Exhibit 10.6

 

WARRANT

 

THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN A FORM REASONABLY
SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT.

 

ISONICS CORPORATION

 

Warrant To Purchase Common Stock

 

Warrant No.: CCP-001

 

Number of Shares: 2,000,000

 

 

 

 

 

Warrant Exercise Price: $1.25

 

 

 

 

 

Expiration Date: May 30, 2009

 

Date of Issuance: May 30, 2006

 

Isonics Corporation, a California corporation (the “Company”), hereby certifies
that, for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Cornell Capital Partners, LP (the “Holder”), the
registered holder hereof or its permitted assigns, is entitled, subject to the
terms set forth below, to purchase from the Company upon surrender of this
Warrant, at any time or times on or after the date hereof, but not after
11:59 P.M. Eastern Time on the Expiration Date (as defined herein) Two Million
(2,000,000) fully paid and nonassessable shares of Common Stock (as defined
herein) of the Company (the “Warrant Shares”) at the exercise price per share
provided in Section 1(b) below or as subsequently adjusted; provided, however,
that in no event shall the holder be entitled to exercise this Warrant for a
number of Warrant Shares in excess of that number of Warrant Shares which, upon
giving effect to such exercise, would cause the aggregate number of shares of
Common Stock beneficially owned by the holder and its affiliates to exceed 4.99%
of the outstanding shares of the Common Stock following such exercise, except
within sixty (60) days of the Expiration Date (however, such restriction may be
waived by Holder (but only as to itself and not to any other holder) upon not
less than 65 days prior notice to the Company). For purposes of the foregoing
proviso, the aggregate 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 the determination
of such proviso is being made, but shall exclude shares of Common Stock which
would be issuable upon (i) exercise of the remaining, unexercised Warrants
beneficially owned by the holder and its affiliates and

 

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(ii) exercise or conversion of the unexercised or unconverted portion of any
other securities of the Company beneficially owned by the holder and its
affiliates (including, without limitation, any convertible notes or preferred
stock) 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 a holder may rely on the number of outstanding shares of
Common Stock as reflected in (1) the Company’s most recent Form 10-QSB or
Form 10-KSB, as the case may be, (2) a more recent public announcement by the
Company or (3) any other notice by the Company or its transfer agent setting
forth the number of shares of Common Stock outstanding. Upon the written request
of any holder, the Company shall promptly, but in no event later than one
(1) Business Day following the receipt of such notice, confirm in writing to any
such 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 exercise of Warrants (as defined below) by such holder and
its affiliates since the date as of which such number of outstanding shares of
Common Stock was reported.

 

SECTION 1.

 

(A)                                  THIS WARRANT IS ONE (1) OF THREE (3) COMMON
STOCK PURCHASE WARRANTS (THE “WARRANT”) ISSUED PURSUANT TO THE SECURITIES
PURCHASE AGREEMENT (“SECURITIES PURCHASE AGREEMENT”) DATED THE DATE HEREOF
BETWEEN THE COMPANY AND THE BUYERS LISTED ON SCHEDULE I THERETO. THE OTHER
WARRANT ISSUED PURSUANT TO THE SECURITIES PURCHASE AGREEMENT IS REFERRED TO
HEREIN AS THE “COMPANION WARRANTS” AND ARETO BE INTERPRETED TOGETHER WITH THIS
WARRANT. CONVERTIBLE DEBENTURES WERE ISSUED TO THE HOLDER OF THIS WARRANT AT THE
SAME TIME AS AND AFTER THIS WARRANT AND THE COMPANION WARRANTS AS DESCRIBED IN
THE SECURITIES PURCHASE AGREEMENT AND ARE REFERRED TO HEREIN AS THE CONVERTIBLE
DEBENTURES.

 

(B)                                 DEFINITIONS. THE FOLLOWING WORDS AND TERMS
AS USED IN THIS WARRANT SHALL HAVE THE FOLLOWING MEANINGS:

 

(I)                                     “APPROVED STOCK PLAN” MEANS ANY EMPLOYEE
BENEFIT PLAN WHICH HAS BEEN APPROVED OR IS IN THE FUTURE APPROVED BY THE BOARD
OF DIRECTORS OF THE COMPANY, PURSUANT TO WHICH THE COMPANY’S SECURITIES MAY BE
ISSUED TO ANY EMPLOYEE, CONSULTANT, OFFICER OR DIRECTOR FOR SERVICES PROVIDED TO
THE COMPANY.

 

(II)                                  “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.

 

(III)                               “CLOSING BID PRICE” MEANS THE CLOSING BID
PRICE OF COMMON STOCK AS QUOTED ON THE PRINCIPAL MARKET (AS REPORTED BY
BLOOMBERG FINANCIAL MARKETS (“BLOOMBERG”) THROUGH ITS “VOLUME AT PRICE”
FUNCTION).

 

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(IV)                              “COMMON STOCK” MEANS (I) THE COMPANY’S COMMON
STOCK, NO PAR VALUE PER SHARE, AND (II) ANY CAPITAL STOCK INTO WHICH SUCH COMMON
STOCK SHALL HAVE BEEN CHANGED OR ANY CAPITAL STOCK RESULTING FROM A
RECLASSIFICATION OF SUCH COMMON STOCK.

 

(V)                                 “EVENT OF DEFAULT” MEANS AN EVENT OF DEFAULT
UNDER THE SECURITIES PURCHASE AGREEMENT, THE CONVERTIBLE DEBENTURES ISSUED IN
CONNECTION THEREWITH OR THE INVESTOR’S REGISTRATION RIGHTS AGREEMENT DATED THE
DATE HEREOF.

 

(VI)                              “EXCLUDED SECURITIES” MEANS, ANY OF THE
FOLLOWING:

 

(A) ANY ISSUANCE BY THE COMPANY OF SECURITIES IN CONNECTION WITH A STRATEGIC
PARTNERSHIP OR A JOINT VENTURE (THE PRIMARY PURPOSE OF WHICH IS NOT TO RAISE
EQUITY CAPITAL),

 

 (B) ANY ISSUANCE BY THE COMPANY OF SECURITIES AS CONSIDERATION FOR A MERGER OR
CONSOLIDATION OR THE ACQUISITION OF A BUSINESS, PRODUCT, LICENSE, OR OTHER
ASSETS OF ANOTHER PERSON OR ENTITY,

 

(C) OPTIONS TO PURCHASE SHARES OF COMMON STOCK, PROVIDED (I) SUCH OPTIONS ARE
ISSUED AFTER THE DATE OF THIS WARRANT TO EMPLOYEES OF THE COMPANY WITHIN THIRTY
(30) DAYS OF SUCH EMPLOYEE’S STARTING HIS EMPLOYMENT WITH THE COMPANY, AND (II)
THE EXERCISE PRICE OF SUCH OPTIONS IS NOT LESS THAN THE CLOSING PRICE, AS QUOTED
BY BLOOMBERG, LP OF THE COMMON STOCK ON THE DATE OF ISSUANCE OF SUCH OPTION.

 

(D) SECURITIES ISSUED PURSUANT TO AN APPROVED STOCK PLAN;

 

(E) UP TO 1,000,000 WITHOUT REGISTRATION RIGHTS AND NOT PURSUANT TO FORM S-8 (IN
THE EVENT THAT SUCH ISSUANCE HAS REGISTRATION RIGHTS THE OBLIGOR SHALL OBTAIN
THE PRIOR WRITTEN APPROVAL OF THE HOLDER) SHARES THAT MAY BE ISSUED FROM TIME TO
TIME AT A PRICE NO LESS THAN THE VWAP ENDING WITHIN THREE (3) BUSINESS DAYS
PRIOR TO THE COMPLETION OF THE TRANSACTION (THE PRIMARY PURPOSE OF WHICH IS NOT
TO RAISE EQUITY CAPITAL), AND

 

(F) ANY ISSUANCE OF SECURITIES TO HOLDERS OF THE OTHER SECURITIES PROVIDED SUCH
TRANSACTIONS ARE IN ACCORDANCE WITH THE TERMS OF SUCH INSTRUMENT (INCLUDING ANY
ANTI-DILUTION PROTECTION CONTAINED IN SUCH INSTRUMENT) OR ARE ON TERMS
DETERMINED BY THE BOARD OF DIRECTORS OF THE COMPANY TO BE NO LESS FAVORABLE TO
THE COMPANY THAN THE EXISTING TERMS.

 

(VII)                           “EXPIRATION DATE” MEANS THE DATE THREE (3) YEARS
FROM THE ISSUANCE DATE OF THIS WARRANT OR, IF SUCH DATE FALLS ON A SATURDAY,
SUNDAY OR OTHER DAY ON WHICH BANKS ARE REQUIRED OR AUTHORIZED TO BE CLOSED IN
THE CITY OF NEW YORK OR THE STATE OF NEW YORK OR ON WHICH TRADING DOES NOT TAKE
PLACE ON THE PRINCIPAL EXCHANGE OR AUTOMATED QUOTATION SYSTEM ON WHICH THE
COMMON STOCK IS TRADED (A “HOLIDAY”), THE NEXT DATE THAT IS NOT A HOLIDAY.

 

(VIII)                        “ISSUANCE DATE” MEANS THE DATE HEREOF.

 

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

 

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(X)                                   “OTHER SECURITIES” MEANS (I) THOSE
CONVERTIBLE DEBENTURES, OPTIONS AND WARRANTS OF THE COMPANY ISSUED PRIOR TO, AND
OUTSTANDING ON, THE ISSUANCE DATE OF THIS WARRANT, (II) THE SHARES OF COMMON
STOCK ISSUABLE ON EXERCISE OF SUCH CONVERTIBLE DEBENTURES, OPTIONS AND WARRANTS,
PROVIDED SUCH CONVERTIBLE DEBENTURES, OPTIONS AND WARRANTS ARE NOT AMENDED AFTER
THE ISSUANCE DATE OF THIS WARRANT AND (III) THE SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE OF THIS WARRANT THE CONVERTIBLE DEBENTURE AND THE COMPANION
WARRANTS THAT WERE ISSUED PURSUANT TO THE SECURITIES PURCHASE AGREEMENT, AND
(IV) THE 660,000 SHARES OF RESTRICTED COMMON STOCK ISSUED OR TO BE ISSUED
PURSUANT TO THE SECURITIES PURCHASE AGREEMENT, AND (V) ANY OTHER SHARES OF
COMMON STOCK ISSUED OR ISSUABLE PURSUANT TO THIS WARRANT, THE COMPANION
WARRANTS, THE CONVERTIBLE DEBENTURE, AND THE REGISTRATION RIGHTS AGREEMENT
ENTERED INTO BETWEEN THE COMPANY AND THE INITIAL HOLDER OF THIS WARRANT.

 

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

 

(XII)                             “PRINCIPAL MARKET” MEANS THE NEW YORK STOCK
EXCHANGE, THE AMERICAN STOCK EXCHANGE, THE NASDAQ NATIONAL MARKET, THE NASDAQ
CAPITAL MARKET, WHICHEVER IS AT THE TIME THE PRINCIPAL TRADING EXCHANGE OR
MARKET FOR SUCH SECURITY, OR THE OVER-THE-COUNTER MARKET ON THE ELECTRONIC
BULLETIN BOARD FOR SUCH SECURITY AS REPORTED BY BLOOMBERG OR, IF NO BID OR SALE
INFORMATION IS REPORTED FOR SUCH SECURITY BY BLOOMBERG, THEN THE AVERAGE OF THE
BID PRICES OF EACH OF THE MARKET MAKERS FOR SUCH SECURITY AS REPORTED IN THE
“PINK SHEETS” BY THE NATIONAL QUOTATION BUREAU, INC.

 

(XIII)                          “SECURITIES ACT” MEANS THE SECURITIES ACT OF
1933, AS AMENDED.

 

(XIV)                         “VWAP” MEANS THE VOLUME WEIGHTED AVERAGE PRICE PER
SHARE OF THE COMPANY’S COMMON STOCK ON THE NASDAQ CAPITAL MARKET OR OTHER
SUBSEQUENT MARKET, AS QUOTED BY BLOOMBERG, LP.

 

(XV)                            “WARRANT” MEANS THIS WARRANT AND ALL WARRANTS
ISSUED IN EXCHANGE, TRANSFER OR REPLACEMENT THEREOF.

 

(XVI)                         “WARRANT EXERCISE PRICE” SHALL BE $1.25 OR AS
SUBSEQUENTLY ADJUSTED AS PROVIDED IN SECTION 8 HEREOF.

 

(XVII)                      “WARRANT SHARES” MEANS THE SHARES OF COMMON STOCK
ISSUABLE AT ANY TIME UPON EXERCISE OF THIS WARRANT.

 

(C)                                  OTHER DEFINITIONAL PROVISIONS.

 

(I)                                     EXCEPT AS OTHERWISE SPECIFIED HEREIN,
ALL REFERENCES HEREIN (A) TO THE COMPANY SHALL BE DEEMED TO INCLUDE THE
COMPANY’S SUCCESSORS AND (B) TO ANY APPLICABLE LAW DEFINED OR REFERRED TO HEREIN
SHALL BE DEEMED REFERENCES TO SUCH APPLICABLE LAW AS THE SAME MAY HAVE BEEN OR
MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME.

 

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(II)                                  WHEN USED IN THIS WARRANT, THE WORDS
“HEREIN”, “HEREOF”, AND “HEREUNDER” AND WORDS OF SIMILAR IMPORT, SHALL REFER TO
THIS WARRANT AS A WHOLE AND NOT TO ANY PROVISION OF THIS WARRANT, AND THE WORDS
“SECTION”, “SCHEDULE”, AND “EXHIBIT” SHALL REFER TO SECTIONS OF, AND SCHEDULES
AND EXHIBITS TO, THIS WARRANT UNLESS OTHERWISE SPECIFIED.

 

(III)                               WHENEVER THE CONTEXT SO REQUIRES, THE NEUTER
GENDER INCLUDES THE MASCULINE OR FEMININE, AND THE SINGULAR NUMBER INCLUDES THE
PLURAL, AND VICE VERSA.

 

SECTION 2.                                            EXERCISE OF WARRANT.

 

(A)                                  SUBJECT TO THE TERMS AND CONDITIONS HEREOF,
THIS WARRANT MAY BE EXERCISED BY THE HOLDER HEREOF THEN REGISTERED ON THE BOOKS
OF THE COMPANY, PRO RATA AS HEREINAFTER PROVIDED, AT ANY TIME ON ANY BUSINESS
DAY ON OR AFTER THE OPENING OF BUSINESS ON SUCH BUSINESS DAY, COMMENCING WITH
THE FIRST DAY AFTER THE DATE HEREOF, AND PRIOR TO 11:59 P.M. EASTERN TIME ON THE
EXPIRATION DATE (I) BY DELIVERY OF A WRITTEN NOTICE, IN THE FORM OF THE
SUBSCRIPTION NOTICE ATTACHED AS EXHIBIT A HERETO (THE “EXERCISE NOTICE”), OF
SUCH HOLDER’S ELECTION TO EXERCISE THIS WARRANT, WHICH NOTICE SHALL SPECIFY THE
NUMBER OF WARRANT SHARES TO BE PURCHASED, PAYMENT TO THE COMPANY OF AN AMOUNT
EQUAL TO THE WARRANT EXERCISE PRICE(S) APPLICABLE TO THE WARRANT SHARES BEING
PURCHASED, MULTIPLIED BY THE NUMBER OF WARRANT SHARES (AT THE APPLICABLE WARRANT
EXERCISE PRICE) AS TO WHICH THIS WARRANT IS BEING EXERCISED (PLUS ANY APPLICABLE
ISSUE OR TRANSFER TAXES) (THE “AGGREGATE EXERCISE PRICE”) IN CASH OR WIRE
TRANSFER OF IMMEDIATELY AVAILABLE FUNDS AND THE SURRENDER OF THIS WARRANT (OR AN
INDEMNIFICATION UNDERTAKING WITH RESPECT TO THIS WARRANT IN THE CASE OF ITS
LOSS, THEFT OR DESTRUCTION) TO A COMMON CARRIER FOR OVERNIGHT DELIVERY TO THE
COMPANY AS SOON AS PRACTICABLE FOLLOWING SUCH DATE (“CASH BASIS”) OR (II) IF
AFTER JANUARY 15, 2007, AT THE TIME OF EXERCISE, THE WARRANT SHARES ARE NOT
SUBJECT TO AN EFFECTIVE REGISTRATION STATEMENT OR IF AN EVENT OF DEFAULT HAS
OCCURRED, BY DELIVERING AN EXERCISE NOTICE AND IN LIEU OF MAKING PAYMENT OF THE
AGGREGATE EXERCISE PRICE IN CASH OR WIRE TRANSFER, ELECT INSTEAD TO RECEIVE UPON
SUCH EXERCISE THE “NET NUMBER” OF SHARES OF COMMON STOCK DETERMINED ACCORDING TO
THE FOLLOWING FORMULA (THE “CASHLESS EXERCISE”):

 

 

Net Number = (A x B) – (A x C)

 

                                     B

 

For purposes of the foregoing formula:

 

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

 

B = the VWAP of the Common Stock on the date of exercise of the Warrant.

 

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

 

IN THE EVENT OF ANY EXERCISE OF THE RIGHTS REPRESENTED BY THIS WARRANT IN
COMPLIANCE WITH THIS SECTION 2, THE COMPANY SHALL ON OR BEFORE THE FIFTH (5TH)
BUSINESS DAY FOLLOWING THE DATE OF RECEIPT OF THE EXERCISE NOTICE, THE AGGREGATE
EXERCISE PRICE AND THIS WARRANT (OR AN INDEMNIFICATION UNDERTAKING WITH RESPECT
TO THIS WARRANT IN THE CASE OF ITS LOSS, THEFT OR

 

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DESTRUCTION) AND THE RECEIPT OF THE REPRESENTATIONS OF THE HOLDER SPECIFIED IN
SECTION 6 HEREOF, IF REQUESTED BY THE COMPANY (THE “EXERCISE DELIVERY
DOCUMENTS”), AND IF THE COMMON STOCK IS DTC ELIGIBLE, CREDIT SUCH AGGREGATE
NUMBER OF SHARES OF COMMON STOCK TO WHICH THE HOLDER SHALL BE ENTITLED TO THE
HOLDER’S OR ITS DESIGNEE’S BALANCE ACCOUNT WITH THE DEPOSITORY TRUST COMPANY;
PROVIDED, HOWEVER, IF THE HOLDER WHO SUBMITTED THE EXERCISE NOTICE REQUESTED
PHYSICAL DELIVERY OF ANY OR ALL OF THE WARRANT SHARES, OR, IF THE COMMON STOCK
IS NOT DTC ELIGIBLE  THEN THE COMPANY SHALL, ON OR BEFORE THE FIFTH (5TH)
BUSINESS DAY FOLLOWING RECEIPT OF THE EXERCISE DELIVERY DOCUMENTS, ISSUE AND
SURRENDER TO A COMMON CARRIER FOR OVERNIGHT DELIVERY TO THE ADDRESS SPECIFIED IN
THE EXERCISE NOTICE, A CERTIFICATE, REGISTERED IN THE NAME OF THE HOLDER, FOR
THE NUMBER OF SHARES OF COMMON STOCK TO WHICH THE HOLDER SHALL BE ENTITLED
PURSUANT TO SUCH REQUEST. UPON DELIVERY OF THE EXERCISE NOTICE AND AGGREGATE
EXERCISE PRICE REFERRED TO IN CLAUSE (I) OR (II) ABOVE THE HOLDER OF THIS
WARRANT 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. IN THE CASE OF A DISPUTE AS TO THE DETERMINATION OF THE WARRANT
EXERCISE PRICE, THE VWAP OR THE ARITHMETIC CALCULATION OF THE WARRANT SHARES,
THE COMPANY SHALL PROMPTLY ISSUE TO THE HOLDER THE NUMBER OF WARRANT SHARES THAT
IS NOT DISPUTED AND SHALL SUBMIT THE DISPUTED DETERMINATIONS OR ARITHMETIC
CALCULATIONS TO THE HOLDER VIA FACSIMILE WITHIN ONE (1) BUSINESS DAY OF RECEIPT
OF THE HOLDER’S EXERCISE NOTICE.

 

(B)                                 IF THE HOLDER AND THE COMPANY ARE UNABLE TO
AGREE UPON THE DETERMINATION OF THE WARRANT EXERCISE PRICE OR ARITHMETIC
CALCULATION OF THE WARRANT SHARES WITHIN ONE (1) DAY OF SUCH DISPUTED
DETERMINATION OR ARITHMETIC CALCULATION BEING SUBMITTED TO THE HOLDER, THEN THE
COMPANY SHALL IMMEDIATELY SUBMIT VIA FACSIMILE OR OTHER FORM OF ELECTRONIC
COMMUNICATION (INCLUDING WITHOUT LIMITATION E-MAIL) (I) THE DISPUTED
DETERMINATION OF THE WARRANT EXERCISE PRICE OR THE VWAP TO AN INDEPENDENT,
REPUTABLE INVESTMENT BANKING FIRM OR (II) THE DISPUTED ARITHMETIC CALCULATION OF
THE WARRANT SHARES TO ITS INDEPENDENT, OUTSIDE ACCOUNTANT. THE COMPANY SHALL
CAUSE THE INVESTMENT BANKING FIRM 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 FORTY-EIGHT (48) HOURS FROM THE TIME IT RECEIVES
THE DISPUTED DETERMINATIONS OR CALCULATIONS. SUCH INVESTMENT BANKING FIRM’S OR
ACCOUNTANT’S DETERMINATION OR CALCULATION, AS THE CASE MAY BE, SHALL BE DEEMED
CONCLUSIVE ABSENT MANIFEST ERROR.

 

(C)                                  UNLESS THE RIGHTS REPRESENTED BY THIS
WARRANT SHALL HAVE EXPIRED OR SHALL HAVE BEEN FULLY EXERCISED, THE COMPANY
SHALL, AS SOON AS PRACTICABLE AND IN NO EVENT LATER THAN FIVE (5) BUSINESS DAYS
AFTER ANY EXERCISE AND AT ITS OWN EXPENSE, ISSUE A NEW WARRANT IDENTICAL IN ALL
RESPECTS TO THIS WARRANT EXERCISED EXCEPT IT SHALL REPRESENT RIGHTS TO PURCHASE
THE NUMBER OF WARRANT SHARES PURCHASABLE IMMEDIATELY PRIOR TO SUCH EXERCISE
UNDER THIS WARRANT EXERCISED, LESS THE NUMBER OF WARRANT SHARES WITH RESPECT TO
WHICH SUCH WARRANT IS EXERCISED.

 

(D)                                 NO FRACTIONAL WARRANT SHARES ARE TO BE
ISSUED UPON ANY PRO RATA EXERCISE OF THIS WARRANT, BUT RATHER THE NUMBER OF
WARRANT SHARES ISSUED UPON SUCH EXERCISE OF THIS WARRANT SHALL BE ROUNDED UP OR
DOWN TO THE NEAREST WHOLE NUMBER.

 

(E)                                  IF THE COMPANY OR ITS TRANSFER AGENT SHALL
FAIL FOR ANY REASON OR FOR NO REASON TO ISSUE TO THE HOLDER WITHIN TEN (10) DAYS
OF RECEIPT OF THE EXERCISE DELIVERY DOCUMENTS, A CERTIFICATE FOR THE NUMBER OF
WARRANT SHARES TO WHICH THE HOLDER IS ENTITLED OR TO CREDIT THE HOLDER’S BALANCE
ACCOUNT WITH THE DEPOSITORY TRUST COMPANY FOR SUCH NUMBER OF WARRANT

 

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SHARES TO WHICH THE HOLDER IS ENTITLED UPON THE HOLDER’S EXERCISE OF THIS
WARRANT, THE COMPANY SHALL, IN ADDITION TO ANY OTHER REMEDIES UNDER THIS WARRANT
OR OTHERWISE AVAILABLE TO SUCH HOLDER, PAY AS ADDITIONAL DAMAGES IN CASH TO SUCH
HOLDER ON EACH DAY THE ISSUANCE OF SUCH CERTIFICATE FOR WARRANT SHARES IS NOT
TIMELY EFFECTED AN AMOUNT EQUAL TO 0.025% OF THE PRODUCT OF (A) THE SUM OF THE
NUMBER OF WARRANT SHARES NOT ISSUED TO THE HOLDER ON A TIMELY BASIS AND TO WHICH
THE HOLDER IS ENTITLED, AND (B) THE VWAP OF THE COMMON STOCK FOR THE TRADING DAY
IMMEDIATELY PRECEDING THE LAST POSSIBLE DATE WHICH THE COMPANY COULD HAVE ISSUED
SUCH COMMON STOCK TO THE HOLDER WITHOUT VIOLATING THIS SECTION 2.

 

(F)                                    IF WITHIN TEN (10) DAYS AFTER THE
COMPANY’S RECEIPT OF THE EXERCISE DELIVERY DOCUMENTS, THE COMPANY FAILS TO
DELIVER A NEW WARRANT TO THE HOLDER FOR THE NUMBER OF WARRANT SHARES TO WHICH
SUCH HOLDER IS ENTITLED PURSUANT TO SECTION 2 HEREOF, THEN, IN ADDITION TO ANY
OTHER AVAILABLE REMEDIES UNDER THIS WARRANT, OR OTHERWISE AVAILABLE TO SUCH
HOLDER, THE COMPANY SHALL PAY AS ADDITIONAL DAMAGES IN CASH TO SUCH HOLDER ON
EACH DAY AFTER SUCH TENTH (10TH) DAY THAT SUCH DELIVERY OF SUCH NEW WARRANT IS
NOT TIMELY EFFECTED IN AN AMOUNT EQUAL TO 0.25% OF THE PRODUCT OF (A) THE NUMBER
OF WARRANT SHARES REPRESENTED BY THE PORTION OF THIS WARRANT WHICH IS NOT BEING
EXERCISED AND (B) THE VWAP OF THE COMMON STOCK FOR THE TRADING DAY IMMEDIATELY
PRECEDING THE LAST POSSIBLE DATE WHICH THE COMPANY COULD HAVE ISSUED SUCH
WARRANT TO THE HOLDER WITHOUT VIOLATING THIS SECTION 2.

 

SECTION 3.                                            COVENANTS AS TO COMMON
STOCK. THE COMPANY HEREBY COVENANTS AND AGREES AS FOLLOWS:

 

(A)                                  THIS WARRANT IS, AND ANY WARRANTS ISSUED IN
SUBSTITUTION FOR OR REPLACEMENT OF THIS WARRANT WILL UPON ISSUANCE BE, DULY
AUTHORIZED AND VALIDLY ISSUED.

 

(B)                                 SUBJECT TO THE AVAILABILITY OF SUFFICIENT
AUTHORIZED SHARES, ALL WARRANT SHARES WHICH MAY BE ISSUED UPON THE EXERCISE OF
THE RIGHTS REPRESENTED BY THIS WARRANT WILL, UPON ISSUANCE, BE VALIDLY ISSUED,
FULLY PAID AND NONASSESSABLE AND FREE FROM ALL TAXES, LIENS AND CHARGES WITH
RESPECT TO THE ISSUE THEREOF.

 

(C)                                  DURING THE PERIOD WITHIN WHICH THE RIGHTS
REPRESENTED BY THIS WARRANT MAY BE EXERCISED, AND SUBJECT TO THE AVAILABILITY OF
SUFFICIENT AUTHORIZED SHARES THE COMPANY WILL AT ALL TIMES HAVE AUTHORIZED AND
RESERVED AT LEAST ONE HUNDRED PERCENT (100%) OF THE NUMBER OF SHARES OF COMMON
STOCK NEEDED TO PROVIDE FOR THE EXERCISE OF THE RIGHTS THEN REPRESENTED BY THIS
WARRANT AND THE PAR VALUE OF SAID SHARES WILL AT ALL TIMES BE LESS THAN OR EQUAL
TO THE APPLICABLE WARRANT EXERCISE PRICE. IF AT ANY TIME AFTER DECEMBER 31, 2006
THE COMPANY DOES NOT HAVE A SUFFICIENT NUMBER OF SHARES OF COMMON STOCK
AUTHORIZED AND AVAILABLE, THEN THE COMPANY SHALL CALL AND HOLD A SPECIAL MEETING
OF ITS STOCKHOLDERS WITHIN SIXTY (60) DAYS OF THAT TIME FOR THE SOLE PURPOSE OF
INCREASING THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK.

 

(D)                                 THE COMPANY WILL NOT, BY AMENDMENT OF ITS
ARTICLES OF INCORPORATION OR THROUGH ANY REORGANIZATION, TRANSFER OF ASSETS,
CONSOLIDATION, MERGER, DISSOLUTION, ISSUE OR SALE OF SECURITIES, OR ANY OTHER
VOLUNTARY ACTION, AVOID OR SEEK TO AVOID THE OBSERVANCE OR PERFORMANCE OF ANY OF
THE TERMS TO BE OBSERVED OR PERFORMED BY IT HEREUNDER, BUT WILL AT ALL TIMES IN
GOOD FAITH ASSIST IN THE CARRYING OUT OF ALL THE PROVISIONS OF THIS WARRANT AND
IN THE TAKING OF ALL SUCH ACTION AS MAY REASONABLY BE REQUESTED BY THE HOLDER OF
THIS WARRANT IN ORDER TO PROTECT THE EXERCISE

 

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PRIVILEGE OF THE HOLDER OF THIS WARRANT AGAINST DILUTION OR OTHER IMPAIRMENT,
CONSISTENT WITH THE TENOR AND PURPOSE OF THIS WARRANT. THE COMPANY WILL NOT
INCREASE THE PAR VALUE OF ANY SHARES OF COMMON STOCK RECEIVABLE UPON THE
EXERCISE OF THIS WARRANT ABOVE THE WARRANT EXERCISE PRICE THEN IN EFFECT, AND
(II) WILL 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 ASSUMING THAT THERE IS AN
EXEMPTION AVAILABLE FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF
1933 AND APPLICABLE STATE LAW FOR SUCH EXERCISE.

 

(E)                                  THIS WARRANT WILL BE BINDING UPON ANY
ENTITY SUCCEEDING TO THE COMPANY BY MERGER, CONSOLIDATION OR ACQUISITION OF ALL
OR SUBSTANTIALLY ALL OF THE COMPANY’S ASSETS.

 

SECTION 4.                                            TAXES. THE COMPANY SHALL
PAY ANY AND ALL TAXES, EXCEPT ANY APPLICABLE WITHHOLDING, WHICH MAY BE PAYABLE
WITH RESPECT TO THE ISSUANCE AND DELIVERY OF WARRANT SHARES UPON EXERCISE OF
THIS WARRANT.

 

SECTION 5.                                            WARRANT HOLDER NOT DEEMED
A STOCKHOLDER. EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED HEREIN, NO HOLDER, AS
SUCH, OF THIS WARRANT SHALL BE ENTITLED TO VOTE OR RECEIVE DIVIDENDS OR BE
DEEMED THE HOLDER OF SHARES OF CAPITAL STOCK OF THE COMPANY FOR ANY PURPOSE, NOR
SHALL ANYTHING CONTAINED IN THIS WARRANT BE CONSTRUED TO CONFER UPON THE HOLDER
HEREOF, AS SUCH, 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
THIS WARRANT OF THE WARRANT SHARES WHICH HE OR SHE 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 SUCH 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 5, THE COMPANY WILL
PROVIDE THE HOLDER OF THIS WARRANT 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.

 

SECTION 6.                                            REPRESENTATIONS OF HOLDER.
THE HOLDER OF THIS WARRANT, BY THE ACCEPTANCE HEREOF, REPRESENTS THAT IT IS
ACQUIRING THIS WARRANT AND THE WARRANT SHARES FOR ITS OWN ACCOUNT FOR INVESTMENT
ONLY AND NOT WITH A VIEW TOWARDS, OR FOR RESALE IN CONNECTION WITH, THE PUBLIC
SALE OR DISTRIBUTION OF THIS WARRANT OR THE WARRANT SHARES, EXCEPT PURSUANT TO
SALES REGISTERED OR EXEMPTED UNDER THE SECURITIES ACT; PROVIDED, HOWEVER, THAT
BY MAKING THE REPRESENTATIONS HEREIN, THE HOLDER DOES NOT AGREE TO HOLD THIS
WARRANT OR ANY OF THE WARRANT SHARES FOR ANY MINIMUM OR OTHER SPECIFIC TERM AND
RESERVES THE RIGHT TO DISPOSE OF THIS WARRANT AND THE WARRANT SHARES AT ANY TIME
IN ACCORDANCE WITH OR PURSUANT TO A REGISTRATION STATEMENT OR AN EXEMPTION UNDER
THE SECURITIES ACT. THE HOLDER OF THIS WARRANT FURTHER REPRESENTS, BY ACCEPTANCE
HEREOF, THAT, AS OF THIS DATE, SUCH HOLDER IS AN “ACCREDITED INVESTOR” AS SUCH
TERM IS DEFINED IN RULE 501(A)(1) OF REGULATION D PROMULGATED BY THE SECURITIES
AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT (AN “ACCREDITED INVESTOR”).
UPON EXERCISE OF THIS WARRANT  THE HOLDER SHALL, IF REQUESTED BY THE COMPANY,
CONFIRM IN WRITING, IN A FORM SATISFACTORY TO THE COMPANY, THAT THE WARRANT
SHARES SO PURCHASED ARE BEING ACQUIRED SOLELY FOR THE HOLDER’S OWN ACCOUNT AND
NOT AS A NOMINEE FOR ANY OTHER PARTY, FOR INVESTMENT, AND NOT WITH A VIEW TOWARD
DISTRIBUTION OR RESALE

 

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AND THAT SUCH HOLDER IS AN ACCREDITED INVESTOR. IF SUCH HOLDER CANNOT MAKE SUCH
REPRESENTATIONS BECAUSE THEY WOULD BE FACTUALLY INCORRECT, IT SHALL BE A
CONDITION TO SUCH HOLDER’S EXERCISE OF THIS WARRANT THAT THE COMPANY RECEIVE
SUCH OTHER REPRESENTATIONS AS THE COMPANY CONSIDERS REASONABLY NECESSARY TO
ASSURE THE COMPANY THAT THE ISSUANCE OF ITS SECURITIES UPON EXERCISE OF THIS
WARRANT SHALL NOT VIOLATE ANY UNITED STATES OR STATE SECURITIES LAWS.

 

SECTION 7.                                            OWNERSHIP AND TRANSFER.

 

(A)                                  THE COMPANY SHALL MAINTAIN AT ITS PRINCIPAL
EXECUTIVE OFFICES (OR SUCH OTHER OFFICE OR AGENCY OF THE COMPANY AS IT
MAY DESIGNATE BY NOTICE TO THE HOLDER HEREOF), A REGISTER FOR THIS WARRANT, IN
WHICH THE COMPANY SHALL RECORD THE NAME AND ADDRESS OF THE PERSON IN WHOSE NAME
THIS WARRANT HAS BEEN ISSUED, AS WELL AS THE NAME AND ADDRESS OF EACH
TRANSFEREE. THE COMPANY MAY TREAT THE PERSON IN WHOSE NAME ANY WARRANT IS
REGISTERED ON THE REGISTER AS THE OWNER AND HOLDER THEREOF FOR ALL PURPOSES,
NOTWITHSTANDING ANY NOTICE TO THE CONTRARY, BUT IN ALL EVENTS RECOGNIZING ANY
TRANSFERS MADE IN ACCORDANCE WITH THE TERMS OF THIS WARRANT.

 

SECTION 8.                                            ADJUSTMENT OF WARRANT
EXERCISE PRICE AND NUMBER OF SHARES. THE WARRANT EXERCISE PRICE AND THE NUMBER
OF SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT SHALL BE
ADJUSTED FROM TIME TO TIME AS FOLLOWS:

 

(A)                                  ADJUSTMENT OF WARRANT EXERCISE PRICE AND
NUMBER OF SHARES UPON ISSUANCE OF COMMON STOCK. IF AND WHENEVER ON OR AFTER THE
ISSUANCE DATE OF THIS WARRANT, THE COMPANY ISSUES OR SELLS, OR IS DEEMED TO HAVE
ISSUED OR SOLD, ANY SHARES OF COMMON STOCK (OTHER THAN (I) EXCLUDED SECURITIES,
(II) SHARES OF COMMON STOCK WHICH ARE ISSUED OR DEEMED TO HAVE BEEN ISSUED BY
THE COMPANY IN CONNECTION WITH AN APPROVED STOCK PLAN, OR (III) THE OTHER
SECURITIES) (THE NEW SHARES) FOR A CONSIDERATION PER SHARE LESS THAN A PRICE
(THE “APPLICABLE PRICE”) EQUAL TO THE WARRANT EXERCISE PRICE IN EFFECT
IMMEDIATELY PRIOR TO SUCH ISSUANCE OR SALE, THEN IMMEDIATELY AFTER SUCH ISSUE OR
SALE THE WARRANT EXERCISE PRICE THEN IN EFFECT SHALL BE ADJUSTED (THE “WEIGHTED
ADJUSTMENT”) TO A PRICE DETERMINED BY MULTIPLYING SUCH EXERCISE PRICE BY A
FRACTION,

 

THE NUMERATOR OF WHICH SHALL BE THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING
IMMEDIATELY BEFORE SUCH ISSUANCE PLUS THE NUMBER OF SHARES OF COMMON STOCK THAT
THE AGGREGATE CONSIDERATION RECEIVED BY THE COMPANY FOR SUCH ISSUANCE WOULD
PURCHASE AT THE WARRANT EXERCISE PRICE THEN IN EFFECT; AND

 

THE DENOMINATOR OF WHICH SHALL BE THE NUMBER OF SHARES OF COMMON STOCK
OUTSTANDING IMMEDIATELY PRIOR TO SUCH ISSUANCE PLUS THE NUMBER OF NEW SHARES.

 

FOR THE PURPOSES OF THIS SECTION 8(A), THE TERM “COMMON STOCK OUTSTANDING”
INCLUDES ALL SHARES OF COMMON STOCK THEN OUTSTANDING CALCULATED IN ACCORDANCE
WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES CONSISTENTLY APPLIED.

 

UPON EACH SUCH ADJUSTMENT OF THE WARRANT EXERCISE PRICE HEREUNDER, THE NUMBER OF
WARRANT SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT SHALL BE ADJUSTED TO THE
NUMBER OF SHARES DETERMINED BY MULTIPLYING THE WARRANT EXERCISE PRICE IN EFFECT
IMMEDIATELY PRIOR TO SUCH ADJUSTMENT BY THE NUMBER OF WARRANT SHARES ISSUABLE
UPON EXERCISE OF THIS WARRANT IMMEDIATELY PRIOR TO SUCH ADJUSTMENT AND DIVIDING
THE PRODUCT THEREOF BY THE WARRANT EXERCISE PRICE RESULTING FROM SUCH
ADJUSTMENT.

 

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(B)                                 EFFECT ON WARRANT EXERCISE PRICE OF CERTAIN
EVENTS. FOR PURPOSES OF DETERMINING THE ADJUSTED WARRANT EXERCISE PRICE UNDER
SECTION 8(A) ABOVE, THE FOLLOWING SHALL BE APPLICABLE:

 

(I)                                     ISSUANCE OF OPTIONS. IF AFTER THE DATE
HEREOF, 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 OR EXCHANGE OF ANY CONVERTIBLE SECURITIES
ISSUABLE UPON EXERCISE OF ANY SUCH OPTION IS LESS THAN THE APPLICABLE PRICE (NOT
INCLUDING EXCLUDED SECURITIES), 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 AND SHALL BE
SUBJECT TO THE WEIGHTED ADJUSTMENT. FOR PURPOSES OF THIS SECTION 8(B)(I), THE
LOWEST PRICE PER SHARE FOR WHICH ONE SHARE OF COMMON STOCK IS ISSUABLE UPON
EXERCISE OF SUCH OPTIONS OR UPON CONVERSION OR EXCHANGE OF SUCH CONVERTIBLE
SECURITIES 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 OR UPON CONVERSION OR EXCHANGE OF ANY CONVERTIBLE SECURITY ISSUABLE UPON
EXERCISE OF SUCH OPTION. NO FURTHER ADJUSTMENT OF THE WARRANT EXERCISE PRICE
SHALL BE MADE UPON THE ACTUAL ISSUANCE OF SUCH COMMON STOCK OR OF SUCH
CONVERTIBLE SECURITIES UPON THE EXERCISE OF SUCH OPTIONS OR UPON THE ACTUAL
ISSUANCE OF SUCH COMMON STOCK UPON CONVERSION 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 OR EXCHANGE THEREOF IS LESS THAN THE APPLICABLE PRICE (NOT INCLUDING
EXCLUDED SECURITIES), 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 AND
SHALL BE SUBJECT TO THE WEIGHTED ADJUSTMENT. FOR THE PURPOSES OF THIS
SECTION 8(B)(II), THE LOWEST PRICE PER SHARE FOR WHICH ONE SHARE OF COMMON STOCK
IS ISSUABLE UPON SUCH CONVERSION OR EXCHANGE 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 OR EXCHANGE OF SUCH CONVERTIBLE
SECURITY. NO FURTHER ADJUSTMENT OF THE WARRANT EXERCISE PRICE SHALL BE MADE UPON
THE ACTUAL ISSUANCE OF SUCH COMMON STOCK UPON CONVERSION 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 THE
WARRANT EXERCISE PRICE HAD BEEN OR ARE TO BE MADE PURSUANT TO OTHER PROVISIONS
OF THIS SECTION 8(B), NO FURTHER ADJUSTMENT OF THE WARRANT EXERCISE PRICE SHALL
BE MADE BY REASON OF SUCH ISSUE OR SALE.

 

(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 OR EXCHANGE OF ANY
CONVERTIBLE SECURITIES, OR THE RATE AT WHICH ANY CONVERTIBLE SECURITIES ARE
CONVERTIBLE INTO OR EXCHANGEABLE FOR COMMON STOCK CHANGES AT ANY TIME, THE
WARRANT EXERCISE PRICE IN EFFECT AT THE TIME OF SUCH CHANGE SHALL BE ADJUSTED
AND SHALL BE SUBJECT TO THE WEIGHTED ADJUSTMENT TO THE WARRANT EXERCISE PRICE
WHICH WOULD HAVE BEEN IN EFFECT AT SUCH TIME HAD SUCH OPTIONS OR CONVERTIBLE
SECURITIES PROVIDED FOR SUCH CHANGED PURCHASE PRICE, ADDITIONAL CONSIDERATION OR
CHANGED CONVERSION RATE, AS THE CASE MAY BE, AT THE TIME INITIALLY GRANTED,
ISSUED OR SOLD AND THE NUMBER OF WARRANT SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT

 

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SHALL BE CORRESPONDINGLY READJUSTED. FOR PURPOSES OF THIS SECTION 8(B)(III), IF
THE TERMS OF ANY OPTION OR CONVERTIBLE SECURITY THAT WAS OUTSTANDING AS OF THE
ISSUANCE DATE OF THIS WARRANT ARE CHANGED IN THE MANNER DESCRIBED IN THE
IMMEDIATELY PRECEDING SENTENCE, THEN SUCH OPTION OR CONVERTIBLE SECURITY AND THE
COMMON STOCK DEEMED ISSUABLE UPON EXERCISE, CONVERSION OR EXCHANGE THEREOF SHALL
BE DEEMED TO HAVE BEEN ISSUED AS OF THE DATE OF SUCH CHANGE. NO ADJUSTMENT
PURSUANT TO THIS SECTION 8(B) SHALL BE MADE IF SUCH ADJUSTMENT WOULD RESULT IN
AN INCREASE OF THE WARRANT EXERCISE PRICE THEN IN EFFECT.

 

(C)                                  EFFECT ON WARRANT EXERCISE PRICE OF CERTAIN
EVENTS. FOR PURPOSES OF DETERMINING THE ADJUSTED WARRANT EXERCISE PRICE UNDER
SECTIONS 8(A) AND 8(B), THE FOLLOWING SHALL BE APPLICABLE:

 

(I)                                     CALCULATION OF CONSIDERATION RECEIVED.
IF ANY COMMON STOCK, OPTIONS OR CONVERTIBLE SECURITIES ARE ISSUED OR SOLD OR
DEEMED TO HAVE BEEN ISSUED OR SOLD FOR CASH, THE CONSIDERATION RECEIVED
THEREFORE WILL BE DEEMED TO BE THE GROSS AMOUNT RECEIVED BY THE COMPANY
THEREFORE. IF ANY 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 MARKETABLE SECURITIES, IN WHICH CASE THE
AMOUNT OF CONSIDERATION RECEIVED BY THE COMPANY WILL BE THE MARKET PRICE OF SUCH
SECURITIES ON THE DATE OF RECEIPT OF SUCH SECURITIES. IF ANY 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 THEREFORE 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 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 JOINTLY BY THE COMPANY AND THE HOLDERS OF WARRANTS
REPRESENTING AT LEAST A MAJORITY OF THE WARRANT SHARES ISSUABLE UPON EXERCISE OF
THE WARRANTS AND COMPANION WARRANTS THEN OUTSTANDING. 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) BUSINESS DAYS AFTER THE
TENTH (10TH) DAY FOLLOWING THE VALUATION EVENT BY AN INDEPENDENT, REPUTABLE
APPRAISER JOINTLY SELECTED BY THE COMPANY AND THE HOLDERS OF WARRANTS
REPRESENTING AT LEAST A MAJORITY  OF THE WARRANT SHARES ISSUABLE UPON EXERCISE
OF THE WARRANTS (INCLUDING THE COMPANION WARRANTS) THEN OUTSTANDING. THE
DETERMINATION OF SUCH APPRAISER SHALL BE FINAL AND BINDING UPON ALL PARTIES AND
THE FEES AND EXPENSES OF SUCH APPRAISER SHALL BE BORNE EQUALLY BY THE COMPANY
AND THE HOLDERS OF WARRANTS.

 

(II)                                  INTEGRATED TRANSACTIONS. 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 $.01.

 

(III)                               TREASURY SHARES. THE NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING AT ANY GIVEN TIME DOES NOT INCLUDE SHARES OWNED OR HELD
BY OR FOR THE ACCOUNT OF THE COMPANY, AND THE DISPOSITION OF ANY SHARES SO OWNED
OR HELD WILL BE CONSIDERED AN ISSUE OR SALE OF COMMON STOCK.

 

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(IV)                              RECORD DATE. IF THE COMPANY TAKES A RECORD OF
THE HOLDERS OF COMMON STOCK FOR THE PURPOSE OF ENTITLING THEM (1) TO RECEIVE A
DIVIDEND OR OTHER DISTRIBUTION PAYABLE IN COMMON STOCK, OPTIONS OR IN
CONVERTIBLE SECURITIES OR (2) TO SUBSCRIBE FOR OR PURCHASE 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.

 

(D)                                 ADJUSTMENT OF WARRANT EXERCISE PRICE UPON
SUBDIVISION OR COMBINATION OF COMMON STOCK. IF THE COMPANY AT ANY TIME AFTER THE
DATE OF ISSUANCE OF THIS WARRANT 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, ANY WARRANT EXERCISE PRICE IN
EFFECT IMMEDIATELY PRIOR TO SUCH SUBDIVISION WILL BE PROPORTIONATELY REDUCED AND
THE NUMBER OF SHARES OF COMMON STOCK OBTAINABLE UPON EXERCISE OF THIS WARRANT
WILL BE PROPORTIONATELY INCREASED. IF THE COMPANY AT ANY TIME AFTER THE DATE OF
ISSUANCE OF THIS WARRANT 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, ANY WARRANT EXERCISE PRICE IN EFFECT IMMEDIATELY PRIOR
TO SUCH COMBINATION WILL BE PROPORTIONATELY INCREASED AND THE NUMBER OF WARRANT
SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT WILL BE PROPORTIONATELY DECREASED.
ANY ADJUSTMENT UNDER THIS SECTION 8(D) SHALL BECOME EFFECTIVE AT THE CLOSE OF
BUSINESS ON THE DATE THE SUBDIVISION OR COMBINATION BECOMES EFFECTIVE.

 

(E)                                  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 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 OR OTHER SIMILAR TRANSACTION) (A
“DISTRIBUTION”), AT ANY TIME AFTER THE ISSUANCE OF THIS WARRANT, THEN, IN EACH
SUCH CASE:

 

(I)                                     ANY WARRANT EXERCISE PRICE IN EFFECT
IMMEDIATELY PRIOR TO THE CLOSE OF BUSINESS ON THE RECORD DATE FIXED FOR THE
DETERMINATION OF HOLDERS 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 WARRANT EXERCISE PRICE BY A FRACTION OF
WHICH (A) THE NUMERATOR SHALL BE THE CLOSING SALE PRICE OF THE 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 (B) THE DENOMINATOR SHALL BE THE
CLOSING SALE PRICE OF THE COMMON STOCK ON THE TRADING DAY IMMEDIATELY PRECEDING
SUCH RECORD DATE; AND

 

(II)                                  EITHER (A) THE NUMBER OF WARRANT SHARES
OBTAINABLE UPON EXERCISE OF THIS WARRANT SHALL BE INCREASED TO A NUMBER OF
SHARES EQUAL TO THE NUMBER OF SHARES OF COMMON STOCK OBTAINABLE IMMEDIATELY
PRIOR TO THE CLOSE OF BUSINESS ON THE RECORD DATE FIXED FOR THE DETERMINATION OF
HOLDERS OF COMMON STOCK ENTITLED TO RECEIVE THE DISTRIBUTION MULTIPLIED BY THE
RECIPROCAL OF THE FRACTION SET FORTH IN THE IMMEDIATELY PRECEDING CLAUSE (I), OR
(B) IN THE EVENT THAT THE DISTRIBUTION IS OF COMMON STOCK OF A COMPANY WHOSE
COMMON STOCK IS TRADED ON A NATIONAL SECURITIES EXCHANGE OR A NATIONAL AUTOMATED
QUOTATION SYSTEM, THEN THE HOLDER OF THIS WARRANT SHALL RECEIVE AN ADDITIONAL
WARRANT TO PURCHASE COMMON STOCK, THE TERMS OF WHICH SHALL

 

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BE IDENTICAL TO THOSE OF THIS WARRANT, EXCEPT THAT SUCH WARRANT SHALL BE
EXERCISABLE INTO THE AMOUNT OF THE ASSETS THAT WOULD HAVE BEEN PAYABLE TO THE
HOLDER OF THIS WARRANT PURSUANT TO THE DISTRIBUTION HAD THE HOLDER EXERCISED
THIS WARRANT IMMEDIATELY PRIOR TO SUCH RECORD DATE AND WITH AN EXERCISE PRICE
EQUAL TO THE AMOUNT BY WHICH THE EXERCISE PRICE OF THIS WARRANT WAS DECREASED
WITH RESPECT TO THE DISTRIBUTION PURSUANT TO THE TERMS OF THE IMMEDIATELY
PRECEDING CLAUSE (I).

 

(F)                                    CERTAIN EVENTS. IF ANY EVENT OCCURS OF
THE TYPE CONTEMPLATED BY THE PROVISIONS OF THIS SECTION 8 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 WARRANT EXERCISE PRICE AND THE NUMBER OF SHARES OF COMMON
STOCK OBTAINABLE UPON EXERCISE OF THIS WARRANT SO AS TO PROTECT THE RIGHTS OF
THE HOLDERS OF THE WARRANTS; PROVIDED, EXCEPT AS SET FORTH IN SECTION 8(D),THAT
NO SUCH ADJUSTMENT PURSUANT TO THIS SECTION 8(F) WILL INCREASE THE WARRANT
EXERCISE PRICE OR DECREASE THE NUMBER OF SHARES OF COMMON STOCK OBTAINABLE AS
OTHERWISE DETERMINED PURSUANT TO THIS SECTION 8.

 

(G)                                 NOTICES.

 

(I)                                     IMMEDIATELY UPON ANY ADJUSTMENT OF THE
WARRANT EXERCISE PRICE, THE COMPANY WILL GIVE WRITTEN NOTICE THEREOF TO THE
HOLDER OF THIS WARRANT, SETTING FORTH IN REASONABLE DETAIL, AND CERTIFYING, THE
CALCULATION OF SUCH ADJUSTMENT.

 

(II)                                  THE COMPANY WILL GIVE WRITTEN NOTICE TO
THE HOLDER OF THIS WARRANT AT LEAST TEN (10) 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 COMMON STOCK, (B) WITH RESPECT TO ANY PRO RATA
SUBSCRIPTION OFFER TO HOLDERS OF COMMON STOCK OR (C) FOR DETERMINING RIGHTS TO
VOTE WITH RESPECT TO ANY ORGANIC CHANGE (AS DEFINED BELOW), DISSOLUTION OR
LIQUIDATION, PROVIDED THAT SUCH INFORMATION SHALL BE MADE KNOWN TO THE PUBLIC
PRIOR TO OR IN CONJUNCTION WITH SUCH NOTICE BEING PROVIDED TO SUCH HOLDER.

 

(III)                               THE COMPANY WILL ALSO GIVE WRITTEN NOTICE TO
THE HOLDER OF THIS WARRANT AT LEAST TEN (10) DAYS PRIOR TO THE DATE ON WHICH ANY
ORGANIC CHANGE, DISSOLUTION OR LIQUIDATION WILL TAKE PLACE, PROVIDED THAT SUCH
INFORMATION SHALL BE MADE KNOWN TO THE PUBLIC PRIOR TO OR IN CONJUNCTION WITH
SUCH NOTICE BEING PROVIDED TO SUCH HOLDER.

 

SECTION 9.                                            PURCHASE RIGHTS;
REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.

 

(A)                                  IN ADDITION TO ANY ADJUSTMENTS PURSUANT TO
SECTION 8 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 COMMON STOCK (THE
“PURCHASE RIGHTS”), THEN THE HOLDER OF THIS WARRANT WILL BE ENTITLED TO ACQUIRE,
UPON THE TERMS APPLICABLE TO SUCH PURCHASE RIGHTS, THE AGGREGATE PURCHASE RIGHTS
WHICH SUCH HOLDER COULD HAVE ACQUIRED IF SUCH HOLDER HAD HELD THE NUMBER OF
SHARES OF COMMON STOCK ACQUIRABLE UPON COMPLETE EXERCISE OF THIS WARRANT
IMMEDIATELY BEFORE THE DATE ON WHICH A RECORD IS TAKEN

 

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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 COMMON STOCK ARE TO BE
DETERMINED FOR THE GRANT, ISSUE OR SALE OF SUCH PURCHASE RIGHTS.

 

(B)                                 ANY RECAPITALIZATION, REORGANIZATION,
RECLASSIFICATION, CONSOLIDATION, MERGER, SALE OF ALL OR SUBSTANTIALLY ALL OF THE
COMPANY’S ASSETS TO ANOTHER PERSON OR OTHER TRANSACTION IN EACH CASE WHICH IS
EFFECTED IN SUCH A WAY THAT HOLDERS OF COMMON STOCK ARE ENTITLED TO RECEIVE
(EITHER DIRECTLY OR UPON SUBSEQUENT LIQUIDATION) STOCK, SECURITIES OR ASSETS
WITH RESPECT TO OR IN EXCHANGE FOR COMMON STOCK IS REFERRED TO HEREIN AS AN
“ORGANIC CHANGE.”  PRIOR TO THE CONSUMMATION OF ANY (I) SALE OF ALL OR
SUBSTANTIALLY ALL OF THE COMPANY’S ASSETS TO AN ACQUIRING PERSON OR (II) OTHER
ORGANIC CHANGE FOLLOWING WHICH THE COMPANY IS NOT A SURVIVING ENTITY, THE
COMPANY WILL SECURE FROM THE PERSON PURCHASING SUCH ASSETS OR THE SUCCESSOR
RESULTING FROM SUCH ORGANIC CHANGE (IN EACH CASE, THE “ACQUIRING ENTITY”) A
WRITTEN AGREEMENT (IN FORM AND SUBSTANCE SATISFACTORY TO THE HOLDERS OF WARRANTS
REPRESENTING AT LEAST A MAJORITY  OF THE WARRANT SHARES ISSUABLE UPON EXERCISE
OF THE WARRANTS THEN OUTSTANDING) TO DELIVER TO EACH HOLDER OF WARRANTS IN
EXCHANGE FOR SUCH WARRANTS, A SECURITY OF THE ACQUIRING ENTITY EVIDENCED BY A
WRITTEN INSTRUMENT SUBSTANTIALLY SIMILAR IN FORM AND SUBSTANCE TO THIS WARRANT
AND SATISFACTORY TO THE HOLDERS OF THE WARRANTS (INCLUDING AN ADJUSTED WARRANT
EXERCISE PRICE EQUAL TO THE VALUE FOR THE COMMON STOCK REFLECTED BY THE TERMS OF
SUCH CONSOLIDATION, MERGER OR SALE, AND EXERCISABLE FOR A CORRESPONDING NUMBER
OF SHARES OF COMMON STOCK ACQUIRABLE AND RECEIVABLE UPON EXERCISE OF THE
WARRANTS WITHOUT REGARD TO ANY LIMITATIONS ON EXERCISE, IF THE VALUE SO
REFLECTED IS LESS THAN ANY APPLICABLE WARRANT EXERCISE PRICE IMMEDIATELY PRIOR
TO SUCH CONSOLIDATION, MERGER OR SALE). PRIOR TO THE CONSUMMATION OF ANY OTHER
ORGANIC CHANGE, THE COMPANY SHALL MAKE APPROPRIATE PROVISION (IN FORM AND
SUBSTANCE SATISFACTORY TO THE HOLDERS OF WARRANTS REPRESENTING A MAJORITY OF THE
WARRANT SHARES ISSUABLE UPON EXERCISE OF THE WARRANTS THEN OUTSTANDING) TO
INSURE THAT EACH OF THE HOLDERS OF THE WARRANTS WILL THEREAFTER HAVE THE RIGHT
TO ACQUIRE AND RECEIVE IN LIEU OF OR IN ADDITION TO (AS THE CASE MAY BE) THE
WARRANT SHARES IMMEDIATELY THERETOFORE ISSUABLE AND RECEIVABLE UPON THE EXERCISE
OF SUCH HOLDER’S WARRANTS (WITHOUT REGARD TO ANY LIMITATIONS ON EXERCISE), SUCH
SHARES OF STOCK, SECURITIES OR ASSETS THAT WOULD HAVE BEEN ISSUED OR PAYABLE IN
SUCH ORGANIC CHANGE WITH RESPECT TO OR IN EXCHANGE FOR THE NUMBER OF WARRANT
SHARES WHICH WOULD HAVE BEEN ISSUABLE AND RECEIVABLE UPON THE EXERCISE OF SUCH
HOLDER’S WARRANT AS OF THE DATE OF SUCH ORGANIC CHANGE (WITHOUT TAKING INTO
ACCOUNT ANY LIMITATIONS OR RESTRICTIONS ON THE EXERCISABILITY OF THIS WARRANT).

 

SECTION 10.                                      LOST, STOLEN, MUTILATED OR
DESTROYED WARRANT. IF THIS WARRANT IS LOST, STOLEN, MUTILATED OR DESTROYED, THE
COMPANY SHALL PROMPTLY, ON RECEIPT OF AN INDEMNIFICATION UNDERTAKING (OR, IN THE
CASE OF A MUTILATED WARRANT, THE WARRANT), ISSUE A NEW WARRANT OF LIKE
DENOMINATION AND TENOR AS THIS WARRANT SO LOST, STOLEN, MUTILATED OR DESTROYED.

 

SECTION 11.                                      NOTICE. ANY NOTICES, CONSENTS,
WAIVERS OR OTHER COMMUNICATIONS REQUIRED OR PERMITTED TO BE GIVEN UNDER THE
TERMS OF THIS WARRANT MUST BE IN WRITING AND WILL BE DEEMED TO HAVE BEEN
DELIVERED:  (I) UPON RECEIPT, WHEN DELIVERED PERSONALLY; (II) UPON RECEIPT, WHEN
SENT BY FACSIMILE (PROVIDED CONFIRMATION OF RECEIPT IS RECEIVED BY THE SENDING
PARTY TRANSMISSION IS MECHANICALLY OR ELECTRONICALLY GENERATED AND KEPT ON FILE
BY THE SENDING PARTY); OR (III) ONE BUSINESS DAY AFTER DEPOSIT WITH A NATIONALLY
RECOGNIZED OVERNIGHT DELIVERY SERVICE, IN EACH CASE PROPERLY ADDRESSED TO THE
PARTY TO RECEIVE THE SAME. THE ADDRESSES AND FACSIMILE NUMBERS FOR SUCH
COMMUNICATIONS SHALL BE:

 

14

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If to Holder:

 

Cornell Capital Partners, LP

 

 

101 Hudson Street – Suite 3700

 

 

Jersey City, NJ 07302

 

 

Attention:

Mark A. Angelo

 

 

Telephone:

(201) 985-8300

 

 

Facsimile:

(201) 985-8266

 

 

 

With Copy to:

 

David Gonzalez, Esq.

 

 

101 Hudson Street – Suite 3700

 

 

Jersey City,

NJ 07302

 

 

Telephone:

(201) 985-8300

 

 

Facsimile:

(201) 985-8266

 

 

 

If to the Company, to:

 

Isonics Corporation

 

 

5906 McIntyre Street

 

 

Golden, CO 80403

 

 

Attention:

James E. Alexander, President

 

 

Telephone:

(303) 279-7900

 

 

Facsimile:

(303) 279-7300

 

 

 

With a copy (which does not constitute notice) to:

 

Burns, Figa & Will, P.C.

 

 

6400 South Fiddler’s Green Circle – Suite 1000

 

 

Greenwood Village, CO 80111

 

 

Attention:

Herrick K. Lidstone, Jr., Esq.

 

 

Telephone:

(303) 796-2626

 

 

Facsimile:

(303) 796-2777

 

If to a holder of this Warrant, to it at the address and facsimile number set
forth on Exhibit C hereto, with copies to such holder’s representatives as set
forth on Exhibit C, or at such other address and facsimile as shall be delivered
to the Company upon the issuance or transfer of this Warrant. Each party shall
provide five days’ prior written notice to the other party of any change in
address or facsimile number. Written confirmation of receipt (A) given by the
recipient of such notice, consent, facsimile, waiver or other communication, (or
(B) provided by a nationally recognized overnight delivery service shall be
rebuttable evidence of personal service, receipt by facsimile or receipt from a
nationally recognized overnight delivery service in accordance with clause (i),
(ii) or (iii) above, respectively.

 

SECTION 12.                                      DATE. THE DATE OF THIS WARRANT
IS SET FORTH ON PAGE 1 HEREOF. THIS WARRANT, IN ALL EVENTS, SHALL BE WHOLLY VOID
AND OF NO EFFECT AFTER THE CLOSE OF BUSINESS ON THE EXPIRATION DATE, EXCEPT THAT
NOTWITHSTANDING ANY OTHER PROVISIONS HEREOF, THE PROVISIONS OF
SECTION 8(B) SHALL CONTINUE IN FULL FORCE AND EFFECT AFTER SUCH DATE AS TO ANY
WARRANT SHARES OR OTHER SECURITIES ISSUED UPON THE EXERCISE OF THIS WARRANT.

 

15

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SECTION 13.                                      AMENDMENT AND WAIVER. EXCEPT AS
OTHERWISE PROVIDED HEREIN, THE PROVISIONS OF THE WARRANTS 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 HOLDERS OF WARRANTS REPRESENTING AT A MAJORITY  OF THE WARRANT
SHARES ISSUABLE UPON EXERCISE OF THE WARRANTS THEN OUTSTANDING; PROVIDED THAT,
EXCEPT FOR SECTION 8(D), NO SUCH ACTION MAY INCREASE THE WARRANT EXERCISE PRICE
OR DECREASE THE NUMBER OF SHARES OR CLASS OF STOCK OBTAINABLE UPON EXERCISE OF
ANY WARRANT WITHOUT THE WRITTEN CONSENT OF THE HOLDER OF SUCH WARRANT.

 

SECTION 14.                                      DESCRIPTIVE HEADINGS; GOVERNING
LAW. THE DESCRIPTIVE HEADINGS OF THE SEVERAL SECTIONS AND PARAGRAPHS OF THIS
WARRANT ARE INSERTED FOR CONVENIENCE ONLY AND DO NOT CONSTITUTE A PART OF THIS
WARRANT. THE CORPORATE LAWS OF THE STATE OF NEW JERSEY SHALL GOVERN ALL ISSUES
CONCERNING THE RELATIVE RIGHTS OF THE COMPANY AND ITS STOCKHOLDERS. ALL OTHER
QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION
OF THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW
JERSEY, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION
OR RULE (WHETHER OF THE STATE OF NEW JERSEY OR ANY OTHER JURISDICTIONS) THAT
WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTIONS OTHER THAN THE
STATE OF NEW JERSEY. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY,
SITTING IN NEWARK, NEW JERSEY FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR
IN CONNECTION HEREWITH OR THEREWITH, 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.

 

SECTION 15.                                   WAIVER OF JURY TRIAL. AS A
MATERIAL INDUCEMENT FOR EACH PARTY HERETO TO ENTER INTO THIS WARRANT, THE
PARTIES HERETO HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
RELATED IN ANY WAY TO THIS WARRANT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS
ASSOCIATED WITH THIS TRANSACTION.

 

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

 

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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed as of the
date first set forth above.

 

 

ISONICS CORPORATION

 

 

 

By:

 

 

 

Name:

 James E. Alexander

 

Title:

President and Chief Executive Officer

 

17

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EXHIBIT A TO WARRANT

 

EXERCISE NOTICE

 

TO BE EXECUTED
BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT

 

ISONICS CORPORATION

 

The undersigned holder hereby exercises the right to purchase
                              of the shares of Common Stock (“Warrant Shares”)
of Isonics Corporation (the “Company”), evidenced by the attached Warrant (the
“Warrant”). Capitalized terms used herein and not otherwise defined shall have
the respective meanings set forth in the Warrant.

 

Specify Method of exercise by check mark:

 

1.  o                         Cash Exercise

 

(a) Payment of Warrant Exercise Price. The holder shall pay the Aggregate
Exercise Price of $                              to the Company in accordance
with the terms of the Warrant.

 

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

 

2.  o                         Cashless Exercise

 

(a) Payment of Warrant Exercise Price. In lieu of making payment of the
Aggregate Exercise Price, the holder elects to receive upon such exercise the
Net Number of shares of Common Stock determined in accordance with the terms of
the Warrant.

 

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

 

By submitting this Exercise Notice, the undersigned holder represents and
warrants to the Company that it is an accredited investor as that term is
defined in SEC Rule 501(a), it is a sophisticated investor as required by SEC
Rule 506, that it has completed such investigation into the Company and the
securities being acquired pursuant to this Exercise Notice as the undersigned
(in consultation with its advisors) has determined appropriate, and that it is
submitting this Exercise Notice of its own volition and free will.

 

 

Date:

 

,

 

 

 

Name of Registered Holder

 

18

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By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

2

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EXHIBIT B TO WARRANT

 

FORM OF WARRANT POWER

 

FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to
                             , Federal Identification No.              , a
warrant to purchase                               shares of the capital stock of
Isonics Corporation represented by warrant certificate no.        , standing in
the name of the undersigned on the books of said corporation. The undersigned
does hereby irrevocably constitute and appoint                              ,
attorney to transfer the warrants of said corporation, with full power of
substitution in the premises.

 

In submitting this Warrant Power, the undersigned represents and warrants to
Isonics Corporation that it has not offered the Warrant through any means of
general advertising or public solicitation, and that it will provide Isonics
Corporation such other information and representations of the undersigned or of
the transferee necessary or appropriate to permit Isonics Corporation to
determine whether there is an exemption available for the transfer of this
Warrant.

 

Dated:

 

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

B-1

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