Exhibit 10.4

 

[FORM OF WARRANT]

 

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
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, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS 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.

 

THINK PARTNERSHIP INC.

 

WARRANT TO PURCHASE COMMON STOCK

 

Warrant No.:

Number of Shares of Common Stock:

Date of Issuance: March 20, 2006 (“Issuance Date”)

 

Think Partnership Inc. (formerly known as CGI Holding Corporation), a Nevada
corporation (the “Company”), hereby certifies that, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
[MAGNETAR CAPITAL MASTER FUND, LTD.], [OTHER BUYERS], 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 surrender 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 date hereof, but not after 11:59 p.m., New York time, on the Expiration Date
(as defined below),                     (1) fully paid nonassessable shares of
Common Stock (as defined below) (the “Warrant Shares”). Except as otherwise
defined herein, capitalized terms in this Warrant shall have the meanings set
forth in Section 15. 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 March 20, 2006 (the “Subscription
Date”), by and among the Company and the investors (the “Buyers”) referred to
therein (the “Securities Purchase Agreement”).

 

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(1)                                  INSERT NUMBER OF SHARES EQUAL TO 40% OF THE
NUMBER OF CONVERSION SHARES INITIALLY ISSUABLE UPON CONVERSION OF THE PREFERRED
SHARES ISSUED TO THE HOLDER PURSUANT TO THE SECURITIES PURCHASE AGREEMENT.

 

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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 DATE HEREOF, IN WHOLE OR IN PART, BY (I) DELIVERY OF A WRITTEN NOTICE,
IN THE FORM ATTACHED HERETO AS EXHIBIT A (THE “EXERCISE NOTICE”), OF THE
HOLDER’S ELECTION TO EXERCISE THIS WARRANT AND (II) (A) PAYMENT TO THE COMPANY
OF AN AMOUNT EQUAL TO THE APPLICABLE EXERCISE PRICE MULTIPLIED BY THE NUMBER OF
WARRANT SHARES AS TO WHICH THIS WARRANT IS BEING EXERCISED (THE “AGGREGATE
EXERCISE PRICE”) IN CASH OR WIRE TRANSFER OF IMMEDIATELY AVAILABLE FUNDS OR (B)
BY NOTIFYING THE COMPANY THAT THIS WARRANT IS BEING EXERCISED PURSUANT TO A
CASHLESS EXERCISE (AS DEFINED IN SECTION 1(D)). THE HOLDER SHALL NOT BE REQUIRED
TO DELIVER THE ORIGINAL WARRANT IN ORDER TO EFFECT AN EXERCISE HEREUNDER.
EXECUTION AND DELIVERY OF THE EXERCISE NOTICE WITH RESPECT TO LESS THAN ALL OF
THE WARRANT SHARES SHALL HAVE THE SAME EFFECT AS CANCELLATION OF THE ORIGINAL
WARRANT AND ISSUANCE OF A NEW WARRANT EVIDENCING THE RIGHT TO PURCHASE THE
REMAINING NUMBER OF WARRANT SHARES. ON OR BEFORE THE FIRST BUSINESS DAY
FOLLOWING THE DATE ON WHICH THE COMPANY HAS RECEIVED EACH OF THE EXERCISE NOTICE
AND THE AGGREGATE EXERCISE PRICE (OR NOTICE OF A CASHLESS EXERCISE) (THE
“EXERCISE DELIVERY DOCUMENTS”), THE COMPANY SHALL TRANSMIT BY FACSIMILE AN
ACKNOWLEDGMENT OF CONFIRMATION OF RECEIPT OF THE EXERCISE DELIVERY DOCUMENTS TO
THE HOLDER AND THE COMPANY’S TRANSFER AGENT (THE “TRANSFER AGENT”). ON OR BEFORE
THE THIRD BUSINESS DAY FOLLOWING THE DATE ON WHICH THE COMPANY HAS RECEIVED ALL
OF THE EXERCISE DELIVERY DOCUMENTS (THE “SHARE DELIVERY 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 AGENT
COMMISSION SYSTEM, OR (Y) IF THE TRANSFER AGENT IS NOT PARTICIPATING IN THE DTC
FAST AUTOMATED SECURITIES TRANSFER PROGRAM, ISSUE AND DISPATCH BY OVERNIGHT
COURIER TO THE ADDRESS AS SPECIFIED IN THE EXERCISE NOTICE, A CERTIFICATE,
REGISTERED IN THE COMPANY’S SHARE REGISTER IN THE NAME OF THE HOLDER OR ITS
DESIGNEE, FOR THE NUMBER OF SHARES OF COMMON STOCK TO WHICH THE HOLDER IS
ENTITLED PURSUANT TO SUCH EXERCISE. UPON DELIVERY OF THE EXERCISE DELIVERY
DOCUMENTS, 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 WARRANTS ARE CREDITED TO THE
HOLDER’S DTC (AS DEFINED BELOW) 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,
THEN THE COMPANY SHALL AS SOON AS PRACTICABLE AND IN NO EVENT LATER THAN THREE
BUSINESS DAYS AFTER ANY EXERCISE AND AT ITS OWN EXPENSE, ISSUE 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 COMPANY SHALL PAY
ANY AND ALL TAXES WHICH MAY BE PAYABLE WITH RESPECT TO THE ISSUANCE AND DELIVERY
OF WARRANT SHARES UPON EXERCISE OF THIS WARRANT.

 

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(B)                                 EXERCISE PRICE. FOR PURPOSES OF THIS
WARRANT, “EXERCISE PRICE” MEANS $2.50, 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 TO ISSUE
TO THE HOLDER WITHIN THREE (3) BUSINESS DAYS OF RECEIPT OF THE EXERCISE DELIVERY
DOCUMENTS, A CERTIFICATE FOR THE NUMBER OF SHARES OF COMMON STOCK TO WHICH THE
HOLDER IS ENTITLED AND REGISTER SUCH SHARES OF COMMON STOCK ON THE COMPANY’S
SHARE REGISTER OR TO CREDIT THE HOLDER’S BALANCE ACCOUNT WITH DTC FOR SUCH
NUMBER OF SHARES OF COMMON STOCK TO WHICH THE HOLDER IS ENTITLED UPON THE
HOLDER’S EXERCISE OF THIS WARRANT, THEN, IN ADDITION TO ALL OTHER REMEDIES
AVAILABLE TO THE HOLDER, SUBJECT TO THE LIMITATION ON DAMAGES (AS DEFINED IN THE
CERTIFICATE OF DESIGNATIONS), THE COMPANY SHALL PAY IN CASH TO THE HOLDER ON
EACH DAY AFTER SUCH THIRD BUSINESS DAY THAT THE ISSUANCE OF SUCH SHARES OF
COMMON STOCK IS NOT TIMELY EFFECTED AN AMOUNT EQUAL TO 1.5% OF THE PRODUCT OF
(A) THE SUM OF THE NUMBER OF SHARES OF COMMON STOCK NOT ISSUED TO THE HOLDER ON
A TIMELY BASIS AND TO WHICH THE HOLDER IS ENTITLED AND (B) THE CLOSING SALE
PRICE OF THE SHARES OF COMMON STOCK ON THE TRADING DAY IMMEDIATELY PRECEDING THE
LAST POSSIBLE DATE WHICH THE COMPANY COULD HAVE ISSUED SUCH SHARES OF COMMON
STOCK TO THE HOLDER WITHOUT VIOLATING SECTION 1(A). IN ADDITION TO THE
FOREGOING, IF WITHIN THREE (3) TRADING DAYS AFTER THE COMPANY’S RECEIPT OF THE
FACSIMILE COPY OF A EXERCISE NOTICE THE COMPANY SHALL FAIL TO ISSUE AND DELIVER
A CERTIFICATE TO THE HOLDER AND REGISTER SUCH SHARES OF COMMON STOCK ON THE
COMPANY’S SHARE REGISTER OR CREDIT THE HOLDER’S BALANCE ACCOUNT WITH DTC FOR THE
NUMBER OF SHARES OF COMMON STOCK TO WHICH THE HOLDER IS ENTITLED UPON SUCH
HOLDER’S EXERCISE HEREUNDER, AND IF ON OR AFTER SUCH TRADING DAY 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 SHARES OF COMMON STOCK
ISSUABLE UPON SUCH EXERCISE THAT THE HOLDER ANTICIPATED RECEIVING FROM THE
COMPANY (A “BUY-IN”), THEN THE COMPANY SHALL, WITHIN THREE 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, IF ANY) FOR THE SHARES OF COMMON STOCK SO PURCHASED (THE
“BUY-IN PRICE”), AT WHICH POINT THE COMPANY’S OBLIGATION TO DELIVER SUCH
CERTIFICATE (AND TO ISSUE SUCH SHARES OF COMMON STOCK) SHALL TERMINATE, OR (II)
PROMPTLY HONOR ITS OBLIGATION TO DELIVER TO THE HOLDER A CERTIFICATE OR
CERTIFICATES REPRESENTING SUCH SHARES OF COMMON STOCK 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 SHARES OF COMMON STOCK, TIMES (B) THE CLOSING BID PRICE ON
THE DATE OF EXERCISE.

 

(D)                                 CASHLESS EXERCISE. NOTWITHSTANDING ANYTHING
CONTAINED HEREIN TO THE CONTRARY, 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 SHARES OF COMMON STOCK DETERMINED ACCORDING TO THE
FOLLOWING FORMULA (A “CASHLESS EXERCISE”):

 

NET NUMBER = (A X B) - (A X C)

 

B

 

FOR PURPOSES OF THE FOREGOING FORMULA:

 

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A= the total number of shares with respect to which this Warrant is then being
exercised.

 

B= the Closing Sale Price of the shares of Common Stock (as reported by
Bloomberg) on the date immediately preceding the date of the Exercise Notice.

 

C= the Exercise Price then in effect for the applicable Warrant Shares at the
time of such exercise.

 

(E)                                  DISPUTES. IN THE CASE OF A DISPUTE AS TO
THE DETERMINATION OF THE EXERCISE PRICE OR THE ARITHMETIC CALCULATION OF THE
WARRANT SHARES, 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 12.

 

(F)                                    LIMITATIONS ON EXERCISES.

 

(I)                                     BENEFICIAL OWNERSHIP. THE COMPANY SHALL
NOT EFFECT THE EXERCISE OF THIS WARRANT, AND THE HOLDER SHALL NOT HAVE THE RIGHT
TO EXERCISE THIS WARRANT, TO THE EXTENT THAT AFTER GIVING EFFECT TO SUCH
EXERCISE, SUCH PERSON (TOGETHER WITH SUCH PERSON’S AFFILIATES) WOULD
BENEFICIALLY OWN (DIRECTLY OR INDIRECTLY THROUGH WARRANT SHARES OR OTHERWISE) IN
EXCESS OF 4.99% 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 (DIRECTLY OR
INDIRECTLY THROUGH WARRANT SHARES OR OTHERWISE) BY SUCH PERSON AND ITS
AFFILIATES SHALL INCLUDE 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 (I) EXERCISE OF THE REMAINING, UNEXERCISED PORTION OF THIS WARRANT
BENEFICIALLY OWNED BY SUCH PERSON AND ITS AFFILIATES AND (II) EXERCISE OR
CONVERSION OF THE UNEXERCISED OR UNCONVERTED PORTION OF ANY OTHER SECURITIES OF
THE COMPANY BENEFICIALLY OWNED BY SUCH PERSON AND ITS AFFILIATES (INCLUDING,
WITHOUT LIMITATION, ANY CONVERTIBLE NOTES OR CONVERTIBLE PREFERRED STOCK OR
WARRANTS) SUBJECT TO A LIMITATION ON CONVERSION OR EXERCISE ANALOGOUS TO THE
LIMITATION CONTAINED HEREIN. EXCEPT AS SET FORTH IN THE PRECEDING SENTENCE, FOR
PURPOSES OF THIS PARAGRAPH, BENEFICIAL OWNERSHIP SHALL BE CALCULATED IN
ACCORDANCE WITH SECTION 13(D) OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED. FOR PURPOSES OF THIS WARRANT, IN DETERMINING THE NUMBER OF OUTSTANDING
SHARES OF COMMON STOCK, THE HOLDER MAY RELY ON THE NUMBER OF OUTSTANDING SHARES
OF COMMON STOCK AS REFLECTED IN (1) THE COMPANY’S MOST RECENT FORM 10-K OR FORM
10-KSB, FORM 10-Q OR FORM 10-QSB, CURRENT REPORT ON FORM 8-K OR OTHER PUBLIC
FILING WITH THE SECURITIES AND EXCHANGE COMMISSION, AS THE CASE MAY BE, (2) A
MORE RECENT PUBLIC ANNOUNCEMENT BY THE COMPANY OR (3) ANY OTHER NOTICE BY THE
COMPANY OR THE TRANSFER AGENT SETTING FORTH THE NUMBER OF SHARES OF COMMON STOCK
OUTSTANDING. FOR ANY REASON AT ANY TIME, UPON THE WRITTEN OR ORAL REQUEST

 

 

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OF THE HOLDER, THE COMPANY SHALL WITHIN ONE BUSINESS DAY CONFIRM ORALLY AND IN
WRITING TO THE HOLDER THE NUMBER OF SHARES OF COMMON STOCK THEN OUTSTANDING. IN
ANY CASE, THE NUMBER OF OUTSTANDING SHARES OF COMMON STOCK SHALL BE DETERMINED
AFTER GIVING EFFECT TO THE CONVERSION OR EXERCISE OF SECURITIES OF THE COMPANY,
INCLUDING THE SPA SECURITIES AND THE SPA WARRANTS, BY THE HOLDER AND ITS
AFFILIATES SINCE THE DATE AS OF WHICH SUCH NUMBER OF OUTSTANDING SHARES OF
COMMON STOCK WAS REPORTED. BY WRITTEN NOTICE TO THE COMPANY, THE HOLDER MAY
INCREASE OR DECREASE THE MAXIMUM PERCENTAGE TO ANY OTHER PERCENTAGE NOT IN
EXCESS OF 9.99% SPECIFIED IN SUCH NOTICE; PROVIDED THAT (I) ANY SUCH INCREASE
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 NOT TO ANY OTHER HOLDER OF SPA WARRANTS.

 

(II)                                  PRINCIPAL MARKET REGULATION. THE COMPANY
SHALL NOT BE OBLIGATED TO ISSUE ANY SHARES OF COMMON STOCK UPON EXERCISE OF THIS
WARRANT IF THE ISSUANCE OF SUCH SHARES OF COMMON STOCK WOULD EXCEED THAT NUMBER
OF SHARES OF COMMON STOCK WHICH THE COMPANY MAY ISSUE UPON EXERCISE, REDEMPTION
OR CONVERSION, AS APPLICABLE, OF THE SPA WARRANTS AND SPA SECURITIES OR
OTHERWISE WITHOUT BREACHING THE COMPANY’S OBLIGATIONS UNDER THE RULES OR
REGULATIONS OF THE PRINCIPAL MARKET (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 REQUIRED HOLDERS. UNTIL SUCH APPROVAL OR WRITTEN OPINION IS OBTAINED, NO
BUYER SHALL BE ISSUED IN THE AGGREGATE, UPON EXERCISE OR CONVERSION, AS
APPLICABLE, OF ANY SPA WARRANTS OR SPA SECURITIES, SHARES OF COMMON STOCK IN AN
AMOUNT GREATER THAN THE PRODUCT OF THE EXCHANGE CAP MULTIPLIED BY A FRACTION,
THE NUMERATOR OF WHICH IS THE TOTAL NUMBER OF SHARES OF COMMON STOCK UNDERLYING
THE SPA WARRANTS ISSUED TO SUCH BUYER PURSUANT TO THE SECURITIES PURCHASE
AGREEMENT ON THE ISSUANCE DATE AND THE DENOMINATOR OF WHICH IS THE AGGREGATE
NUMBER OF SHARES OF COMMON STOCK UNDERLYING THE SPA WARRANTS ISSUED TO THE
BUYERS PURSUANT TO THE SECURITIES PURCHASE AGREEMENT ON THE ISSUANCE 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, AND THE RESTRICTIONS OF THE PRIOR SENTENCE SHALL APPLY TO SUCH
TRANSFEREE WITH RESPECT TO THE PORTION OF THE EXCHANGE CAP ALLOCATION ALLOCATED
TO SUCH TRANSFEREE. IN THE EVENT THAT ANY HOLDER OF SPA WARRANTS SHALL EXERCISE
ALL OF SUCH HOLDER’S SPA WARRANTS INTO A NUMBER OF SHARES OF COMMON STOCK WHICH,
IN THE AGGREGATE, IS LESS THAN SUCH HOLDER’S EXCHANGE CAP ALLOCATION, THEN THE
DIFFERENCE BETWEEN SUCH HOLDER’S EXCHANGE CAP ALLOCATION AND THE

 

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NUMBER OF SHARES OF COMMON STOCK ACTUALLY ISSUED TO SUCH HOLDER SHALL BE
ALLOCATED TO THE RESPECTIVE EXCHANGE CAP ALLOCATIONS OF THE REMAINING HOLDERS OF
SPA WARRANTS ON A PRO RATA BASIS IN PROPORTION TO THE SHARES OF COMMON STOCK
UNDERLYING THE SPA WARRANTS THEN HELD BY EACH SUCH HOLDER. IN THE EVENT THAT THE
COMPANY IS PROHIBITED FROM ISSUING ANY WARRANT SHARES FOR WHICH AN EXERCISE
NOTICE HAS BEEN RECEIVED AS A RESULT OF THE OPERATION OF THIS SECTION 1(F)(II),
THE COMPANY SHALL PAY CASH IN EXCHANGE FOR CANCELLATION OF SUCH WARRANT SHARES,
AT A PRICE PER WARRANT SHARE EQUAL TO THE DIFFERENCE BETWEEN THE CLOSING SALE
PRICE AND THE EXERCISE PRICE AS OF THE DATE OF THE ATTEMPTED EXERCISE.

 

(G)                                 INSUFFICIENT AUTHORIZED SHARES. IF AT ANY
TIME WHILE ANY OF THE 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 FOR ISSUANCE UPON EXERCISE OF THE WARRANTS AT LEAST A
NUMBER OF SHARES OF COMMON STOCK EQUAL TO THE MAXIMUM NUMBER OF SHARES OF COMMON
STOCK AS SHALL FROM TIME TO TIME BE NECESSARY TO EFFECT THE EXERCISE OF ALL OF
THE WARRANTS THEN OUTSTANDING (ASSUMING FOR PURPOSES HEREOF THAT THE EXERCISE
PRICE IS EQUAL TO $2.00, SUBJECT TO ADJUSTMENT FOR STOCK SPLITS AND STOCK
DIVIDENDS) (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 THE WARRANTS THEN
OUTSTANDING. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING SENTENCE, AS 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.

 

2.               ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. THE
EXERCISE PRICE AND THE NUMBER OF WARRANT SHARES SHALL BE ADJUSTED FROM TIME TO
TIME AS FOLLOWS:

 

(A)                                  ADJUSTMENT UPON ISSUANCE OF SHARES OF
COMMON STOCK. IF AND WHENEVER ON OR AFTER THE SUBSCRIPTION DATE THE COMPANY
ISSUES OR SELLS, OR IN ACCORDANCE WITH THIS SECTION 2 IS DEEMED TO HAVE 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 (AS DEFINED IN THE CERTIFICATE OF DESIGNATIONS) FOR A
CONSIDERATION PER SHARE (THE “NEW ISSUANCE PRICE”) LESS THAN A PRICE (THE
“APPLICABLE PRICE”) EQUAL TO THE EXERCISE PRICE IN EFFECT IMMEDIATELY PRIOR TO
SUCH ISSUE OR SALE OR DEEMED ISSUANCE OR SALE (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.
UPON EACH SUCH ADJUSTMENT OF THE EXERCISE PRICE HEREUNDER, THE NUMBER OF WARRANT
SHARES SHALL BE ADJUSTED TO THE NUMBER OF SHARES OF COMMON STOCK DETERMINED BY
MULTIPLYING THE EXERCISE PRICE IN EFFECT IMMEDIATELY PRIOR TO SUCH ADJUSTMENT BY
THE NUMBER OF WARRANT SHARES ACQUIRABLE UPON EXERCISE OF THIS WARRANT
IMMEDIATELY PRIOR TO SUCH ADJUSTMENT

 

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AND DIVIDING THE PRODUCT THEREOF BY THE EXERCISE PRICE RESULTING FROM SUCH
ADJUSTMENT. FOR PURPOSES OF DETERMINING THE ADJUSTED EXERCISE PRICE UNDER THIS
SECTION 2(A), THE FOLLOWING SHALL BE APPLICABLE:

 

(I)                                     ISSUANCE OF OPTIONS. IF THE COMPANY IN
ANY MANNER GRANTS ANY OPTIONS AND THE LOWEST PRICE PER SHARE FOR WHICH ONE SHARE
OF COMMON STOCK IS 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 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 GRANTING OR SALE OF SUCH OPTION FOR SUCH
PRICE PER SHARE. FOR PURPOSES OF THIS SECTION 2(A)(I), THE “LOWEST PRICE PER
SHARE FOR WHICH ONE SHARE OF COMMON STOCK IS 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” SHALL BE EQUAL TO 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 OR SALE
OF THE OPTION, UPON EXERCISE OF THE OPTION AND UPON CONVERSION, EXERCISE OR
EXCHANGE OF ANY CONVERTIBLE SECURITY ISSUABLE UPON EXERCISE OF SUCH OPTION. NO
FURTHER ADJUSTMENT OF THE EXERCISE PRICE OR NUMBER OF WARRANT SHARES 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 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 ANY CONVERTIBLE SECURITIES AND THE LOWEST
PRICE PER SHARE FOR WHICH ONE SHARE OF COMMON STOCK IS ISSUABLE UPON THE
CONVERSION, EXERCISE OR EXCHANGE 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 OF SUCH
CONVERTIBLE SECURITIES FOR SUCH PRICE PER SHARE. FOR THE PURPOSES OF THIS
SECTION 2(A)(II), THE “LOWEST PRICE PER SHARE FOR WHICH ONE SHARE OF COMMON
STOCK IS ISSUABLE UPON THE CONVERSION, EXERCISE OR EXCHANGE THEREOF” SHALL BE
EQUAL TO 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 OF THE CONVERTIBLE SECURITY AND UPON CONVERSION, EXERCISE OR
EXCHANGE OF SUCH CONVERTIBLE SECURITY. NO FURTHER ADJUSTMENT OF THE EXERCISE
PRICE OR NUMBER OF WARRANT SHARES SHALL BE MADE UPON THE ACTUAL ISSUANCE OF SUCH
SHARES OF COMMON STOCK UPON CONVERSION, EXERCISE OR EXCHANGE OF SUCH CONVERTIBLE
SECURITIES, AND IF ANY SUCH ISSUE 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(A), NO FURTHER
ADJUSTMENT OF THE EXERCISE PRICE OR NUMBER OF WARRANT SHARES SHALL BE MADE BY
REASON OF SUCH ISSUE OR SALE.

 

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(III)                               CHANGE IN OPTION PRICE OR RATE OF
CONVERSION. IF THE PURCHASE 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, THE EXERCISE PRICE AND THE NUMBER OF WARRANT
SHARES IN EFFECT AT THE TIME OF SUCH INCREASE OR DECREASE SHALL BE ADJUSTED TO
THE EXERCISE PRICE AND THE NUMBER OF WARRANT SHARES 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(A)(III), IF THE TERMS OF ANY
OPTION OR CONVERTIBLE SECURITY THAT WAS OUTSTANDING AS OF THE DATE OF ISSUANCE
OF THIS WARRANT 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(A) SHALL BE MADE IF SUCH
ADJUSTMENT WOULD RESULT IN AN INCREASE OF THE EXERCISE PRICE THEN IN EFFECT OR A
DECREASE IN THE NUMBER OF WARRANT SHARES.

 

(IV)                              CALCULATION OF CONSIDERATION RECEIVED. IN CASE
ANY OPTION IS ISSUED IN CONNECTION WITH THE ISSUE OR SALE OF OTHER SECURITIES OF
THE COMPANY, TOGETHER COMPRISING ONE INTEGRATED TRANSACTION IN WHICH NO SPECIFIC
CONSIDERATION IS ALLOCATED TO SUCH OPTIONS BY THE PARTIES THERETO, THE OPTIONS
WILL BE DEEMED TO HAVE BEEN ISSUED FOR A CONSIDERATION OF $0.01. 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 WILL
BE DEEMED TO BE THE NET AMOUNT 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 WILL BE THE FAIR VALUE OF SUCH CONSIDERATION, EXCEPT WHERE SUCH
CONSIDERATION CONSISTS OF SECURITIES, IN WHICH CASE THE AMOUNT OF CONSIDERATION
RECEIVED BY THE COMPANY WILL BE THE CLOSING SALE PRICE OF SUCH SECURITY ON 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 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 SECURITIES WILL BE
DETERMINED BY THE BOARD OF DIRECTORS OF THE COMPANY IN GOOD FAITH IN ITS
REASONABLE DISCRETION.

 

8

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(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 ISSUE 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.

 

(VI)                              FLOOR PRICE. NO ADJUSTMENT PURSUANT TO SECTION
2(A) SHALL CAUSE THE EXERCISE PRICE TO BE LESS THAN $2.00, AS ADJUSTED FOR ANY
STOCK DIVIDEND, STOCK SPLIT, STOCK COMBINATION, RECLASSIFICATION OR SIMILAR
TRANSACTION (THE “EXERCISE FLOOR PRICE”).

 

(B)                                 ADJUSTMENT UPON SUBDIVISION OR COMBINATION
OF COMMON STOCK. IF THE COMPANY AT ANY TIME ON OR AFTER THE SUBSCRIPTION DATE
SUBDIVIDES (BY ANY STOCK SPLIT, STOCK DIVIDEND, RECAPITALIZATION OR OTHERWISE)
ONE OR MORE CLASSES OF ITS OUTSTANDING SHARES OF COMMON STOCK INTO A GREATER
NUMBER OF SHARES, THE EXERCISE PRICE IN EFFECT IMMEDIATELY PRIOR TO SUCH
SUBDIVISION WILL BE PROPORTIONATELY REDUCED AND THE NUMBER OF WARRANT SHARES
WILL BE PROPORTIONATELY INCREASED. IF THE COMPANY AT ANY TIME ON OR AFTER THE
SUBSCRIPTION DATE  COMBINES (BY COMBINATION, REVERSE STOCK SPLIT OR OTHERWISE)
ONE OR MORE CLASSES OF ITS OUTSTANDING SHARES OF COMMON STOCK INTO A SMALLER
NUMBER OF SHARES, THE EXERCISE PRICE IN EFFECT IMMEDIATELY PRIOR TO SUCH
COMBINATION WILL BE PROPORTIONATELY INCREASED AND THE NUMBER OF WARRANT SHARES
WILL BE PROPORTIONATELY DECREASED. ANY ADJUSTMENT UNDER THIS SECTION 2(B) SHALL
BECOME EFFECTIVE AT THE CLOSE OF BUSINESS ON THE DATE THE SUBDIVISION OR
COMBINATION BECOMES EFFECTIVE.

 

(C)                                  OTHER EVENTS. 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 WILL MAKE AN APPROPRIATE ADJUSTMENT IN THE
EXERCISE PRICE AND THE NUMBER OF WARRANT SHARES SO AS TO PROTECT THE RIGHTS OF
THE HOLDER; PROVIDED THAT NO SUCH ADJUSTMENT PURSUANT TO THIS SECTION 2(C) WILL
INCREASE THE EXERCISE PRICE OR DECREASE THE NUMBER OF WARRANT SHARES AS
OTHERWISE DETERMINED PURSUANT TO THIS SECTION 2.

 

3.               RIGHTS UPON DISTRIBUTION OF ASSETS. IF THE COMPANY SHALL
DECLARE OR MAKE ANY DIVIDEND OR OTHER DISTRIBUTION OF ITS ASSETS (OR RIGHTS TO
ACQUIRE ITS ASSETS) TO HOLDERS OF SHARES OF COMMON STOCK, BY WAY OF RETURN OF
CAPITAL OR OTHERWISE (INCLUDING, WITHOUT LIMITATION, ANY DISTRIBUTION OF CASH,
STOCK OR OTHER SECURITIES, PROPERTY OR OPTIONS BY WAY OF A DIVIDEND, SPIN OFF,
RECLASSIFICATION, CORPORATE REARRANGEMENT, SCHEME OF ARRANGEMENT OR OTHER
SIMILAR TRANSACTION) (A “DISTRIBUTION”), AT ANY TIME AFTER THE ISSUANCE OF THIS
WARRANT, THEN, IN EACH SUCH CASE ANY EXERCISE PRICE IN EFFECT IMMEDIATELY PRIOR
TO THE CLOSE OF BUSINESS ON THE RECORD DATE FIXED FOR THE DETERMINATION OF
HOLDERS OF SHARES OF COMMON STOCK ENTITLED TO RECEIVE THE DISTRIBUTION SHALL BE
REDUCED, EFFECTIVE AS OF THE CLOSE OF BUSINESS ON SUCH RECORD DATE, TO A PRICE
DETERMINED BY MULTIPLYING SUCH EXERCISE PRICE BY A FRACTION OF WHICH (I) THE
NUMERATOR

 

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SHALL BE THE CLOSING BID PRICE OF A SHARE OF COMMON STOCK ON THE TRADING DAY
IMMEDIATELY PRECEDING SUCH RECORD DATE MINUS THE VALUE OF THE DISTRIBUTION (AS
DETERMINED IN GOOD FAITH BY THE COMPANY’S BOARD OF DIRECTORS) APPLICABLE TO ONE
SHARE OF COMMON STOCK, AND (II) THE DENOMINATOR SHALL BE THE CLOSING BID PRICE
OF THE SHARES OF COMMON STOCK ON THE TRADING DAY IMMEDIATELY PRECEDING SUCH
RECORD DATE.

 

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 SHARES OF COMMON

 

(B)                                 STOCK (THE “PURCHASE RIGHTS”), THEN THE
HOLDER WILL BE ENTITLED TO ACQUIRE, UPON THE TERMS APPLICABLE TO SUCH PURCHASE
RIGHTS, THE AGGREGATE PURCHASE RIGHTS WHICH THE HOLDER COULD HAVE ACQUIRED IF
THE HOLDER HAD HELD THE NUMBER OF SHARES OF COMMON STOCK ACQUIRABLE UPON
COMPLETE EXERCISE OF THIS WARRANT (WITHOUT REGARD TO ANY LIMITATIONS ON THE
EXERCISE OF THIS WARRANT) IMMEDIATELY BEFORE THE DATE ON WHICH A RECORD IS TAKEN
FOR THE GRANT, ISSUANCE OR SALE OF SUCH PURCHASE RIGHTS, OR, IF NO SUCH RECORD
IS TAKEN, THE DATE AS OF WHICH THE RECORD HOLDERS OF SHARES OF COMMON STOCK ARE
TO BE DETERMINED FOR THE GRANT, ISSUE OR SALE OF SUCH PURCHASE RIGHTS.

 

(C)                                  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 IN ACCORDANCE WITH THE
PROVISIONS OF THIS SECTION (4)(B) PURSUANT TO WRITTEN AGREEMENTS IN FORM AND
SUBSTANCE SATISFACTORY TO THE REQUIRED HOLDERS AND APPROVED BY THE REQUIRED
HOLDERS PRIOR TO SUCH FUNDAMENTAL TRANSACTION, INCLUDING AGREEMENTS TO DELIVER
TO EACH HOLDER OF WARRANTS IN EXCHANGE FOR SUCH WARRANTS A SECURITY OF THE
SUCCESSOR ENTITY EVIDENCED BY A WRITTEN INSTRUMENT SUBSTANTIALLY SIMILAR IN FORM
AND SUBSTANCE TO THIS WARRANT, INCLUDING, WITHOUT LIMITATION, AN ADJUSTED
EXERCISE PRICE EQUAL TO THE VALUE FOR THE SHARES OF COMMON STOCK REFLECTED BY
THE TERMS OF SUCH FUNDAMENTAL TRANSACTION, AND 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 SATISFACTORY TO THE REQUIRED HOLDERS 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
OCCURRENCE OF ANY FUNDAMENTAL TRANSACTION, THE SUCCESSOR ENTITY SHALL SUCCEED
TO, AND BE SUBSTITUTED FOR (SO THAT FROM AND AFTER THE DATE OF SUCH FUNDAMENTAL
TRANSACTION, THE PROVISIONS OF THIS WARRANT REFERRING TO THE “COMPANY” SHALL
REFER INSTEAD TO THE SUCCESSOR ENTITY), AND MAY EXERCISE EVERY RIGHT AND POWER
OF THE COMPANY AND SHALL ASSUME ALL OF THE OBLIGATIONS OF THE COMPANY UNDER THIS
WARRANT WITH THE SAME EFFECT AS IF SUCH SUCCESSOR ENTITY HAD BEEN NAMED AS THE
COMPANY HEREIN. UPON CONSUMMATION OF THE 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 FUNDAMENTAL
TRANSACTION, IN LIEU OF THE SHARES OF THE COMMON STOCK (OR OTHER SECURITIES,
CASH, ASSETS OR OTHER PROPERTY) ISSUABLE UPON THE EXERCISE OF THE WARRANT PRIOR
TO SUCH FUNDAMENTAL TRANSACTION, SUCH SHARES OF THE PUBLICLY TRADED COMMON STOCK
(OR ITS

 

10

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EQUIVALENT) OF THE SUCCESSOR ENTITY (INCLUDING ITS PARENT ENTITY) WHICH THE
HOLDER WOULD HAVE BEEN ENTITLED TO RECEIVE UPON THE HAPPENING OF SUCH
FUNDAMENTAL TRANSACTION HAD THIS WARRANT BEEN CONVERTED IMMEDIATELY PRIOR TO
SUCH FUNDAMENTAL TRANSACTION, AS ADJUSTED IN ACCORDANCE WITH THE PROVISIONS OF
THIS WARRANT. IN ADDITION TO AND NOT IN SUBSTITUTION FOR ANY OTHER RIGHTS
HEREUNDER, PRIOR TO THE CONSUMMATION OF ANY 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 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) 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 SUCH FUNDAMENTAL TRANSACTION HAD THE WARRANT
BEEN EXERCISED IMMEDIATELY PRIOR TO SUCH FUNDAMENTAL TRANSACTION. PROVISION MADE
PURSUANT TO THE PRECEDING SENTENCE SHALL BE IN A FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO THE REQUIRED HOLDERS. THE PROVISIONS OF THIS SECTION SHALL APPLY
SIMILARLY AND EQUALLY TO SUCCESSIVE FUNDAMENTAL TRANSACTIONS AND CORPORATE
EVENTS AND SHALL BE APPLIED WITHOUT REGARD TO ANY LIMITATIONS ON THE EXERCISE OF
THIS WARRANT.

 

(D)                                 NOTWITHSTANDING THE FOREGOING AND THE
PROVISIONS OF SECTION 4(B) ABOVE, IN THE EVENT OF A FUNDAMENTAL TRANSACTION, IF
THE HOLDER HAS NOT EXERCISED THE WARRANT IN FULL PRIOR TO THE CONSUMMATION OF
THE FUNDAMENTAL TRANSACTION, AT THE REQUEST OF THE HOLDER DELIVERED BEFORE THE
90TH DAY AFTER SUCH FUNDAMENTAL TRANSACTION, THE COMPANY (OR THE SUCCESSOR
ENTITY) SHALL PURCHASE THIS WARRANT FROM THE HOLDER BY PAYING TO THE HOLDER,
CASH IN AN AMOUNT EQUAL TO THE BLACK SCHOLES VALUE OF THE REMAINING UNEXERCISED
PORTION OF THIS WARRANT ON THE DATE OF SUCH FUNDAMENTAL TRANSACTION.

 

5.               NONCIRCUMVENTION. THE COMPANY HEREBY COVENANTS AND AGREES THAT
THE COMPANY WILL NOT, BY AMENDMENT OF ITS ARTICLES OF INCORPORATION, BYLAWS OR
THROUGH ANY REORGANIZATION, TRANSFER OF ASSETS, CONSOLIDATION, MERGER, SCHEME OF
ARRANGEMENT, DISSOLUTION, ISSUE OR SALE OF SECURITIES, OR ANY OTHER VOLUNTARY
ACTION, AVOID OR SEEK TO AVOID THE OBSERVANCE OR PERFORMANCE OF ANY OF THE TERMS
OF THIS WARRANT, 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 (I) 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, (II) SHALL TAKE ALL SUCH ACTIONS AS MAY BE NECESSARY OR APPROPRIATE IN
ORDER THAT THE COMPANY MAY VALIDLY AND LEGALLY ISSUE FULLY PAID AND
NONASSESSABLE SHARES OF COMMON STOCK UPON THE EXERCISE OF THIS WARRANT, AND
(III) SHALL, SO LONG AS ANY OF THE SPA WARRANTS ARE OUTSTANDING, TAKE ALL ACTION
NECESSARY TO RESERVE AND KEEP AVAILABLE OUT OF ITS AUTHORIZED AND UNISSUED
SHARES OF COMMON STOCK, SOLELY FOR THE PURPOSE OF EFFECTING THE EXERCISE OF THE
SPA WARRANTS, THE MAXIMUM NUMBER OF SHARES OF COMMON STOCK AS SHALL FROM TIME TO
TIME BE NECESSARY TO EFFECT THE EXERCISE OF THE SPA WARRANTS THEN OUTSTANDING
(ASSUMING FOR PURPOSES HEREOF THAT THE EXERCISE PRICE IS EQUAL TO $2.00, SUBJECT
TO ADJUSTMENT FOR STOCK SPLITS AND STOCK DIVIDENDS AND WITHOUT REGARD TO ANY
LIMITATIONS ON EXERCISE).

 

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6.               WARRANT HOLDER NOT DEEMED A STOCKHOLDER. EXCEPT AS OTHERWISE
SPECIFICALLY PROVIDED HEREIN, THE HOLDER, SOLELY IN SUCH PERSON’S 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 SUCH PERSON’S 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 SUCH
PERSON IS THEN ENTITLED TO RECEIVE UPON THE DUE EXERCISE OF THIS WARRANT. IN
ADDITION, NOTHING CONTAINED IN THIS WARRANT SHALL BE CONSTRUED AS 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 THEN 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, AND, IN THE CASE OF
LOSS, THEFT OR DESTRUCTION, OF ANY INDEMNIFICATION UNDERTAKING BY THE HOLDER TO
THE COMPANY IN CUSTOMARY 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, THAT
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

 

12

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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.

 

 

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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, INCLUDING IN REASONABLE DETAIL A DESCRIPTION OF SUCH
ACTION AND THE REASON THEREFORE. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, THE COMPANY WILL GIVE WRITTEN NOTICE TO THE HOLDER (I) IMMEDIATELY
UPON ANY ADJUSTMENT OF THE EXERCISE PRICE, SETTING FORTH IN REASONABLE DETAIL,
AND CERTIFYING, THE CALCULATION OF SUCH ADJUSTMENT AND (II) AT LEAST FIFTEEN
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.

 

9.               AMENDMENT AND WAIVER. EXCEPT AS OTHERWISE PROVIDED HEREIN, THE
PROVISIONS OF THIS WARRANT 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 REQUIRED
HOLDERS; PROVIDED THAT NO SUCH ACTION MAY INCREASE THE EXERCISE PRICE OF ANY SPA
WARRANT OR DECREASE THE NUMBER OF SHARES OR CLASS OF STOCK OBTAINABLE UPON
EXERCISE OF ANY SPA WARRANT WITHOUT THE WRITTEN CONSENT OF THE HOLDER. NO SUCH
AMENDMENT SHALL BE EFFECTIVE TO THE EXTENT THAT IT APPLIES TO LESS THAN ALL OF
THE HOLDERS OF THE SPA WARRANTS THEN OUTSTANDING.

 

10.         SEVERABILITY. IF ANY PROVISION OF THIS WARRANT OR THE APPLICATION
THEREOF BECOMES OR IS DECLARED BY A COURT OF COMPETENT JURISDICTION TO BE
ILLEGAL, VOID OR UNENFORCEABLE, THE REMAINDER OF THE TERMS OF THIS WARRANT WILL
CONTINUE IN FULL FORCE AND EFFECT.

 

11.         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.

 

12.         CONSTRUCTION; HEADINGS. THIS WARRANT SHALL BE DEEMED TO BE JOINTLY
DRAFTED BY THE COMPANY AND ALL THE BUYERS 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.

 

13.         DISPUTE RESOLUTION. IN THE CASE OF A DISPUTE AS TO THE DETERMINATION
OF THE EXERCISE PRICE OR THE ARITHMETIC CALCULATION OF THE WARRANT SHARES, THE
COMPANY SHALL SUBMIT THE DISPUTED DETERMINATIONS OR ARITHMETIC CALCULATIONS VIA
FACSIMILE WITHIN TWO BUSINESS DAYS OF RECEIPT OF THE EXERCISE NOTICE GIVING RISE
TO SUCH DISPUTE, AS THE CASE MAY BE, TO THE HOLDER. IF THE HOLDER AND THE
COMPANY ARE UNABLE TO AGREE UPON SUCH DETERMINATION OR CALCULATION OF THE
EXERCISE PRICE OR THE WARRANT SHARES WITHIN THREE BUSINESS DAYS OF SUCH DISPUTED
DETERMINATION OR ARITHMETIC CALCULATION BEING SUBMITTED TO THE HOLDER, THEN THE

 

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COMPANY SHALL, WITHIN TWO BUSINESS DAYS SUBMIT VIA FACSIMILE (A) THE DISPUTED
DETERMINATION OF THE EXERCISE PRICE TO AN INDEPENDENT, REPUTABLE INVESTMENT BANK
SELECTED BY THE COMPANY AND APPROVED BY THE HOLDER  OR (B) THE DISPUTED
ARITHMETIC CALCULATION OF THE WARRANT SHARES TO THE COMPANY’S INDEPENDENT,
OUTSIDE ACCOUNTANT. THE COMPANY SHALL CAUSE AT ITS EXPENSE THE INVESTMENT BANK
OR THE ACCOUNTANT, AS THE CASE MAY BE, TO PERFORM THE DETERMINATIONS OR
CALCULATIONS AND NOTIFY THE COMPANY AND THE HOLDER OF THE RESULTS NO LATER THAN
TEN BUSINESS DAYS FROM THE TIME IT RECEIVES THE DISPUTED DETERMINATIONS OR
CALCULATIONS. SUCH INVESTMENT BANK’S OR ACCOUNTANT’S DETERMINATION OR
CALCULATION, AS THE CASE MAY BE, SHALL BE BINDING UPON ALL PARTIES ABSENT
DEMONSTRABLE ERROR.

 

14.         REMEDIES, 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 RIGHT
TO PURSUE ACTUAL DAMAGES FOR ANY FAILURE BY THE COMPANY TO COMPLY WITH THE TERMS
OF THIS WARRANT. 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 AN INJUNCTION
RESTRAINING ANY BREACH, WITHOUT THE NECESSITY OF SHOWING ECONOMIC LOSS AND
WITHOUT ANY BOND OR OTHER SECURITY BEING REQUIRED.

 

15.         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(F) OF THE SECURITIES PURCHASE AGREEMENT.

 

16.         CERTAIN DEFINITIONS. FOR PURPOSES OF THIS WARRANT, THE FOLLOWING
TERMS SHALL HAVE THE FOLLOWING MEANINGS:

 

(A)                                  “BLACK SCHOLES VALUE” MEANS THE VALUE OF
THIS WARRANT BASED ON THE BLACK AND SCHOLES OPTION PRICING MODEL OBTAINED FROM
THE “OV” FUNCTION ON BLOOMBERG DETERMINED AS OF THE DAY IMMEDIATELY FOLLOWING
THE PUBLIC ANNOUNCEMENT OF THE APPLICABLE FUNDAMENTAL TRANSACTION AND REFLECTING
(I) A RISK-FREE INTEREST RATE CORRESPONDING TO THE U.S. TREASURY RATE FOR A
PERIOD EQUAL TO THE REMAINING TERM OF THIS WARRANT AS OF SUCH DATE OF REQUEST
AND (II) AN EXPECTED VOLATILITY EQUAL TO THE GREATER OF 60% AND THE 100 DAY
VOLATILITY OBTAINED FROM THE HVT FUNCTION ON BLOOMBERG.

 

(B)                                 “BLOOMBERG” MEANS BLOOMBERG FINANCIAL
MARKETS.

 

(C)                                  “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.

 

(D)                                 “CLOSING BID PRICE” AND “CLOSING SALE PRICE”
MEANS, FOR ANY SECURITY AS OF ANY DATE, THE LAST CLOSING BID PRICE AND LAST
CLOSING TRADE PRICE, RESPECTIVELY, 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 BID PRICE OR THE

 

15

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CLOSING TRADE PRICE, AS THE CASE MAY BE, THEN THE LAST BID PRICE OR LAST TRADE
PRICE, RESPECTIVELY, 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 CLOSING BID
PRICE OR LAST TRADE PRICE, RESPECTIVELY, 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 DO NOT APPLY, THE LAST CLOSING BID
PRICE OR LAST TRADE PRICE, RESPECTIVELY, OF SUCH SECURITY IN THE
OVER-THE-COUNTER MARKET ON THE ELECTRONIC BULLETIN BOARD FOR SUCH SECURITY AS
REPORTED BY BLOOMBERG, OR, IF NO CLOSING BID PRICE OR LAST TRADE PRICE,
RESPECTIVELY, IS REPORTED FOR SUCH SECURITY BY BLOOMBERG, THE AVERAGE OF THE BID
PRICES, OR THE ASK PRICES, RESPECTIVELY, OF ANY MARKET MAKERS FOR SUCH SECURITY
AS REPORTED IN THE “PINK SHEETS” BY PINK SHEETS LLC (FORMERLY THE NATIONAL
QUOTATION BUREAU, INC.). IF THE CLOSING BID PRICE OR THE CLOSING SALE PRICE
CANNOT BE CALCULATED FOR A SECURITY ON A PARTICULAR DATE ON ANY OF THE FOREGOING
BASES, THE CLOSING BID PRICE OR THE CLOSING SALE PRICE, AS THE CASE MAY BE, 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
PURSUANT TO SECTION 12. ALL SUCH DETERMINATIONS TO BE APPROPRIATELY ADJUSTED FOR
ANY STOCK DIVIDEND, STOCK SPLIT, STOCK COMBINATION OR OTHER SIMILAR TRANSACTION
DURING THE APPLICABLE CALCULATION PERIOD.

 

(E)                                  “COMMON STOCK” MEANS (I) THE COMPANY’S
SHARES OF COMMON STOCK, PAR VALUE $.001 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.

 

(F)                                    “COMMON STOCK DEEMED OUTSTANDING” MEANS,
AT ANY GIVEN TIME, THE NUMBER OF SHARES OF COMMON STOCK ACTUALLY OUTSTANDING AT
SUCH TIME, PLUS THE NUMBER OF SHARES OF COMMON STOCK DEEMED TO BE OUTSTANDING
PURSUANT TO SECTIONS 2(A)(I) AND 2(A)(II) HEREOF REGARDLESS OF WHETHER THE
OPTIONS OR CONVERTIBLE SECURITIES ARE ACTUALLY EXERCISABLE AT SUCH TIME, BUT
EXCLUDING ANY SHARES OF COMMON STOCK OWNED OR HELD BY OR FOR THE ACCOUNT OF THE
COMPANY OR ISSUABLE UPON CONVERSION AND EXERCISE, AS APPLICABLE, OF THE SPA
SECURITIES AND THE WARRANTS.

 

(G)                                 “CONVERTIBLE SECURITIES” MEANS ANY STOCK OR
SECURITIES (OTHER THAN OPTIONS) DIRECTLY OR INDIRECTLY CONVERTIBLE INTO OR
EXERCISABLE OR EXCHANGEABLE FOR SHARES OF COMMON STOCK.

 

(H)                                 “ELIGIBLE MARKET” MEANS THE PRINCIPAL
MARKET, THE NEW YORK STOCK EXCHANGE, INC., THE NASDAQ NATIONAL MARKET OR THE
NASDAQ CAPITAL MARKET.

 

(I)                                     “EXPIRATION DATE” MEANS THE DATE SIXTY
(60) MONTHS AFTER THE ISSUANCE DATE OR, IF SUCH DATE FALLS ON A DAY OTHER THAN A
BUSINESS DAY OR ON WHICH TRADING DOES NOT TAKE PLACE ON THE PRINCIPAL MARKET (A
“HOLIDAY”), THE NEXT DATE THAT IS NOT A HOLIDAY.

 

(J)                                     “FUNDAMENTAL TRANSACTION” MEANS THAT THE
COMPANY SHALL, DIRECTLY OR INDIRECTLY, IN ONE OR MORE RELATED TRANSACTIONS, (I)
CONSOLIDATE OR MERGE WITH OR INTO (WHETHER OR NOT THE COMPANY IS THE SURVIVING
CORPORATION) ANOTHER PERSON, OR (II) SELL, ASSIGN, TRANSFER, CONVEY OR OTHERWISE
DISPOSE OF ALL OR SUBSTANTIALLY ALL OF THE PROPERTIES OR ASSETS OF THE COMPANY
TO ANOTHER PERSON, OR (III) ALLOW ANOTHER PERSON TO MAKE A PURCHASE, TENDER OR
EXCHANGE

 

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OFFER THAT IS ACCEPTED BY THE HOLDERS OF MORE THAN THE 50% OF THE OUTSTANDING
SHARES OF COMMON STOCK (NOT INCLUDING ANY SHARES OF COMMON STOCK HELD BY THE
PERSON OR PERSONS MAKING OR PARTY TO, OR ASSOCIATED OR AFFILIATED WITH THE
PERSONS MAKING OR PARTY TO, SUCH PURCHASE, TENDER OR EXCHANGE OFFER), OR (IV)
CONSUMMATE A STOCK PURCHASE AGREEMENT OR OTHER BUSINESS COMBINATION (INCLUDING,
WITHOUT LIMITATION, A REORGANIZATION, RECAPITALIZATION, SPIN-OFF OR SCHEME OF
ARRANGEMENT) WITH ANOTHER PERSON WHEREBY SUCH OTHER PERSON ACQUIRES MORE THAN
THE 50% OF THE OUTSTANDING SHARES OF COMMON STOCK (NOT INCLUDING ANY SHARES OF
COMMON STOCK HELD BY THE OTHER PERSON OR OTHER PERSONS MAKING OR PARTY TO, OR
ASSOCIATED OR AFFILIATED WITH THE OTHER PERSONS MAKING OR PARTY TO, SUCH STOCK
PURCHASE AGREEMENT OR OTHER BUSINESS COMBINATION), OR (V) REORGANIZE,
RECAPITALIZE OR RECLASSIFY ITS COMMON STOCK, OR (VI) ANY “PERSON” OR “GROUP” (AS
THESE TERMS ARE USED FOR PURPOSES OF SECTIONS 13(D) AND 14(D) OF THE EXCHANGE
ACT) IS OR SHALL BECOME THE “BENEFICIAL OWNER” (AS DEFINED IN RULE 13D-3 UNDER
THE EXCHANGE ACT), DIRECTLY OR INDIRECTLY, OF 50% OF THE AGGREGATE ORDINARY
VOTING POWER REPRESENTED BY ISSUED AND OUTSTANDING COMMON STOCK.

 

(K)                                  “OPTIONS” MEANS ANY RIGHTS, WARRANTS OR
OPTIONS TO SUBSCRIBE FOR OR PURCHASE SHARES OF COMMON STOCK OR CONVERTIBLE
SECURITIES.

 

(L)                                     “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.

 

(M)                               “PERSON” MEANS AN INDIVIDUAL, A LIMITED
LIABILITY COMPANY, A PARTNERSHIP, A JOINT VENTURE, A CORPORATION, A TRUST, AN
UNINCORPORATED ORGANIZATION, ANY OTHER ENTITY AND A GOVERNMENT OR ANY DEPARTMENT
OR AGENCY THEREOF.

 

(N)                                 “PRINCIPAL MARKET” MEANS THE AMERICAN STOCK
EXCHANGE.

 

(O)                                 “REGISTRATION RIGHTS AGREEMENT” MEANS THAT
CERTAIN REGISTRATION RIGHTS AGREEMENT BY AND AMONG THE COMPANY AND THE BUYERS.

 

(P)                                 “REQUIRED HOLDERS” MEANS THE HOLDERS OF THE
SPA WARRANTS REPRESENTING AT LEAST A MAJORITY OF SHARES OF COMMON STOCK
UNDERLYING THE SPA WARRANTS THEN OUTSTANDING.

 

(Q)                                 “SPA SECURITIES” MEANS THE PREFERRED SHARES
ISSUED PURSUANT TO THE SECURITIES PURCHASE AGREEMENT.

 

(R)                                    “SUCCESSOR ENTITY” MEANS THE PERSON (OR,
IF SO ELECTED BY THE REQUIRED HOLDERS, THE PARENT ENTITY) FORMED BY, RESULTING
FROM OR SURVIVING ANY FUNDAMENTAL TRANSACTION OR THE PERSON (OR, IF SO ELECTED
BY THE REQUIRED HOLDERS, THE PARENT ENTITY) WITH WHICH SUCH FUNDAMENTAL
TRANSACTION SHALL HAVE BEEN ENTERED INTO.

 

(S)                                  “TRADING DAY” MEANS ANY DAY ON WHICH THE
COMMON SHARES IS TRADED ON THE PRINCIPAL MARKET, OR, IF THE PRINCIPAL MARKET IS
NOT THE PRINCIPAL TRADING MARKET FOR THE COMMON SHARES, THEN ON THE PRINCIPAL
SECURITIES EXCHANGE OR SECURITIES MARKET ON WHICH THE

 

17

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COMMON SHARES IS THEN TRADED; PROVIDED THAT “TRADING DAY” SHALL NOT INCLUDE ANY
DAY ON WHICH THE COMMON SHARES IS SCHEDULED TO TRADE ON SUCH EXCHANGE OR MARKET
FOR LESS THAN 4.5 HOURS OR ANY DAY THAT THE COMMON SHARES 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).

 

[Signature Page Follows]

 

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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.

 

 

 

THINK PARTNERSHIP INC.

 

 

 

 

 

By:

 

 

 

Name:

 

Title:

 

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EXHIBIT A

 

EXERCISE NOTICE

 

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

 

THINK PARTNERSHIP INC.

 

The undersigned holder hereby exercises the right to purchase
                                    of the shares of Common Stock (“Warrant
Shares”) of Think Partnership Inc., a Nevada corporation (the “Company”),
evidenced by the attached Warrant to Purchase Common Stock (the “Warrant”).
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 Exercise Price
shall be made as:

 

a  “Cash Exercise” with respect to                                Warrant
Shares; and/or

 

a  “Cashless Exercise” with respect to                                Warrant
Shares.

 

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.

 

3. Delivery of Warrant Shares. The Company shall deliver to the holder
                               Warrant Shares in accordance with the terms of
the Warrant.

 

 

Date:

 

,

 

 

 

 

 

 

Name of Registered Holder

 

By:

 

 

 

Name:

 

Title:

 

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ACKNOWLEDGMENT

 

The Company hereby acknowledges this Exercise Notice and hereby directs Colonial
Stock Transfer to issue the above indicated number of shares of Common Stock in
accordance with the Transfer Agent Instructions dated March      , 2006 from the
Company and acknowledged and agreed to by Colonial Stock Transfer.

 

 

THINK PARTNERSHIP INC.

 

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

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