Exhibit 10.1

 

WAIVER AGREEMENT

 

This Waiver Agreement (this “Agreement”), is made and entered into as of April 
18, 2008, by and among Riptide Worldwide, Inc. (formerly Shea Development
Corp.), a Nevada corporation (the “Company”), CAMOFI MASTER LDC, a Cayman
Islands limited duration company (“CAMOFI”), and CAMHZN Master LDC, a Cayman
Islands limited duration company (“CAMHZN”), (CAMOFI and CAMHZN are collectively
referred to as  the “Holders”).

 

RECITALS

 

WHEREAS, the Company and Holders are parties to that certain Securities Purchase
Agreement dated as of July 13, 2007 (the “Purchase Agreement”), pursuant to
which the Company issued to Holders Senior Secured Notes in the aggregate
principal amount of $7,222,222 (the “Notes”), and warrants to purchase shares of
the Company’s common stock, no par value per share (the “Common Stock”);

 

WHEREAS, the Company has incurred certain Events of Default (as such term is
defined in the Notes) under the Notes and the Registration Rights Agreement
dated as of July 13, 2007 among the Company and the Holders (the “RRA”);

 

WHEREAS, the Company has requested that the Holders agree to waive all such
Events of Default;

 

WHEREAS, Holders have agreed to waive all such Events of Default, subject to the
terms and conditions set forth in this Agreement; and

 

WHEREAS, capitalized terms used herein, but not otherwise defined, shall have
the meanings ascribed to such terms as set forth in the Purchase Agreement,
Notes, RRA, and other documents and instruments executed and delivered in
connection therewith (collectively, the “Transaction Documents”).

 

WITNESSETH

 

NOW, THEREFORE, in consideration of the terms and conditions contained in this
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties, intending to be
legally bound hereby, agree as follows:

 

1.             Capitalized Terms.      Capitalized terms used and not defined
herein shall have the meaning ascribed to them in the applicable Transaction
Document.

 

2.             Incorporation of Preliminary Statements and Acknowledgement.  The
preliminary statements set forth above are hereby incorporated into this
Agreement and made a part hereof.  Without limiting the foregoing, the Company
hereby acknowledges that the Existing Defaults have occurred and are continuing
under the terms of the Transaction Documents, and, notwithstanding anything to
the contrary contained in this Agreement or in any Transaction Document, the
Company acknowledges and agrees that upon any breach of this Agreement by the
Company, such breach shall reinstate the Event of Default under the applicable
Transaction Document being waived hereby, whereupon Holder shall have the right
to immediately pursue any remedy which may be available to it under any
applicable Transaction Document, including without limitation its right to
enforce payment of all of the Obligations and, in connection therewith, without
further notice, to enforce its liens on, and security interests in, the
Collateral. The Company hereby acknowledges and agrees that in the event of any
breach of this Agreement by the Company, any payments made by it through the
date of such breach shall be applied in the following order: (i) first, to the
payment of any and all liquidated damages, penalties and Late Fees due and owing
to Holders, (ii) second, to the payment of interest due and owing to Holders,
and (iii) third, to the payment of principal due and owing to Holders.

 

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3.             Waiver of Existing Defaults Only.  Subject to the provisions of
Section 2 hereof, each of the Holders agrees to waive (the “Waiver”), its
respective rights and remedies against the Company, including without
limitation, acceleration of the Notes, in each case solely in connection with,
and as they relate to, the prior occurrence of the Events of Default in
existence as of the date hereof (the “Existing Defaults”).  Notwithstanding
anything herein contained to the contrary, this Waiver is limited only to the
Existing Defaults, and any future Events of Default, including without
limitation, a breach of this Agreement, shall not be deemed waived hereunder.

 

4.             Consideration for Waiver of Existing Defaults. (a)  In
consideration for Holders granting the Waiver, the Company shall compensate
Holders as follows:

 

(a) Following the execution hereof, on or before April 25, 2008, the Company
shall pay by wire transfer of immediately available funds, $1.6 million to
CAMOFI, and $400,000 to CAMHZN;

 

(b) Simultaneously with the execution hereof, the Company shall issue to
(i) CAMOFI warrants to acquire 1,259,555 shares of Common Stock, and (ii) CAMHZN
warrants to acquire 314,889 shares of Common Stock (collectively, the
“Warrants”). The Warrants shall be in the form annexed hereto as Exhibit A;

 

(c) On or before May 15, 2008, the Company shall pay by wire transfer of
immediately available funds, $4 million to CAMOFI, and $1 million to CAMHZN;

 

(d)  On or before June 15, 2008, the Company shall pay by wire transfer of
immediately available funds, $600,000 to CAMOFI, and $150,000 to CAMHZN; and

 

(e)    On or before June 30, 2008, the Company shall pay by wire transfer of
immediately available funds, $654,330 to CAMOFI, and $163,582 to CAMHZN.

 

5.             Conditions Precedent. The respective waivers and obligations of
the Holders hereunder are subject to the following conditions precedent being
met:

 

i.               the accuracy in all material respects of the representations
and warranties of the Company contained herein;

 

ii.              all obligations, covenants and agreements of the Company
required to be performed hereunder shall have been performed;

 

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iii.            within seven (7) days of the date hereof, the Company shall
deliver to Holders an opinion of its legal counsel in form and substance
satisfactory to Holders, addressed to the Holders and the Company’s transfer
agent, which opinion shall provide that all securities currently held by the
Holders, other than the Warrants and the shares of the Company’s common stock,
par value $.001 per share (the “shares”), issuable upon exercise of the
Warrants, shall be freely tradable under Rule 144 (“Rule 144”) promulgated under
the Securities Act of 1933, as amended;

 

iv.            within seven (7) days of the six (6) month anniversary of the
date of this Agreement, the Company shall deliver to Holders an opinion of its
legal counsel in form and substance satisfactory to Holders, addressed to the
Holders and the Company’s transfer agent, which opinion shall provide that,
assuming the Holders exercise the Warrants pursuant to the cashless exercise
provisions contained therein, the Shares shall be freely tradable under
Rule 144;

 

v.             the Company shall take any and all action necessary or
appropriate to cooperate with the Holders to facilitate any proposed sale of the
Company’s securities held by such Holders, including without limitation,
delivering any other opinions of counsel which may be required, directing its
transfer agent to take any and all action necessary or appropriate to facilitate
any such proposed sales, and delivering appropriate stock certificates in a
timely manner;

 

vi.            the Company shall comply with all of its filing obligations under
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder, including without limitation, timely filing any and all
Forms and reports necessary or appropriate to be filed pursuant thereto; and

 

vii.           the Company shall deliver the Warrants.

 

6.             Representations and Warranties of the Company.  The Company
hereby makes to the Holders the following representations and warranties:

 

i.  Authorization; Enforcement.  The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
this Agreement and otherwise to carry out its obligations hereunder and
thereunder.  The execution and delivery of this Agreement by the Company and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary action on the part of the Company and no further
action is required by the Company, its board of directors or its stockholders in
connection therewith.  This Agreement has been duly executed by the Company and,
when delivered in accordance with the terms hereof will constitute the valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms except (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors’ rights generally,
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies, and (iii) insofar as
indemnification and contribution provisions may be limited by applicable law.

 

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ii.  No Conflicts.  The execution, delivery and performance of this Agreement by
the Company and the consummation by the Company of the transactions contemplated
hereby do not and will not: (i) conflict with or violate any provision of the
Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws
or other organizational or charter documents, or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, result in the creation of any Lien (except as
contemplated by the Transaction Documents) upon any of the properties or assets
of the Company or any Subsidiary, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice, lapse of time
or both) of, any material agreement, credit facility, debt or other material
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
material understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) conflict with or result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority to which the Company or a Subsidiary is subject
(including federal and state securities laws and regulations), or by which any
property or asset of the Company or a Subsidiary is bound or affected; except in
the case of each of clauses (ii) and (iii), such as could not have or reasonably
be expected to result in a Material Adverse Effect.

 

7.             Representations and Warranties of the Holders.  Each Holder
represents and warrants as of the date hereof to the Company, severally and not
jointly, as follows:

 

i.                 Authority.  The execution, delivery and performance by such
Holder of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate or similar action on the part of such
Holder.  This Agreement has been duly executed by such Holder, and when
delivered by such Holder in accordance with the terms hereof, will constitute
the valid and legally binding obligation of such Holder, enforceable against it
in accordance with its terms, except (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors’ rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies, and (iii) insofar as
indemnification and contribution provisions may be limited by applicable law.

 

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8.           Effect on Transaction Documents.  Except as expressly provided
herein, all of the terms and conditions of all of the Transaction Documents
shall continue in full force and effect after the execution of this Agreement
and shall not be in any way changed, modified or superseded by the terms set
forth herein, including but not limited to, any other obligations the Company
may have to the Holder under any of such Transaction Documents.  Except as
expressly set forth herein, this Agreement shall not be deemed to be a waiver,
amendment or modification of any provisions of any of the Transaction Documents
or of any right, power or remedy of the Holder, or constitute a waiver of any
provision of any Transaction Documents (except to the extent expressly herein
set forth), or any other document, instrument and/or agreement executed or
delivered in connection therewith, in each case whether arising before or after
the date hereof or as a result of performance hereunder or thereunder.  The
Holder reserves all rights, remedies, powers, or privileges available under each
of the Transaction Documents, at law or otherwise.  This Agreement shall not
constitute a novation or satisfaction and accord of any Transaction Documents or
any other document, instrument and/or agreement executed or delivered in
connection therewith. Notwithstanding anything contained in this Section 8 to
the contrary, the Company’s obligations under the Purchase Agreement and all
other Transaction Documents, except for (i) the Warrants, and (ii) the warrants
to acquire Common Stock issued to the CAM Entities on July 13, 2007 (the “2007
Warrants”), shall terminate and be of no further force and effect simultaneously
with the Company’s satisfaction in full of all of its obligations under this
Agreement, except that the Purchase Agreement shall survive for the sole purpose
of providing definitions for capitalized terms which are used and not defined
herein. The Company’s obligations under this Agreement, the Warrants and the
2007 Warrants shall continue in full until the earlier to occur of (i) the
expiration of all of the Warrants and the 2007 Warrants, and (ii) the sale by
the CAM Entities of all of the shares of Common Stock issuable upon exercise of
all of the Warrants and the 2007 Warrants.

 

9.           Release of all Claims.  THE COMPANY (FOR ITSELF AND ITS AFFILIATES)
HEREBY UNCONDITIONALLY RELEASES AND FOREVER DISCHARGES HOLDER AND ITS
SUCCESSORS, ASSIGNS, AGENTS, DIRECTORS, OFFICERS, EMPLOYEES, AFFILIATES,
ACCOUNTANTS, CONSULTANTS, CONTRACTORS, ADVISORS AND ATTORNEYS (COLLECTIVELY, THE
“BENEFITED PARTIES”) FROM ANY AND ALL CLAIMS (AS DEFINED BELOW) AND AGREES TO
INDEMNIFY THE BENEFITED PARTIES, AND HOLD THEM HARMLESS FROM ANY AND ALL CLAIMS,
LOSSES, CAUSES OF ACTION, COSTS AND EXPENSES OF EVERY KIND OR CHARACTER IN
CONNECTION WITH THE CLAIMS, AS INCURRED.  AS USED IN THIS AGREEMENT, THE TERM
“CLAIMS” MEANS ANY AND ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTIONS,
COSTS, EXPENSES AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, AT LAW OR IN
EQUITY, ORIGINATING IN WHOLE OR IN PART, WHICH THE COMPANY, OR ANY OF ITS
AGENTS, EMPLOYEES OR AFFILIATES MAY NOW OR HEREAFTER HAVE OR CLAIM AGAINST ANY
OF THE BENEFITED PARTIES AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT
OF CONTRACT, TORT, VIOLATION OF LAW OR OTHERWISE IN CONNECTION WITH ANY OF THE
TRANSACTION DOCUMENTS, INCLUDING ANY CONTRACTING FOR, CHARGING, TAKING,
RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE MAXIMUM RATE ON
INTEREST CHARGEABLE UNDER APPLICABLE LAW AND ANY LOSS, COST OR DAMAGE, OF ANY
KIND OR CHARACTER, ARISING OUT OF OR IN ANY WAY CONNECTED WITH OR IN ANY WAY
RESULTING FROM THE ACTIONS OR OMISSIONS OF THE BENEFITED PARTIES, INCLUDING ANY
BREACH OF FIDUCIARY DUTY, BREACH OF ANY DUTY OF GOOD FAITH OR FAIR DEALING,
UNDUE INFLUENCE, DURESS, ECONOMIC COERCION, CONFLICT OF INTEREST, NEGLIGENCE,
BAD FAITH, MALPRACTICE, VIOLATIONS OF THE RACKETEER INFLUENCED AND CORRUPT
ORGANIZATIONS ACT, INTENTIONAL OR NEGLIGENT INFLICTION OF MENTAL DISTRESS,
TORTIOUS INTERFERENCE WITH CONTRACTUAL RELATIONS, TORTIOUS INTERFERENCE WITH
CORPORATE GOVERNANCE OR PROSPECTIVE BUSINESS ADVANTAGE, BREACH OF CONTRACT,
DECEPTIVE TRADE PRACTICES, LIBEL, SLANDER, CONSPIRACY OR ANY CLAIM FOR
WRONGFULLY ACCELERATING ANY OBLIGATIONS OR WRONGFULLY ATTEMPTING TO FORECLOSE ON
ANY COLLATERAL.  THE COMPANY (FOR ITSELF AND ITS AFFILIATES) AGREES THAT NONE OF
THE BENEFITED PARTIES HAS FIDUCIARY OR SIMILAR OBLIGATIONS TO THE COMPANY OR ANY
AGENTS, EMPLOYEES OR AFFILIATES OF THE COMPANY AND THAT THEIR RELATIONSHIPS ARE
STRICTLY THAT OF CREDITOR AND DEBTOR.  THIS RELEASE IS ACCEPTED BY THE HOLDERS
PURSUANT TO THIS AGREEMENT AND SHALL NOT BE CONSTRUED AS AN ADMISSION OF
LIABILITY BY HOLDERS OR ANY OTHER BENEFITED PARTY.

 

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THE COMPANY (FOR ITSELF AND ITS AFFILIATES) ACKNOWLEDGES THAT THE FOREGOING
PROVISIONS ARE INTENDED TO, AND THE TRANSACTION DOCUMENTS CONTAIN PROVISIONS
WHICH, RELEASE HOLDER FROM LIABILITY AND/OR INDEMNIFY AND HOLD HARMLESS HOLDER
FOR, AMONG OTHER THINGS, THE ORDINARY NEGLIGENCE OF HOLDER.  THE COMPANY (FOR
ITSELF AND ITS AFFILIATES) AGREES THAT THE RELEASE AND/OR INDEMNITY PROVISIONS
CONTAINED IN THESE DOCUMENTS ARE CAPTIONED TO CLEARLY IDENTIFY THE RELEASE
AND/OR INDEMNITY PROVISIONS AND, THEREFORE, ARE SO CONSPICUOUS THAT THE COMPANY
AND ITS AFFILIATES HAVE FAIR NOTICE OF THE EXISTENCE AND CONTENTS OF SUCH
PROVISIONS.

 

10.           Filing of Form 8-K.  On or before 9:30 am (NY time) on the fourth
Trading Day immediately following the date hereof, the Company shall file a
Current Report on Form 8-K, reasonably acceptable to Holder disclosing the
material terms of the transactions contemplated hereby, which shall include this
Agreement as an attachment thereto.

 

11.           Expenses.  Except as expressly set forth herein, 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.

 

12.           Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders.

 

13.           Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be delivered as set forth
in the applicable Transaction Document.

 

14.           Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of each of the
parties and shall inure to the benefit of the Holders. The Company may not
assign (except by merger) its rights or obligations hereunder without the prior
written consent of the Holders.  The Holders may assign their respective rights
hereunder in the manner and to the Persons as permitted under the applicable
Transaction Document.

 

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15.           Execution and Counterparts. 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 by e-mail delivery of a
“.pdf” format data 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”
signature page were an original thereof.

 

16.           Governing Law.  This Agreement shall be governed by and construed
in accordance with the laws of the State of New York pertaining to agreements to
be delivered and wholly performed within said State.

 

17.           Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their commercially reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.

 

18.           Headings. The headings in this Agreement are for convenience only,
do not constitute a part of the Agreement and shall not be deemed to limit or
affect any of the provisions hereof.

 

19.           Independent Nature of Holders’ Obligations and Rights.  The
Company has elected to provide all Holders with substantially the same terms and
form of waiver for the convenience of the Company and not because it was
required or requested to do so by the Holders.  The obligations of each Holder
under this Agreement and any Transaction Document are several and not joint with
the obligations of any other Holder, and no Holder shall be responsible in any
way for the performance or non-performance of the obligations of any other
Holder under this consent and waiver or any Transaction Document. Nothing
contained herein or in any Transaction Document, and no action taken by any
Holder pursuant thereto, shall be deemed to constitute the Holders as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Holders are in any way acting in concert or as a
group with respect to such obligations or the transactions contemplated by this
consent and waiver or the Transaction Documents.  Each Holder shall be entitled
to independently protect and enforce its rights, including without limitation,
the rights arising out of this consent and waiver or out of the other
Transaction Documents, and it shall not be necessary for any other Holder to be
jointed as an additional party in any proceeding for such purpose. Each Holder
has been represented by its own separate legal counsel in their review and
negotiation of this Agreement and the Transaction Documents.

 

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[SIGNATURE PAGE FOLLOWS]

 

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

 

 

 

RIPTIDE WORLDWIDE, INC.

 

 

 

 

 

By:

 

 

 

Name: Francis E. Wilde

 

 

Title: CEO

 

 

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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR HOLDERS FOLLOW]

 

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[HOLDER’S SIGNATURE PAGE TO RIPTIDE WAIVER AGREEMENT]

 

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

 

 

Name of Holder:

 

 

 

 

Signature of Authorized Signatory of Holder:

 

 

 

 

Name of Authorized Signatory:

 

 

 

 

Title of Authorized Signatory:

 

 

 

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[HOLDER’S SIGNATURE PAGE TO RIPTIDE WAIVER AGREEMENT]

 

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

 

 

Name of Holder:

 

 

 

 

Signature of Authorized Signatory of Holder:

 

 

 

 

Name of Authorized Signatory:

 

 

 

 

Title of Authorized Signatory:

 

 

 

[SIGNATURE PAGES CONTINUE]

 

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EXHIBIT A

 

Form of Warrant

 

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NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.

 

COMMON STOCK PURCHASE WARRANT

 

To Purchase                Shares of Common Stock of

 

RIPTIDE WORLDWIDE INC.

 

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value
received,                  (the “Holder”), is entitled, upon the terms and
subject to the limitations on exercise and the conditions hereinafter set forth,
at any time on or after the date hereof (the “Initial Exercise Date”) and on or
prior to the close of business on April       , 2013, the five year anniversary
of the Initial Exercise Date (the “Termination Date”) but not thereafter, to
subscribe for and purchase from Riptide Worldwide, Inc., a Nevada corporation
(the “Company”),            shares (the “Warrant Shares”) of Common Stock, par
value $0.001 per share, of the Company (the “Common Stock”).  The purchase price
of one share of Common Stock under this Warrant shall be equal to the Exercise
Price, as defined in Section 2(b).

 

Section 1.                                            Definitions.  Capitalized
terms used and not otherwise defined herein shall have the meanings set forth in
that certain Securities Purchase Agreement (the “Purchase Agreement”), dated
July 13, 2007, between the Company and the Holder.

 

Section 2.                    Exercise.

 

a)                                      Exercise of Warrant.  Exercise of the
purchase rights represented by this Warrant may be made at any time or times on
or after the Initial Exercise Date and on or before the Termination Date by
delivery to the Company of a duly executed facsimile copy of the Notice of
Exercise Form annexed  hereto (or 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); provided, however, within 5
Trading Days of the date said Notice of Exercise is delivered to the Company,
the Holder shall have surrendered this Warrant to the Company and the Company
shall have received  payment of the aggregate Exercise Price of the shares
thereby purchased by wire transfer or cashier’s check drawn on a United States
bank.

 

b)                                     Exercise Price.  The exercise price of
the Common Stock under this Warrant shall be $.00001, subject to adjustment
hereunder (the “Exercise Price”).

 

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c)                                      Cashless Exercise.  If there is no
registration statement covering the resale of the Warrant Shares, this Warrant
may also be exercised by means of a “cashless exercise” in which the Holder
shall be entitled to receive a certificate for the number of Warrant Shares
equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

 

(A) = the VWAP on the Trading Day immediately preceding the date of such
election;

 

(B) = the Exercise Price of this Warrant, as adjusted; and

 

(X) = the number of Warrant Shares issuable upon exercise of this Warrant in
accordance with the terms of this Warrant by means of a cash exercise rather
than a cashless exercise.

 

d)                                     Exercise Limitations; Holder’s
Restrictions.  The Holder shall not have the right to exercise any portion of
this Warrant, pursuant to Section 2(c) or otherwise, to the extent that after
giving effect to such issuance after exercise, the Holder (together with the
Holder’s affiliates), as set forth on the applicable Notice of Exercise, would
beneficially own in excess of 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to such issuance.  For purposes of
the foregoing sentence, the number of shares of Common Stock beneficially owned
by the Holder and its affiliates shall include the number of shares of Common
Stock issuable upon exercise of this Warrant with respect to which the
determination of such sentence is being made, but shall exclude the number of
shares of Common Stock which would be issuable upon (A) exercise of the
remaining, nonexercised portion of this Warrant beneficially owned by the Holder
or any of its affiliates and (B) exercise or conversion of the unexercised or
nonconverted portion of any other securities of the Company (including, without
limitation, any other Notes or Warrants) subject to a limitation on conversion
or exercise analogous to the limitation contained herein beneficially owned by
the Holder or any of its affiliates.  Except as set forth in the preceding
sentence, for purposes of this Section 2(d), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act, it being
acknowledged by Holder that the Company is not representing to Holder that such
calculation is in compliance with Section 13(d) of the Exchange Act and Holder
is solely responsible for any schedules required to be filed in accordance
therewith.   To the extent that the limitation contained in this
Section 2(d) applies, the determination of whether this Warrant is exercisable
(in relation to other securities owned by the Holder) and of which a portion of
this Warrant is exercisable shall be in the sole discretion of such Holder, and
the submission of a Notice of Exercise shall be deemed to be such Holder’s
determination of whether this Warrant is exercisable (in relation to other
securities owned by such Holder) and of which portion of this Warrant is
exercisable, in each case subject to such aggregate percentage limitation, and
the Company shall have no obligation to verify or confirm the accuracy of such
determination.  For purposes of this Section 2(d), in determining the number of
outstanding shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as reflected in (x) the Company’s most recent
Form 10-QSB or Form 10-KSB, as the case may be, (y) a more recent public
announcement by the Company or (z) any other notice by the Company or the
Company’s Transfer Agent setting forth the number of shares of Common Stock
outstanding.  Upon the written or oral request of the Holder, the Company shall
within two Trading Days confirm orally and in writing to the Holder the number
of shares of Common Stock then outstanding.  In any case, the number of
outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including this Warrant,
by the Holder or its affiliates since the date as of which such number of
outstanding shares of Common Stock was reported.  The provisions of this
Section 2(d) may be waived by the Holder upon, at the election of the Holder,
not less than 61 days’ prior notice to the Company, and the provisions of this
Section 2(d) shall continue to apply until such 61st day (or such later date, as
determined by the Holder, as may be specified in such notice of waiver).

 

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e)                                      Mechanics of Exercise.

 

i)                                         Authorization of Warrant Shares.  The
Company covenants that all Warrant Shares which may be issued upon the exercise
of the purchase rights represented by this Warrant will, upon exercise of the
purchase rights represented by this Warrant, be duly authorized, validly issued,
fully paid and nonassessable and free from all taxes, liens and charges in
respect of the issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).  The Company covenants that during
the period the Warrant is outstanding, it will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of the Warrant Shares upon the exercise of any purchase rights under this
Warrant.  The Company further covenants that its issuance of this Warrant shall
constitute full authority to its officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates for
the Warrant Shares upon the exercise of the purchase rights under this Warrant. 
The Company will take all such reasonable action as may be necessary to assure
that such Warrant Shares may be issued as provided herein without violation of
any applicable law or regulation, or of any requirements of the Trading Market
upon which the Common Stock may be listed.

 

ii)                                      Delivery of Certificates Upon
Exercise.  Certificates for shares purchased 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 through its Deposit
Withdrawal Agent Commission (“DWAC”) system if the Company is a participant in
such system, and otherwise by physical delivery to the address specified by the
Holder in the Notice of Exercise within 3 Trading Days from the delivery to the
Company of the Notice of Exercise Form, surrender of this Warrant and payment of
the aggregate Exercise Price as set forth above (“Warrant Share Delivery
Date”).  This Warrant shall be deemed to have been exercised on the date the
Exercise Price is received by the Company.  The Warrant Shares shall be deemed
to have been issued, and Holder or any other person so designated to be named
therein shall be deemed to have become a holder of record of such shares for all
purposes, as of the date the Warrant has been exercised by payment to the
Company of the Exercise Price and all taxes required to be paid by the Holder,
if any, pursuant to Section 2(e)(vii) prior to the issuance of such shares, have
been paid.

 

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iii)                                   Delivery of New Warrants Upon Exercise. 
If this Warrant shall have been exercised in part, the Company shall, at the
time of delivery of the certificate or certificates representing Warrant Shares,
deliver to Holder a new Warrant evidencing the rights of Holder to purchase the
unpurchased Warrant Shares called for by this Warrant, which new Warrant shall
in all other respects be identical with this Warrant.

 

iv)                                  Rescission Rights.  If the Company fails to
cause its transfer agent to transmit to the Holder a certificate or certificates
representing the Warrant Shares pursuant to this Section 2(e)(iv) by the Warrant
Share Delivery Date, then the Holder will have the right to rescind such
exercise.

 

v)                                     Compensation for Buy-In on Failure to
Timely Deliver Certificates Upon Exercise.  In addition to any other rights
available to the Holder, if the Company fails to cause its transfer agent to
transmit to the Holder a certificate or certificates representing the Warrant
Shares pursuant to an exercise on or before the Warrant Share Delivery Date, and
if after such date the Holder is required by its broker to purchase (in an open
market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Warrant Shares which the Holder
anticipated receiving upon such exercise (a “Buy-In”), then the Company shall
(1) pay in cash to the Holder the amount by which (x) the Holder’s total
purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the
number of Warrant Shares that the Company was required to deliver to the Holder
in connection with the exercise at issue times (B) the price at which the sell
order giving rise to such purchase obligation was executed, and (2) at the
option of the Holder, either reinstate the portion of the Warrant and equivalent
number of Warrant Shares for which such exercise was not honored or deliver to
the Holder the number of shares of Common Stock that would have been issued had
the Company timely complied with its exercise and delivery obligations
hereunder.  For example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted
exercise of shares of Common Stock with an aggregate sale price giving rise to
such purchase obligation of $10,000, under clause (1) of the immediately
preceding sentence the Company shall be required to pay the Holder $1,000. The
Holder shall provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In, together with applicable confirmations
and other evidence reasonably requested by the Company.  Nothing herein shall
limit a Holder’s right to pursue any other remedies available to it hereunder,
at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company’s failure to
timely deliver certificates representing shares of Common Stock upon exercise of
the Warrant as required pursuant to the terms hereof.

 

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vi)           No Fractional Shares or Scrip.  No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant.  As to any fraction of a share which Holder would otherwise be entitled
to purchase upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to such fraction multiplied by
the Exercise Price.

 

vii)          Charges, Taxes and Expenses.  Issuance of certificates for Warrant
Shares shall be made without charge to the Holder for any issue or transfer tax
or other incidental expense in respect of the issuance of such certificate, all
of which taxes and expenses shall be paid by the Company, and such certificates
shall be issued in the name of the Holder or in such name or names as may be
directed by the Holder; provided, however, that in the event certificates for
Warrant Shares are to be issued in a name other than the name of the Holder,
this Warrant when surrendered for exercise shall be accompanied by the
Assignment Form attached hereto duly executed by the Holder; and the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.

 

viii)         Closing of Books.  The Company will not close its stockholder
books or records in any manner which prevents the timely exercise of this
Warrant, pursuant to the terms hereof.

 

Section 3.                    Certain Adjustments.

 

a)                                      Stock Dividends and Splits. If the
Company, at any time while this Warrant is outstanding: (A) pays a stock
dividend or otherwise make a distribution or distributions on shares of its
Common Stock or any other equity or equity equivalent securities payable in
shares of Common Stock (which, for avoidance of doubt, shall not include any
shares of Common Stock issued by the Company pursuant to this Warrant),
(B) subdivides outstanding shares of Common Stock into a larger number of
shares, (C) combines (including by way of reverse stock split) outstanding
shares of Common Stock into a smaller number of shares, or (D) issues by
reclassification of shares of the Common Stock any shares of capital stock of
the Company, then in each case the Exercise Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding before such event and of which
the denominator shall be the number of shares of Common Stock outstanding after
such event and the number of shares issuable upon exercise of this Warrant shall
be proportionately adjusted.  Any adjustment made pursuant to this
Section 3(a) shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision, combination or re-classification.

 

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b)                                     Subsequent Equity Sales. If the Company
or any Subsidiary thereof, as applicable, at any time while this Warrant is
outstanding, shall offer, sell, grant any option to purchase or offer, sell or
grant any right to reprice its securities, or otherwise dispose of or issue (or
announce any offer, sale, grant or any option to purchase or other disposition)
any Common Stock or Common Stock Equivalents entitling any Person to acquire
shares of Common Stock, at an effective price per share less than the then
Exercise Price (such lower price, the “Base Share Price” and such issuances
collectively, a “Dilutive Issuance”), as adjusted hereunder (if the holder of
the Common Stock or Common Stock Equivalents so issued shall at any time,
whether by operation of purchase price adjustments, reset provisions, floating
conversion, exercise or exchange prices or otherwise, or due to warrants,
options or rights per share which is issued in connection with such issuance, be
entitled to receive shares of Common Stock at an effective price per share which
is less than the Exercise Price, such issuance shall be deemed to have occurred
for less than the Exercise Price), then, the Exercise Price shall be reduced to
equal the Base Share Price and the number of Warrant Shares issuable hereunder
shall be increased such that the aggregate Exercise Price payable hereunder,
after taking into account the decrease in the Exercise Price, shall be equal to
the aggregate Exercise Price prior to such adjustment. Such adjustment shall be
made whenever such Common Stock or Common Stock Equivalents are issued.  Such
adjustment shall be made whenever such Common Stock or Common Stock Equivalents
are issued.  The Company shall notify the Holder in writing, no later than the
Trading Day following the issuance of any Common Stock or Common Stock
Equivalents subject to this section, indicating therein the applicable issuance
price, or of applicable reset price, exchange price, conversion price and other
pricing terms (such notice the “Dilutive Issuance Notice”).  For purposes of
clarification, whether or not the Company provides a Dilutive Issuance Notice
pursuant to this Section 3(b), upon the occurrence of any Dilutive Issuance,
after the date of such Dilutive Issuance the Holder is entitled to receive a
number of Warrant Shares based upon the Base Share Price regardless of whether
the Holder accurately refers to the Base Share Price in the Notice of Exercise.

 

c)                                      Adjustments for Combinations/Reverse
Stock Splits.  In addition to the provisions of Section 3(a) (and after
application of such provisions), if the Company, at any time while the Notes are
outstanding combines (including by way of reverse stock split) outstanding
shares of Common Stock into a smaller number of shares, the Conversion Price
shall be adjusted to the lower of (i) the Conversion Price immediately after
such combination and (ii) the VWAP of the Common Stock for the thirtieth (30th)
through the fortieth (40th) Trading Day (inclusive) after such combination was
effectuated.

 

d)                                     Pro Rata Distributions.  If the Company,
at any time prior to the Termination Date, shall distribute to all holders of
Common Stock (and not to Holders of the Warrants) evidences of its indebtedness
or assets or rights or warrants to subscribe for or purchase any security other
than the Common Stock (which shall be subject to Section 3(b)), then in each
such case the Exercise Price shall be adjusted by multiplying the Exercise Price
in effect immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of which the
denominator shall be the VWAP determined as of the record date mentioned above,
and of which the numerator shall be such VWAP on such record date less the then
per share fair market value at such record date of the portion of such assets or
evidence of indebtedness so distributed applicable to one outstanding share of
the Common Stock as determined by the Board of Directors in good faith.  In
either case the adjustments shall be described in a statement provided to the
Holders of the portion of assets or evidences of indebtedness so distributed or
such subscription rights applicable to one share of Common Stock.  Such
adjustment shall be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above.

 

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e)                                      Calculations. All calculations under
this Section 3 shall be made to the nearest cent or the nearest 1/100th of a
share, as the case may be. The number of shares of Common Stock outstanding at
any given time shall not includes shares of Common Stock owned or held by or for
the account of the Company, and the description of any such shares of Common
Stock shall be considered on issue or sale of Common  Stock.  For purposes of
this Section 3, the number of shares of Common Stock deemed to be issued and
outstanding as of a given date shall be the sum of the number of shares of
Common Stock (excluding treasury shares, if any) issued and outstanding.

 

f)                                        Notice to Holders.

 

i.                                          Adjustment to Exercise Price.
Whenever the Exercise Price is adjusted pursuant to this Section 3, the Company
shall promptly mail to each Holder a notice setting forth the Exercise Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment. If the Company issues a variable rate security, despite the
prohibition thereon in the Purchase Agreement, the Company shall be deemed to
have issued Common Stock or Common Stock Equivalents at the lowest possible
conversion or exercise price at which such securities may be converted or
exercised in the case of a Variable Rate Transaction (as defined in the Purchase
Agreement), or the lowest possible adjustment price in the case of an MFN
Transaction (as defined in the Purchase Agreement).

 

ii.                                       Notice to Allow Exercise by Holder. If
(A) the Company shall declare a dividend (or any other distribution) on the
Common Stock; (B) the Company shall declare a special nonrecurring cash dividend
on or a redemption of the Common Stock; (C) the Company shall authorize the
granting to all holders of the Common Stock rights or warrants to subscribe for
or purchase any shares of capital stock of any class or of any rights; (D) the
approval of any stockholders of the Company shall be required in connection with
any reclassification of the Common Stock, any consolidation or merger to which
the Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, of any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property; (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Company; then, in each case, the Company shall cause to be
mailed to the Holder at its last addresses as it shall appear upon the Warrant
Register of the Company, at least 20 calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be determined or
(y) the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and the
date as of which it is expected that holders of the Common Stock of record shall
be entitled to exchange their shares of the Common Stock for securities, cash or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided, that the failure to mail such notice
or any defect therein or in the mailing thereof shall not affect the validity of
the corporate action required to be specified in such notice.  The Holder is
entitled to exercise this Warrant during the 20-day period commencing the date
of such notice to the effective date of the event triggering such notice.

 

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g)                                     Fundamental Transaction. If, at any time
while this Warrant is outstanding, (A) the Company effects any merger or
consolidation of the Company with or into another Person, (B) the Company
effects any sale of all or substantially all of its assets in one or a series of
related transactions, (C) any tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders of Common
Stock are permitted to tender or exchange their shares for other securities,
cash or property, or (D) the Company effects any reclassification of the Common
Stock or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property
(in any such case, a “Fundamental Transaction”), then, upon any subsequent
conversion of this Warrant, the Holder shall have the right to receive, for each
Warrant Share that would have been issuable upon such exercise absent such
Fundamental Transaction, at the option of the Holder, (a) upon exercise of this
Warrant, the number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation, and Alternate
Consideration receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a Holder of
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event or (b) cash equal to the value of this Warrant
as determined in accordance with the Black-Scholes option pricing formula (the
“Alternate Consideration”).  For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted to apply to
such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Exercise Price among the
Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of the Alternate Consideration.  If holders of Common
Stock are given any choice as to the securities, cash or property to be received
in a Fundamental Transaction, then the Holder shall be given the same choice as
to the Alternate Consideration it receives upon any exercise of this Warrant
following such Fundamental Transaction.  To the extent necessary to effectuate
the foregoing provisions, any successor to the Company or surviving entity in
such Fundamental Transaction shall issue to the Holder a new warrant consistent
with the foregoing provisions and evidencing the Holder’s right to exercise such
warrant into Alternate Consideration. The terms of any agreement pursuant to
which a Fundamental Transaction is effected shall include terms requiring any
such successor or surviving entity to comply with the provisions of this
paragraph (f) and insuring that this Warrant (or any such replacement security)
will be similarly adjusted upon any subsequent transaction analogous to a
Fundamental Transaction.

 

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h)                                     Exempt Issuance.  Notwithstanding the
foregoing, no adjustments, Alternate Consideration nor notices shall be made,
paid or issued under this Section 3 in respect of an Exempt Issuance.

 

i)                                         Voluntary Adjustment By Company. The
Company may at any time during the term of this Warrant reduce the then current
Exercise Price to any amount and for any period of time deemed appropriate by
the Board of Directors of the Company.

 

Section 4.                    Transfer of Warrant.

 

a)                                      Transferability.  Subject to compliance
with any applicable securities laws and the conditions set forth in Sections
5(a) and 4(d) hereof, this Warrant and all rights hereunder are transferable, in
whole or in part, upon surrender of this Warrant at the principal office of the
Company, together with a written assignment of this Warrant substantially in the
form attached hereto duly executed by the Holder or its agent or attorney and
funds sufficient to pay any transfer taxes payable upon the making of such
transfer.  Upon such surrender and, if required, such payment, the Company shall
execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees and in the denomination or denominations specified in such instrument
of assignment, and shall issue to the assignor a new Warrant evidencing the
portion of this Warrant not so assigned, and this Warrant shall promptly be
cancelled.  A Warrant, if properly assigned, may be exercised by a new holder
for the purchase of Warrant Shares without having a new Warrant issued.

 

b)                                     New Warrants. This Warrant may be divided
or combined with other Warrants upon presentation hereof at the aforesaid office
of the Company, together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by the Holder or
its agent or attorney.  Subject to compliance with Section 4(a), as to any
transfer which may be involved in such division or combination, the Company
shall execute and deliver a new Warrant or Warrants in exchange for the Warrant
or Warrants to be divided or combined in accordance with such notice.

 

c)                                      Warrant Register. The Company shall
register this Warrant, upon records to be maintained by the Company for that
purpose (the “Warrant Register”), in the name of the record Holder hereof from
time to time.  The Company may deem and treat the registered Holder of this
Warrant as the absolute owner hereof for the purpose of any exercise hereof or
any distribution to the Holder, and for all other purposes, absent actual notice
to the contrary.

 

d)                                      Transfer Restrictions. If, at the time
of the surrender of this Warrant in connection with any transfer of this
Warrant, the transfer of this Warrant shall not be registered pursuant to an
effective registration statement under the Securities Act and under applicable
state securities or blue sky laws, the Company may require, as a condition of
allowing such transfer (i) that the Holder or transferee of this Warrant, as the
case may be, furnish to the Company a written opinion of counsel (which opinion
shall be in form, substance and scope customary for opinions of counsel in
comparable transactions) to the effect that such transfer may be made without
registration under the Securities Act and under applicable state securities or
blue sky laws, (ii) that the holder or transferee execute and deliver to the
Company an investment letter in form and substance acceptable to the Company and
(iii) that the transferee be an “accredited investor” as defined in
Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8) promulgated under the
Securities Act or a qualified institutional buyer as defined in
Rule 144A(a) under the Securities Act.

 

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Section 5.                    Miscellaneous.

 

a)                                      Title to Warrant.  Prior to the
Termination Date and subject to compliance with applicable laws and Section 4 of
this Warrant, this Warrant and all rights hereunder are transferable, in whole
or in part, at the office or agency of the Company by the Holder in person or by
duly authorized attorney, upon surrender of this Warrant together with the
Assignment Form annexed hereto properly endorsed.  The transferee shall sign an
investment letter in form and substance reasonably satisfactory to the Company.

 

b)                                     No Rights as Shareholder Until Exercise. 
This Warrant 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 this Warrant and the payment of the aggregate Exercise Price (or by means of
a cashless exercise), the Warrant Shares so purchased shall be and be deemed to
be issued to such Holder as the record owner of such shares as of the close of
business on the later of the date of such surrender or payment.

 

c)                                      Loss, Theft, Destruction or Mutilation
of Warrant. The Company covenants that upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant or any stock certificate relating to the Warrant Shares, and in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it (which, in the case of the Warrant, shall not include the
posting of any bond), and upon surrender and cancellation of such Warrant or
stock certificate, if mutilated, the Company will make and deliver a new Warrant
or stock certificate of like tenor and dated as of such cancellation, in lieu of
such Warrant or stock certificate.

 

d)                                     Saturdays, Sundays, Holidays, etc.  If
the last or appointed day for the taking of any action or the expiration of any
right required or granted herein shall be a Saturday, Sunday or a legal holiday,
then such action may be taken or such right may be exercised on the next
succeeding day not a Saturday, Sunday or legal holiday.

 

e)                                      Authorized Shares. The Company covenants
that during the period the Warrant is outstanding, it will reserve from its
authorized and unissued Common Stock a sufficient number of shares to provide
for the issuance of the Warrant Shares upon the exercise of any purchase rights
under this Warrant.  The Company further covenants that its issuance of this
Warrant shall constitute full authority to its officers who are charged with the
duty of executing stock certificates to execute and issue the necessary
certificates for the Warrant Shares upon the exercise of the purchase rights
under this Warrant.  The Company will take all such reasonable action as may be
necessary to assure that such Warrant Shares may be issued as provided herein
without violation of any applicable law or regulation, or of any requirements of
the Trading Market upon which the Common Stock may be listed.

 

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Except and to the extent as waived or consented to by the Holder, the Company
shall not by any action, including, without limitation, amending its certificate
of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Holder as set forth in this
Warrant against impairment.  Without limiting the generality of the foregoing,
the Company will (a) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (b) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares upon the exercise of this Warrant, and (c) use commercially
reasonable efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be necessary
to enable the Company to perform its obligations under this Warrant.

 

Before taking any action which would result in an adjustment in the number of
Warrant Shares for which this Warrant is exercisable or in the Exercise Price,
the Company shall obtain all such authorizations or exemptions thereof, or
consents thereto, as may be necessary from any public regulatory body or bodies
having jurisdiction thereof.

 

f)                                        Jurisdiction. All questions concerning
the construction, validity, enforcement and interpretation of this Warrant shall
be determined in accordance with the provisions of the Purchase Agreement.

 

g)                                     Restrictions.  The Holder acknowledges
that the Warrant Shares acquired upon the exercise of this Warrant, if not
registered, will have restrictions upon resale imposed by state and federal
securities laws.

 

h)                                     Nonwaiver and Expenses.  No course of
dealing or any delay or failure to exercise any right hereunder on the part of
Holder shall operate as a waiver of such right or otherwise prejudice Holder’s
rights, powers or remedies, notwithstanding the fact that all rights hereunder
terminate on the Termination Date.  If the Company willfully and knowingly fails
to comply with any provision of this Warrant, which results in any material
damages to the Holder, the Company shall pay to Holder such amounts as shall be
sufficient to cover any costs and expenses including, but not limited to,
reasonable attorneys’ fees, including those of appellate proceedings, incurred
by Holder in collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies hereunder.

 

i)                                         Notices.  Any notice, request or
other document required or permitted to be given or delivered to the Holder by
the Company shall be delivered in accordance with the notice provisions of the
Purchase Agreement.

 

j)                                         Limitation of Liability.  No
provision hereof, in the absence of any affirmative action by Holder to exercise
this Warrant or purchase Warrant Shares, and no enumeration herein of the rights
or privileges of Holder, shall give rise to any liability of Holder for the
purchase price of any Common Stock or as a stockholder of the Company, whether
such liability is asserted by the Company or by creditors of the Company.

 

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k)                                      Remedies.  Holder, in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this Warrant.  The
Company agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this Warrant and
hereby agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate.

 

l)                                         Successors and Assigns.  Subject to
applicable securities laws, this Warrant and the rights and obligations
evidenced hereby shall inure to the benefit of and be binding upon the
successors of the Company and the successors and permitted assigns of Holder. 
The provisions of this Warrant are intended to be for the benefit of all Holders
from time to time of this Warrant and shall be enforceable by any such Holder or
holder of Warrant Shares.

 

m)                                   Amendment.  This Warrant may be modified or
amended or the provisions hereof waived with the written consent of the Company
and the Holder.

 

n)                                     Severability.  Wherever possible, each
provision of this Warrant shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Warrant shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Warrant.

 

o)                                     Headings.  The headings used in this
Warrant are for the convenience of reference only and shall not, for any
purpose, be deemed a part of this Warrant.

 

********************

 

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized.

 

 

 

RIPTIDE WORLDWIDE, INC.

 

 

 

 

 

 

 

Name:

 

Title:

 

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NOTICE OF EXERCISE

 

To:                              RIPTIDE WORLDWIDE, INC.

 

(1)          The undersigned hereby elects to purchase                  Warrant
Shares 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)          Payment shall take the form of (check applicable box):

 

o in lawful money of the United States; or

 

o the cancellation of such number of Warrant Shares as is necessary, in
accordance with the formula set forth in subsection 2(c), to exercise this
Warrant with respect to the maximum number of Warrant Shares purchasable
pursuant to the cashless exercise procedure set forth in subsection 2(c).

 

(3)          Please issue a certificate or certificates representing said
Warrant Shares in the name of the undersigned or in such other name as is
specified below:

 

 

Tax ID Number

 

The Warrant Shares shall be delivered to the following:

 

 

 

(4)  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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