Exhibit 10.3

 

WARRANT AGREEMENT

 

This Warrant Agreement (this “Agreement”) is dated as of June 16, 2008 among
Answers Corporation, a Delaware corporation (the “Company”), and Redpoint Omega,
L.P. and Redpoint Omega Associates, LLC (each a “Holder” and collectively, the
“Holders”).

 

WHEREAS, pursuant to the Securities Purchase Agreement, dated of even date
herewith, between the Company and the Holders (“Purchase Agreement”), the
Holders have agreed to purchase Series A Preferred Stock with a Stated Value
equal to $6,000,000 and Warrants; and

 

WHEREAS, the Company, concurrently with the purchase of the Series A Preferred
Stock and Warrants, has agreed to issue certificates as set forth on Exhibit A
attached hereto (“Warrant Certificates”) evidencing warrants (the “Unit
Warrants”) to purchase a Unit (as defined herein) to the Holders for an
investment of up to $7,000,000 hereunder;

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the Company and the Holders hereby agree as follows:

 

1.                                                                                      
DEFINITIONS.  CAPITALIZED TERMS USED AND NOT OTHERWISE DEFINED HEREIN THAT ARE
DEFINED IN THE PURCHASE AGREEMENT SHALL HAVE THE MEANINGS GIVEN SUCH TERMS IN
THE PURCHASE AGREEMENT.

 

2.                                                                                      
EXERCISE OF WARRANT.

 

(A)                                  EACH UNIT WARRANT SHALL ENTITLE THE HOLDER
TO PURCHASE FOR $100 (THE “EXERCISE PRICE”) A UNIT (“UNIT”) CONSISTING OF
(I) ONE SHARE OF THE COMPANY’S SERIES B CONVERTIBLE PREFERRED STOCK, PAR VALUE
$0.01 PER SHARE (“SERIES B PREFERRED STOCK”), AND (II) ONE COMMON STOCK PURCHASE
WARRANT ATTACHED HERETO AS EXHIBIT B (THE “COMMON STOCK PURCHASE WARRANT”), EACH
COMMON STOCK PURCHASE WARRANT ENTITLING THE HOLDER THEREOF TO PURCHASE UP TO A
NUMBER OF SHARES OF COMMON STOCK EQUAL TO 50% OF THE NUMBER OF SHARES OF COMMON
STOCK ISSUABLE UPON CONVERSION OF THE SERIES B PREFERRED STOCK PURCHASED
HEREUNDER AND ISSUED IN ACCORDANCE WITH THE TERMS OF THE CERTIFICATE OF
DESIGNATION, NUMBER, VOTING POWERS, PREFERENCES AND RIGHTS OF SERIES B
CONVERTIBLE PREFERRED STOCK (IN SUBSTANTIALLY THE FORM ATTACHED HERETO AS
EXHIBIT C) (“SERIES B CERTIFICATE OF DESIGNATION”), WITH AN EXERCISE PRICE EQUAL
TO $6.05 PER SHARE, SUBJECT TO ADJUSTMENT AS SET FORTH HEREIN.  THE SHARES OF
COMMON STOCK ISSUABLE UPON CONVERSION OF THE SERIES B PREFERRED STOCK AND
EXERCISE OF THE COMMON STOCK PURCHASE WARRANT ARE HEREINAFTER REFERRED TO AS THE
“SERIES B UNDERLYING SHARES” AND THE WARRANT CERTIFICATES, SERIES B PREFERRED
STOCK, THE COMMON STOCK PURCHASE WARRANTS AND THE SERIES B UNDERLYING SHARES ARE
HEREINAFTER COLLECTIVELY REFERRED TO AS THE “WARRANT SECURITIES”.  THE HOLDERS
SHALL BE ENTITLED TO PURCHASE UNITS FOR AN AGGREGATE PURCHASE PRICE OF UP TO
$7,000,000 PURSUANT TO THIS AGREEMENT.

 

(B)                                 EXERCISE OF THE PURCHASE RIGHTS REPRESENTED
BY THE UNIT WARRANT MAY BE MADE, IN WHOLE OR IN PART, AT ANY TIME BETWEEN THE
DATE HEREOF AND JUNE 16, 2009 (“EXPIRY TIME”) BY DELIVERY TO THE PRINCIPAL
OFFICE OF THE COMPANY OF A DULY EXECUTED COPY OF THE NOTICE OF EXERCISE

 

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ANNEXED HERETO (OR TO SUCH OTHER OFFICE OR AGENCY OF THE COMPANY AS IT MAY
DESIGNATE BY NOTICE IN WRITING TO THE REGISTERED HOLDER AT THE ADDRESS OF SUCH
HOLDER APPEARING ON THE BOOKS OF THE COMPANY). IF THE WARRANT CERTIFICATE
EVIDENCING THE UNIT WARRANTS IS EXERCISED IN FULL, THE HOLDER SHALL HAVE
SURRENDERED THE WARRANT CERTIFICATE TO THE COMPANY AND THE COMPANY SHALL HAVE
RECEIVED PAYMENT OF THE AGGREGATE EXERCISE PRICE OF THE UNITS THEREBY PURCHASED
BY WIRE TRANSFER OR CASHIER’S CHECK DRAWN ON A UNITED STATES BANK. 
NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, THE HOLDER SHALL NOT BE
REQUIRED TO PHYSICALLY SURRENDER THE WARRANT CERTIFICATE TO THE COMPANY UNTIL
THE HOLDER HAS PURCHASED ALL OF THE UNITS AVAILABLE HEREUNDER AND THE WARRANT
CERTIFICATE HAS BEEN EXERCISED IN FULL.  PARTIAL EXERCISES OF THE WARRANT
CERTIFICATE RESULTING IN PURCHASES OF A PORTION OF THE TOTAL NUMBER OF THE UNITS
AVAILABLE HEREUNDER SHALL HAVE THE EFFECT OF LOWERING THE OUTSTANDING NUMBER OF
UNITS PURCHASABLE HEREUNDER IN AN AMOUNT EQUAL TO THE APPLICABLE NUMBER OF UNITS
PURCHASED.  IF ANY UNIT WARRANT SHOULD BE EXERCISED IN PART ONLY, THE COMPANY
SHALL, UPON SURRENDER OF THE WARRANT CERTIFICATES FOR CANCELLATION AND
PRESENTMENT OF THE EXERCISE FORM, EXECUTE AND DELIVER NEW A WARRANT CERTIFICATE
OR CERTIFICATES, AS THE CASE MAY BE, EVIDENCING THE RIGHTS OF THE HOLDER THEREOF
TO PURCHASE THE BALANCE OF THE SHARES PURCHASABLE THEREUNDER.

 

(C)                                  THE HOLDER SHALL, AT LEAST ONE (1) BUSINESS
DAY PRIOR TO THE DELIVERY OF THE NOTICE OF EXERCISE, DELIVER TO THE COMPANY
WRITTEN NOTICE OF ITS INTENTION TO EXERCISE, IN WHOLE OR IN PART, THE UNIT
WARRANT (THE “INTENT NOTICE”).  NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY,
WITHIN ONE (1) BUSINESS DAY OF RECEIPT OF THE INTENT NOTICE, THE COMPANY SHALL
FILE WITH THE STATE OF DELAWARE THE SERIES B CERTIFICATE OF DESIGNATIONS.

 

(D)                                 UPON ANY EXERCISE OF A UNIT WARRANT PURSUANT
TO SECTION 2(A), NO COMMON STOCK PURCHASE WARRANT SHALL BE ISSUED EXERCISABLE
FOR FRACTIONAL SHARES OF COMMON STOCK.  THE AGGREGATE NUMBER OF SHARES OF COMMON
STOCK ISSUED UPON EXERCISE OF SUCH COMMON STOCK PURCHASE WARRANT SHALL BE
ROUNDED DOWN TO THE NEAREST WHOLE SHARE AND ANY FRACTIONAL SHARES OF COMMON
STOCK THAT ARE NOT REQUIRED TO BE ISSUED BY REASON OF THIS SECTION 2(D) SHALL BE
CARRIED FORWARD AND SHALL BE TAKEN INTO ACCOUNT IN THE SUBSEQUENT EXERCISE OF A
UNIT WARRANT.  WHETHER OR NOT COMMON STOCK PURCHASE WARRANTS EXERCISABLE FOR
FRACTIONAL SHARES OF COMMON STOCK WOULD BE ISSUABLE UPON ANY EXERCISE OF A UNIT
WARRANT SHALL BE DETERMINED ON THE BASIS OF THE TOTAL NUMBER OF UNIT WARRANTS
BEING EXERCISED AT THE TIME AND THE AGGREGATE NUMBER OF COMMON STOCK PURCHASE
WARRANTS ISSUABLE UPON SUCH EXERCISE.

 

(E)                                  NOTWITHSTANDING ANYTHING HEREIN TO THE
CONTRARY, THE COMPANY SHALL NOT ISSUE TO ANY HOLDER ANY UNITS, INCLUDING
PURSUANT TO ANY RIGHTS HEREIN, INCLUDING, WITHOUT LIMITATION, ANY EXERCISE
RIGHTS, TO THE EXTENT SUCH SHARES COMPRISING SUCH UNIT, WHEN ADDED TO THE NUMBER
OF SHARES OF COMMON STOCK ISSUED (A) UPON CONVERSION OF ANY SHARES OF SERIES A
PREFERRED STOCK  AND SERIES B PREFERRED STOCK AND (B) UPON EXERCISE OF THE
COMMON STOCK PURCHASE WARRANTS ISSUED HEREUNDER OR PURSUANT TO THE PURCHASE
AGREEMENT, AS APPLICABLE, WOULD CAUSE THE TOTAL NUMBER OF SHARES OF COMMON STOCK
THEN BENEFICIALLY OWNED BY SUCH HOLDER AND ANY PERSONS WHOSE BENEFICIAL
OWNERSHIP OF COMMON STOCK WOULD BE AGGREGATED WITH SUCH HOLDER FOR PURPOSES OF
SECTION 13(D) OF THE SECURITIES EXCHANGE ACT TO EXCEED 19.999% OF THE TOTAL
NUMBER OF OUTSTANDING SHARES OF COMMON STOCK OF THE COMPANY AT THE TIME OF SUCH
ISSUANCE, OR SUCH GREATER NUMBER OF SHARES OF COMMON STOCK PERMITTED PURSUANT TO
THE CORPORATE GOVERNANCE RULES OF THE TRADING MARKET THAT IS AT THE TIME THE
PRINCIPAL TRADING EXCHANGE OR MARKET FOR THE COMMON STOCK, BASED UPON SHARE
VOLUME, AS CONFIRMED IN WRITING BY COUNSEL TO THE COMPANY

 

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(THE “MAXIMUM AGGREGATE SHARE AMOUNT”), UNLESS AND UNTIL THE COMPANY OBTAINS
STOCKHOLDER APPROVAL (AS DEFINED BELOW).  FOR PURPOSES OF THIS SECTION 2(E),
BENEFICIAL OWNERSHIP SHALL BE DETERMINED IN ACCORDANCE WITH SECTION 13(D) OF THE
EXCHANGE ACT AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.    IF ON ANY
ATTEMPTED EXERCISE OF A UNIT WARRANT, THE ISSUANCE OF UNITS WOULD EXCEED THE
MAXIMUM AGGREGATE SHARE AMOUNT AND THE COMPANY SHALL NOT HAVE PREVIOUSLY
OBTAINED STOCKHOLDER APPROVAL AT THE TIME OF EXERCISE, THEN THE COMPANY SHALL
ISSUE TO THE HOLDER REQUESTING A UNIT WARRANT EXERCISE SUCH NUMBER OF UNITS AS
MAY BE ISSUED BELOW THE MAXIMUM AGGREGATE SHARE AMOUNT AND, WITH RESPECT TO THE
REMAINDER OF THE AGGREGATE NUMBER OF UNITS, THIS UNIT WARRANT SHALL NOT BE
EXERCISABLE UNTIL AND UNLESS STOCKHOLDER APPROVAL HAS BEEN OBTAINED.

 

3.                                                                                      
REPRESENTATIONS AND WARRANTIES.  THE COMPANY HEREBY REPRESENTS AND WARRANTS TO
EACH HOLDER THAT, EXCEPT AS SET FORTH ON THE DISCLOSURE SCHEDULES DELIVERED TO
EACH HOLDER ON THE DATE HEREOF OR ON EACH DATE OF A NOTICE OF EXERCISE HEREUNDER
(EACH, AN “EXERCISE DATE”), AS APPLICABLE, EACH OF THE REPRESENTATIONS AND
WARRANTIES MADE BY THE COMPANY IN THE PURCHASE AGREEMENT WILL BE TRUE AND
CORRECT AS OF THE DATE HEREOF AND AS OF EACH EXERCISE DATE UNLESS A DIFFERENT
TIME IS EXPRESSLY PROVIDED IN SUCH PARAGRAPH; PROVIDED, FOR PURPOSES OF THIS
SECTION 3, THAT REFERENCES TO THE “UNDERLYING SHARES” IN SUCH REPRESENTATIONS
AND WARRANTIES IN THE PURCHASE AGREEMENT SHALL INSTEAD REFER TO THE WARRANT
SECURITIES WITH RESPECT TO THE REPRESENTATIONS AND WARRANTIES MADE PURSUANT TO
THIS SECTION 3.

 

4.                                                                                      
CLOSING DELIVERIES.  ON OR PRIOR TO EACH EXERCISE DATE, THE COMPANY SHALL
DELIVER OR CAUSE TO BE DELIVERED TO EACH PURCHASER THE FOLLOWING:

 

(A)                                  A CERTIFICATE, DATED AS OF SUCH EXERCISE
DATE, DULY EXECUTED BY AN OFFICER OF THE COMPANY TO THE EFFECT THAT THE
CONDITIONS SPECIFIED IN SECTIONS 5(B)(I) AND 5(B)(II) HAVE BEEN SATISFIED;

 

(B)                                 A LEGAL OPINION OF COMPANY COUNSEL,
SUBSTANTIALLY IN THE FORM OF EXHIBIT D TO THE PURCHASE AGREEMENT;

 

(C)                                  THE SERIES B PREFERRED STOCK AND THE COMMON
STOCK PURCHASE WARRANTS INCLUDED IN THE UNITS PURCHASED AS A RESULT OF THE
EXERCISE OF THE UNIT WARRANT PURSUANT TO SECTION 2 HEREOF REGISTERED IN THE NAME
OF THE HOLDER;

 

(D)                                 EVIDENCE OF FILING OF THE SERIES B
CERTIFICATE OF DESIGNATION IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO EACH
HOLDER; AND

 

(E)                                  THE INDEMNIFICATION AGREEMENT IN FAVOR OF
THE SERIES B DIRECTOR (AS DEFINED IN THE REGISTRATION RIGHTS AGREEMENT), TO THE
EXTENT THAT THE HOLDER OR ITS AFFILIATES HAVE THE RIGHT TO APPOINT THE SERIES B
DIRECTOR, DULY EXECUTED BY THE COMPANY, UNLESS SUCH AGREEMENT IS ALREADY IN FULL
FORCE AND EFFECT WITH RESPECT TO THE SERIES B DIRECTOR.

 

5.                                                                                      
CLOSING CONDITIONS.

 

(A)                                  THE OBLIGATIONS OF THE COMPANY HEREUNDER IN
CONNECTION WITH EACH EXERCISE OF THE UNIT WARRANT PURSUANT TO SECTION 2 HEREOF
IS SUBJECT TO THE FOLLOWING CONDITIONS BEING MET, ANY OR ALL OF WHICH MAY BE
WAIVED BY THE COMPANY:

 

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(I)                                     THE ACCURACY IN ALL MATERIAL RESPECTS ON
EACH EXERCISE DATE OF THE REPRESENTATIONS AND WARRANTIES OF THE HOLDER CONTAINED
IN THE PURCHASE AGREEMENT; AND

 

(II)                                  THE DELIVERY BY THE HOLDER TO THE COMPANY
OF THE AGGREGATE EXERCISE PRICE OF THE UNITS THEREBY PURCHASED.

 

(B)                                 THE OBLIGATIONS OF THE HOLDER HEREUNDER IN
CONNECTION WITH EACH EXERCISE OF THE UNIT WARRANT PURSUANT TO SECTION 2 HEREOF
IS SUBJECT TO THE FOLLOWING CONDITIONS BEING MET, ANY OR ALL OF WHICH MAY BE
WAIVED BY SUCH HOLDER IN WRITING:

 

(I)                                     THE ACCURACY IN ALL MATERIAL RESPECTS ON
EACH EXERCISE DATE OF THE REPRESENTATIONS AND WARRANTIES OF THE COMPANY
CONTAINED IN THE PURCHASE AGREEMENT (WHICH ARE INCORPORATED BY REFERENCE HEREIN
AND MODIFIED AS SET FORTH IN SECTION 3 ABOVE);

 

(II)                                  ALL OBLIGATIONS, COVENANTS AND AGREEMENTS
OF THE COMPANY REQUIRED TO BE PERFORMED IN CONNECTION WITH SUCH EXERCISE OF THE
UNIT WARRANT SHALL HAVE BEEN PERFORMED;

 

(III)                               THERE SHALL HAVE BEEN NO MATERIAL ADVERSE
EFFECT WITH RESPECT TO THE COMPANY SINCE THE DATE HEREOF;

 

(IV)                              AS OF EACH EXERCISE DATE, THE TRANSACTION
DOCUMENTS SHALL BE IN FULL FORCE AND EFFECT;

 

(V)                                 THE SERIES B CERTIFICATE OF DESIGNATION
SHALL HAVE BEEN DULY FILED BY THE COMPANY WITH THE SECRETARY OF STATE OF THE
STATE OF DELAWARE IN ACCORDANCE WITH THE GENERAL CORPORATION LAW OF THE STATE OF
DELAWARE; AND

 

(VI)                              AS OF EACH EXERCISE DATE, TRADING IN THE
COMMON STOCK SHALL NOT HAVE BEEN SUSPENDED BY THE COMMISSION OR THE COMPANY’S
PRINCIPAL TRADING MARKET (EXCEPT FOR ANY SUSPENSION OF TRADING OF LIMITED
DURATION AGREED TO BY THE COMPANY, WHICH SUSPENSION SHALL BE TERMINATED PRIOR TO
EACH EXERCISE DATE), AND, AT ANY TIME PRIOR TO EACH EXERCISE DATE, TRADING IN
SECURITIES GENERALLY AS REPORTED BY BLOOMBERG FINANCIAL MARKETS SHALL NOT HAVE
BEEN SUSPENDED OR LIMITED, OR MINIMUM PRICES SHALL NOT HAVE BEEN ESTABLISHED ON
SECURITIES WHOSE TRADES ARE REPORTED BY SUCH SERVICE, OR ON ANY TRADING MARKET,
NOR SHALL A BANKING MORATORIUM HAVE BEEN DECLARED EITHER BY THE UNITED STATES OR
NEW YORK STATE AUTHORITIES NOR SHALL THERE HAVE OCCURRED ANY MATERIAL OUTBREAK
OR ESCALATION OF HOSTILITIES OR OTHER NATIONAL OR INTERNATIONAL CALAMITY OF SUCH
MAGNITUDE IN ITS EFFECT ON, OR ANY MATERIAL ADVERSE CHANGE IN, THE FINANCIAL
MARKETS WHICH, IN EACH CASE, MAKES IT IMPRACTICABLE OR INADVISABLE TO PURCHASE
THE SERIES B PREFERRED STOCK AND THE COMMON STOCK PURCHASE WARRANTS.

 

6.                                                                                      
STOCKHOLDER APPROVAL.  THE COMPANY SHALL PROVIDE EACH STOCKHOLDER ENTITLED TO
VOTE AT A SPECIAL MEETING OF STOCKHOLDERS OF THE COMPANY (THE “STOCKHOLDER
MEETING”), WHICH SHALL BE PROMPTLY CALLED AND HELD NOT LATER THAN 90 CALENDAR
DAYS FROM THE DATE HEREOF, A PROXY

 

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STATEMENT MEETING THE REQUIREMENTS OF SECTION 14 OF THE EXCHANGE ACT AND THE
RELATED RULES AND REGULATIONS THEREUNDER PROMULGATED BY THE COMMISSION (“PROXY
STATEMENT”) SOLICITING EACH SUCH STOCKHOLDER’S AFFIRMATIVE VOTE AT THE
STOCKHOLDER MEETING FOR APPROVAL OF RESOLUTIONS APPROVING THE COMPANY’S ISSUANCE
OF THE WARRANT SECURITIES AND ANY SHARES OF COMMON STOCK ISSUED OR ISSUABLE UPON
CONVERSION OF THE SERIES A PREFERRED STOCK AND EXERCISE OF THE COMMON STOCK
PURCHASE WARRANTS AND ANY OTHER SECURITIES ISSUABLE PURSUANT TO THE CERTIFICATE
OF DESIGNATION AND THE SERIES B CERTIFICATE OF DESIGNATION AND ALL THE OTHER
TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENTS AND THIS AGREEMENT
(INCLUDING, WITHOUT LIMITATION, INCREASE IN THE SIZE OF THE BOARD OF DIRECTORS
AS NECESSARY TO ELECT THE SERIES B DIRECTOR (AS DEFINED IN THE REGISTRATION
RIGHTS AGREEMENT)) (THE “STOCKHOLDER APPROVAL”) IN ACCORDANCE WITH LAW AND THE
RULES AND REGULATIONS OF THE NASDAQ GLOBAL MARKET (OR ANY OTHER APPLICABLE
TRADING MARKET) AND THE DELAWARE GENERAL CORPORATION LAW, AND THE COMPANY SHALL
USE ITS REASONABLE BEST EFFORTS TO SOLICIT ITS STOCKHOLDERS’ APPROVAL OF SUCH
RESOLUTIONS AND TO CAUSE THE BOARD OF DIRECTORS OF THE COMPANY TO RECOMMEND TO
THE STOCKHOLDERS THAT THEY APPROVE SUCH RESOLUTIONS.  THE PROXY STATEMENT SHALL
BE IN A FORM REASONABLY ACCEPTABLE TO THE HOLDERS AND ACCORDINGLY, THE COMPANY
SHALL PROVIDE THE LEGAL COUNSEL (AS DEFINED IN THE REGISTRATION RIGHTS
AGREEMENT) WITH REASONABLE OPPORTUNITY TO REVIEW AND COMMENT ON THE PROXY
STATEMENT.

 

THE COMPANY SHALL KEEP THE HOLDERS APPRISED OF THE STATUS OF MATTERS RELATING TO
THE PROXY STATEMENT AND THE STOCKHOLDER MEETING, INCLUDING PROMPTLY FURNISHING
THE HOLDERS AND THEIR COUNSEL WITH COPIES OF NOTICES OR OTHER COMMUNICATIONS
RELATED TO THE PROXY STATEMENT, THE STOCKHOLDER MEETING OR THE TRANSACTIONS
CONTEMPLATED HEREBY RECEIVED BY THE COMPANY FROM THE COMMISSION OR THE NASDAQ
GLOBAL MARKET.

 

7.                                                                                      
OPERATION OF BUSINESS.  DURING THE PERIOD FROM THE DATE OF THIS AGREEMENT UNTIL
THE EXPIRY TIME, EXCEPT AS CONTEMPLATED BY THIS AGREEMENT AND THE TRANSACTION
DOCUMENTS, THE COMPANY SHALL CARRY ON ITS BUSINESS IN THE ORDINARY COURSE IN
SUBSTANTIALLY THE SAME MANNER AS HERETOFORE CONDUCTED AND, TO THE EXTENT
CONSISTENT WITH SUCH BUSINESS, USE ITS COMMERCIALLY REASONABLE EFFORTS
CONSISTENT WITH PAST PRACTICE AND POLICIES TO PRESERVE INTACT ITS PRESENT
BUSINESS ORGANIZATIONS, KEEP AVAILABLE THE SERVICES OF ITS PRESENT OFFICERS,
CONSULTANTS AND EMPLOYEES AND PRESERVE ITS RELATIONSHIPS WITH CUSTOMERS,
SUPPLIERS AND OTHERS HAVING BUSINESS DEALINGS WITH IT.

 

8.                                                                                      
NON-SOLICITATION.

 

(A)                                  DURING THE PERIOD FROM THE DATE OF THIS
AGREEMENT UNTIL THE FIRST DAY FOLLOWING  THE STOCKHOLDER MEETING IN WHICH A VOTE
OF THE STOCKHOLDERS OF THE COMPANY TAKES PLACE FOR THE STOCKHOLDER APPROVAL,
WITHOUT THE CONSENT OF EACH OF THE HOLDERS, THE COMPANY SHALL NOT TAKE, CAUSE OR
PERMIT (AND SHALL USE ITS BEST EFFORTS TO ENSURE THAT NONE OF ITS OFFICERS,
DIRECTORS, AGENTS OR REPRESENTATIVES TAKES, CAUSES OR PERMITS) ANY PERSON TO
TAKE, DIRECTLY OR INDIRECTLY, ANY OF THE FOLLOWING ACTIONS WITH ANY THIRD
PARTY:  (I) SOLICIT, KNOWINGLY ENCOURAGE, INITIATE OR PARTICIPATE IN ANY
NEGOTIATIONS, INQUIRIES OR DISCUSSIONS WITH RESPECT TO ANY OFFER OR PROPOSAL
(INCLUDING, WITHOUT LIMITATION, FROM ANY THIRD PARTIES) TO ACQUIRE ANY CAPITAL
STOCK OF THE COMPANY (INCLUDING ANY SECURITIES CONVERTIBLE INTO OR EXERCISABLE
OR EXCHANGEABLE FOR SUCH CAPITAL STOCK) FOR CAPITAL RAISING PURPOSES (AN
“ALTERNATIVE PROPOSAL”), (II) DISCLOSE, IN CONNECTION WITH AN ALTERNATIVE
PROPOSAL, ANY NONPUBLIC INFORMATION CONCERNING COMPANY’S BUSINESS OR PROPERTIES
OR AFFORD TO ANY THIRD PARTY ACCESS TO ITS PROPERTIES, BOOKS OR RECORDS, EXCEPT
IN THE ORDINARY COURSE OF BUSINESS AND AS REQUIRED BY LAW OR PURSUANT TO A
GOVERNMENTAL REQUEST FOR INFORMATION, (III) ENTER

 

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INTO OR EXECUTE ANY AGREEMENT PROVIDING FOR AN ALTERNATIVE PROPOSAL OR (IV) MAKE
OR AUTHORIZE ANY PUBLIC STATEMENT, RECOMMENDATION OR SOLICITATION IN SUPPORT OF
ANY ALTERNATIVE PROPOSAL OR ANY OFFER OR PROPOSAL RELATING TO AN ALTERNATIVE
PROPOSAL.

 

(B)                                 IN THE EVENT THAT THE COMPANY IS CONTACTED
BY ANY THIRD PARTY EXPRESSING AN INTEREST IN DISCUSSING AN ALTERNATIVE PROPOSAL,
THE COMPANY WILL PROMPTLY, BUT IN NO EVENT LATER THAN TWENTY-FOUR (24) HOURS
FOLLOWING THE COMPANY’S KNOWLEDGE OF SUCH CONTACT, NOTIFY THE HOLDERS IN WRITING
OF SUCH CONTACT AND THE IDENTITY OF THE THIRD PARTY SO CONTACTING THE COMPANY
AND SHALL PROMPTLY, BUT IN NO EVENT LATER THAN TWENTY-FOUR (24) HOURS, ADVISE
THE HOLDERS OF ANY MATERIAL MODIFICATION OR PROPOSED MODIFICATION THERETO.

 

9.                                                                                      
INTEGRATION.  NEITHER THE COMPANY, NOR ANY OF ITS AFFILIATES, NOR ANY PERSON
ACTING ON ITS OR THEIR BEHALF SHALL SELL, OFFER FOR SALE OR SOLICIT OFFERS TO
BUY OR OTHERWISE NEGOTIATE IN RESPECT OF ANY SECURITY (AS DEFINED IN SECTION 2
OF THE SECURITIES ACT) THAT WOULD BE INTEGRATED WITH THE OFFER OR SALE OF THE
WARRANT SECURITIES IN A MANNER THAT WOULD REQUIRE THE REGISTRATION UNDER THE
SECURITIES ACT OF THE SALE OF THE WARRANT SECURITIES TO THE HOLDERS OR THAT
WOULD BE INTEGRATED WITH THE OFFER OR SALE OF THE WARRANT SECURITIES FOR
PURPOSES OF THE RULES AND REGULATIONS OF ANY TRADING MARKET.

 

10.                                                                                
CONVERSION AND EXERCISE PROCEDURES.  THE FORM OF NOTICE OF EXERCISE INCLUDED IN
THIS AGREEMENT, THE WARRANT CERTIFICATE AND THE COMMON STOCK PURCHASE WARRANTS
AND THE FORM OF NOTICE OF CONVERSION INCLUDED IN THE SERIES B CERTIFICATE OF
DESIGNATION SET FORTH THE TOTALITY OF THE PROCEDURES REQUIRED OF A HOLDER IN
ORDER TO EXERCISE THE UNIT WARRANTS AND THE COMMON STOCK PURCHASE WARRANTS OR
CONVERT THE SERIES B PREFERRED STOCK.  NO ADDITIONAL LEGAL OPINION OR OTHER
INFORMATION OR INSTRUCTIONS SHALL BE REQUIRED OF SUCH HOLDER TO EXERCISE THEIR
UNIT WARRANTS OR COMMON STOCK PURCHASE WARRANTS OR CONVERT THEIR SERIES B
PREFERRED STOCK.  THE COMPANY SHALL HONOR EXERCISES OF THE UNIT WARRANTS AND
COMMON STOCK PURCHASE WARRANTS AND CONVERSIONS OF THE SERIES B PREFERRED STOCK
AND SHALL DELIVER SERIES B UNDERLYING SHARES IN ACCORDANCE WITH THE TERMS,
CONDITIONS AND TIME PERIODS SET FORTH HEREIN AND IN THE TRANSACTION DOCUMENTS.

 

11.                                                                                
SECURITIES LAWS DISCLOSURE; PUBLICITY.  THE COMPANY AND THE HOLDERS SHALL
CONSULT WITH EACH OTHER IN ISSUING ANY PRESS RELEASES OR OTHER PUBLIC
DISCLOSURES WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY, AND NEITHER
THE COMPANY NOR ANY HOLDER SHALL ISSUE ANY SUCH PRESS RELEASE WITHOUT THE PRIOR
CONSENT OF THE COMPANY, WITH RESPECT TO ANY PRESS RELEASE OR OTHER PUBLIC
DISCLOSURE OF SUCH HOLDER, OR WITHOUT THE PRIOR CONSENT OF THE HOLDERS WITH
RESPECT TO ANY PRESS RELEASE OR OTHER PUBLIC DISCLOSURE OF THE COMPANY, WHICH
CONSENT SHALL NOT UNREASONABLY BE WITHHELD, EXCEPT IF SUCH DISCLOSURE IS
REQUIRED BY LAW, IN WHICH CASE THE DISCLOSING PARTY SHALL PROMPTLY PROVIDE THE
OTHER PARTY WITH PRIOR NOTICE OF SUCH PUBLIC STATEMENT OR COMMUNICATION. 
NOTWITHSTANDING THE FOREGOING, THE COMPANY SHALL NOT PUBLICLY DISCLOSE THE NAME
OF ANY HOLDER OR ANY OF ITS AFFILIATES, OR INCLUDE THE NAME OF ANY HOLDER OR ANY
OF ITS AFFILIATES IN ANY FILING WITH THE COMMISSION OR ANY REGULATORY AGENCY OR
TRADING MARKET, WITHOUT THE PRIOR WRITTEN CONSENT OF SUCH HOLDER, EXCEPT (I) AS
REQUIRED BY FEDERAL SECURITIES LAW IN CONNECTION WITH THE REGISTRATION STATEMENT
CONTEMPLATED BY THE REGISTRATION RIGHTS AGREEMENT AND (II) TO THE EXTENT SUCH
DISCLOSURE IS REQUIRED BY LAW OR TRADING MARKET REGULATIONS, IN WHICH CASE THE
COMPANY SHALL PROVIDE SUCH HOLDER WITH PRIOR NOTICE OF SUCH DISCLOSURE PERMITTED
UNDER SUBCLAUSE (I) OR (II).

 

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12.                                                                                
STOCKHOLDER RIGHTS PLAN.  NO CLAIM WILL BE MADE OR ENFORCED BY THE COMPANY OR,
TO THE KNOWLEDGE OF THE COMPANY, ANY OTHER PERSON, THAT ANY HOLDER IS AN
“ACQUIRING PERSON” UNDER ANY STOCKHOLDER RIGHTS PLAN OR SIMILAR PLAN OR
ARRANGEMENT IN EFFECT OR HEREAFTER ADOPTED BY THE COMPANY, OR THAT ANY HOLDER
COULD BE DEEMED TO TRIGGER THE PROVISIONS OF ANY SUCH PLAN OR ARRANGEMENT, BY
VIRTUE OF RECEIVING WARRANT SECURITIES HEREUNDER OR UNDER THE TRANSACTION
DOCUMENTS OR UNDER ANY OTHER AGREEMENT BETWEEN THE COMPANY AND SUCH HOLDER. THE
COMPANY SHALL CONDUCT ITS BUSINESS IN A MANNER SO THAT IT WILL NOT BECOME
SUBJECT TO THE INVESTMENT COMPANY ACT.

 

13.                                                                                
INDEMNIFICATION OF HOLDERS.   SUBJECT TO THE PROVISIONS OF THIS SECTION 13, THE
COMPANY WILL INDEMNIFY AND HOLD EACH HOLDER AND ITS DIRECTORS, OFFICERS,
STOCKHOLDERS, MEMBERS, PARTNERS, EMPLOYEES AND AGENTS (AND ANY OTHER PERSONS
WITH A FUNCTIONALLY EQUIVALENT ROLE OF A PERSON HOLDING SUCH TITLES
NOTWITHSTANDING A LACK OF SUCH TITLE OR ANY OTHER TITLE), EACH PERSON WHO
CONTROLS SUCH HOLDER (WITHIN THE MEANING OF SECTION 15 OF THE SECURITIES ACT AND
SECTION 20 OF THE EXCHANGE ACT), AND THE DIRECTORS, OFFICERS, AGENTS, MEMBERS,
PARTNERS OR EMPLOYEES (AND ANY OTHER PERSONS WITH A FUNCTIONALLY EQUIVALENT ROLE
OF A PERSON HOLDING SUCH TITLES NOTWITHSTANDING A LACK OF SUCH TITLE OR ANY
OTHER TITLE) OF SUCH CONTROLLING PERSON (EACH, A “HOLDER PARTY”) HARMLESS FROM
ANY AND ALL LOSSES, LIABILITIES, OBLIGATIONS, CLAIMS, CONTINGENCIES, DAMAGES,
COSTS AND EXPENSES, INCLUDING ALL JUDGMENTS, AMOUNTS PAID IN SETTLEMENTS, COURT
COSTS AND REASONABLE ATTORNEYS’ FEES AND COSTS OF INVESTIGATION THAT ANY SUCH
HOLDER PARTY MAY SUFFER OR INCUR AS A RESULT OF OR RELATING TO (A) ANY BREACH OF
ANY OF THE REPRESENTATIONS, WARRANTIES, COVENANTS OR AGREEMENTS MADE BY THE
COMPANY IN THIS AGREEMENT OR (B) ANY ACTION INSTITUTED AGAINST A HOLDER PARTY,
BY ANY THIRD PARTY WITH RESPECT TO ANY OF THE TRANSACTIONS CONTEMPLATED
HEREUNDER (UNLESS SUCH ACTION IS BASED UPON A BREACH OF SUCH HOLDER’S
REPRESENTATIONS, WARRANTIES OR COVENANTS UNDER THIS AGREEMENT OR ANY AGREEMENTS
OR UNDERSTANDINGS SUCH HOLDER MAY HAVE WITH ANY SUCH STOCKHOLDER OR ANY
VIOLATIONS BY SUCH HOLDER OF STATE OR FEDERAL SECURITIES LAWS OR ANY CONDUCT BY
SUCH HOLDER WHICH CONSTITUTES FRAUD, GROSS NEGLIGENCE, WILLFUL MISCONDUCT OR
MALFEASANCE).  IF ANY ACTION SHALL BE BROUGHT AGAINST ANY HOLDER PARTY IN
RESPECT OF WHICH INDEMNITY MAY BE SOUGHT PURSUANT TO THIS AGREEMENT, SUCH HOLDER
PARTY SHALL PROMPTLY NOTIFY THE COMPANY IN WRITING, AND THE COMPANY SHALL HAVE
THE RIGHT TO ASSUME THE DEFENSE THEREOF WITH COUNSEL OF ITS OWN CHOOSING.  ANY
HOLDER PARTY SHALL HAVE THE RIGHT TO EMPLOY SEPARATE COUNSEL IN ANY SUCH ACTION
AND PARTICIPATE IN THE DEFENSE THEREOF, BUT THE FEES AND EXPENSES OF SUCH
COUNSEL SHALL BE AT THE EXPENSE OF SUCH HOLDER PARTY EXCEPT TO THE EXTENT THAT
(I) THE EMPLOYMENT THEREOF HAS BEEN SPECIFICALLY AUTHORIZED BY THE COMPANY IN
WRITING, (II) THE COMPANY HAS FAILED AFTER A REASONABLE PERIOD OF TIME TO ASSUME
SUCH DEFENSE AND TO EMPLOY COUNSEL OR (III) IN SUCH ACTION THERE IS, IN THE
REASONABLE OPINION OF SUCH SEPARATE COUNSEL, A MATERIAL CONFLICT ON ANY MATERIAL
ISSUE BETWEEN THE POSITION OF THE COMPANY AND THE POSITION OF SUCH HOLDER
PARTY.  THE COMPANY WILL NOT BE LIABLE TO ANY HOLDER PARTY UNDER THIS AGREEMENT
(I) FOR ANY SETTLEMENT BY A HOLDER PARTY EFFECTED WITHOUT THE COMPANY’S PRIOR
WRITTEN CONSENT, WHICH SHALL NOT BE UNREASONABLY WITHHELD OR DELAYED; OR (II) TO
THE EXTENT, BUT ONLY TO THE EXTENT THAT A LOSS, CLAIM, DAMAGE OR LIABILITY IS
ATTRIBUTABLE TO ANY HOLDER PARTY’S BREACH OF ANY OF THE REPRESENTATIONS,
WARRANTIES, COVENANTS OR AGREEMENTS MADE BY THE HOLDERS IN THIS AGREEMENT.

 

14.                                                                                
RESERVATION AND LISTING OF SECURITIES.

 

(A)                                  THE COMPANY SHALL MAINTAIN A RESERVE FROM
ITS DULY AUTHORIZED SHARES OF COMMON STOCK FOR ISSUANCE PURSUANT TO THIS
AGREEMENT OR THE TRANSACTION DOCUMENTS IN SUCH

 

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AMOUNT AS MAY BE REQUIRED TO FULFILL ITS OBLIGATIONS IN FULL UNDER THIS
AGREEMENT AND THE TRANSACTION DOCUMENTS.

 

(B)                                 IF, ON ANY DATE, THE NUMBER OF AUTHORIZED
BUT UNISSUED (AND OTHERWISE UNRESERVED) SHARES OF COMMON STOCK IS LESS THAN THE
REQUIRED MINIMUM ON SUCH DATE, THEN THE BOARD OF DIRECTORS SHALL USE
COMMERCIALLY REASONABLE EFFORTS TO AMEND THE COMPANY’S CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED BUT UNISSUED SHARES OF COMMON
STOCK TO AT LEAST THE REQUIRED MINIMUM AT SUCH TIME, AS SOON AS POSSIBLE AND IN
ANY EVENT NOT LATER THAN THE 75TH DAY AFTER SUCH DATE.

 

(C)                                  THE COMPANY SHALL, IF APPLICABLE: (I) IN
THE TIME AND MANNER REQUIRED BY THE TRADING MARKET, PREPARE AND FILE WITH SUCH
TRADING MARKET AN ADDITIONAL SHARES LISTING APPLICATION COVERING A NUMBER OF
SHARES OF COMMON STOCK AT LEAST EQUAL TO THE REQUIRED MINIMUM ON THE DATE OF
SUCH APPLICATION, (II) TAKE ALL STEPS NECESSARY TO CAUSE SUCH SHARES OF COMMON
STOCK TO BE APPROVED FOR LISTING ON THE TRADING MARKET AS SOON AS POSSIBLE
THEREAFTER, (III) PROVIDE TO EACH HOLDER EVIDENCE OF SUCH LISTING, AND
(IV) MAINTAIN THE LISTING OF SUCH COMMON STOCK ON ANY DATE AT LEAST EQUAL TO THE
REQUIRED MINIMUM ON SUCH DATE ON SUCH TRADING MARKET OR ANOTHER TRADING MARKET.

 

15.                                                                                
FORM D: BLUE SKY FILINGS.  THE COMPANY AGREES TO TIMELY FILE A FORM D WITH
RESPECT TO THE WARRANT SECURITIES AS REQUIRED UNDER REGULATION D AND TO PROVIDE
A COPY THEREOF, PROMPTLY UPON REQUEST OF ANY HOLDER.  THE COMPANY SHALL, ON OR
BEFORE THE DATE HEREOF, TAKE SUCH ACTION AS THE COMPANY SHALL REASONABLY
DETERMINE IS NECESSARY IN ORDER TO OBTAIN AN EXEMPTION FOR, OR TO QUALIFY THE
WARRANT SECURITIES FOR, SALE TO THE HOLDERS UNDER APPLICABLE SECURITIES OR “BLUE
SKY” LAWS OF THE STATES OF THE UNITED STATES, AND SHALL PROVIDE EVIDENCE OF SUCH
ACTIONS PROMPTLY UPON REQUEST OF ANY HOLDER.  THE COMPANY SHALL MAKE ALL FILINGS
AND REPORTS RELATING TO THE OFFER AND SALE OF THE WARRANT SECURITIES REQUIRED
UNDER APPLICABLE SECURITIES OR “BLUE SKY” LAWS OF THE STATES OF THE UNITED
STATES FOLLOWING THE DATE HEREOF.

 

16.                                                                                
LEGENDS.

 

(A)                                  CERTIFICATES EVIDENCING THE UNDERLYING
SHARES SHALL NOT CONTAIN ANY LEGEND: (I) WHILE A REGISTRATION STATEMENT
(INCLUDING, WITHOUT LIMITATION, THE REGISTRATION STATEMENT) COVERING THE RESALE
OF SUCH SECURITY IS EFFECTIVE UNDER THE SECURITIES ACT, OR (II) FOLLOWING ANY
SALE OF SUCH UNDERLYING SHARES PURSUANT TO RULE 144, OR (III) IF SUCH UNDERLYING
SHARES ARE ELIGIBLE FOR SALE UNDER RULE 144(B)(1), OR (IV) IF SUCH LEGEND IS NOT
REQUIRED UNDER APPLICABLE REQUIREMENTS OF THE SECURITIES ACT (INCLUDING, WITHOUT
LIMITATION, JUDICIAL INTERPRETATIONS AND PRONOUNCEMENTS ISSUED BY THE STAFF OF
THE COMMISSION). THE COMPANY SHALL CAUSE ITS COUNSEL TO ISSUE A LEGAL OPINION TO
THE COMPANY’S TRANSFER AGENT PROMPTLY AFTER THE EFFECTIVE DATE IF REQUIRED BY
THE COMPANY’S TRANSFER AGENT TO EFFECT THE REMOVAL OF THE LEGEND HEREUNDER.  IF
ALL OR ANY PORTION OF SERIES B PREFERRED STOCK OR COMMON STOCK PURCHASE WARRANT
IS CONVERTED OR EXERCISED (AS APPLICABLE) AT A TIME WHEN THERE IS AN EFFECTIVE
REGISTRATION STATEMENT (INCLUDING, WITHOUT LIMITATION, THE REGISTRATION
STATEMENT) TO COVER THE RESALE OF THE UNDERLYING SHARES, OR IF SUCH UNDERLYING
SHARES MAY BE SOLD UNDER RULE 144(B)(1) OR IF SUCH LEGEND IS NOT OTHERWISE
REQUIRED UNDER APPLICABLE REQUIREMENTS OF THE SECURITIES ACT (INCLUDING, WITHOUT
LIMITATION, JUDICIAL INTERPRETATIONS THEREOF) THEN SUCH UNDERLYING SHARES SHALL
BE ISSUED FREE OF ALL LEGENDS.  THE COMPANY AGREES THAT FOLLOWING THE EFFECTIVE
DATE OR AT SUCH TIME AS SUCH LEGEND IS NO

 

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LONGER REQUIRED UNDER THIS SECTION 16(A), IT WILL, NO LATER THAN THREE TRADING
DAYS FOLLOWING THE DELIVERY BY A HOLDER TO THE COMPANY OR THE COMPANY’S TRANSFER
AGENT OF A CERTIFICATE REPRESENTING UNDERLYING SHARES, AS APPLICABLE, ISSUED
WITH A RESTRICTIVE LEGEND (SUCH THIRD TRADING DAY, THE “LEGEND REMOVAL DATE”),
DELIVER OR CAUSE TO BE DELIVERED TO SUCH HOLDER A CERTIFICATE REPRESENTING SUCH
SHARES THAT IS FREE FROM ALL RESTRICTIVE AND OTHER LEGENDS.  THE COMPANY MAY NOT
MAKE ANY NOTATION ON ITS RECORDS OR GIVE INSTRUCTIONS TO ANY TRANSFER AGENT OF
THE COMPANY THAT ENLARGE THE RESTRICTIONS ON TRANSFER SET FORTH IN THIS
SECTION.  CERTIFICATES FOR SECURITIES SUBJECT TO LEGEND REMOVAL HEREUNDER SHALL
BE TRANSMITTED BY THE TRANSFER AGENT OF THE COMPANY TO THE HOLDER BY CREDITING
THE ACCOUNT OF THE HOLDER’S PRIME BROKER WITH THE DEPOSITORY TRUST COMPANY
SYSTEM

 

(B)                                 NOTWITHSTANDING ANYTHING HEREIN TO THE
CONTRARY, NO REGISTRATION STATEMENT OR OPINION OF COUNSEL SHALL BE NECESSARY FOR
A TRANSFER (I) BY A HOLDER THAT IS A PARTNERSHIP TO A PARTNER (LIMITED OR
GENERAL) OF SUCH PARTNERSHIP OR A RETIRED PARTNER OF SUCH PARTNERSHIP WHO
RETIRES AFTER THE DATE HEREOF, OR TO THE ESTATE OF ANY SUCH PARTNER OR RETIRED
PARTNER OR THE TRANSFER BY GIFT, WILL OR INTESTATE SUCCESSION OF ANY PARTNER TO
HIS OR HER SPOUSE OR TO THE SIBLINGS, LINEAL DESCENDANTS OR ANCESTORS OF SUCH
PARTNER OR HIS OR HER SPOUSE,  (II) BY A HOLDER THAT IS A LIMITED LIABILITY
COMPANY TO A MEMBER OF SUCH LIMITED LIABILITY COMPANY OR A RETIRED MEMBER OF
SUCH LIMITED LIABILITY COMPANY WHO RETIRES AFTER THE DATE HEREOF, OR TO THE
ESTATE OF ANY SUCH MEMBER OR RETIRED MEMBER OR THE TRANSFER BY GIFT, WILL OR
INTESTATE SUCCESSION OF ANY MEMBER TO HIS OR HER SPOUSE OR TO THE SIBLINGS,
LINEAL DESCENDANTS OR ANCESTORS OF SUCH MEMBER OR HIS OR HER SPOUSE OR (III) BY
A HOLDER TO AN AFFILIATE OF SUCH HOLDER, IF THE PROSPECTIVE TRANSFEREE AGREES IN
ALL SUCH INSTANCES IN WRITING TO BE SUBJECT TO THE TERMS HEREOF TO THE SAME
EXTENT AS IF HE OR SHE WERE AN ORIGINAL INVESTOR HEREUNDER.

 

17.                                                                                
RIGHTS OF THE HOLDER. THE WARRANT CERTIFICATE DOES NOT ENTITLE THE HOLDER TO ANY
VOTING RIGHTS OR OTHER RIGHTS AS A SHAREHOLDER OF THE COMPANY PRIOR TO THE
EXERCISE HEREOF.  UPON THE SURRENDER OF THE WARRANT CERTIFICATE AND THE PAYMENT
OF THE AGGREGATE EXERCISE PRICE, THE SERIES B PREFERRED STOCK AND COMMON STOCK
PURCHASE WARRANTS SO PURCHASED SHALL BE AND BE DEEMED TO BE ISSUED TO SUCH
HOLDER AS THE RECORD OWNER OF SUCH SECURITIES AS OF THE CLOSE OF BUSINESS ON THE
LATER OF THE DATE OF SUCH SURRENDER OR PAYMENT.

 

18.                                                                                
NOTICES TO WARRANT HOLDER. NOTHING CONTAINED IN THIS AGREEMENT SHALL BE
CONSTRUED AS CONFERRING UPON THE HOLDER OR  HOLDERS THE RIGHT TO VOTE OR TO
CONSENT OR TO RECEIVE NOTICE AS A SHAREHOLDER IN RESPECT OF ANY MEETINGS OF
SHAREHOLDERS FOR THE ELECTION OF DIRECTORS OR ANY OTHER MATTER, OR AS HAVING ANY
RIGHTS WHATSOEVER AS A SHAREHOLDER OF THE COMPANY.

 

19.                                                                                
NOTICES.  ANY AND ALL NOTICES OR OTHER COMMUNICATIONS OR DELIVERIES REQUIRED OR
PERMITTED TO BE PROVIDED HEREUNDER SHALL BE IN WRITING AND SHALL BE DEEMED GIVEN
AND EFFECTIVE ON THE EARLIEST OF (A) THE NEXT TRADING DAY AFTER DELIVERY, IF
SUCH NOTICE OR COMMUNICATION IS DELIVERED VIA CONFIRMED REGISTERED MAIL, 
(B) THE 2ND TRADING DAY FOLLOWING THE DATE OF MAILING, IF SENT BY U.S.
NATIONALLY RECOGNIZED OVERNIGHT COURIER SERVICE, OR (C) UPON ACTUAL RECEIPT BY
THE PARTY TO WHOM SUCH NOTICE IS REQUIRED TO BE GIVEN.  THE ADDRESS FOR SUCH
NOTICES AND COMMUNICATIONS SHALL BE AS SET FORTH ON THE SIGNATURE PAGES ATTACHED
HERETO (UNLESS LATER UPDATED IN WRITING BY THE PARTIES HERETO TO THE OTHER
PARTIES) AND IF TO THE COMPANY, WITH A COPY TO:

 

--------------------------------------------------------------------------------

 

GUNDERSON DETTMER STOUGH VILLENEUVE FRANKLIN & HACHIGIAN, LLP

155 CONSTITUTION DRIVE

MENLO PARK, CA 94025

ATTENTION: SCOTT C. DETTMER, BENNETT L. YEE

FAX: (650) 321-2800.

 

20.                                                                                
FEES AND EXPENSES.  EXCEPT AS EXPRESSLY SET FORTH HEREIN AND IN THE TRANSACTION
DOCUMENTS TO THE CONTRARY, EACH PARTY SHALL PAY THE FEES AND EXPENSES OF ITS
ADVISERS, COUNSEL, ACCOUNTANTS AND OTHER EXPERTS, IF ANY, AND ALL OTHER EXPENSES
INCURRED BY SUCH PARTY INCIDENT TO THE NEGOTIATION, PREPARATION, EXECUTION,
DELIVERY AND PERFORMANCE OF THIS AGREEMENT; PROVIDED, HOWEVER, THE COMPANY SHALL
REIMBURSE, IN CONNECTION WITH EACH EXERCISE OF THE UNIT WARRANT (AND PAYABLE ON
SUCH EXERCISE DATES), THE REASONABLE FEES FOR THE HOLDERS’ LEGAL COUNSEL, FEES
TO OTHER ADVISORS RETAINED BY THE HOLDERS TO REPRESENT THEM IN THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT AND THE TRANSACTION DOCUMENTS, IN AN AGGREGATE
AMOUNT NOT TO EXCEED $100,000, LESS ANY AMOUNT PREVIOUSLY REIMBURSED BY THE
COMPANY PURSUANT TO THIS SECTION 20 OR PURSUANT TO SECTION 5.2 OF THE PURCHASE
AGREEMENT.  THE COMPANY SHALL PAY ALL TRANSFER AGENT FEES, STAMP TAXES AND OTHER
TAXES AND DUTIES LEVIED IN CONNECTION WITH THE DELIVERY OF ANY SECURITIES TO THE
PURCHASERS.

 

21.                                                                                
SURVIVAL.  THE REPRESENTATIONS, WARRANTIES, COVENANTS AND OTHER AGREEMENTS
CONTAINED HEREIN SHALL SURVIVE THE DELIVERY, EXERCISE AND/OR CONVERSION OF THIS
WARRANT AGREEMENT, THE SERIES B PREFERRED STOCK, THE COMMON STOCK PURCHASE
WARRANTS, THE WARRANT CERTIFICATES AND THE SERIES B UNDERLYING SHARES, AS
APPLICABLE, FOR THE APPLICABLE STATUE OF LIMITATIONS.

 

22.                                                                                
SUCCESSORS.  ALL THE COVENANTS AND PROVISIONS OF THE WARRANT AGREEMENT BY OR FOR
THE BENEFIT OF THE HOLDER SHALL INURE TO THE BENEFIT OF HIS SUCCESSORS AND
ASSIGNS HEREUNDER.

 

23.                                                                                
GOVERNING LAW. THE WARRANT AGREEMENT SHALL BE DEEMED TO BE MADE UNDER THE LAWS
OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF SAID STATE, EXCLUDING CHOICE OF LAW PRINCIPLES THEREOF.

 

24.                                                                                
ENTIRE AGREEMENT; AMENDMENT; WAIVER.  THE WARRANT AGREEMENT AND ALL ATTACHMENTS
HERETO AND ALL INCORPORATION BY REFERENCES SET FORTH HEREIN, SET FORTH THE
ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES AS TO THE SUBJECT MATTER
HEREOF AND MERGES AND SUPERSEDES ALL PRIOR DISCUSSIONS, AGREEMENTS AND
UNDERSTANDINGS OF ANY AND EVERY NATURE AMONG THEM. THE WARRANT AGREEMENT MAY BE
AMENDED, THE COMPANY MAY TAKE ANY ACTION HEREIN PROHIBITED OR OMIT TO TAKE ANY
ACTION HEREIN REQUIRED TO BE PERFORMED BY IT, AND ANY BREACH OF ANY COVENANT,
AGREEMENT, WARRANTY OR REPRESENTATION MAY BE WAIVED, ONLY IF THE COMPANY HAS
OBTAINED THE WRITTEN CONSENT OR WAIVER OF THE HOLDER. NO COURSE OF DEALING
BETWEEN OR AMONG ANY PERSONS HAVING ANY INTEREST IN THE WARRANT AGREEMENT WILL
BE DEEMED EFFECTIVE TO MODIFY, AMEND OR DISCHARGE ANY PART OF THE WARRANT
AGREEMENT OR ANY RIGHTS OR OBLIGATIONS OF ANY PERSON UNDER OR BY REASON OF THE
WARRANT AGREEMENT.

 

25.                                                                                
EXECUTION.  THIS AGREEMENT MAY BE EXECUTED IN TWO OR MORE COUNTERPARTS, ALL OF
WHICH WHEN TAKEN TOGETHER SHALL BE CONSIDERED ONE AND THE SAME AGREEMENT AND
SHALL BECOME EFFECTIVE WHEN COUNTERPARTS HAVE BEEN SIGNED BY EACH PARTY AND
DELIVERED TO THE OTHER PARTY, IT BEING UNDERSTOOD THAT BOTH PARTIES NEED NOT
SIGN THE SAME COUNTERPART.  IN THE EVENT THAT ANY

 

--------------------------------------------------------------------------------

 

SIGNATURE IS DELIVERED BY FACSIMILE TRANSMISSION (OR ELECTRONIC TRANSMISSION OF
PDF FILE), SUCH SIGNATURE SHALL CREATE A VALID AND BINDING OBLIGATION OF THE
PARTY EXECUTING (OR ON WHOSE BEHALF SUCH SIGNATURE IS EXECUTED) WITH THE SAME
FORCE AND EFFECT AS IF SUCH FACSIMILE (OR PDF FILE) SIGNATURE PAGE WERE AN
ORIGINAL THEREOF.

 

26.                                                                                
SEVERABILITY.  IF ANY PROVISION OF THIS AGREEMENT IS HELD TO BE INVALID OR
UNENFORCEABLE IN ANY RESPECT, THE VALIDITY AND ENFORCEABILITY OF THE REMAINING
TERMS AND PROVISIONS OF THIS AGREEMENT SHALL NOT IN ANY WAY BE AFFECTED OR
IMPAIRED THEREBY AND THE PARTIES WILL ATTEMPT TO AGREE UPON A VALID AND
ENFORCEABLE PROVISION THAT IS A REASONABLE SUBSTITUTE THEREFOR, AND UPON SO
AGREEING, SHALL INCORPORATE SUCH SUBSTITUTE PROVISION IN THIS AGREEMENT.

 

27.                                                                                
REPLACEMENT OF SECURITIES.  IF ANY CERTIFICATE OR INSTRUMENT EVIDENCING ANY
SERIES B PREFERRED STOCK, UNIT WARRANT, COMMON STOCK PURCHASE WARRANT OR
SERIES B UNDERLYING SHARES IS MUTILATED, LOST, STOLEN OR DESTROYED, THE COMPANY
SHALL ISSUE OR CAUSE TO BE ISSUED IN EXCHANGE AND SUBSTITUTION FOR AND UPON
CANCELLATION THEREOF, OR IN LIEU OF AND SUBSTITUTION THEREFOR, A NEW CERTIFICATE
OR INSTRUMENT, BUT ONLY UPON RECEIPT OF EVIDENCE REASONABLY SATISFACTORY TO THE
COMPANY OF SUCH LOSS, THEFT OR DESTRUCTION AND CUSTOMARY AND REASONABLE
INDEMNITY, IF REQUESTED.  THE APPLICANTS FOR A NEW CERTIFICATE OR INSTRUMENT
UNDER SUCH CIRCUMSTANCES SHALL ALSO PAY ANY REASONABLE THIRD-PARTY COSTS
ASSOCIATED WITH THE ISSUANCE OF SUCH REPLACEMENT CERTIFICATE OR INSTRUMENT.

 

28.                                                                                
REMEDIES.  IN ADDITION TO BEING ENTITLED TO EXERCISE ALL RIGHTS PROVIDED HEREIN
OR GRANTED BY LAW, INCLUDING RECOVERY OF DAMAGES, EACH HOLDER AND THE COMPANY
WILL BE ENTITLED TO SPECIFIC PERFORMANCE UNDER THE TRANSACTION DOCUMENTS AND
THIS AGREEMENT.  THE PARTIES AGREE THAT MONETARY DAMAGES MAY NOT BE ADEQUATE
COMPENSATION FOR ANY LOSS INCURRED BY REASON OF ANY BREACH OF OBLIGATIONS
DESCRIBED IN THE FOREGOING SENTENCE AND HEREBY AGREES TO WAIVE IN ANY ACTION FOR
SPECIFIC PERFORMANCE OF ANY SUCH OBLIGATION THE DEFENSE THAT A REMEDY AT LAW
WOULD BE ADEQUATE.

 

29.                                                                                
LIQUIDATED DAMAGES.  THE COMPANY’S OBLIGATION TO PAY ANY PARTIAL LIQUIDATED
DAMAGES OR OTHER AMOUNTS OWING UNDER THE TRANSACTION DOCUMENTS OR THIS AGREEMENT
IS A CONTINUING OBLIGATION OF THE COMPANY AND SHALL NOT TERMINATE UNTIL ALL
UNPAID PARTIAL LIQUIDATED DAMAGES AND OTHER AMOUNTS HAVE BEEN PAID
NOTWITHSTANDING THE FACT THAT THE INSTRUMENT OR SECURITY PURSUANT TO WHICH SUCH
PARTIAL LIQUIDATED DAMAGES OR OTHER AMOUNTS ARE DUE AND PAYABLE SHALL HAVE BEEN
CANCELED.

 

(Signature Pages Follow)

 

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IN WITNESS WHEREOF, THE PARTIES HERETO HAVE CAUSED THIS WARRANT AGREEMENT TO BE
DULY EXECUTED BY THEIR RESPECTIVE AUTHORIZED SIGNATORIES AS OF THE DATE FIRST
INDICATED ABOVE.

 

ANSWERS CORPORATION

 

Address for Notice:

 

 

 

 

 

 

By:

/s/ Robert S. Rosenschein

 

 

 

Name:  Robert S. Rosenschein

 

 

 

Title:    Chief Executive Officer

 

 

 

 

 

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

 

 

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

 

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[HOLDER SIGNATURE PAGE TO WARRANT AGREEMENT]

 

IN WITNESS WHEREOF, the undersigned have caused this Warrant Agreement to be
duly executed by their respective authorized signatories as of the date first
indicated above.

 

 

Redpoint Omega, L.P., by its General Partner

Redpoint Omega, LLC

 

 

Redpoint Omega Associates, LLC, as nominee

 

 

By:

/s/ W. Allen Beasley

 

 

 

 

 

W. Allen Beasley

 

 

Name

 

 

 

 

 

Managing Director

 

 

Title

 

 

 

 

Address for Notice of Holder:

 

 

 

 

Address for Delivery of Securities for Holder (if not same as above):

 

 

EIN Number:

 

--------------------------------------------------------------------------------

 

EXHIBIT A

 

[Form of Warrant Certificate]

 

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EXHIBIT B

 

[Form of Common Stock Purchase Warrant Certificate]

 

--------------------------------------------------------------------------------

 

EXHIBIT C

 

[Series B Certificate of Designation]

 

--------------------------------------------------------------------------------

 

NOTICE OF EXERCISE

 

TO:     ANSWERS CORPORATION

 

(1)          The undersigned hereby elects to purchase                  Units of
the Company pursuant to the terms of the attached Warrant (only if exercised in
full), and tenders herewith payment of the Exercise Price in full, together with
all applicable transfer taxes, if any.

 

(2)          Please issue a certificate or certificates representing said
securities issuable in the name of the undersigned or in such other name as is
specified below:

 

 

 

 

 

 

The Units shall be delivered to the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3)          Accredited Investor.  The undersigned is an “accredited investor”
as defined in Regulation D promulgated under the Securities Act of 1933, as
amended.

 

[SIGNATURE OF HOLDER]

 

Name of Investing Entity:

 

Signature of Authorized Signatory of Investing Entity:

 

Name of Authorized Signatory:

 

Title of Authorized Signatory:

 

Date:

 

 

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ASSIGNMENT FORM

 

(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)

 

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are
hereby assigned to

 

 

 whose address is

 

 

 

.

 

 

 

 

 

 

 

 

 

Dated:

 

,

 

 

 

 

 

Holder’s Signature:

 

 

 

 

 

 

 

Holder’s Address:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Signature Guaranteed:

 

 

 

 

NOTE:  The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company.  Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.

 

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