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the shares thereby purchased by wire transfer or cashier’s check drawn on a UnitedStates bank. Notwithstanding anything herein to the contrary, the Holder shall not berequired to physically surrender this Warrant to the Company until the Holder has purchasedall of the Warrant Shares available hereunder and the Warrant has been exercised in full, inwhich case, the Holder shall surrender this Warrant to the Company for cancellation within 3Business Days of the date the final Notice of Exercise is delivered to the Company. Partialexercises of this Warrant resulting in purchases of a portion of the total number of WarrantShares available hereunder shall have the effect of lowering the outstanding number ofWarrant Shares purchasable hereunder in an amount equal to the applicable number of WarrantShares purchased. The Holder and the Company shall maintain records showing the number ofWarrant Shares purchased and the date of such purchases. The Company shall deliver anyobjection to any Notice of Exercise Form within 1 Business Day of receipt of such notice.In the event of any dispute or discrepancy, the records of the Holder shall be controllingand determinative in the absence of manifest error. **The Holder and any assignee, byacceptance of this Warrant, acknowledge and agree that, by reason of the provisions of thisparagraph, following the purchase of a portion of the Warrant Shares hereunder, the numberof Warrant Shares available for purchase hereunder at any given time may be less than theamount stated on the face hereof.**     b) Exercise Price. The exercise price per share of the Common Stock under thisWarrant shall be **$2.00**, subject to adjustment hereunder (the “Exercise Price”).     c) Cashless Exercise. If at any time after the 18-month anniversary of thedate of the Purchase Agreement, there is no effective Registration Statement registering, orno current prospectus available for, the resale of the Warrant Shares by the Holder, then,subject to board approval, this Warrant may also be exercised at such time by means of a“cashless exercise” in which the Holder shall be entitled to receive a certificate for thenumber of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A),where: (A) = the VWAP on the Business Day immediately preceding the dateof the delivery of the Notice of Exercise;  (B) = the Exercise Price of this Warrant, as adjusted; and  (X) = the number of Warrant Shares issuable upon exercise of thisWarrant in accordance with the terms of this Warrant by means of a cashexercise rather than a cashless exercise.     d) Reserved.     e) Mechanics of Exercise.     i. Delivery of Certificates Upon Exercise. Certificates for shares purchased hereunder shall be transmitted by the Transfer Agent to the
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Holder by crediting the account of the Holder’s prime broker with theDepository Trust Company through its Deposit Withdrawal Agent Commission(“DWAC”) system if the Company is then a participant in such systemand either (A) there is an effective Registration Statement permitting theresale of the Warrant Shares by the Holder or (B) the shares are eligiblefor resale without volume or manner-of-sale limitations pursuant to Rule144, and otherwise by physical delivery to the address specified by theHolder in the Notice of Exercise within 7 Business Days from the delivery tothe Company of the Notice of Exercise Form, surrender of this Warrant (ifrequired) and payment of the aggregate Exercise Price as set forth above(the “Warrant Share Delivery Date”). This Warrant shall be deemedto have been exercised on the date the Exercise Price is received by theCompany. The Warrant Shares shall be deemed to have been issued, and Holderor any other person so designated to be named therein shall be deemed tohave become a holder of record of such shares for all purposes, as of thedate the Warrant has been exercised by payment to the Company of theExercise Price (or by cashless exercise, if permitted) and all taxesrequired to be paid by the Holder, if any, pursuant to Section 2(e)(vi)prior to the issuance of such shares, have been paid.     ii. Delivery of New Warrants Upon Exercise. If this Warrantshall have been exercised in part, the Company shall, at the request of aHolder and upon surrender of this Warrant certificate, at the time ofdelivery of the certificate or certificates representing Warrant Shares,deliver to Holder a new Warrant evidencing the rights of Holder to purchasethe unpurchased Warrant Shares called for by this Warrant, which new Warrantshall in all other respects be identical with this Warrant.     iii. Reserved.     iv. Reserved.     v. No Fractional Shares or Scrip. No fractional shares orscrip representing fractional shares shall be issued upon the exercise ofthis Warrant. As to any fraction of a share which Holder would otherwise beentitled to purchase upon such exercise, the Company shall, at its election,either pay a cash adjustment in respect of such final fraction in an amountequal to such fraction multiplied by the Exercise Price or round up to thenext whole share.     vi. Charges, Taxes and Expenses. Issuance of certificates forWarrant Shares shall be made without charge to the Holder for any issue ortransfer tax or other incidental expense in respect of the issuance of suchcertificate, all of which taxes and expenses shall be paid by the Company,and such certificates shall be issued in the name of the Holder
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or in such name or names as may be directed by the Holder;provided, however, that in the event certificates forWarrant 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 theAssignment Form attached hereto duly executed by the Holder and the Companymay require, as a condition thereto, the payment of a sum sufficient toreimburse it for any transfer tax incidental thereto.     vii. Closing of Books. The Company will not close itsstockholder books or records in any manner which prevents the timelyexercise 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 Warrantis outstanding: (i) pays a stock dividend or otherwise make a distribution or distributionson 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 ofCommon Stock issued by the Company upon exercise of this Warrant), (ii) subdividesoutstanding shares of Common Stock into a larger number of shares, (iii) combines (includingby way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues by reclassification of shares of the Common Stock any shares ofcapital stock of the Company, then in each case the Exercise Price shall be multiplied by afraction of which the numerator shall be the number of shares of Common Stock (excludingtreasury shares, if any) outstanding immediately before such event and of which thedenominator shall be the number of shares of Common Stock outstanding immediately after suchevent and the number of shares issuable upon exercise of this Warrant shall beproportionately adjusted such that the aggregate Exercise Price of this Warrant shall remainunchanged. Any adjustment made pursuant to this Section 3(a) shall become effectiveimmediately after the record date for the determination of stockholders entitled to receivesuch dividend or distribution and shall become effective immediately after the effectivedate in the case of a subdivision, combination or re-classification.          b) Reserved.          c) Reserved.          d) Pro Rata Distributions. If the Company, at any time while this Warrant isoutstanding, shall distribute to all holders of Common Stock (and not to Holders of theWarrants) evidences of its indebtedness or assets (including cash and cash dividends) orrights 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 beadjusted by multiplying the Exercise Price in effect immediately prior to the record datefixed for determination of stockholders entitled to receive such distribution by a fractionof 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
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per share fair market value at such record date of the portion of such assets orevidence of indebtedness so distributed applicable to one outstanding share of the CommonStock as determined by the Board of Directors in good faith. In either case the adjustmentsshall be described in a statement provided to the Holder of the portion of assets orevidences of indebtedness so distributed or such subscription rights applicable to one shareof Common Stock. Such adjustment shall be made whenever any such distribution is made andshall become effective immediately after the record date mentioned above.          e) Fundamental Transaction. If, at any time while this Warrant is outstanding,(i) the Company effects any merger or consolidation of the Company with or into anotherPerson, (ii) the Company effects any sale of all or substantially all of its assets in oneor a series of related transactions, (iii) any tender offer or exchange offer (whether bythe Company or another Person) is completed pursuant to which holders of Common Stock arepermitted to tender or exchange their shares for other securities, cash or property or (iv)the Company effects any reclassification of the Common Stock or any compulsory shareexchange pursuant to which the Common Stock is effectively converted into or exchanged forother securities, cash or property (each a “Fundamental Transaction”), then, uponany subsequent exercise of this Warrant, the Holder shall have the right to receive, foreach Warrant Share that would have been issuable upon such exercise immediately prior to theoccurrence of such Fundamental Transaction, the number of shares of Common Stock of thesuccessor or acquiring corporation or of the Company, if it is the surviving corporation,and any additional consideration (the “Alternate Consideration”) receivable as aresult of such 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 suchevent. For purposes of any such exercise, the determination of the Exercise Price shall beappropriately adjusted to apply to such Alternate Consideration based on the amount ofAlternate Consideration issuable in respect of one share of Common Stock in such FundamentalTransaction, and the Company shall apportion the Exercise Price among the AlternateConsideration in a reasonable manner reflecting the relative value of any differentcomponents of the Alternate Consideration. If holders of Common Stock are given any choiceas to the securities, cash or property to be received in a Fundamental Transaction, then theHolder shall be given the same choice as to the Alternate Consideration it receives upon anyexercise of this Warrant following such Fundamental Transaction.          f) Calculations. All calculations under this Section 3 shall be made to thenearest cent or the nearest 1/100th of a share, as the case may be. For purposes of thisSection 3, the number of shares of Common Stock deemed to be issued and outstanding as of agiven date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.          g) Notice to Holder.     i. Adjustment to Exercise Price. Whenever the Exercise Price isadjusted pursuant to any provision of this Section 3, the Company shallpromptly mail to the Holder a notice setting forth the Exercise Price after
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such adjustment and setting forth a brief statement of the factsrequiring such adjustment.     ii. Notice to Allow Exercise by Holder. If (A) the Companyshall declare a dividend (or any other distribution in whatever form) on theCommon Stock, (B) the Company shall declare a special nonrecurring cashdividend on or a redemption of the Common Stock, (C) the Company shallauthorize the granting to all holders of the Common Stock rights or warrantsto subscribe for or purchase any shares of capital stock of any class or ofany rights, (D) the approval of any stockholders of the Company shall berequired in connection with any reclassification of the Common Stock, anyconsolidation or merger to which the Company is a party, any sale ortransfer of all or substantially all of the assets of the Company, of anycompulsory share exchange whereby the Common Stock is converted into othersecurities, cash or property, or (E) the Company shall authorize thevoluntary or involuntary dissolution, liquidation or winding up of theaffairs of the Company, then, in each case, the Company shall cause to bemailed to the Holder at its last address as it shall appear upon the WarrantRegister of the Company, at least 3 calendar days prior to the applicablerecord or effective date hereinafter specified, a notice stating (x) thedate 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 betaken, the date as of which the holders of the Common Stock of record to beentitled to such dividend, distributions, redemption, rights or warrants areto be determined or (y) the date on which such reclassification,consolidation, merger, sale, transfer or share exchange is expected tobecome effective or close, and the date as of which it is expected thatholders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other propertydeliverable upon such reclassification, consolidation, merger, sale,transfer or share exchange; provided that the failure to mail such notice orany defect therein or in the mailing thereof shall not affect the validityof the corporate action required to be specified in such notice. The Holderis entitled to exercise this Warrant during the period commencing on thedate of such notice to the effective date of the event triggering suchnotice.     h) Other Adjustment. In the event that the Company fails to consummate a“Qualified Financing” (as defined below) on or before April 30, 2009, the Exercise Pricehereunder shall be reduced to equal the lesser of (i) the then effective Exercise Price and(ii) $1.65 (subject to adjustment for forward and reverse stock splits, stock dividends,recapitalizations and the like that occur after the date of the Purchase Agreement). Forclarity, the Exercise Price can only be adjusted downward pursuant to this Section 3(h). Asused herein, “Qualified Financing” means an issuance by the Company of Common Stockand/or Common Stock Equivalents in an equity financing transaction that occurs after thedate of this Warrant and before April 30, 2009 with net cash proceeds to the Company of atleast $6,000,000.
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     Section 4. Transfer of Warrant.     a) Transferability. Subject to compliance with any applicable securities lawsand the conditions set forth in Section 4(d) hereof and to the provisions of Section 4.1 ofthe Purchase Agreement, this Warrant and all rights hereunder (including, withoutlimitation, any registration rights unless inclusion of such transferee would require filinga post-effective amendment) are transferable, in whole or in part, upon surrender of thisWarrant at the principal office of the Company or its designated agent, together with awritten assignment of this Warrant substantially in the form attached hereto duly executedby the Holder or its agent or attorney and funds sufficient to pay any transfer taxespayable upon the making of such transfer. The assignee shall also agree to all terms of theTransaction Documents as applicable. Upon such surrender and, if required, such payment,the Company shall execute and deliver a new Warrant or Warrants in the name of the assigneeor assignees, as applicable, and in the denomination or denominations specified in suchinstrument of assignment, and shall issue to the assignor a new Warrant evidencing theportion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. TheWarrant, if properly assigned, may be exercised by a new holder for the purchase of WarrantShares without having a new Warrant issued.     b) New Warrants. This Warrant may be divided or combined with other Warrantsupon presentation hereof at the aforesaid office of the Company, together with a writtennotice specifying the names and denominations in which new Warrants are to be issued, signedby the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to anytransfer which may be involved in such division or combination, the Company shall executeand deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be dividedor combined in accordance with such notice. All Warrants issued on transfers or exchangesshall be dated the original Issue Date and shall be identical with this Warrant except as tothe number of Warrant Shares issuable pursuant thereto.     c) Warrant Register. The Company shall register this Warrant, upon records tobe maintained by the Company for that purpose (the “Warrant Register”), in the nameof the record Holder hereof from time to time. The Company may deem and treat theregistered Holder of this Warrant as the absolute owner hereof for the purpose of anyexercise hereof or any distribution to the Holder, and for all other purposes, absent actualnotice to the contrary.     d) Transfer Restrictions. If, at the time of the surrender of this Warrant inconnection with any transfer of this Warrant, the transfer of this Warrant shall not beeither (i) registered pursuant to an effective registration statement under the SecuritiesAct and under applicable state securities or blue sky laws or (ii) eligible for resalewithout volume or manner-of-sale restrictions pursuant to Rule 144, the Company may require,as a condition of allowing such transfer, that the Holder or transferee of this Warrant, asthe case may be, comply with the provisions of the Purchase Agreement.     Section 5. Miscellaneous.
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     a) No Rights as Stockholder Until Exercise. This Warrant does not entitle theHolder to any voting rights or other rights as a stockholder of the Company prior to theexercise hereof as set forth in Section 2(e)(i).     b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenantsthat 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 theWarrant Shares, and in case of loss, theft or destruction, of indemnity or securityreasonably satisfactory to it (which, in the case of the Warrant, shall not include theposting of any bond), and upon surrender and cancellation of such Warrant or stockcertificate, if mutilated, the Company will make and deliver a new Warrant or stockcertificate of like tenor and dated as of such cancellation, in lieu of such Warrant orstock certificate.     c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for thetaking of any action or the expiration of any right required or granted herein shall not bea Business Day, then, such action may be taken or such right may be exercised on the nextsucceeding Business Day.     d) Authorized Shares.     The Company covenants that, during the period the Warrant is outstanding, itwill reserve from its authorized and unissued Common Stock the greater of theRequired Minimum and a sufficient number of shares to provide for the issuance ofthe Warrant Shares upon the exercise of any purchase rights under this Warrant. TheCompany further covenants that its issuance of this Warrant shall constitute fullauthority to its officers who are charged with the duty of executing stockcertificates to execute and issue the necessary certificates for the Warrant Sharesupon the exercise of the purchase rights under this Warrant. The Company will takeall such reasonable action as may be necessary to assure that such Warrant Sharesmay be issued as provided herein without violation of any applicable law orregulation, or of any requirements of the Trading Market upon which the Common Stockmay be listed. The Company covenants that all Warrant Shares which may be issuedupon the exercise of the purchase rights represented by this Warrant will, uponexercise of the purchase rights represented by this Warrant, be duly authorized,validly issued, fully paid and nonassessable and free from all taxes, liens andcharges created by the Company in respect of the issue thereof (other than taxes inrespect of any transfer occurring contemporaneously with such issue).     Except and to the extent as waived or consented to by the Holder, the Companyshall not by any action, including, without limitation, amending its certificate ofincorporation 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 thisWarrant, but will at all times in good faith assist in the carrying out of all suchterms and in the taking of all such actions as may be necessary or
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appropriate to protect the rights of Holder as set forth in this Warrantagainst impairment. Without limiting the generality of the foregoing, the Companywill (i) not increase the par value of any Warrant Shares above the amount payabletherefor upon such exercise immediately prior to such increase in par value, (ii)take all such action as may be necessary or appropriate in order that the Companymay validly and legally issue fully paid and nonassessable Warrant Shares upon theexercise of this Warrant and (iii) use commercially reasonable efforts to obtain allsuch authorizations, exemptions or consents from any public regulatory body havingjurisdiction thereof, as may be, necessary to enable the Company to perform itsobligations under this Warrant.     Before taking any action which would result in an adjustment in the number ofWarrant Shares for which this Warrant is exercisable or in the Exercise Price, theCompany shall obtain all such authorizations or exemptions thereof, or consentsthereto, as may be necessary from any public regulatory body or bodies havingjurisdiction thereof.     e) Jurisdiction. All questions concerning the construction, validity,enforcement and interpretation of this Warrant shall be determined in accordance with theprovisions of the Purchase Agreement.     f) Restrictions. The Holder acknowledges that the Warrant Shares acquired uponthe exercise of this Warrant, if not registered, will have restrictions upon resale imposedby state and federal securities laws.     g) Nonwaiver and Expenses. No course of dealing or any delay or failure toexercise any right hereunder on the part of Holder shall operate as a waiver of such rightor otherwise prejudice Holder’s rights, powers or remedies, notwithstanding the fact thatall rights hereunder terminate on the Termination Date. If the Company willfully andknowingly fails to comply with any provision of this Warrant, which results in any materialdamages to the Holder, the Company shall pay to Holder such amounts as shall be sufficientto 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 duepursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.     h) Notices. Any notice, request or other document required or permitted to begiven or delivered to the Holder by the Company shall be delivered in accordance with thenotice provisions of the Purchase Agreement to the addresses of the Company and Holder setforth in the Purchase Agreement, respectively.     i) Limitation of Liability. No provision hereof, in the absence of anyaffirmative action by Holder to exercise this Warrant to purchase Warrant Shares, and noenumeration herein of the rights or privileges of Holder, shall give rise to any liabilityof 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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     j) Remedies. The Holder, in addition to being entitled to exercise all rightsgranted by law, including recovery of damages, will be entitled to specific performance ofits rights under this Warrant. The Company agrees that monetary damages would not beadequate compensation for any loss incurred by reason of a breach by it of the provisions ofthis Warrant and hereby agrees to waive and not to assert the defense in any action forspecific performance that a remedy at law would be adequate.     k) Successors and Assigns. Subject to applicable securities laws, this Warrantand the rights and obligations evidenced hereby shall inure to the benefit of and be bindingupon the successors of the Company and the successors and permitted assigns of Holder. Theprovisions of this Warrant are intended to be for the benefit of all Holders from time totime of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.     l) Amendment. This Warrant may be modified or amended or the provisions hereofwaived with the written consent of the Company and Holders holding Warrants at least equalto 67% of the Warrant Shares issuable upon exercise of all then outstanding Warrants.     m) Severability. Wherever possible, each provision of this Warrant shall beinterpreted in such manner as to be effective and valid under applicable law, but if anyprovision of this Warrant shall be prohibited by or invalid under applicable law, suchprovision shall be ineffective to the extent of such prohibition or invalidity, withoutinvalidating the remainder of such provisions or the remaining provisions of this Warrant.     n) Headings. The headings used in this Warrant are for the convenience ofreference only and shall not, for any purpose, be deemed a part of this Warrant.*********************(Signature Pages Follow)*
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     IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officerthereunto duly authorized as of the date first above indicated.      **T3 MOTION, INC.**