Exhibit 10.4
 
EXHIBIT B
 
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH
SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED.
 
WARRANT TO PURCHASE
 
SHARES OF COMMON STOCK
 
OF
 
MAX SOUND CORPORATION
 
Expires January 24, 2017
 
No.: W-11-1 Number of Shares: 12,000,000
Date of Issuance: January 24, 2012
 
FOR VALUE RECEIVED, the undersigned, Max Sound Corporation, a Delaware
corporation (together with its successors and assigns, the "Issuer" and the
“Company”), hereby certifies that 590 Partners Capital, LLC (“590”) or its
registered assigns is entitled to subscribe for and purchase, during the Term
(as hereinafter defined), up to twelve million (12,000,000) shares (the
“Shares”) (subject to adjustment as hereinafter provided) of the duly
authorized, validly issued, fully paid and non-assessable Common Stock of the
Issuer, at an exercise price per share the greater of $1.00 or an amount equal
to 130% of the average Closing Price based on the 15 Trading Days preceding
March 31, 2012. Capitalized terms used in this Warrant and not otherwise defined
herein shall have the respective meanings specified in Section 9 hereof.
 
1.            Term. The term of this Warrant shall commence on January 24, 2012
and shall expire at 6:00 p.m., Eastern Time, on January 24, 2017 (such period
being the "Term").
 
2.            Method of Exercise; Payment; Issuance of New Warrant; Transfer and
Exchange.
 
(a)   Time of Exercise. The purchase rights represented by this Warrant may be
exercised in whole or in part during the Term.
 
(b)   Method of Exercise. The Holder hereof may exercise this Warrant, in whole
or in part, by the surrender of this Warrant (with the exercise form attached
hereto duly executed) at the principal office of the Issuer, and by the payment
to the Issuer of an amount of consideration therefor equal to the Warrant Price
in effect on the date of such exercise multiplied by the number of shares of
Warrant Stock with respect to which this Warrant is then being exercised,
payable at such Holder's election (i) by certified or official bank check or by
wire transfer to an account designated by the Issuer, (ii) by "cashless
exercise" in accordance with the provisions of subsection (c) of this Section 2,
or (iii) by a combination of the foregoing methods of payment selected by the
Holder of this Warrant.
 
 
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(c)   Cashless Exercise.
 
(i)    Notwithstanding any provisions herein to the contrary, subject to Section
2(c)(ii) below, if (i) the Per Share Market Value of one share of Common Stock
is greater than the Warrant Price (at the date of calculation as set forth
below) and (ii) a registration statement under the Securities Act providing for
the resale of the Warrant Stock is not then in effect by the date such
registration statement is required to be effective pursuant to the Registration
Rights Agreement (as defined in the Purchase Agreement) or not effective at any
time during the Effectiveness Period (as defined in the Registration Rights
Agreement) in accordance with the terms of the Registration Rights Agreement,
unless the registration statement is not effective as a result of the Issuer
exercising its rights under Section 3(n) of the Registration Rights Agreement,
in lieu of exercising this Warrant by payment of cash, the Holder may exercise
this Warrant by a cashless exercise and shall receive the number of shares of
Common Stock equal to an amount (as determined below) by surrender of this
Warrant at the principal office of the Issuer together with the properly
endorsed Notice of Exercise in which event the Issuer shall issue to the Holder
a number of shares of Common Stock computed using the following formula:
 

 
X = Y - (A)(Y)
                  B
 

 

Where X = the number of shares of Common Stock to be issued to the Holder.      
  Y = the number of shares of Common Stock purchasable upon exercise of all of
the Warrant or, if only a portion of the Warrant is being exercised, the portion
of the Warrant being exercised.         A = the Warrant Price.         B = the
Per Share Market Value of one share of Common Stock.

 
(ii)    Holders of this Warrant shall not have the right to exercise this
Warrant by a cashless exercise pursuant to Section 2(c)(i) above if GEM Global
Yield Fund Limited (“GEM”) does not, within six months from the date of January
24, 2012, deliver a bona fide fair market offer for a licensing or funding
opportunity that results in the Issuer receiving at least $3,000,000 of cash
income.
 
(iii)    Holders of this Warrant shall not have the right to exercise this
Warrant by a cashless exercise pursuant to Section 2(c)(i) above if the Company
does not become S-3 Eligible for a period of at least 90 calendar days within
the six months period beginning on January 24, 2012 and ending 180 days later.
 
 
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(iv)    If the Company does not become S-3 Eligible for a 90-day period within
six months from the period beginning on January 24, 2012 and ending 180 days
later, and if GEM does not, within six months from the date of January 24, 2012,
deliver to the Company a bona fide fair market offer for a licensing or funding
opportunity that results in the Issuer receiving at least $3,000,000 of cash
income, then 10,800,000 of the Shares issuable upon exercise of this Warrant
shall expire immediately and in their entirety 181 days after January 24, 2012,
and the remaining 1,200,000 of Shares issuable upon exercise of this Warrant
shall remain in tact without a cashless exercise option and without the Company
having any obligation to register the Shares other than in accordance with
piggyback registration rights in the event that the Company otherwise files a
registration statement.
 
(d)   Issuance of Stock Certificates . In the event of any exercise of this
Warrant in accordance with and subject to the terms and conditions hereof,
certificates for the shares of Warrant Stock so purchased shall be dated the
date of such exercise and delivered to the Holder hereof within a reasonable
time, not exceeding three (3) Trading Days after such exercise (the “Delivery
DateÓ) or, at the request of the Holder (provided that a registration statement
under the Securities Act providing for the resale of the Warrant Stock is then
in effect or that the shares of Warrant Stock are otherwise exempt from
registration), issued and delivered to the Depository Trust Company (ÒDTCÓ)
account on the Holder’s behalf via the Deposit Withdrawal Agent Commission
System (ÒDWACÓ) within a reasonable time, not exceeding three (3) Trading
Days after such exercise, and the Holder hereof shall be deemed for all purposes
to be the holder of the shares of Warrant Stock so purchased as of the date of
such exercise. Notwithstanding the foregoing to the contrary, the Issuer or its
transfer agent shall be obligated to issue and deliver the shares to the DTC on
a holder’s behalf via DWAC only if such exercise is in connection with a sale or
other exemption from registration by which the shares may be issued without
a restrictive legend and the Issuer and its transfer agent are participating in
DTC through the DWAC system. The Holder shall deliver this original Warrant, or
an indemnification reasonably acceptable to the Issuer undertaking with respect
to such Warrant in the case of its loss, theft or destruction, at such time that
this Warrant is fully exercised. With respect to partial exercises of this
Warrant, the Issuer shall keep written records for the Holder of the number of
shares of Warrant Stock exercised as of each date of exercise.
 
(e)   Compensation for Buy-In on Failure to Timely Deliver Certificates Upon
 Exercise. In addition to any other rights available to the Holder, if the
Issuer fails to cause its transfer agent to transmit to the Holder a certificate
or certificates representing the Warrant Stock pursuant to an exercise on or
before the Delivery Date, and if after such date the Holder is required by its
broker to purchase (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by the Holder of the Warrant Stock
which the Holder anticipated receiving upon such exercise (a ÒBuy-In”), then the
Issuer shall (1) pay in cash to the Holder the amount by which (x) the Holder’s
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the
number of shares of Warrant Stock that the Issuer was required to deliver to the
Holder in connection with the exercise at issue times (B) the price at which the
sell order giving rise to such purchase obligation was executed, and (2) at the
option of the Holder, either reinstate the portion of the Warrant and equivalent
number of shares of Warrant Stock for which such exercise was not honored or
deliver to the Holder the number of shares of Common Stock that would have been
issued had the Issuer timely complied with its exercise and delivery obligations
hereunder. For example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted
exercise of shares of Common Stock with an aggregate sale price giving rise to
such purchase obligation of $10,000, under clause (1) of the immediately
preceding sentence the Issuer shall be required to pay the Holder $1,000. The
Holder shall provide the Issuer written notice indicating the amounts payable to
the Holder in respect of the Buy -In, together with applicable confirmations and
other evidence reasonably requested by the Issuer. Nothing herein shall limit a
Holder’s right to pursue any other remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Issuer’s failure to timely deliver
certificates representing shares of Common Stock upon exercise of this Warrant
as required pursuant to the terms hereof.
 
 
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(f)            Transferability of Warrant. Subject to Section 2(h) hereof, this
Warrant may be transferred by a Holder, in whole or in part, without the consent
of the Issuer. If transferred pursuant to this paragraph, this Warrant may be
transferred on the books of the Issuer by the Holder hereof in person or by duly
authorized attorney, upon surrender of this Warrant at the principal office of
the Issuer, properly endorsed (by the Holder executing an assignment in the form
attached hereto) and upon payment of any necessary transfer tax or other
governmental charge imposed upon such transfer. This Warrant is exchangeable at
the principal office of the Issuer for Warrants to purchase the same aggregate
number of shares of Warrant Stock, each new Warrant to represent the right to
purchase such number of shares of Warrant Stock as the Holder hereof shall
designate at the time of such exchange. All Warrants issued on transfers or
exchanges shall be dated the Original Issue Date and shall be identical with
this Warrant except as to the number of shares of Warrant Stock issuable
pursuant thereto.
 
(g)            Continuing Rights of Holder. The Issuer will, at the time of or
at any time after each exercise of this Warrant, upon the request of the Holder
hereof, acknowledge in writing the extent, if any, of its continuing obligation
to afford to such Holder all rights to which such Holder shall continue to be
entitled after such exercise in accordance with the terms of this Warrant,
provided that if any such Holder shall fail to make any such request, the
failure shall not affect the continuing obligation of the Issuer to afford such
rights to such Holder.
 
(h)            Compliance with Securities Laws.
 
(i) The Holder of this Warrant, by acceptance hereof, acknowledges that this
Warrant and the shares of Warrant Stock to be issued upon exercise hereof are
being acquired solely for the Holder's own account and not as a nominee for any
other party, and for investment, and that the Holder will not offer, sell or
otherwise dispose of this Warrant or any shares of Warrant Stock to be issued
upon exercise hereof except pursuant to an effective registration statement, or
an exemption from registration, under the Securities Act and any applicable
state securities laws.
 
(ii) Except as provided in paragraph (iii) below, this Warrant and all
certificates representing shares of Warrant Stock issued upon exercise hereof
shall be stamped or imprinted with a legend in substantially the following form:
 

  THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH
SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED.  

 
 
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(iii)    The Issuer agrees to reissue this Warrant or certificates representing
any of the Warrant Stock, without the legend set forth above if at such time,
prior to making any transfer of any such securities, the Holder shall give
written notice to the Issuer describing the manner and terms of such transfer.
Such proposed transfer will not be effected until: (a) either (i) the Issuer has
received an opinion of counsel reasonably satisfactory to the Issuer, to the
effect that the registration of such securities under the Securities Act is not
required in connection with such proposed transfer, (ii) a registration
statement under the Securities Act covering such proposed disposition has been
filed by the Issuer with the Securities and Exchange Commission and has become
effective under the Securities Act, (iii) the Issuer has received other evidence
reasonably satisfactory to the Issuer that such registration and qualification
under the Securities Act and state securities laws are not required, or (iv) the
Holder provides the Issuer with reasonable assurances that such security can be
sold pursuant to Rule 144 under the Securities Act; and (b) either (i) the Issue
r has received an opinion of counsel reasonably satisfactory to the Issuer, to
the effect that registration or qualification under the securities or "blue sky"
laws of any state is not required in connection with such proposed disposition,
or (ii) compliance with applicable state securities or "blue sky" laws has been
effected or a valid exemption exists with respect thereto. The Issuer will
respond to any such notice from a holder within three (3) Trading Days. In the
case of any proposed transfer under this Section 2(h), the Issuer will use
reasonable efforts to comply with any such applicable state securities or "blue
sky" laws, but shall in no event be required, (x) to qualify to do business in
any state where it is not then qualified, (y) to take any action that would
subject it to tax or to the general service of process in any state where it is
not then subject, or (z) to comply with state securities or “blue sky” laws of
any state for which registration by coordination is unavailable to the Issuer.
The restrictions on transfer contained in this Section 2(h) shall be in addition
to, and not by way of limitation of, any other restrictions on transfer
contained in any other section of this Warrant. Whenever a certificate
representing the Warrant Stock is required to be issued to a the Holder without
a legend, in lieu of delivering physical certificates representing the Warrant
Stock, the Issuer shall cause its transfer agent to electronically transmit the
Warrant Stock to the Holder by crediting the account of the Holder or Holder's
Prime Broker with DTC through its DWAC system (to the extent not inconsistent
with any provisions of this Warrant or the Purchase Agreement).
 
(i)   Accredited Investor Status. In no event may the Holder exercise this
Warrant in whole or in part unless the Holder is an “accredited investor” as
defined in Regulation D under the Securities Act.
 
3.   Stock Fully Paid; Reservation and Listing of Shares; Covenants.
 
(a)            Stock Fully Paid. The Issuer represents, warrants, covenants and
agrees that all shares of Warrant Stock which may be issued upon the exercise of
this Warrant or otherwise hereunder will, when issued in accordance with the
terms of this Warrant, be duly authorized, validly issued, fully paid and
non-assessable and free from all taxes, liens and charges created by or through
the Issuer. The Issuer further covenants and agrees that during the period
within which this Warrant may be exercised, the Issuer will at all times have
authorized and reserved for the purpose of the issuance upon exercise of this
Warrant a number of authorized but unissued shares of Common Stock equal to at
least one hundred fifty (150%) of the number of shares of Common Stock issuable
upon exercise of this Warrant without regard to any limitations on exercise.
 
(b)            Reservation. If any shares of Common Stock required to be
reserved for issuance upon exercise of this Warrant or as otherwise provided
hereunder require registration or qualification with any Governmental Authority
under any federa l or state law before such shares may be so issued, the Issuer
will in good faith use its best efforts as expeditiously as possible at its
expense to cause such shares to be duly registered or qualified. If the Issuer
shall list any shares of Common Stock on any securities exchange or market it
will, at its expense, list thereon, and maintain and increase when necessary
such listing, of, all shares of Warrant Stock from time to time issued upon
exercise of this Warrant or as otherwise provided hereunder (provided that such
Warrant Stock has been registered pursuant to a registration statement under the
Securities Act then in effect), and, to the extent permissible under the
applicable securities exchange rules, all unissued shares of Warrant Stock which
are at any time issuable hereunder, so long as any shares of Common Stock shall
be so listed. The Issuer will also so list on each securities exchange or
market, and will maintain such listing of, any other securities which the Holder
of this Warrant shall be entitled to receive upon the exercise of this Warrant
if at the time any securities of the same class shall be listed on such
securities exchange or market by the Issuer.
 
(c)            Covenants. The Issuer shall not by any action including, without
limitation, amending the Certificate of Incorporation or the by -laws of the
Issuer, or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such actions as may be necessary or appropriate to
protect the rights of the Holder hereof against dilution (to the extent
specifically provided herein) or impairment. Without limiting the generality of
the foregoing, the Issuer will (i) not permit the par value, if any, of its
Common Stock to exceed the then effective Warrant Price, (ii) not amend or
modify any provision of the Certificate of Incorporation or by-laws of the
Issuer in any manner that would adversely affect the rights of the Holder, (iii)
take all such action as may be reasonably necessary in order that the Issuer may
validly and legally issue fully paid and nonassessable shares of Common Stock,
free and clear of any liens, claims, encumbrances and restrictions (other than
as provided herein) upon the exercise of this Warrant, and (iv) use its best
efforts to obtain all such authorizations, exempt ions or consents from any
public regulatory body having jurisdiction thereof as may be reasonably
necessary to enable the Issuer to perform its obligations under this Warrant.
 
 
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(d)            Loss, Theft, Destruction of Warrant. Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Issuer
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same number of shares of Common Stock.
 
(e)            Payment of Taxes. The Issuer will pay any documentary stamp taxes
attributable to the initial issuance of the Warrant Stock issuable upon exercise
of this Warrant; provided, however, that the Issuer shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in the
issuance or delivery of any certificates representing Warrant Stock in a name
other than that of the Holder in respect to which such shares are issued.
 
4.   Adjustment of Warrant Price. The price at which such shares of Warrant
Stock may be purchased upon exercise of this Warrant shall be subject to
adjustment from time to time as set forth in this Section 4. The Issuer shall
give the Holder notice of any event described below which requires an adjustment
pursuant to this Section 4 in accordance with the notice provisions set forth in
Section 5.
 
(a)   Recapitalization, Reorganization, Reclassification, Consolidation, Merger
or Sale.
 
(i)    In case the Issuer after the Original Issue Date shall do any of the
following (each, a "Triggering Event"): (a) consolidate or merge with or into
any other Person and the Issuer shall not be the continuing or surviving
corporation of such consolidation or merger, or (b) permit any other Person to
consolidate with or merge into the Issuer and the Issuer shall be the continuing
or surviving Person but, in connection with such consolidation or merger, any
Capital Stock of the Issuer shall be changed into or exchanged for Securities of
any other Person or cash or any other property, or (c) transfer all or
substantially all of its properties or assets to any other Person, or (d) effect
a capital reorganization or reclassification of its Capital Stock, then, and in
the case of each such Triggering Event, proper provision shall be made to the
Warrant Price and the number of shares of Warrant Stock that may be purchased
upon exercise of this Warrant so that, upon the basis and the terms and in the
manner provided in this Warrant, the Holder of this Warrant shall be entitled
upon the exercise hereof at any time after the consummation of such Triggering
Event, to the extent this Warrant is not exercised prior to such Triggering
Event, to receive at the Warrant Price as adjusted to take into account the
consummation of such Triggering Event, in lieu of the Common Stock issuable upon
such exercise of this Warrant prior to such Triggering Event, the Securities,
cash and property to which such Holder would have been entitled upon the
consummation of such Triggering Event if such H older had exercised the rights
represented by this Warrant immediately prior thereto (including the right of a
shareholder to elect the type of consideration it will receive upon a Triggering
Event), subject to adjustments (subsequent to such corporate act ion) as nearly
equivalent as possible to the adjustments provided for elsewhere in this Section
4; provided, however, the Holder at its option may elect to
 
 
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receive shares of Common Stock in an amount equal to eighty percent (80%) of the
average VWAP of the Common Stock for the forty (40) Trading Days preceding the
date of such Triggering Event. Immediately upon the occurrence of a Triggering
Event, the Issuer shall notify the Holder in writing of such Triggering Event
and provide the calculations in determining the number of shares of Warrant
Stock issuable upon exercise of the new warrant and the adjusted Warrant Price.
Upon the Holder’s request, the continuing or surviving corporation as a result
of such Triggering Event shall issue to the Holder a new warrant of like tenor
evidencing the right to purchase the adjusted number of shares of Warrant Stock
and the adjusted Warrant Price pursuant to the terms and provisions of this
Section 4(a)(i). Notwithstanding the foregoing to the contrary, this Section
4(a)(i) shall only apply if the surviving entity pursuant to any such Triggering
Event is a company that has a class of equity securities registered pursuant to
the Securities Exchange Act of 1934, as amended, and its common stock is listed
or quoted on a national securities exchange, national automated quotation system
or the OTC Bulletin Board. In the event that the surviving entity pursuant to
any such Triggering Event is not a public company that is registered pursuant to
the Securities Exchange Act of 1934, as amended, or its common stock is not
listed or quoted on a national securities exchange, national automated quotation
system or the OTC Bulletin Board, then the Holder shall have the right to demand
that the Issuer pay to the Holder an amount in cash equal to the value of this
Warrant calculated in accordance with the Black-Scholes formula.
 
(ii)    In the event that the Holder has elected not to exercise this Warrant
prior to the consummation of a Triggering Event and has also elected not to
receive shares of Common Stock pursuant to the provisions of Section 4(a)(i)
above, so long as the surviving entity pursuant to any Triggering Event is a
company that has a class of equity securities registered pursuant to the
Securities Exchange Act of 1934, as amended, and its common stock is listed or
quoted on a national securities exchange, national automated quotation system or
the OTC Bulletin Board, the surviving entity and/or each Person (other than the
Issuer) which may be required to deliver any Securities, cash or property upon
the exercise of this Warrant as provided herein shall assume, by written
instrument delivered to, and reasonably satisfactory to, the Holder of this
Warrant, (A) the obligations of the Issuer under this Warrant (and if the Issuer
shall survive the consummation of such Triggering Event, such assumption shall
be in addition to, and shall not release the Issuer from, any continuing
obligations of the Issuer under this Warrant) and (B) the obligation to deliver
to such Holder such Securities, cash or property as, in accordance with the
foregoing provisions of this subsection (a), such Holder shall be entitled to
receive, and the surviving entity and/or each such Person shall have similarly
delivered to such Holder an opinion of counsel for the surviving entity and/or
each such Person, which counsel shall be reasonably satisfactory to such Holder,
or in the alternative, a written acknowledgement executed by the President or
Chief Financial Officer of the Issuer, stating that this Warrant shall
thereafter continue in full force and effect and the terms hereof (including,
without limitation, all of the provisions of this subsection (a)) shall be
applicable to the Securities, cash or property which the surviving entity and/or
each such Person may be required to deliver upon any exercise of this Warrant or
the exercise of any rights pursuant hereto.
 
 
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(b)   Stock Dividends, Subdivisions and Combinations. If at any time the Issuer
shall:
 
(i) make or issue or set a record date for the holders of the Common Stock for
the purpose of entitling them to receive a dividend payable in, or other
distribution of, shares of Common Stock,
 
(ii) subdivide its outstanding shares of Common Stock into a larger number of
shares of Common Stock, or
 
(iii) combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock,
 
then (1) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (2) the Warrant Price then in
effect shall be adjusted to equal (A) the Warrant Price then in effect
multiplied by the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the adjustment divided by (B) the number of
shares of Common Stock for which this Warrant is exercisable immediately after
such adjustment.
 
(c)   Certain Other Distributions. If at any time the Issuer shall make or issue
or set a record date for the holders of the Common Stock for the purpose of
entitling them to receive any dividend or other distribution of:
 
(i) cash,
 
(ii) any evidences of its indebtedness, any shares of stock of any class or any
other securities or property of any nature whatsoever (other than cash, Common
Stock Equivalents or Additional Shares of Common Stock), or
 
(iii) any warrants or other rights to subscribe for or purchase any evidences of
its indebtedness, any shares of stock of any class or any other securities or
property of any nature whatsoever (other than cash, Common Stock Equivalents or
Additional Shares of Common Stock),
 
then (1) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the product of the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to such
adjustment multiplied by a fraction (A) the numerator of which shall be the Per
Share Market Value of Common Stock at the date of taking such record and (B) the
denominator of which shall be such Per Share Market Value minus the amount
allocable to one share of Common Stock of any such cash so distributable and of
the fair value (as determined in good faith by the Board of Directors of the
Issuer and supported by an opinion from an investment banking firm mutually
agreed upon by the Issuer and the Holder) of any and all such evidences of
indebtedness, shares of stock, other securities or property or warrants or other
subscription or purchase rights so distributable, and (2) the Warrant Price then
in effect shall be adjusted to equal (A) the Warrant Price then in effect
multiplied by the number of shares
 
 
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of Common Stock for which this Warrant is exercisable immediately prior to the
adjustment divided by (B) the number of shares of Common Stock for which this W
arrant is exercisable immediately after such adjustment. A reclassification of
the Common Stock (other than a change in par value, or from par value to no par
value or from no par value to par value) into shares of Common Stock and shares
of any other class of stock shall be deemed a distribution by the Issuer to the
holders of its Common Stock of such shares of such other class of stock within
the meaning of this Section 4(c) and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock as a
part of such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 4(b).
 
(d)            Issuance of Additional Shares of Common Stock. In the event the
Issuer shall at any time following the Original Issuance Date issue any
Additional Shares of Common Stock (otherwise than as provided in the foregoing
subsections (b) through (c) of this Section 4), at a price per share less than
the Warrant Price then in effect or without consideration, then the Warrant
Price upon each such issuance shall be adjusted to the price equal to the
consideration per share paid for such Additional Shares of Common Stock;
provided, however, that no such adjustment shall be made upon the issuance of up
to $6,000,000 of such Additional Shares of Common Stock.
 
(e)            Issuance of Common Stock Equivalents. In the event the Issuer
shall at any time following the Original Issuance Date take a record of the
holders of its Common Stock for the purpose of entitling them to receive a
distribution of, or shall in any manner (whether directly or by assumption in a
merger in which the Issuer is the surviving corporation) issue or sell, any
Common Stock Equivalents, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which Common
Stock is issuable upon such conversion or exchange shall be less than the
Warrant Price in effect immediately prior to the time of such issue or sale, or
if, after any such issuance of Common Stock Equivalents, the price per share for
which Additional Shares of Common Stock may be issuable thereafter is amended or
adjusted, and such price as so amended shall be less than the Warrant Price in
effect at the time of such amendment or adjustment, then the Warrant Price then
in effect shall be adjusted as provided in Section 4(d); provided, however, that
no such adjustment shall be made upon the issuance of up to $6,000,000 of such
of Common Stock Equivalents. No further adjustments of the number of shares of
Common Stock for which this Warrant is exercisable and the Warrant Price then in
effect shall be made upon the actual issue of such Common Stock upon conversion
or exchange of such Common Stock Equivalents.
 
(f)            Other Provisions applicable to Adjustments under this Section.
The following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Warrant Price then in effect provided for in this Section 4:
 
 
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(i)   Computation of Consideration. To the extent that any Additional Shares of
Common Stock or any Common Stock Equivalents (or any warrants or other rights
therefor) shall be issued for cash consideration, the consideration received by
the Issuer therefor shall be the amount of the cash received by the Issuer
therefor, or, if such Additional Shares of Common Stock or Common Stock
Equivalents are offered by the Issuer for subscription, the subscription price,
or, if such Additional Shares of Common Stock or Common Stock Equivalents are
sold to underwriters or dealers for public offering without a subscription
offering, the initial public offering price (in any such case subtracting any
amounts paid or receivable for accrued interest or accrued dividends and without
taking into account any compensation, discounts or expenses paid or incurred by
the Issuer for and in the underwriting of, or otherwise in connection with, the
issuance thereof). In connection with any merger or consolidation in which the
Issuer is the surviving corporation (other than any consolidation or merger in
which the previously outstanding shares of Common Stock of the Issuer shall be
changed to or exchanged for the stock or other securities of another
corporation), the amount of consideration therefore shall be, deemed to be the
fair value, as determined reasonably and in good faith by the Board, of such
portion of the assets and business of the nonsurviving corporation as the Board
may determine to be attributable to such shares of Common Stock or Common Stock
Equivalents, as the case may be. The consideration for any Additional Shares of
Common Stock issuable pursuant to any warrants or other rights to subscribe for
or purchase the same shall be the consideration received by the Issuer for
issuing such warrants or other rights plus the additional consideration payable
to the Issuer upon exercise of such warrants or other rights. The consideration
for any Additional Shares of Common Stock issuable pursuant to the terms of any
Common Stock Equivalents shall be the consideration received by the Issuer for
issuing warrants or other rights to subscribe for or purchase such Common Stock
Equivalents, plus the consideration paid or payable to the Issuer in respect of
the subscription for or purchase of such Common Stock Equivalents, plus the
additional consideration, if any, payable to the Issuer upon the exercise of the
right of conversion or exchange in such Common Stock Equivalents. In the event
of any consolidation or merger of the Issuer in which the Issuer is not the
surviving corporation or in which the previously outstanding shares of Common
Stock of the Issuer shall be changed into or exchanged for the stock or other
securities of another corporation, or in the event of any sale of all or
substantially all of the assets of the Issuer for stock or other securities of
any corporation, the Issuer shall be deemed to have issued a number of shares of
its Common Stock for stock or securities or other property of the other
corporation computed on the basis of the actual exchange ratio on which the
transaction was predicated, and for a consideration equal to the fair market
value on the date of such transaction of all such stock or securities or other
property of the other corporation. In the event any consideration received by
the Issuer for any securities consists of property other than cash, the fair
market value thereof at the time of issuance or as otherwise ap plicable shall
be as determined in good faith by the Board. In the event Common Stock is issued
with other shares or securities or other assets of the Issuer for consideration
which covers both, the consideration computed as provided in this Section
4(f)(i) shall be allocated among such securities and assets as determined in
good faith by the Board.
 
(ii)   When Adjustments to Be Made. The adjustments required by this Section 4
shall be made whenever and as often as any specified event requiring an
adjustment shall occur, except that any adjustment of the number of shares of
Common Stock for which this Warrant is exercisable that would otherwise be
required may be postponed (except in the case of a subdivision or combination of
shares of the Common Stock, as provided for in Section 4(b)) up to, but not
beyond the date of exercise if such adjustment either by itself or with other
adjustments not previously made adds or subtracts less than one percent (1%) of
the shares of Common Stock for which this Warrant is exercisable immediately
prior to the making of such adjustment. Any adjustment representing a change of
less than such minimum amount (except as aforesaid) which is postponed shall be
carried forward and made as soon as such adjustment, together with other
adjustments required by this Section 4 and not previously made, would result in
a minimum adjustment or on the date of exercise. For the purpose of any
adjustment, any
specified event shall be deemed to have occurred at the close of business on the
date of its occurrence.
 
 
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(iii)            Fractional Interests. In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken into account to
the nearest one one-hundredth (1/100th) of a share.
 
(iv)            When Adjustment Not Required. If the Issuer shall take a record
of the holders of its Common Stock for the purpose of entitling them to receive
a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
 
(g)            Form of Warrant after Adjustments. The form of this Warrant need
not be changed because of any adjustments in the Warrant Price or the number and
kind of Securities purchasable upon the exercise of this Warrant.
 
(h)   Escrow of Warrant Stock. If after any property becomes distributable
pursuant to this Section 4 by reason of the taking of any record of the holders
of Common Stock, but prior to the occurrence of the event for which such record
is taken, and the Holder exercises this Warrant, any shares of Common Stock
issuable upon exercise by reason of such adjustment shall be deemed the last
shares of Common Stock for which this Warrant is exercised (notwithstanding any
other provision to the contrary herein) and such shares or other property shall
be held in escrow for the Holder by the Issuer to be issued to the Holder upon
and to the extent that the event actually takes place, upon payment of the
current Warrant Price. Notwithstanding any other provision to the contrary
herein, if the event for which such record was taken fails to occur or is
rescinded, then such escrowed shares shall be cancelled by the Issuer and
escrowed property returned.
 
5.   Notice of Adjustments . Whenever the Warrant Price or Warrant Share Number
shall be adjusted pursuant to Section 4 hereof (for purposes of this Section 5,
each an "adjustment"), the Issuer shall cause its Chief Financial Officer to
prepare and execute a certificate setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated (including a description of the basis on which the
Board made any determination hereunder), and the Warrant Price and Warrant Share
Number after giving effect to such adjustment, and shall cause copies of such
certificate to be delivered to the Holder of this Warrant promptly after each
adjustment. Any dispute between the Issuer and the Holder of this Warrant with
respect to the matters set forth in such certificate may at the option of the
Holder of this Warrant be submitted to a national or regional accounting firm
reasonably acceptable to the Issuer and the Holder, provided that the Issuer
shall have ten (10) days after receipt of notice from such Holder of its
selection of such firm to object thereto, in which case such Holder shall select
another such firm and the Issuer shall have no such right of objection. The firm
selected by the Holder of this Warrant as provided in the preceding sentence
shall be instructed to deliver a written opinion as to such matters to the
Issuer and such Holder within thirty (30) days after submission to it of such
dispute. Such opinion shall be final and binding on the parties hereto. The
costs and expenses of the initial accounting firm shall be paid equally by the
Issuer and the Holder and, in the case of an objection by the Issuer, the costs
and expenses of the subsequent accounting firm shall be paid in full by the
Issuer.
 
 
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6.            Fractional Shares. No fractional shares of Warrant Stock will be
issued in connection with any exercise hereof, but in lieu of such fractional
shares, the Issuer shall round the number of shares to be issued upon exercise
up to the nearest whole number of shares.
 
7.            Ownership Cap and Exercise Restriction. Notwithstanding anything
to the contrary set forth in this Warrant, at no time may a Holder of this
Warrant exercise this Warrant if the number of shares of Common Stock to be
issued pursuant to such exercise would exceed, when aggregated with all other
shares of Common Stock owned by such Holder and its affiliates at such time, the
number of shares of Common Stock which would result in such Holder and its
affiliates beneficially owning (as determined in accordance with Section 13(d)
of the Exchange Act and the rules thereunder) in excess of 4.99% of the then
issued and outstanding shares of Common Stock; provided, however , that upon a
Holder of this Warrant providing the Issuer with sixty-one (61) days notice
(pursuant to Section 13 hereof) (the "Waiver Notice") that such Holder would
like to waive this Section 7 with regard to any or all shares of Common Stock
issuable upon exercise of this Warrant, this Section 7 will be of no force or
effect with regard to all or a portion of the Warrant referenced in the Waiver
Notice until the date that the Holder notifies the Issuer (pursuant to Section
13 hereof) that the Holder revokes the Waiver Notice; provided, further, that
during the sixty-one (61) day period prior to the expiration of the Term, the
Holder may waive this Section 7 by providing a Waiver Notice at any time during
such sixty-one (61) day period.
 
8.            [Reserved.]
 
9.            Definitions. For the purposes of this Warrant, the following terms
have the following meanings:
 
"Additional Shares of Common Stock" means all shares of Common Stock issued by
the Issuer after the Original Issue Date, and all shares of Other Common, if
any, issued by the Issuer after the Original Issue Date, except: (i) securities
issued (other than for cash) in connection with a merger, acquisition, or
consolidation, (ii) securities issued pursuant to the conversion or exercise of
convertible or exercisable securities issued or outstanding on or prior to the
date of the Purchase Agreement or issued pursuant to the Purchase Agreement (so
long as the conversion or exercise price in such securities are not amended to
lower such price and/or adversely affect the Holder), (iii) the Warrant Stock,
(iv) securities issued in connection with bona fide strategic license agreements
or other partnering arrangements so long as such issuances are not for the
purpose of raising capital, (v) Common Stock issued or the issuance or grants of
options to purchase Common Stock pursuant to the Issuer’s stock option plans and
employee stock purchase plans outstanding as they exist on the date of the
Purchase Agreement, and (vi) any warrants issued to the placement agent and its
designees for the transactions contemplated by the Purchase Agreement.
 
“Board" shall mean the Board of Directors of the Issuer.
 
 
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"Capital Stock" means and includes (i) any and all shares, interests,
participations or other equivalents of or interests in (however designated)
corporate stock, including, without limitation, shares of preferred or
preference stock, (ii) all partnership interests (whether general or limited) in
any Person which is a partnership, (iii) all membership interests or limited
liability company interests in any limited liability company, and (iv) all
equity or ownership interests in any Person of any other type.
 
"Certificate of Incorporation" means the Certificate of Incorporation of the
Issuer as in effect on the Original Issue Date, and as hereafter from time to
time amended, modified, supplemented or restated in accordance with the terms
hereof and thereof and pursuant to applicable law.
 
“Closing Price” shall mean the closing price of the Common Stock, as recorded by
the Principal Market, on a particular day.
 
"Common Stock" means the common stock, $0.0001 par value per share, of the
Issuer and any other Capital Stock into which such stock may hereafter be
changed.
 
"Common Stock Equivalent" means any Convertible Security or warrant, option or
other right to subscribe for or purchase any Additional Shares of Common Stock
or any Convertible Security.
 
"Convertible Securities" means evidences of indebtedness, shares of Capital
Stock or other Securities which are or may be at any time convertible into or
exchangeable for Additional Shares of Common Stock. The term "Convertible
Security" means one of the Convertible Securities.
 
"Governmental Authority" means any governmental, regulatory or self-regulatory
entity, department, body, official, authority, commission, board, agency or
instrumentality, whether federal, state or local, and whether domestic or
foreign.
 
"Holders" mean the Persons who shall from time to time own any Warrant. The term
"Holder" means one of the Holders.
 
"Independent Appraiser" means a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants of
recognized standing (which may be the firm that regularly examines the financial
statements of the Issuer) that is regularly engaged in the business of
appraising the Capital Stock or assets of corporations or other entities as
going concerns, and which is not affiliated with either the Issuer or the Holder
of any Warrant.
 
"Original Issue Date" means January 23, 2012.
 
"OTC Bulletin Board" means the over-the-counter electronic bulletin board.
 
"Other Common" means any other Capital Stock of th e Issuer of any class which
shall be authorized at any time after the date of this Warrant (other than
Common Stock) and which shall have the right to participate in the distribution
of earnings and assets of the Issuer without limitation as to amount.
 
 
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“Outstanding Common Stock” means, at any given time, the aggregate amount of
outstanding shares of Common Stock, assuming full exercise, conversion or
exchange (as applicable) of all options, warrants and other Securities which are
convertible into or exercisable or exchangeable for, and any right to subscribe
for, shares of Common Stock that are outstanding at such time.
 
"Person" means an individual, corporation, limited liability company,
partnership, joint stock company, trust, unincorporated organization, joint
venture, Governmental Authority or other entity of whatever nature.
 
"Per Share Market Value" means on any particular date (a) the last closing bid
price per share of the Common Stock on such date on a registered national stock
exchange on which the Common Stock is then listed, or if there is no such price
on such date, then the closing price on such exchange or quotation system on the
date nearest preceding such date, or (b) if the Common Stock is not listed or
traded then on any registered national stock exchange, the last closing bid
price for a share of Common Stock in the over-the-counter market, as reported by
the OTC Bulletin Board or by Pink Sheets LLC (or similar organization or agency
succeeding to its functions of reporting prices) at the close of business on
such date, or (c) if the Common Stock is not then publicly traded the fair
market value of a share of Common Stock as determined by an Independent
Appraiser selected in good faith by the Holder; provided, however, that the
Issuer, after receipt of the determination by such Independent Appraiser, shall
have the right to select an additional Independent Appraiser, in which case, the
fair market value shall be equal to the average of the determinations by each
such Independent Appraiser; and provided, further that all determinations of the
Per Share Market Value shall be appropriately adjusted for any stock dividends,
stock splits or other similar transactions during such period. The determination
of fair market value by an Independent Appraiser shall be based upon the fair
market value of the Issuer determined on a going concern basis as between a
willing buyer and a willing seller and taking into account all relevant factors
determinative of value, and shall be final and binding on all parties. In
determining the fair market value of any shares of Common Stock, no
consideration shall be given to any restrictions on transfer of the Common Stock
imposed by agreement or by federal or state securities laws, or to the existence
or absence of, or any limitations on, voting rights.
 
"Purchase Agreement" means the Common Stock Purchase Agreement dated as of the
date hereof, between the Issuer and the GEM.
 
"Securities" means any debt or equity securities of the Issuer, whether now or
hereafter authorized, any instrument convertible into or exchangeable for
Securities or a Security, and any option, warrant or other right to purchase or
acquire any Security. "Security" means one of the Securities.
 
"Securities Act" means the Securities Act of 1933, as amended, or any similar
federal statute then in effect.
 
 
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"Subsidiary" means any corporation at least 50% of whose outstanding Voting
Stock shall at the time be owned directly or indirectly by the Issuer or by one
or more of its Subsidiaries, or by the Issuer and one or more of its
Subsidiaries.
 
"Term" has the meaning specified in Section 1 hereof.
 
"Trading Day" means (a) a day on which the Common Stock is traded on a national
securities exchange, or (b) if the Common Stock is not traded on a national
securities exchange, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the OTC Bulletin Board or Pink Sheets LLC
(or any similar organization or agency succeeding its functions of reporting
prices); provided, however, that in the event that the Common Stock is not
listed or quoted as set forth in (a) or (b) hereof, then Trading Day shall mean
any day except Saturday, Sunday and any day which shall be a legal holiday or a
day on which banking institutions in the State of New York are authorized or
required by law or other government action to close.
 
"VWAP" means, for any date, the price determined by the first of the following
clauses that applies: (a) the daily volume weighted average price of the Common
Stock for such date (or the nearest preceding date) on a national securities
exchange or the OTC Bulletin Board as reported by Bloomberg L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City
time); (b) if the Common Stock is not then quoted for trading on a national
securities exchange or the OTC Bulletin Board and if prices for the Common Stock
are then reported by Pink Sheets, LLC (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported; or (c) in all other cases, the fair
market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the Holder and reasonably acceptable to the
Issuer.
 
"Voting Stock" means, as applied to the Capital Stock of any corporation,
Capital Stock of any class or classes (however designated) having ordinary
voting power for the election of a majority of the members of the Board of
Directors (or other governing body) of such corporation, other than Capital
Stock having such power only by reason of the happening of a contingency.
 
"Warrant Price" initially means $1.00, provided, however, that if on March 31,
2012 the average per share Closing Price for the prior 15 Trading Days exceeds
$1.00, then the “Warrant Price” shall be adjusted to an amount equal to 130% of
such average per share Closing Price based on the 15 Trading Days preceding
March 31, 2012, as such price may be adjusted from time to time as shall result
from the adjustments specified in this Warrant, including Section 4 hereto.
 
"Warrant Share Number" means at any time the aggregate number of shares of
Warrant Stock which may at such time be purchased upon exercise of this Warrant,
after giving effect to all prior adjustments and increases to such number made
or required to be made under the terms hereof.
 
"Warrant Stock" means Common Stock issuable upon exercise of this Warrant.
 
 
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10.   Other Notices. In case at any time:
 
(A)  
the Issuer shall make any distributions to the holders of Common Stock; or

 
(B)  
the Issuer shall authorize the granting to all holders of its Common Stock of
rights to subscribe for or purchase any shares of Capital Stock of any class or
other rights; or

 
(C)  
there shall be any reclassification of the Capital Stock of the Issuer; or

 
(D)  
there shall be any capital reorganization by the Issuer; or

 
(E)  
there shall be any (i) consolidation or merger involving the Issuer or (ii)
sale, transfer or other disposition of all or substantially all of the Issuer's
property, assets or business (except a merger or other reorganization in which
the Issuer shall be the surviving corporation and its shares of Capital Stock
shall continue to be outstanding and unchanged and except a consolidation,
merger, sale, transfer or other disposition involving a wholly -owned
Subsidiary); or

 
(F)  
there shall be a voluntary or involuntary dissolution, liquidation or winding-up
of the Issuer or any partial liquidation of the Issuer or distribution to
holders of Common Stock;

 
then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding -up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least twenty
(20) days prior to the action in question and not less than ten (10) days prior
to the record date or the date on which the Issuer's transfer books are closed
in respect thereto. This Warrant entitles the Holder to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Common Stock.
 
11.   Amendment and Waiver. Any term, covenant, agreement or condition in this
Warrant may be amended, or compliance therewith may be waived (either generally
or in a particular instance and either retroactively or prospectively), by a
written instrument or written instruments executed by the Issuer and the Holder.
 
 
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12.            Governing Law ; Jurisdiction . This Warrant shall be governed by
and construed in accordance with the internal laws of the State of California,
without giving effect to any of the conflicts of law principles which would
result in the application of the substantive law of another jurisdiction. This
Warrant shall not be interpreted or construed with any presumption against the
party causing this Warrant to be drafted. The Issuer and the Holder agree that
venue for any dispute arising under this Warrant will lie exclusively in the
state or federal courts located in California, and the parties irrevocably waive
any right to raise forum non conveniens or any other argument that California is
not the proper venue. The Issuer and the Holder irrevocably consent to personal
jurisdiction in the state and federal courts of the state of California. The
Issuer and the Holder consent to process being served in any such suit, action
or proceeding by mailing a copy thereof to such party at the address in effect
for notices to it under this Warrant and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing in
this Section 12 shall affect or limit any right to serve process in any other
manner permitted by law. The Issuer and the Holder hereby agree that the
prevailing party in any suit, action or proceeding arising out of or relating to
this Warrant or the Purchase Agreement, shall be entitled to reimbursement for
reasonable legal fees from the non-prevailing party. The parties hereby waive
all rights to a trial by jury.
 
13.            Notices. Any notice, demand, request, waiver or other
communication requiredor permitted to be given hereunder shall be in writing and
shall be effective (a) upon hand delivery by telecopy or facsimile at the
address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second
business day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur.The addresses for such communications shall be:
 

If to the Issuer: Max Sound Corporation   2902 A Colorado Ave.   Santa Monica,
CA 90404   Attn: John Blaisure     with copies (which copies   shall not
constitute notice) to: Christine Melilli.   Anslow + Jaclin LLP   195 Route 9
South   Manalapan, NJ 07726     If to the Holder: 590 Partners Capital, LLC  
c/o GEM  
27th Floor
  New York, NY 10022

 
 
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with copies (which copies   shall not constitute notice) to: Kramer Levin
Naftalis & Frankel LLP   1177 Avenue of the Americas   New York, New York 10036
  Telephone Number: (212) 715-9100   Fax: (212) 715-8000   Attention:
Christopher S. Auguste, Esq.

 
Any party hereto may from time to time change its address for notices by giving
written notice of such changed address to the other party hereto.
 
14.            Warrant Agent. The Issuer may, by written notice to each Holder
of this Warrant, appoint an agent having an office in New York, New York for the
purpose of issuing shares of Warrant Stock on the exercise of this Warrant
pursuant to subsection (b) of Section 2 hereof, exchanging this Warrant pursuant
to subsection (d) of Section 2 hereof or replacing this Warrant pursuant to
subsection (d) of Section 3 hereof, or any of the foregoing, and thereafter any
such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.
 
15.            Remedies. The Issuer stipulates that the remedies at law of the
Holder of this Warrant in the event of any default or threatened default by the
Issuer in the performance of or compliance with any of the terms of this Warrant
are not and will not be adequate and that, to the fullest extent permitted by
law, such terms may be specifically enforced by a decree for the specific
performance of any agreement contained herein or by an injunction against a
violation of any of the terms hereof or otherwise.
 
16.            Successors and Assigns. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors and
assigns of the Issuer, the Holder hereof and (to the extent provided herein) the
Holders of Warrant Stock issued pursuant hereto, and shall be enforceable by any
such Holder or Holder of Warrant Stock.
 
17.            Modification and Severability. If, in any action before any court
or agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.
 
18.            Headings. The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
 
 
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19.   Registration Rights. The Holder of this Warrant is entitled to the benefit
of certain registration rights with respect to the shares of Warrant Stock
issuable upon the exercise of this Warrant pursuant to that certain Registration
Rights Agreement, of even date herewith, by and among the Issuer and the Holder
(the “Registration Rights Agreement”) and the registration rights with respect
to the shares of Warrant Stock issuable upon the exercise of this Warrant by any
subsequent Holder may only be assigned in accordance with the terms and
provisions of the Registration Rights Agreement.
 
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IN WITNESS WHEREOF, the Issuer has executed this Warrant as of the day and year
first above written.
 

  MAX SOUND CORPORATION            
By:
/s/ Greg Halpern     Name: Greg Halpern     Title: Chief Financial Officer      
   

 
 
 
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EXERCISE FORM
WARRANT
 
MAX SOUND CORPORATION
 
The undersigned , pursuant to the provisions of the within Warrant, hereby
elects to purchase _____ shares of Common Stock of covered by the within
Warrant.
 

Dated:     Signature                       Address                

 
Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the date of Exercise:                                         
The undersigned is an “accredited investor” as defined in Regulation D under the
Securities Act of 1933, as amended.
 
The undersigned intends that payment of the Warrant Price shall be made as
(check one):
 
Cash Exercise                      
 
Cashless Exercise                      
 
If the Holder has elected a Cash Exercise, the Holder shall pay the sum of $ by
certified or official bank check (or via wire transfer) to the Issuer in
accordance with the terms of the Warrant.
 
If the Holder has elected a Cashless Exercise, a certificate shall be issued to
the Holder for the number of shares equal to the whole number portion of the
product of the calculation set forth below, which is. The Company shall pay a
cash adjustment in respect of the fractional portion of the product of the
calculation set forth below in an amount equal to the product of the fractional
portion of such product and the Per Share Market Value on the date of exercise,
which product is .
 
X = Y - (A)(Y)
B
 
Where:
 
The number of Ordinary Shares to be issued to the
Holder                                       (“X”).
 
The number of Ordinary Shares purchasable upon exercise of all of the Warrant
or, if only a portion of the Warrant is being exercised, the portion of the
Warrant being exercised                              (“Y”).
 
The Warrant Price                                     (“A”).
 
 
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The Per Share Market Value of one Ordinary Share (“B”).
 
ASSIGNMENT
 
FOR VALUE RECEIVED,                       hereby sells, assigns and transfers
unto                   the within Warrant and all rights evidenced thereby and
does irrevocably constitute and appoint                      , attorney, to
transfer the said Warrant on the books of the within named corporation.
 

Dated:     Signature                       Address                

 
PARTIAL ASSIGNMENT
 
FOR VALUE RECEIVED,                       hereby sells, assigns and transfers
unto                                  the right to purchase   shares of Warrant
Stock evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint                           , attorney, to
transfer that part of the said Warrant on the books of the within named
corporation.
 

Dated:     Signature                       Address                

 
FOR USE BY THE ISSUER ONLY:
 
This Warrant No. W-___ canceled (or transferred or exchanged) this _____ day
of , _____, shares of Common Stock issued therefor in the name of , Warrant No.
W-_____ issued for ____ shares of Common Stock in the name
of                      .
 
 
 
 
 
22

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