Exhibit 10.3

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 (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), 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.

IPARTY CORP.

WARRANT TO PURCHASE COMMON STOCK

Warrant No.: 1

Number of Shares of Common Stock: 2,083,334

Date of Issuance: September 15, 2006 (“Issuance Date”)

iParty Corp., a Delaware corporation (the “Company”), hereby certifies that, for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, HIGHBRIDGE INTERNATIONAL LLC, 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), TWO MILLION EIGHTY THREE THOUSAND THREE HUNDRED THIRTY FOUR
(2,083,334) 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
September 15, 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.     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 BY 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 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, IF ANY.  ON OR BEFORE THE FIRST
(1ST) 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 (3RD) 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
NOTICE AND (X) THE AGGREGATE EXERCISE PRICE REFERRED TO IN CLAUSE (II)(A) ABOVE,
OR (Y) NOTIFICATION TO THE COMPANY OF A CASHLESS EXERCISE REFERRED TO IN SECTION
1(D), 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 OF DELIVERY OF THE CERTIFICATES
EVIDENCING SUCH WARRANT SHARES.  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; PROVIDED, HOWEVER, THE COMPANY SHALL NOT BE REQUIRED
TO PAY ANY TAXES WHICH MAY BE PAYABLE IN CONNECTION WITH OR IN RESPECT OF ANY
TRANSFER INVOLVED IN THE REGISTRATION OF ANY

2

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CERTIFICATES FOR WARRANT SHARES OR WARRANTS IN A NAME OTHER THAN THAT OF THE
HOLDER, AND THE HOLDER SHALL BE RESPONSIBLE FOR ALL OTHER TAX LIABILITY THAT MAY
ARISE AS A RESULT OF HOLDING OR TRANSFERRING THIS WARRANT.

(B)           EXERCISE PRICE.  FOR PURPOSES OF THIS WARRANT, “EXERCISE PRICE”
MEANS $0.475, 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) TRADING 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 LIEU OF ANY OTHER MONETARY REMEDIES AVAILABLE TO THE HOLDER,
THE HOLDER SHALL HAVE THE OPTION TO REQUIRE THAT (I) THE COMPANY PAY IN CASH TO
THE HOLDER ON EACH DAY AFTER SUCH THIRD TRADING DAY THAT THE ISSUANCE OF SUCH
SHARES OF COMMON STOCK IS NOT TIMELY EFFECTED AN AMOUNT EQUAL TO 1.0% OF THE
PRODUCT (THE “SALE PRICE”) 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), PROVIDED, HOWEVER, THAT THE AGGREGATE AMOUNT OF THE DAILY PAYMENTS UNDER
THIS SENTENCE SHALL NOT EXCEED 10.0% OF THE SALE PRICE, OR, (II) IF AFTER SUCH
THIRD (3RD) 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 HAD
ANTICIPATED RECEIVING FROM THE COMPANY HEREUNDER (A “BUY-IN”), THE COMPANY SHALL
PROMPTLY HONOR ITS OBLIGATION TO DELIVER TO THE HOLDER A CERTIFICATE OR
CERTIFICATES REPRESENTING SUCH SHARES OF COMMON STOCK WITHIN THREE (3) BUSINESS
DAYS AFTER THE HOLDER’S REQUEST AND PAY CASH TO THE HOLDER IN AN AMOUNT EQUAL TO
THE EXCESS (IF ANY) OF THE HOLDER’S TOTAL PURCHASE PRICE (INCLUDING REASONABLE
BROKERAGE COMMISSIONS, IF ANY) FOR THE SHARES OF COMMON STOCK SO PURCHASED (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 SUCH EXERCISE.

(D)           CASHLESS EXERCISE.  NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO
THE CONTRARY, IF A REGISTRATION STATEMENT (AS DEFINED IN THE REGISTRATION RIGHTS
AGREEMENT) COVERING THE WARRANT SHARES THAT ARE THE SUBJECT OF THE EXERCISE
NOTICE (THE “UNAVAILABLE WARRANT SHARES”) IS NOT AVAILABLE FOR THE RESALE OF
SUCH UNAVAILABLE WARRANT SHARES, 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”):

3

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

                                                   B

FOR PURPOSES OF THE FOREGOING FORMULA:

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; 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 OF
THIS WARRANT 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 SHAREHOLDERS 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, UPON EXERCISE OF ANY SPA WARRANTS 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
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 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 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

4

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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 130% (THE “REQUIRED RESERVE AMOUNT”) OF THE 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 (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 NINETY (90) 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 EXCLUDED SECURITIES FOR
A CONSIDERATION PER SHARE 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 PRODUCT OF (A) THE EXERCISE PRICE IN EFFECT IMMEDIATELY
PRIOR TO SUCH DILUTIVE ISSUANCE AND (B) THE QUOTIENT DETERMINED BY DIVIDING
(1) THE SUM OF (I) THE PRODUCT DERIVED BY MULTIPLYING THE EXERCISE PRICE IN
EFFECT IMMEDIATELY PRIOR TO SUCH DILUTIVE ISSUANCE AND THE NUMBER OF COMMON
STOCK DEEMED OUTSTANDING IMMEDIATELY PRIOR TO SUCH DILUTIVE ISSUANCE PLUS
(II) THE CONSIDERATION, IF ANY, RECEIVED BY THE COMPANY UPON SUCH DILUTIVE
ISSUANCE, BY (2) THE PRODUCT DERIVED BY MULTIPLYING (I) THE EXERCISE PRICE IN
EFFECT IMMEDIATELY PRIOR TO SUCH DILUTIVE ISSUANCE BY (II) THE NUMBER OF COMMON
STOCK DEEMED OUTSTANDING IMMEDIATELY AFTER SUCH DILUTIVE ISSUANCE.  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

5

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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 EXERCISE OF SUCH OPTIONS OR UPON
CONVERSION, EXERCISE 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 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” 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

6

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ADJUSTMENT OF THE EXERCISE PRICE OR NUMBER OF WARRANT SHARES 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, 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

7

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ANY CONSIDERATION OTHER THAN CASH OR SECURITIES WILL BE DETERMINED JOINTLY BY
THE COMPANY AND THE REQUIRED HOLDERS.  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 DAY FOLLOWING THE
VALUATION EVENT BY AN INDEPENDENT, REPUTABLE APPRAISER JOINTLY SELECTED BY THE
COMPANY AND THE REQUIRED HOLDERS.  THE DETERMINATION OF SUCH APPRAISER SHALL BE
FINAL AND BINDING UPON ALL PARTIES ABSENT MANIFEST ERROR AND THE FEES AND
EXPENSES OF SUCH APPRAISER SHALL BE BORNE BY THE COMPANY.

(V)           RECORD DATE.  IF THE COMPANY TAKES A RECORD OF THE HOLDERS OF
SHARES OF COMMON STOCK FOR THE PURPOSE OF ENTITLING THEM (A) TO RECEIVE A
DIVIDEND OR OTHER DISTRIBUTION PAYABLE IN SHARES OF COMMON STOCK, OPTIONS OR IN
CONVERTIBLE SECURITIES OR (B) TO SUBSCRIBE FOR OR PURCHASE SHARES OF COMMON
STOCK, OPTIONS OR CONVERTIBLE SECURITIES, THEN SUCH RECORD DATE WILL BE DEEMED
TO BE THE DATE OF THE 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.

(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 DILUTIVE 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
BUT NOT IF GRANTED TO EMPLOYEES OR DIRECTORS UNDER ANY APPROVED STOCK PLAN),
THEN THE COMPANY’S BOARD OF DIRECTORS WILL MAKE AN APPROPRIATE ADJUSTMENT, IN
ACCORDANCE WITH THE TERMS OF THIS WARRANT, 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

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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:

(A)           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 SHALL
BE THE CLOSING BID PRICE OF THE SHARES 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 SHARES 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; AND

(B)           THE NUMBER OF WARRANT SHARES 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 SHARES OF COMMON STOCK ENTITLED TO RECEIVE THE DISTRIBUTION
MULTIPLIED BY THE RECIPROCAL OF THE FRACTION SET FORTH IN THE IMMEDIATELY
PRECEDING PARAGRAPH (A); PROVIDED THAT IN THE EVENT THAT THE DISTRIBUTION IS OF
SHARES OF COMMON STOCK (OR COMMON STOCK) (“OTHER SHARES OF COMMON STOCK”) OF A
COMPANY WHOSE COMMON SHARES ARE TRADED ON A NATIONAL SECURITIES EXCHANGE OR A
NATIONAL AUTOMATED QUOTATION SYSTEM, THEN THE HOLDER MAY ELECT TO RECEIVE A
WARRANT TO PURCHASE OTHER SHARES OF COMMON STOCK IN LIEU OF AN INCREASE IN THE
NUMBER OF WARRANT SHARES, THE TERMS OF WHICH SHALL BE IDENTICAL TO THOSE OF THIS
WARRANT, EXCEPT THAT SUCH WARRANT SHALL BE EXERCISABLE INTO THE NUMBER OF SHARES
OF OTHER SHARES OF COMMON STOCK THAT WOULD HAVE BEEN PAYABLE TO THE HOLDER
PURSUANT TO THE DISTRIBUTION HAD THE HOLDER EXERCISED THIS WARRANT IMMEDIATELY
PRIOR TO SUCH RECORD DATE AND WITH AN AGGREGATE EXERCISE PRICE EQUAL TO THE
PRODUCT OF 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 PARAGRAPH (A) AND THE NUMBER OF WARRANT SHARES CALCULATED IN
ACCORDANCE WITH THE FIRST PART OF THIS PARAGRAPH (B).

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
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.

9

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(B)           FUNDAMENTAL TRANSACTIONS.  (1)         THE COMPANY SHALL NOT ENTER
INTO OR BE PARTY TO A FUNDAMENTAL TRANSACTION UNLESS (X) 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)(1) 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 OF THE SUCCESSOR ENTITY 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 REASONABLY SATISFACTORY TO THE REQUIRED HOLDERS AND (Y) 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 SUCH 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 SUCH 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
PUBLICLY TRADED COMMON STOCK (OR THEIR EQUIVALENT) OF THE SUCCESSOR ENTITY, 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 SUCH FUNDAMENTAL TRANSACTION BUT PRIOR TO THE EXPIRATION DATE,
IN LIEU OF (X) THE SHARES OF THE COMMON STOCK (OR OTHER SECURITIES, CASH, ASSETS
OR OTHER PROPERTY) PURCHASABLE UPON THE EXERCISE OF THE WARRANT PRIOR TO SUCH
FUNDAMENTAL TRANSACTION AND (Y) THE COMMON STOCK OF THE SUCCESSOR ENTITY, 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 EACH SUCH
SUCCESSIVE FUNDAMENTAL TRANSACTIONS AND CORPORATE EVENTS AND SHALL BE APPLIED
WITHOUT REGARD TO ANY LIMITATIONS ON THE EXERCISE OF THIS WARRANT.

(2)           NOTWITHSTANDING THE PROVISIONS OF SECTION 4(B)(1), THE COMPANY
SHALL HAVE THE RIGHT TO REQUIRE THAT HOLDER WAIVE THE REQUIREMENTS OF SECTION
4(B)(1) (THE “WAIVER”) IN EXCHANGE FOR A PAYMENT OF CASH IN AN AMOUNT EQUAL TO
THE VALUE OF THE

10

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REMAINING UNEXERCISED PORTION OF THIS WARRANT ON THE DATE OF SUCH FUNDAMENTAL
TRANSACTION, WHICH VALUE SHALL BE DETERMINED BY USE OF THE BLACK SCHOLES OPTION
PRICING MODEL, WITH THE WAIVER BECOMING EFFECTIVE, AND THIS WARRANT CANCELLED,
CONCURRENTLY WITH SUCH PAYMENT OF SUCH CASH AMOUNT (THE “FUNDAMENTAL TRANSACTION
AMOUNT”) TO THE HOLDER ON THE FUNDAMENTAL TRANSACTION CLOSING DATE. 
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS SECTION 4(B), BUT SUBJECT TO
SECTION 1(F), UNTIL SUCH TIME THAT THE HOLDER RECEIVES THE FUNDAMENTAL
TRANSACTION AMOUNT (AT WHICH POINT THIS WARRANT SHALL BE CANCELLED), THIS
WARRANT MAY BE EXERCISED, IN WHOLE OR IN PART, BY THE HOLDER (X) PRIOR TO THE
FUNDAMENTAL TRANSACTION CLOSING DATE, INTO COMMON STOCK PURSUANT TO SECTION 1,
OR (Y) UPON (WHICH MAY BE EXPRESSLY CONDITIONED UPON THE CLOSING OF THE
FUNDAMENTAL TRANSACTION) OR AFTER THE FUNDAMENTAL TRANSACTION CLOSING DATE, INTO
ANY SUCH SHARES OF STOCK, SECURITIES, CASH, ASSETS OR ANY OTHER PROPERTY
WHATSOEVER (INCLUDING WARRANTS OR OTHER PURCHASE OR SUBSCRIPTION RIGHTS, IF
APPLICABLE) 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 CLOSING DATE.

5.     NONCIRCUMVENTION.  THE COMPANY HEREBY COVENANTS AND AGREES THAT THE
COMPANY WILL NOT, BY AMENDMENT OF ITS CERTIFICATE 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, 130% OF THE NUMBER OF SHARES OF COMMON STOCK AS SHALL FROM TIME TO
TIME BE NECESSARY TO EFFECT THE EXERCISE OF THE SPA WARRANTS THEN OUTSTANDING
(WITHOUT REGARD TO ANY LIMITATIONS ON EXERCISE).

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 SHAREHOLDER 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 SHAREHOLDER 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

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HOLDER WITH COPIES OF THE SAME NOTICES AND OTHER INFORMATION GIVEN TO THE
SHAREHOLDERS OF THE COMPANY GENERALLY, CONTEMPORANEOUSLY WITH THE GIVING THEREOF
TO THE SHAREHOLDERS.

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 RIGHT TO PURCHASE THE WARRANT SHARES THEN
UNDERLYING THIS WARRANT (OR IN THE CASE OF A NEW WARRANT BEING ISSUED PURSUANT
TO SECTION 7(A) OR SECTION 7(C), THE WARRANT SHARES DESIGNATED BY THE HOLDER
WHICH, WHEN ADDED TO THE NUMBER OF SHARES OF COMMON STOCK UNDERLYING THE OTHER
NEW WARRANTS ISSUED IN CONNECTION WITH SUCH ISSUANCE, DOES NOT EXCEED THE NUMBER
OF WARRANT SHARES THEN UNDERLYING THIS WARRANT), (III) SHALL HAVE AN ISSUANCE
DATE, AS INDICATED ON THE FACE OF SUCH NEW WARRANT WHICH IS THE SAME AS THE
ISSUANCE DATE, AND (IV) SHALL HAVE THE SAME RIGHTS AND CONDITIONS AS THIS
WARRANT.

8.             NOTICES.  WHENEVER NOTICE IS REQUIRED TO BE GIVEN UNDER THIS
WARRANT, UNLESS OTHERWISE PROVIDED HEREIN, SUCH NOTICE SHALL BE GIVEN IN
ACCORDANCE WITH SECTION 9(F) OF THE SECURITIES PURCHASE AGREEMENT.  THE COMPANY
SHALL PROVIDE THE HOLDER WITH PROMPT WRITTEN NOTICE OF ALL ACTIONS TAKEN
PURSUANT TO THIS WARRANT, 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

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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 APPLICABLE RECORD DATE (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.  FAILURE TO DELIVER
NOTICE HEREUNDER, OR ANY DEFECT IN ANY NOTICE HEREUNDER, SHALL NOT AFFECT THE
VALIDITY OF THE CORPORATE ACTIONS REQUIRED TO BE DESCRIBED IN SUCH NOTICE UNDER
THIS SECTION 8.

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.           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.

11.           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.

12.           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 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 (WHICH APPROVAL SHALL NOT BE UNREASONABLY WITHHELD OR DELAYED) 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

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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.

13.           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.

14.           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.

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

(A)           “APPROVED STOCK PLAN” MEANS ANY EMPLOYEE BENEFIT PLAN WHICH HAS
BEEN APPROVED BY THE BOARD OF DIRECTORS OF THE COMPANY, PURSUANT TO WHICH THE
COMPANY’S SECURITIES AND ANY STOCK APPRECIATION RIGHTS OR SIMILAR PHANTOM STOCK
RIGHTS MAY BE ISSUED TO ANY EMPLOYEE, OFFICER OR DIRECTOR FOR SERVICES PROVIDED
TO THE COMPANY.

(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 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

14

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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 $0.001 PER SHARE, AND (II) ANY SHARE CAPITAL 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
EXERCISE OF THE SPA 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 GLOBAL SELECT MARKET, THE NASDAQ GLOBAL MARKET OR THE
NASDAQ CAPITAL MARKET.

(I)            “EXCLUDED SECURITIES” MEANS ANY COMMON STOCK ISSUED OR ISSUABLE:
(I) IN CONNECTION WITH ANY APPROVED STOCK PLAN; (II) UPON THE EXERCISE OF THE
WARRANTS; (III) UPON CONVERSION, EXERCISE OR EXCHANGE OF ANY OPTIONS OR
CONVERTIBLE SECURITIES WHICH ARE OUTSTANDING ON THE DAY IMMEDIATELY PRECEDING
THE SUBSCRIPTION DATE, PROVIDED THAT THE TERMS OF SUCH OPTIONS OR CONVERTIBLE
SECURITIES ARE NOT AMENDED, MODIFIED OR CHANGED ON OR AFTER THE SUBSCRIPTION
DATE; OR (IV) PURSUANT TO A BONA FIDE FIRM COMMITMENT UNDERWRITTEN PUBLIC
OFFERING WITH A NATIONALLY RECOGNIZED UNDERWRITER WHICH GENERATES GROSS PROCEEDS
TO THE COMPANY OF $10,000,000 OR MORE (OTHER THAN AN “AT-THE-MARKET OFFERING” AS
DEFINED IN RULE 415(A)(4) UNDER THE 1933 ACT) OR EQUITY LINES.

(J)            “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.

(K)           “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

15

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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.

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

(M)          “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.

(N)           “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.

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

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

(Q)           “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.

(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 STOCK ARE TRADED
ON THE PRINCIPAL MARKET, OR, IF THE PRINCIPAL MARKET IS NOT THE PRINCIPAL
TRADING MARKET FOR THE COMMON STOCK, THEN ON THE PRINCIPAL SECURITIES EXCHANGE
OR SECURITIES MARKET ON WHICH THE COMMON STOCK ARE THEN TRADED.

[Signature Page Follows]

16

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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.

iPARTY CORP.

 

 

 

 

By:

/s/ SAL PERISANO

 

Name:

Sal Perisano

 

Title:

Chief Executive Officer

 

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EXHIBIT A

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT TO PURCHASE COMMON STOCK

iPARTY CORP.

The undersigned holder hereby exercises the right to purchase _________________
of the shares of Common Stock (“Warrant Shares”) of iParty Corp., a Delaware
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
Continental Stock Transfer & Trust Co. to issue the above indicated number of
shares of Common Stock in accordance with the Transfer Agent Instructions dated
September [__], 2006 from the Company and acknowledged and agreed to by
Continental Stock Transfer & Trust Co.

iPARTY CORP.

 

 

By:

 

 

Name:

 

Title:

 

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