this Section 2(d)(i) shall continue to
apply. Any such increase or decrease will not be
effective until the 61 st
day after such notice is delivered to the
Company. The provisions of this paragraph shall be
construed and implemented in a manner otherwise than in strict
conformity with the terms of this Section 2(d)(i) to correct
this paragraph (or any portion hereof) which may be defective
or inconsistent with the intended Beneficial Ownership
Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such
limitation. The limitations contained in this paragraph shall
apply to a successor holder of this Warrant.
e)
Mechanics of Exercise .
i.
Delivery of Certificates Upon Exercise
. Certificates for shares purchased hereunder shall be
transmitted by the Transfer Agent to the Holder by crediting the
account of the Holder’s prime broker with the Depository
Trust Company through its Deposit Withdrawal Agent Commission
(“ DWAC ”)
system if the Company is then a participant in such system and
either (A) there is an effective registration statement permitting
the resale of the Warrant Shares by the Holder, or (B) the shares
are eligible for resale without volume or manner-of-sale
limitations pursuant to Rule 144, and otherwise by physical
delivery to the address specified by the Holder in the Notice of
Exercise within 3 Trading Days from the delivery to the Company of
the Notice of Exercise
Form,
surrender of this Warrant (if required) and payment of the
aggregate Exercise Price as set forth above (the “
Warrant
Share Delivery Date ”). This Warrant shall
be deemed to have been exercised on the date the Exercise Price is
received by the Company. The Warrant Shares shall be
deemed to have been issued, and Holder or any other person so
designated to be named therein shall be deemed to have become a
holder of record of such shares for all purposes, as of the date
the Warrant has been exercised by payment to the Company of the
Exercise Price (or by cashless exercise, if permitted) and all
taxes required to be paid by the Holder, if any, pursuant to
Section 2(e)(vi) prior to the issuance of such shares, have been
paid. If the Company fails for any reason to deliver to the Holder
certificates evidencing the Warrant Shares subject to a Notice of
Exercise by the second Trading Day following the Warrant Share
Delivery Date, the Company shall pay to the Holder, in cash, as
liquidated damages and not as a penalty, for each $2,000 of Warrant
Shares subject to such exercise (based on the VWAP of the Common
Stock on the date of the applicable Notice of Exercise), $10 per
Trading Day (increasing to $20 per Trading Day on the fifth Trading
Day after such liquidated damages begin to accrue) for each Trading
Day after such second Trading Day following the Warrant Share
Delivery Date until such certificates are delivered.
ii.
Delivery of New Warrants Upon Exercise . If this
Warrant shall have been exercised in part, the Company shall, at
the request of a Holder and upon surrender of this Warrant
certificate, at the time of delivery of the certificate or
certificates representing Warrant Shares, deliver to Holder a new
Warrant evidencing the rights of Holder to purchase the unpurchased
Warrant Shares called for by this Warrant, which new Warrant shall
in all other respects be identical with this Warrant.
iii.
Rescission Rights . If the Company fails to cause
the Transfer Agent to transmit to the Holder a certificate or the
certificates representing the Warrant Shares pursuant to Section
2(e)(i) by the Warrant Share Delivery Date, then, the Holder will
have the right to rescind such exercise at any time prior to its
receipt of such certificate or certificates.
iv.
Compensation for Buy-In on Failure to Timely Deliver Certificates
Upon Exercise . In addition to any other rights
available to the Holder, if the Company fails to cause the Transfer
Agent to transmit to the Holder a certificate or the certificates
representing the Warrant Shares pursuant to an exercise on or
before the Warrant Share Delivery Date, and if after such date the
Holder is required by its broker to purchase (in an open market
transaction or otherwise), shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Warrant Shares which
the Holder anticipated receiving upon such exercise (a “
Buy-In
”), then the Company shall (A) pay in cash to the Holder the
amount by which (x) the Holder’s total purchase price
(including brokerage
commissions,
if any) for the shares of Common Stock so purchased exceeds (y) the
amount obtained by multiplying (1) the number of Warrant Shares
that the Company was required to deliver to the Holder in
connection with the exercise at issue times (2) the price at which
the sell order giving rise to such purchase obligation was
executed, and (B) at the option of the Holder, either reinstate the
portion of the Warrant and equivalent number of Warrant Shares for
which such exercise was not honored or deliver to the Holder the
number of shares of Common Stock that would have been issued had
the Company timely complied with its exercise and delivery
obligations hereunder. For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted exercise of shares of
Common Stock with an aggregate sale price giving rise to such
purchase obligation of $10,000, under clause (A) of the immediately
preceding sentence the Company shall be required to pay the Holder
$1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the
Buy-In together with applicable confirmations and other evidence of
such loss reasonably requested by the Company. Nothing
herein shall limit a Holder’s right to pursue any other
remedies available to it hereunder, at law or in equity including,
without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to
timely deliver certificates representing shares of Common Stock
upon exercise of the Warrant as required pursuant to the terms
hereof.
v.
No Fractional Shares or Scrip . No fractional
shares or scrip representing fractional shares shall be issued upon
the exercise of this Warrant. As to any fraction of a
share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall, at its election, either pay a
cash adjustment in respect of such final fraction in an amount
equal to such fraction multiplied by the Exercise Price or round up
to the next whole share.
vi.
Charges, Taxes and Expenses . Issuance of
certificates for Warrant Shares shall be made without charge to the
Holder for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and
expenses shall be paid by the Company, and such certificates shall
be issued in the name of the Holder or in such name or names as may
be directed by the Holder; provided ,
however , that
in the event certificates for Warrant Shares are to be issued in a
name other than the name of the Holder, this Warrant when
surrendered for exercise shall be accompanied by the Assignment
Form attached hereto duly executed by the Holder and the Company
may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any transfer tax incidental
thereto.
vii.
Closing of Books . The Company will not close its
stockholder books or records in any manner which prevents the
timely exercise of this Warrant, pursuant to the terms
hereof.
Section 3 . Certain
Adjustments .
a)
Stock Dividends and Splits . If the Company, at any time
while this Warrant is outstanding: (i) pays a stock dividend or
otherwise make a distribution or distributions on
