EXHIBIT 10.5

 

THE SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH
SECURITIES HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933,
AS AMENDED, (II) SUCH SECURITIES MAY BE SOLD WITHOUT RESTRICTION PURSUANT TO
RULE 144, OR (III) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO IT THAT SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION
UNDER THE SECURITIES ACT OF 1933 OR QUALIFICATION UNDER APPLICABLE STATE
SECURITIES LAWS.

 

THIS WARRANT SHALL BE VOID AFTER 5:00 P.M. EASTERN TIME ON [FIFTH ANNIVERSARY OF
THE ISSUANCE DATE] (THE “EXPIRATION DATE”).

 

No. C-__________

 

MEDIA SCIENCES INTERNATIONAL, INC.

 

SERIES C WARRANT TO PURCHASE _______ SHARES OF

COMMON STOCK, PAR VALUE $0.001 PER SHARE

 

For VALUE RECEIVED, ____________________ (“Warrantholder”), is entitled to
purchase, subject to the provisions of this Warrant, from Media Sciences
International, Inc., a Delaware corporation (“Company”), at any time not later
than 5:00 P.M., Eastern time, on the Expiration Date (as defined above), at an
exercise price per share equal to $___1 (the exercise price in effect being
herein called the “Warrant Price”), ______ shares2 (“Warrant Shares”) of the
Company’s Common Stock, par value $0.001 per share (“Common Stock”). The number
of Warrant Shares purchasable upon exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time as described herein. This
Warrant is being issued pursuant to the Purchase Agreement, dated as of
September 24, 2008 (the “Purchase Agreement”), among the Company and the initial
holders of the Company Warrants (as defined below). Capitalized terms used
herein have the respective meanings ascribed thereto in the Purchase Agreement
unless otherwise defined herein.

 

Section 1.     Registration. The Company shall maintain books for the transfer
and registration of the Warrant. Upon the initial issuance of this Warrant, the
Company shall issue and register the Warrant in the name of the Warrantholder.

 

Section 2.     Transfers. As provided herein, this Warrant may be transferred
only pursuant to a registration statement filed under the Securities Act of
1933, as amended (the “Securities Act”), or an exemption from such registration.
Subject to such restrictions, the Company shall transfer this Warrant from time
to time upon the books to be maintained by the Company for that purpose, upon
surrender hereof for transfer, properly endorsed or accompanied

 

_________________________

1 The Warrant Price then in effect on the Company’s Series A Warrants on the
date of issuance of this Series C Warrant.

2 50% of the shares into which the related Notes are convertible.

 

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by appropriate instructions for transfer and such other documents as may be
reasonably required by the Company, including, if required by the Company, an
opinion of its counsel to the effect that such transfer is exempt from the
registration requirements of the Securities Act, to establish that such transfer
is being made in accordance with the terms hereof, and a new Warrant shall be
issued to the transferee and the surrendered Warrant shall be canceled by the
Company.

 

Section 3.     Exercise of Warrant. Subject to the provisions hereof, the
Warrantholder may exercise this Warrant, in whole or in part, at any time prior
to its expiration upon surrender of the Warrant, together with delivery of a
duly executed Warrant exercise form, in the form attached hereto as Appendix A
(the “Exercise Agreement”) and payment by cash, certified check or wire transfer
of funds (or, in certain circumstances, by cashless exercise as provided below)
of the aggregate Warrant Price for that number of Warrant Shares then being
purchased, to the Company during normal business hours on any business day at
the Company’s principal executive offices (or such other office or agency of the
Company as it may designate by notice to the Warrantholder). The Warrant Shares
so purchased shall be deemed to be issued to the Warrantholder or the
Warrantholder’s designee, as the record owner of such shares, as of the close of
business on the date on which this Warrant shall have been surrendered (or the
date evidence of loss, theft or destruction thereof and security or indemnity
satisfactory to the Company has been provided to the Company), the Warrant Price
shall have been paid and the completed Exercise Agreement shall have been
delivered. Certificates for the Warrant Shares so purchased shall be delivered
to the Warrantholder within a reasonable time, not exceeding three (3) business
days, after this Warrant shall have been so exercised. The certificates so
delivered shall be in such denominations as may be requested by the
Warrantholder and shall be registered in the name of the Warrantholder or such
other name as shall be designated by the Warrantholder, as specified in the
Exercise Agreement. If this Warrant shall have been exercised only in part,
then, unless this Warrant has expired, the Company shall, at its expense, at the
time of delivery of such certificates, deliver to the Warrantholder a new
Warrant representing the right to purchase the number of shares with respect to
which this Warrant shall not then have been exercised. As used herein, “business
day” means a day, other than a Saturday or Sunday, on which banks in New York
City are open for the general transaction of business. Each exercise hereof
shall constitute the re-affirmation by the Warrantholder that the
representations and warranties contained in Section 5 of the Purchase Agreement
are true and correct in all material respects with respect to the Warrantholder
as of the time of such exercise.

 

If (1) a certificate representing the Warrant Shares is not delivered to the
Warrantholder within three (3) Business Days of the due exercise of this Warrant
by the Warrantholder and (2) prior to the time such certificate is received by
the Warrantholder, the Warrantholder, or any third party on behalf of the
Warrantholder or for the Warrantholder’s account, purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a
sale by the Warrantholder of shares represented by such certificate (a
“Buy-In”), then the Company shall pay in cash to the Warrantholder (for costs
incurred either directly by such Warrantholder or on behalf of a third party)
the amount by which the total purchase price paid for Common Stock as a result
of the Buy-In (including brokerage commissions, if any) exceeds the proceeds
received by such Warrantholder as a result of the sale to which such Buy-In
relates. The Warrantholder shall provide the Company written notice indicating
the amounts payable to the Warrantholder in respect of the Buy-In.

 

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Section 4.     Compliance with the Securities Act of 1933. Except as provided in
the Purchase Agreement, the Company may cause the legend set forth on the first
page of this Warrant to be set forth on each Warrant, and a similar legend on
any security issued or issuable upon exercise of this Warrant, unless counsel
for the Company is of the opinion as to any such security that such legend is
unnecessary.

 

Section 5.     Payment of Taxes. The Company will pay any documentary stamp
taxes attributable to the initial issuance of Warrant Shares issuable upon the
exercise of the Warrant; provided, however, that the Company 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 for Warrant Shares in a
name other than that of the Warrantholder in respect of which such shares are
issued, and in such case, the Company shall not be required to issue or deliver
any certificate for Warrant Shares or any Warrant until the person requesting
the same has paid to the Company the amount of such tax or has established to
the Company’s reasonable satisfaction that such tax has been paid. The
Warrantholder shall be responsible for income taxes due under federal, state or
other law, if any such tax is due.

 

Section 6.     Mutilated or Missing Warrants. In case this Warrant shall be
mutilated, lost, stolen, or destroyed, the Company shall issue in exchange and
substitution of and upon surrender and cancellation of the mutilated Warrant, or
in lieu of and substitution for the Warrant lost, stolen or destroyed, a new
Warrant of like tenor and for the purchase of a like number of Warrant Shares,
but only upon receipt of evidence reasonably satisfactory to the Company of such
loss, theft or destruction of the Warrant, and with respect to a lost, stolen or
destroyed Warrant, reasonable indemnity or bond with respect thereto, if
requested by the Company.

 

Section 7.     Reservation of Common Stock. The Company hereby represents and
warrants that there have been reserved, and the Company shall at all applicable
times keep reserved until issued (if necessary) as contemplated by this Section
7, out of the authorized and unissued shares of Common Stock, sufficient shares
to provide for the exercise of the rights of purchase represented by this
Warrant. The Company agrees that all Warrant Shares issued upon due exercise of
the Warrant shall be, at the time of delivery of the certificates for such
Warrant Shares, duly authorized, validly issued, fully paid and non-assessable
shares of Common Stock of the Company.

 

Section 8.     Adjustments. Subject and pursuant to the provisions of this
Section 8, the Warrant Price and number of Warrant Shares subject to this
Warrant shall be subject to adjustment from time to time as set forth
hereinafter.

 

(a)  If the Company shall, at any time or from time to time while this Warrant
is outstanding, pay a dividend or make a distribution on its Common Stock in
shares of Common Stock, subdivide its outstanding shares of Common Stock into a
greater number of shares or combine its outstanding shares of Common Stock into
a smaller number of shares or issue by reclassification of its outstanding
shares of Common Stock any shares of its capital stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), then (i) the Warrant Price in effect
immediately prior to

 

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the date on which such change shall become effective shall be adjusted by
multiplying such Warrant Price by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding immediately prior to such
change and the denominator of which shall be the number of shares of Common
Stock outstanding immediately after giving effect to such change and (ii) the
number of Warrant Shares purchasable upon exercise of this Warrant shall be
adjusted by multiplying the number of Warrant Shares purchasable upon exercise
of this Warrant immediately prior to the date on which such change shall become
effective by a fraction, the numerator of which is shall be the Warrant Price in
effect immediately prior to the date on which such change shall become effective
and the denominator of which shall be the Warrant Price in effect immediately
after giving effect to such change, calculated in accordance with clause (i)
above. Such adjustments shall be made successively whenever any event listed
above shall occur.

 

(b)  If any capital reorganization, reclassification of the capital stock of the
Company, consolidation or merger of the Company with another corporation in
which the Company is not the survivor, or sale, transfer or other disposition of
all or substantially all of the Company’s assets to another corporation shall be
effected, then, as a condition of such reorganization, reclassification,
consolidation, merger, sale, transfer or other disposition, lawful and adequate
provision shall be made whereby each Warrantholder shall thereafter have the
right to purchase and receive upon the basis and upon the terms and conditions
herein specified and in lieu of the Warrant Shares immediately theretofore
issuable upon exercise of the Warrant, such shares of stock, securities or
assets as would have been issuable or payable with respect to or in exchange for
a number of Warrant Shares equal to the number of Warrant Shares immediately
theretofore issuable upon exercise of the Warrant, had such reorganization,
reclassification, consolidation, merger, sale, transfer or other disposition not
taken place, and in any such case appropriate provision shall be made with
respect to the rights and interests of each Warrantholder to the end that the
provisions hereof (including, without limitation, provision for adjustment of
the Warrant Price) shall thereafter be applicable, as nearly equivalent as may
be practicable in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise hereof. The Company shall not effect
any such consolidation, merger, sale, transfer or other disposition unless prior
to or simultaneously with the consummation thereof the successor corporation (if
other than the Company) resulting from such consolidation or merger, or the
corporation purchasing or otherwise acquiring such assets or other appropriate
corporation or entity shall assume the obligation to deliver to the
Warrantholder, at the last address of the Warrantholder appearing on the books
of the Company, such shares of stock, securities or assets as, in accordance
with the foregoing provisions, the Warrantholder may be entitled to purchase,
and the other obligations under this Warrant. The provisions of this paragraph
(b) shall similarly apply to successive reorganizations, reclassifications,
consolidations, mergers, sales, transfers or other dispositions.

 

(c)  In case the Company shall fix a payment date for the making of a
distribution to all holders of Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness or assets (other than cash
dividends or cash distributions payable out of consolidated earnings or earned
surplus or dividends or distributions referred to in Section 8(a)), or
subscription rights or warrants, the Warrant Price to be in effect after such
payment date shall

 

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be determined by multiplying the Warrant Price in effect immediately prior to
such payment date by a fraction, the numerator of which shall be the total
number of shares of Common Stock outstanding multiplied by the Market Price (as
defined below) per share of Common Stock immediately prior to such payment date,
less the fair market value (as determined by the Company’s Board of Directors in
good faith) of said assets or evidences of indebtedness so distributed, or of
such subscription rights or warrants, and the denominator of which shall be the
total number of shares of Common Stock outstanding multiplied by such Market
Price per share of Common Stock immediately prior to such payment date. “Market
Price” as of a particular date (the “Valuation Date”) shall mean the following:
(a) if the Common Stock is then listed on the Nasdaq Global Market or the Nasdaq
Capital Market (“Nasdaq”) or any other national stock exchange, the closing sale
price of one share of Common Stock on such exchange on the last trading day
prior to the Valuation Date; (b) if the Common Stock is then quoted on the
National Association of Securities Dealers, Inc. OTC Bulletin Board (the
“Bulletin Board”) or such similar quotation system or association, the closing
sale price of one share of Common Stock on the Bulletin Board or such other
quotation system or association on the last trading day prior to the Valuation
Date or, if no such closing sale price is available, the average of the high bid
and the low asked price quoted thereon on the last trading day prior to the
Valuation Date; or (c) if the Common Stock is not then listed on a national
stock exchange or quoted on the Bulletin Board or such other quotation system or
association, the fair market value of one share of Common Stock as of the
Valuation Date, as determined in good faith by the Board of Directors of the
Company and the Warrantholder. If the Common Stock is not then listed on a
national securities exchange, the Bulletin Board or such other quotation system
or association, the Board of Directors of the Company shall respond promptly, in
writing, to an inquiry by the Warrantholder prior to the exercise hereunder as
to the fair market value of a share of Common Stock as determined by the Board
of Directors of the Company. In the event that the Board of Directors of the
Company and the Warrantholder are unable to agree upon the fair market value in
respect of subpart (c) of this paragraph, the Company and the Warrantholder
shall jointly select an appraiser, who is experienced in such matters. The
decision of such appraiser shall be final and conclusive, and the cost of such
appraiser shall be borne equally by the Company and the Warrantholder. Such
adjustment shall be made successively whenever such a payment date is fixed.

 

(d)  An adjustment to the Warrant Price shall become effective immediately after
the payment date in the case of each dividend or distribution and immediately
after the effective date of each other event which requires an adjustment.

 

(e)  In the event that, as a result of an adjustment made pursuant to this
Section 8, the Warrantholder shall become entitled to receive any shares of
capital stock of the Company other than shares of Common Stock, the number of
such other shares so receivable upon exercise of this Warrant shall be subject
thereafter to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Warrant Shares
contained in this Warrant.

 

(f) Except as provided in subsection (g) hereof, if and whenever the Company
shall issue or sell, or is, in accordance with any of subsections (f)(l) through
(f)(7) hereof, deemed to have issued or sold, any Additional Shares of Common
Stock for no consideration or

 

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for a consideration per share less than the Warrant Price in effect immediately
prior to the time of such issue or sale, then and in each such case (a “Trigger
Issuance”) the then-existing Warrant Price, shall be reduced, as of the close of
business on the effective date of the Trigger Issuance, to the lowest price per
share at which any share of Common Stock was issued or sold or deemed to be
issued or sold; provided, however, that in no event shall the Warrant Price
after giving effect to such Trigger Issuance be greater than the Warrant Price
in effect prior to such Trigger Issuance.

 

For purposes of this subsection (f), “Additional Shares of Common Stock” shall
mean all shares of Common Stock issued by the Company or deemed to be issued
pursuant to this subsection (f), other than Excluded Issuances (as defined in
subsection (g) hereof).

 

For purposes of this subsection (f), the following subsections (f)(l) to (f)(8)
shall also be applicable:

 

(f)(1) Issuance of Rights or Options. In case at any time the Company shall in
any manner grant (directly and not by assumption in a merger or otherwise) any
warrants or other rights to subscribe for or to purchase, or any options for the
purchase of, Common Stock or any stock or security convertible into or
exchangeable for Common Stock (such warrants, rights or options being called
“Options” and such convertible or exchangeable stock or securities being called
“Convertible Securities”) whether or not such Options or the right to convert or
exchange any such Convertible Securities are immediately exercisable, and the
price per share for which Common Stock is issuable upon the exercise of such
Options or upon the conversion or exchange of such Convertible Securities
(determined by dividing (i) the sum (which sum shall constitute the applicable
consideration) of (x) the total amount, if any, received or receivable by the
Company as consideration for the granting of such Options, plus (y) the
aggregate amount of additional consideration payable to the Company upon the
exercise of all such Options, plus (z), in the case of such Options which relate
to Convertible Securities, the aggregate amount of additional consideration, if
any, payable upon the issue or sale of such Convertible Securities and upon the
conversion or exchange thereof, by (ii) the total maximum number of shares of
Common Stock issuable upon the exercise of such Options or upon the conversion
or exchange of all such Convertible Securities issuable upon the exercise of
such Options) shall be less than the Warrant Price in effect immediately prior
to the time of the granting of such Options, then the total number of shares of
Common Stock issuable upon the exercise of such Options or upon conversion or
exchange of the total amount of such Convertible Securities issuable upon the
exercise of such Options shall be deemed to have been issued for such price per
share as of the date of granting of such Options or the issuance of such
Convertible Securities and thereafter shall be deemed to be outstanding for
purposes of adjusting the Warrant Price. Except as otherwise provided in
subsection 8(f)(3), no adjustment of the Warrant Price shall be made upon the
actual issue of such Common Stock or of such Convertible Securities upon
exercise of such Options or upon the actual

 

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issue of such Common Stock upon conversion or exchange of such Convertible
Securities.

 

(f)(2) Issuance of Convertible Securities. In case the Company shall in any
manner issue (directly and not by assumption in a merger or otherwise) or sell
any Convertible Securities, whether or not the rights to exchange or convert any
such Convertible Securities are immediately exercisable, and the price per share
for which Common Stock is issuable upon such conversion or exchange (determined
by dividing (i) the sum (which sum shall constitute the applicable
consideration) of (x) the total amount received or receivable by the Company as
consideration for the issue or sale of such Convertible Securities, plus (y) the
aggregate amount of additional consideration, if any, payable to the Company
upon the conversion or exchange thereof, by (ii) the total number of shares of
Common Stock issuable upon the conversion or exchange of all such Convertible
Securities) shall be less than the Warrant Price in effect immediately prior to
the time of such issue or sale, then the total maximum number of shares of
Common Stock issuable upon conversion or exchange of all such Convertible
Securities shall be deemed to have been issued for such price per share as of
the date of the issue or sale of such Convertible Securities and thereafter
shall be deemed to be outstanding for purposes of adjusting the Warrant Price,
provided that (a) except as otherwise provided in subsection 8(f)(3), no
adjustment of the Warrant Price shall be made upon the actual issuance of such
Common Stock upon conversion or exchange of such Convertible Securities and (b)
no further adjustment of the Warrant Price shall be made by reason of the issue
or sale of Convertible Securities upon exercise of any Options to purchase any
such Convertible Securities for which adjustments of the Warrant Price have been
made pursuant to the other provisions of subsection 8(f).

(f)(3) Change in Option Price or Conversion Rate. Upon the happening of any of
the following events, namely, if the purchase price provided for in any Option
referred to in subsection 8(f)(l) hereof, the additional consideration, if any,
payable upon the conversion or exchange of any Convertible Securities referred
to in subsections 8(f)(l) or 8(f)(2), or the rate at which Convertible
Securities referred to in subsections 8(f)(l) or 8(f)(2) are convertible into or
exchangeable for Common Stock shall change at any time (including, but not
limited to, changes under or by reason of provisions designed to protect against
dilution), the Warrant Price in effect at the time of such event shall forthwith
be readjusted to the Warrant Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or conversion rate, as the case
may be, at the time initially granted, issued or sold. On the termination of any
Option for which any adjustment was made pursuant to this subsection 8(f) or any
right to convert or exchange Convertible Securities for which any adjustment was
made pursuant to this subsection 8(f) (including without limitation upon the
redemption or purchase for consideration of such Convertible Securities by the
Company), the Warrant Price then in effect hereunder shall forthwith be changed
to the Warrant Price which would have been in effect at the time of such
termination had such Option

 

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or Convertible Securities, to the extent outstanding immediately prior to such
termination, never been issued.

(f)(4) Stock Dividends. Subject to the provisions of this Section 8(f), in case
the Company shall declare or pay a dividend or make any other distribution upon
any stock of the Company (other than the Common Stock) payable in Common Stock,
Options or Convertible Securities, then any Common Stock, Options or Convertible
Securities, as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without consideration.

 

(f)(5) Consideration for Stock. In case any shares of Common Stock, Options or
Convertible Securities shall be issued or sold for cash, the consideration
received therefor shall be deemed to be the net amount received by the Company
therefor, before deduction therefrom of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Company in
connection therewith. In case any shares of Common Stock, Options or Convertible
Securities shall be issued or sold for a consideration other than cash, the
amount of the consideration other than cash received by the Company shall be
deemed to be the fair value of such consideration as determined in good faith by
the Board of Directors of the Company, before deduction of any expenses incurred
or any underwriting commissions or concessions paid or allowed by the Company in
connection therewith. In case any Options shall be issued in connection with the
issue and sale of other securities of the Company, together comprising one
integral transaction in which no specific consideration is allocated to such
Options by the parties thereto, such Options shall be deemed to have been issued
for such consideration as determined in good faith by the Board of Directors of
the Company. If Common Stock, Options or Convertible Securities shall be issued
or sold by the Company and, in connection therewith, other Options or
Convertible Securities (the “Additional Rights”) are issued, then the
consideration received or deemed to be received by the Company shall be reduced
by the fair market value of the Additional Rights (as determined using the
Black-Scholes option pricing model or another method mutually agreed to by the
Company and the Warrantholder). The Board of Directors of the Company shall
respond promptly, in writing, to an inquiry by the Warrantholder as to the fair
market value of the Additional Rights. In the event that the Board of Directors
of the Company and the Warrantholder are unable to agree upon the fair market
value of the Additional Rights, the Company and the Warrantholder shall jointly
select an appraiser, who is experienced in such matters. The decision of such
appraiser shall be final and conclusive, and the cost of such appraiser shall be
borne evenly by the Company and the Warrantholder.

 

(f)(6) Record Date. In case the Company shall take a record of the holders of
its Common Stock for the purpose of entitling them (i) to receive a dividend or
other distribution payable in Common Stock, Options or Convertible Securities or
(ii) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of the issue or
sale

 

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of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.

 

(f)(7) Treasury Shares. The number of shares of Common Stock outstanding at any
given time shall not include shares owned or held by or for the account of the
Company or any of its wholly-owned subsidiaries, and the disposition of any such
shares (other than the cancellation or retirement thereof) shall be considered
an issue or sale of Common Stock for the purpose of this subsection (f).

 

(f)(8) Nasdaq Limitation. Notwithstanding any other provision in Section 8(f) to
the contrary, if a reduction in the Warrant Price pursuant to Section 8(f)
(other than as set forth in this clause (f)(8)) would require the Company to
obtain stockholder approval of the transactions contemplated by the Purchase
Agreement pursuant to Nasdaq Marketplace Rule 4350(i) and such stockholder
approval has not been obtained, (i) the Warrant Price shall be reduced to the
maximum extent that would not require stockholder approval under such Rule, and
(ii) the Company shall use its commercially reasonable efforts to obtain such
stockholder approval as soon as reasonably practicable, including by calling a
special meeting of stockholders to vote on such Warrant Price adjustment. This
provision shall not restrict the number of shares of Common Stock which a
Warrantholder may receive or beneficially own in order to determine the amount
of securities or other consideration that such Holder may receive in the event
of a transaction contemplated by Section 8 of this Warrant.

 

(g)  Anything herein to the contrary notwithstanding, the Company shall not be
required to make any adjustment of the Warrant Price in the case of the issuance
of (A) capital stock, Options or Convertible Securities issued to directors,
officers, employees or consultants of the Company in connection with their
service as directors of the Company, their employment by the Company or their
retention as consultants by the Company pursuant to an equity compensation
program approved by the Board of Directors of the Company or the compensation
committee of the Board of Directors of the Company, (B) shares of Common Stock
issued upon the conversion or exercise of Options or Convertible Securities
issued prior to the Closing Date, provided such securities are not amended after
the Closing Date to increase the number of shares of Common Stock issuable
thereunder or to lower the exercise or conversion price thereof, (C) securities
issued pursuant to the Purchase Agreement and securities issued upon the
exercise or conversion of those securities, and (D) shares of Common Stock
issued or issuable by reason of a dividend, stock split or other distribution on
shares of Common Stock (but only to the extent that such a dividend, split or
distribution results in an adjustment in the Warrant Price pursuant to the other
provisions of this Warrant) (collectively, “Excluded Issuances”).

 

(h)  Upon any adjustment to the Warrant Price pursuant to Section 8(f) above,
the number of Warrant Shares purchasable hereunder shall be adjusted by
multiplying such number by a fraction, the numerator of which shall be the
Warrant Price in effect immediately

 

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prior to such adjustment and the denominator of which shall be the Warrant Price
in effect immediately thereafter.

 

(i) To the extent permitted by applicable law and the listing requirements of
any stock market or exchange on which the Common Stock is then listed, the
Company from time to time may decrease the Warrant Price by any amount for any
period of time if the period is at least twenty (20) days, the decrease is
irrevocable during the period and the Board shall have made a determination that
such decrease would be in the best interests of the Company, which determination
shall be conclusive. Whenever the Warrant Price is decreased pursuant to the
preceding sentence, the Company shall provide written notice thereof to the
Warrantholder at least five (5) days prior to the date the decreased Warrant
Price takes effect, and such notice shall state the decreased Warrant Price and
the period during which it will be in effect.

 

Section 9.     Fractional Interest. The Company shall not be required to issue
fractions of Warrant Shares upon the exercise of this Warrant. If any fractional
share of Common Stock would, except for the provisions of the first sentence of
this Section 9, be deliverable upon such exercise, the Company, in lieu of
delivering such fractional share, shall pay to the exercising Warrantholder an
amount in cash equal to the Market Price of such fractional share of Common
Stock on the date of exercise.

 

Section 10.

[Reserved]

 

Section 11.    Benefits. Nothing in this Warrant shall be construed to give any
person, firm or corporation (other than the Company and the Warrantholder) any
legal or equitable right, remedy or claim, it being agreed that this Warrant
shall be for the sole and exclusive benefit of the Company and the
Warrantholder.

 

Section 12.    Notices to Warrantholder. Upon the happening of any event
requiring an adjustment of the Warrant Price, the Company shall promptly give
written notice thereof to the Warrantholder at the address appearing in the
records of the Company, stating the adjusted Warrant Price and the adjusted
number of Warrant Shares resulting from such event and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. Failure to give such notice to the Warrantholder or any
defect therein shall not affect the legality or validity of the subject
adjustment.

 

Section 13.    Identity of Transfer Agent. The Transfer Agent for the Common
Stock is Continental Stock Transfer & Trust Company. Upon the appointment of any
subsequent transfer agent for the Common Stock or other shares of the Company’s
capital stock issuable upon the exercise of the rights of purchase represented
by the Warrant, the Company will mail to the Warrantholder a statement setting
forth the name and address of such transfer agent.

 

Section 14.    Notices. Unless otherwise provided, any notice required or
permitted under this Warrant shall be given in writing and shall be deemed
effectively given as hereinafter described (i) if given by personal delivery,
then such notice shall be deemed given upon such delivery, (ii) if given by
telex or facsimile, then such notice shall be deemed given upon receipt of
confirmation of complete transmittal, (iii) if given by mail, then such notice
shall be deemed

 

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given upon the earlier of (A) receipt of such notice by the recipient or (B)
three days after such notice is deposited in first class mail, postage prepaid,
and (iv) if given by an internationally recognized overnight air courier, then
such notice shall be deemed given one business day after delivery to such
carrier. All notices shall be addressed as follows: if to the Warrantholder, at
its address as set forth in the Company’s books and records and, if to the
Company, at the address as follows, or at such other address as the
Warrantholder or the Company may designate by ten days’ advance written notice
to the other:

 

If to the Company:

 

Media Sciences International, Inc.

8 Allerman Road

Oakland, New Jersey 07436

Attention: Michael W. Levin,

Chief Executive Officer and President

Fax: (201) 677-0311

 

With a copy to:

 

Law Offices of Dan Brecher

99 Park Avenue, 16th Floor

New York, New York 10016

Attention: Dan Brecher

Fax: (212) 808-4155

 

Section 15.    Registration Rights. The initial Warrantholder is entitled to the
benefit of certain registration rights with respect to the shares of Common
Stock issuable upon the exercise of this Warrant as provided in the Registration
Rights Agreement, and any subsequent Warrantholder may be entitled to such
rights.

 

Section 16.    Successors. All the covenants and provisions hereof by or for the
benefit of the Warrantholder shall bind and inure to the benefit of its
respective successors and assigns hereunder.

 

Section 17.    Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.
This Warrant shall be governed by, and construed in accordance with, the
internal laws of the State of New York, without reference to the choice of law
provisions thereof. The Company and, by accepting this Warrant, the
Warrantholder, each irrevocably submits to the exclusive jurisdiction of the
courts of the State of New York located in New York County and the United States
District Court for the Southern District of New York for the purpose of any
suit, action, proceeding or judgment relating to or arising out of this Warrant
and the transactions contemplated hereby. Service of process in connection with
any such suit, action or proceeding may be served on each party hereto anywhere
in the world by the same methods as are specified for the giving of notices
under this Warrant. The Company and, by accepting this Warrant, the
Warrantholder, each irrevocably consents to the jurisdiction of any such court
in any such suit, action or proceeding and to the laying of venue in such court.
The Company and, by accepting

 

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this Warrant, the Warrantholder, each irrevocably waives any objection to the
laying of venue of any such suit, action or proceeding brought in such courts
and irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum. EACH OF THE
COMPANY AND, BY ITS ACCEPTANCE HEREOF, THE WARRANTHOLDER HEREBY WAIVES ANY RIGHT
TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS WARRANT AND
REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

 

Section 18.    Cashless Exercise. Notwithstanding any other provision contained
herein to the contrary, from and after the six-month anniversary of the Closing
Date and so long as the Company is required under the Registration Rights
Agreement to have effected the registration of the Warrant Shares for resale to
the public pursuant to a Registration Statement (as such term is defined in the
Registration Rights Agreement), if the Warrant Shares may not be freely sold to
the public for any reason (including, but not limited to, the failure of the
Company to have effected the registration of the Warrant Shares or to have a
current prospectus available for delivery or otherwise, but excluding the period
of any Allowed Delay (as defined in the Registration Rights Agreement), the
Warrantholder may elect to receive, without the payment by the Warrantholder of
the aggregate Warrant Price in respect of the shares of Common Stock to be
acquired, shares of Common Stock of equal value to the value of this Warrant, or
any specified portion hereof, by the surrender of this Warrant (or such portion
of this Warrant being so exercised) together with a Net Issue Election Notice,
in the form annexed hereto as Appendix B, duly executed, to the Company.
Thereupon, the Company shall issue to the Warrantholder such number of fully
paid, validly issued and nonassessable shares of Common Stock as is computed
using the following formula:

 

X = Y (A - B)

A

 

where

 

X =     the number of shares of Common Stock to which the Warrantholder is
entitled upon such cashless exercise;

 

Y =    the total number of shares of Common Stock covered by this Warrant for
which the Warrantholder has surrendered purchase rights at such time for
cashless exercise (including both shares to be issued to the Warrantholder and
shares as to which the purchase rights are to be canceled as payment therefor);

 

A =     the “Market Price” of one share of Common Stock as at the date the net
issue election is made; and

 

B =     the Warrant Price in effect under this Warrant at the time the net issue
election is made.

 

Section 19.

Limitations on Exercise.

 

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(a)  Notwithstanding anything to the contrary contained herein, the number of
Warrant Shares that may be acquired by the Warrantholder upon any exercise of
this Warrant (or otherwise in respect hereof) shall be limited to the extent
necessary to insure that, following such exercise (or other issuance), the total
number of shares of Common Stock then beneficially owned by such Warrantholder
and its Affiliates and any other Persons whose beneficial ownership of Common
Stock would be aggregated with the Warrantholder's for purposes of Section 13(d)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), does
not exceed 4.999% of the total number of issued and outstanding shares of Common
Stock (including for such purpose the shares of Common Stock issuable upon such
exercise). For such purposes, beneficial ownership shall be determined in
accordance with Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder. This provision shall not restrict the number of shares
of Common Stock which a Warrantholder may receive or beneficially own in order
to determine the amount of securities or other consideration that such Holder
may receive in the event of a transaction contemplated by Section 8 of this
Warrant. By written notice to the Company, the Warrantholder may waive the
provisions of this Section 20(a), but any such waiver will not be effective
until the 61st day after delivery of such notice, nor will any such waiver
effect any other Warrantholder.

 

(b)  Notwithstanding anything to the contrary contained herein, the number of
Warrant Shares that may be acquired by the Warrantholder upon any exercise of
this Warrant (or otherwise in respect hereof) shall be limited to the extent
necessary to insure that, following such exercise (or other issuance), the total
number of shares of Common Stock then beneficially owned by such Warrantholder
and its Affiliates and any other Persons whose beneficial ownership of Common
Stock would be aggregated with the Warrantholder's for purposes of Section 13(d)
of the Exchange Act, does not exceed 9.999% of the total number of issued and
outstanding shares of Common Stock (including for such purpose the shares of
Common Stock issuable upon such exercise). For such purposes, beneficial
ownership shall be determined in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder. This provision shall
not restrict the number of shares of Common Stock which a Holder may receive or
beneficially own in order to determine the amount of securities or other
consideration that such Holder may receive in the event of a transaction
contemplated by Section 8 of this Warrant. This restriction may not be waived.

 

Section 20.    No Rights as Stockholder. Prior to the exercise of this Warrant,
the Warrantholder shall not have or exercise any rights as a stockholder of the
Company by virtue of its ownership of this Warrant.

 

Section 21.    Amendment; Waiver. This Warrant is one of a series of Series C
Warrants of like tenor issued by the Company pursuant to the Purchase Agreement
and initially covering an aggregate of 378,787 shares of Common Stock
(collectively, the “Company Warrants”). Any term of this Warrant may be amended
or waived (including the adjustment provisions included in Section 8 of this
Warrant) upon the written consent of the Company and the holders of Company
Warrants representing at least 50% of the number of shares of Common Stock then
subject to all outstanding Company Warrants (the “Majority Holders”); provided,
that (x) any such amendment or waiver must apply to all Company Warrants; and
(y) the number of Warrant

 

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Shares subject to this Warrant, the Warrant Price and the Expiration Date may
not be amended, and the right to exercise this Warrant may not be altered or
waived, without the written consent of the Warrantholder.

 

Section 23.    Section Headings. The section headings in this Warrant are for
the convenience of the Company and the Warrantholder and in no way alter,
modify, amend, limit or restrict the provisions hereof.

 

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IN WITNESS WHEREOF, the Company has caused this Series C Warrant to be duly
executed, as of the ______ day of ___________, 200_.

 

MEDIA SCIENCES INTERNATIONAL, INC.

 

 

 

By:___________________________

 

Name: Michael W. Levin

 

Title: Chief Executive Officer and President

 

 

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APPENDIX A

MEDIA SCIENCES INTERNATIONAL, INC.

WARRANT EXERCISE FORM

 

To Media Sciences International, Inc.:

 

The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant (“Warrant”) for, and to purchase thereunder by
the payment of the Warrant Price and surrender of the Warrant, _______________
shares of Common Stock (“Warrant Shares”) provided for therein, and requests
that certificates for the Warrant Shares be issued as follows:

 

_______________________________

 

Name

 

________________________________

Address

 

________________________________

________________________________

Federal Tax ID or Social Security No.

 

 

and delivered by

(certified mail to the above address, or

 

(electronically (provide DWAC Instructions:___________________), or

(other (specify): __________________________________________).

 

 

and, if the number of Warrant Shares shall not be all the Warrant Shares
purchasable upon exercise of the Warrant, that a new Warrant for the balance of
the Warrant Shares purchasable upon exercise of this Warrant be registered in
the name of the undersigned Warrantholder or the undersigned’s Assignee as below
indicated and delivered to the address stated below.

 

Dated: ___________________, ____

 

Note: The signature must correspond
with              Signature:______________________________

the name of the Warrantholder as written

on the first page of the Warrant in every

______________________________

particular, without alteration or enlargement

Name (please print)

 

or any change whatever, unless the Warrant

 

has been assigned.

______________________________

 

______________________________

 

Address

 

 

______________________________

 

Federal Identification or

 

 

Social Security No.

 

 

Assignee:

 

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_______________________________

_______________________________

_______________________________

 

 

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APPENDIX B

MEDIA SCIENCES INTERNATIONAL, INC.

NET ISSUE ELECTION NOTICE

 

To: Media Sciences International, Inc.

 

Date:[_________________________]

 

The undersigned hereby elects under Section 18 of this Warrant to surrender the
right to purchase [____________] shares of Common Stock pursuant to this Warrant
and hereby requests the issuance of [_____________] shares of Common Stock. The
certificate(s) for the shares issuable upon such net issue election shall be
issued in the name of the undersigned or as otherwise indicated below.

 

_________________________________________

Signature

 

_________________________________________

Name for Registration

 

_________________________________________

Mailing Address

 

 

 

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