exv4w1



 






Exhibit 4.1




Execution Version



NEITHER THESE SECURITIES NOR THE SECURITIES FOR WHICH THESE SECURITIES ARE 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 COMPLIANCE
WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. THESE SECURITIES AND THE SECURITIES ISSUABLE
UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY SUCH SECURITIES.




ACE*COMM CORPORATION




WARRANT




	 	 	 
	Warrant No. A-[ ]

	 	Dated: March 31, 2005






     Ace*Comm Corporation, a Maryland corporation (the “Company”), hereby certifies that, for value
received, [Name of Holder] or its registered assigns (the “Holder”), is entitled to purchase from
the Company up to a total of
[      ]1 shares of common stock, $0.01 par value per
share (the “Common Stock”), of the Company (each such share, a “Warrant Share” and all such shares,
the “Warrant Shares”) at an exercise price equal to $[3.53]2 per share (as adjusted from
time to time as provided in Section 9, the “Exercise Price”), at any time and from time to
time from and after the date hereof and through and including the fifth anniversary of the date of
issuance hereof (the “Expiration Date”), and subject to the following terms and conditions. This
Warrant (this “Warrant”) is one of a series of similar warrants issued pursuant to that certain
Securities Purchase Agreement, dated as of the date hereof, by and among the Company and the
Purchasers identified therein (the “Purchase Agreement”). All such warrants are referred to
herein, collectively, as the “Warrants.”



     1. Definitions. In addition to the terms defined elsewhere in this Warrant,
capitalized terms that are not otherwise defined herein have the meanings given to such terms in
the Purchase Agreement.



     2. Registration of Warrant. 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









	1	 	Equal to 50% (aggregate) warrant coverage
	 
	2	 	110% of the arithmetic average of the Closing Prices for the five day period immediately preceding the Closing Date.




 









 









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.




     3. Registration of Transfers. The Company shall register the transfer of any portion
of this Warrant in the Warrant Register, upon surrender of this Warrant, with the Form of
Assignment attached hereto duly completed and signed, to the Transfer Agent or to the Company at
its address specified herein. Upon any such registration or transfer, a new warrant to purchase
Common Stock, in substantially the form of this Warrant (any such new warrant, a “New Warrant”),
evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New
Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be
issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof
shall be deemed the acceptance by such transferee of all of the rights and obligations of a holder
of a Warrant.



     4. Exercise and Duration of Warrants.



          (a) This Warrant shall be exercisable by the registered Holder at any time and from time to
time on or after the date hereof to and including the Expiration Date. At 6:30 P.M., New York City
time on the Expiration Date, the portion of this Warrant not exercised prior thereto shall be and
become void and of no value.



          (b) A Holder may exercise this Warrant by delivering to the Company (i) an exercise notice, in
the form attached hereto (the “Exercise Notice”), appropriately completed and duly signed, and (ii)
payment of the Exercise Price for the number of Warrant Shares as to which this Warrant is being
exercised (which may take the form of a “cashless exercise” if so indicated in the Exercise Notice
and if a “cashless exercise” may occur at such time pursuant to this Section 10 below), and the
date such items are delivered to the Company (as determined in accordance with the notice
provisions hereof) is an “Exercise Date.” The Holder shall not be required to deliver the
original Warrant in order to effect an exercise hereunder. The Holder shall have the right upon
execution and delivery of the Exercise Notice, to surrender the original Warrant and cause the
Company to issue a New Warrant evidencing the right to purchase the remaining number of Warrant
Shares



     5. Delivery of Warrant Shares.



          (a) Upon exercise of this Warrant, the Company shall promptly (but in no event later than
three Trading Days after the Exercise Date) issue or cause to be issued and cause to be delivered
to or upon the written order of the Holder and in such name or names as the Holder may designate, a
certificate for the Warrant Shares issuable upon such exercise, free of restrictive legends unless
a registration statement covering the resale of the Warrant Shares and naming the Holder as a
selling stockholder thereunder is not then effective and the Warrant Shares are not freely
transferable without volume restrictions pursuant to Rule 144 under the Securities Act. The
Holder, or any Person so designated by the Holder to receive Warrant Shares, shall be deemed to
have become holder of record of such Warrant Shares as of the Exercise Date. The Company shall,
upon request of the Holder, use its reasonable best efforts to



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deliver Warrant Shares hereunder electronically through the Depository Trust Corporation or
another established clearing corporation performing similar functions.




          (b) This Warrant is exercisable, either in its entirety or, from time to time, for a portion
of the number of Warrant Shares. Upon surrender of this Warrant following one or more partial
exercises, the Company shall issue or cause to be issued, at its expense, a New Warrant evidencing
the right to purchase the remaining number of Warrant Shares.



          (c) In addition to any other rights available to a Holder, if the Company fails to deliver to
the Holder a certificate representing Warrant Shares by the third Trading Day after the date on
which delivery of such certificate is required by this Warrant, and if after such third Trading Day
the Holder purchases (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 that the Holder anticipated receiving
from the Company (a “Buy-In”), then the Company shall, within three Trading Days after the Holder’s
request and in the Company’s discretion, either (i) pay cash to the Holder in an amount equal to
the Holder’s total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the “Buy-In Price”), at which point the Company’s obligation to deliver
such certificate (and to issue such Common Stock) shall terminate, or (ii) promptly honor its
obligation to deliver to the Holder a certificate or certificates representing such Common Stock
and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the
product of (A) such number of shares of Common Stock, times (B) the Closing Price on the date of
the event giving rise to the Company’s obligation to deliver such certificate.



          (d) The Company’s obligations to issue and deliver Warrant Shares in accordance with the terms
hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to
enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any
judgment against any Person or any action to enforce the same, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other
Person of any obligation to the Company or any violation or alleged violation of law by the Holder
or any other Person, and irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the Holder in connection with the issuance of Warrant Shares. 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.



     6. Charges, Taxes and Expenses. Issuance and delivery of certificates for shares of
Common Stock upon exercise of this Warrant shall be made without charge to the Holder for any issue
or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect
of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company;
provided, however, that the Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the registration of any certificates for Warrant Shares or
Warrants in a name other than that of the Holder or an Affiliate thereof. The Holder shall be
responsible for all other tax liability that may arise as a result of holding or transferring this
Warrant or receiving Warrant Shares upon exercise hereof.



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     7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed,
the Company shall issue or cause to be issued in exchange and substitution for and upon
cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon
receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and
customary and reasonable bond or indemnity, if requested. Applicants for a New Warrant under such
circumstances shall also comply with such other reasonable regulations and procedures and pay such
other reasonable third-party costs as the Company may prescribe.



     8. Reservation of Warrant Shares. The Company covenants that it will at all times
reserve and keep available out of the aggregate of its authorized but unissued and otherwise
unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon
exercise of this Warrant as herein provided, the number of Warrant Shares which are then issuable
and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other
contingent purchase rights of persons other than the Holder (taking into account the adjustments
and restrictions of Section 9). The Company covenants that all Warrant Shares so issuable
and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance
with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable.



     9. Certain Adjustments. The Exercise Price and number of Warrant Shares issuable upon
exercise of this Warrant are subject to adjustment from time to time as set forth in this
Section 9.



          (a) Stock Dividends and Splits. If the Company, at any time while this Warrant is
outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any
class of capital stock that is payable in shares of Common Stock, (ii) subdivides outstanding
shares of Common Stock into a larger number of shares, or (iii) combines outstanding shares of
Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of Common Stock

outstanding immediately before such event and of which the denominator shall be the number of
shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to
clause (i) of this paragraph shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution, and any adjustment
pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the
effective date of such subdivision or combination.



          (b) Pro Rata Distributions. If the Company, at any time while this Warrant is
outstanding, distributes to all holders of Common Stock (i) evidences of its indebtedness, (ii) any
security (other than a distribution of Common Stock covered by the preceding paragraph), (iii)
rights or warrants to subscribe for or purchase any security, or (iv) any other asset (in each
case, “Distributed Property”), then in each such case the Exercise Price in effect immediately
prior to the record date fixed for determination of stockholders entitled to receive such
distribution shall be adjusted (effective on such record date) to equal the product of such
Exercise Price times a fraction of which the denominator shall be the average of the Closing Prices
for the five Trading Days immediately prior to (but not including) such record date and of which
the numerator shall be such average less the then fair market value of the Distributed Property
distributed in respect of one outstanding share of Common Stock, as determined by the



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Company’s independent certified public accountants that regularly examine the financial
statements of the Company (an “Appraiser”). In such event, the Holder, after receipt of the
determination by the Appraiser, shall have the right to select an additional appraiser (which shall
be a nationally recognized accounting firm) at the Holder’s sole expense to determine such fair
market value, in which case such fair market value shall be deemed to equal the average of the
values determined by each of the Appraiser and such appraiser. As an alternative to the foregoing
adjustment to the Exercise Price, at the request of the Holder delivered before the 90th day after
such record date, upon exercise by the Holder of this Warrant, the Company will deliver to such
Holder, within five Trading Days after such request (or, if later, on the effective date of such
distribution), the Distributed Property that such Holder would have been entitled to receive in
respect of the Warrant Shares for which this Warrant is exercised. If such Distributed Property is
not delivered to a Holder pursuant to the preceding sentence, then upon any exercise of the Warrant
that occurs after such record date, such Holder shall remain entitled to receive, in addition to
the Warrant Shares otherwise issuable upon such exercise (if applicable), such Distributed
Property.




          (c) Fundamental Transactions. If, at any time while this Warrant is outstanding, (i)
the Company effects any merger or consolidation of the Company with or into another Person, (ii)
the Company effects any sale of all or substantially all of its assets in one or a series of
related transactions, (iii) 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 (iv) 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 (other than
as a result of a subdivision or combination of shares of Common Stock covered by Section 9(a)
above) (in any such case, a “Fundamental Transaction”), then the Holder shall have the right
thereafter to receive, upon exercise of this Warrant, the same amount and kind of securities, cash
or property as it would have been entitled to receive upon the occurrence of such Fundamental
Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the
number of Warrant Shares then issuable upon exercise in full of this Warrant (the “Alternate
Consideration”). The aggregate Exercise Price for this Warrant will not be affected by any such
Fundamental Transaction, but the Company shall apportion such aggregate 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. In the event of a Fundamental Transaction, the
Company or the successor or purchasing Person, as the case may be, shall offer to execute with the
Holder a written agreement providing that:




     (x) this Warrant shall thereafter entitle the Holder to purchase the Alternate
Consideration in accordance with this section 9(c),




     (y) in the case of any such successor or purchasing Person, upon such consolidation,
merger, statutory exchange, combination, sale or conveyance such



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successor or purchasing Person shall be jointly and severally liable with the Company for
the performance of all of the Company’s obligations under this Warrant and the Purchase
Agreement, and




     (z) if registration or qualification is required under the Exchange Act or applicable
state law for the public resale by the Holder of shares of stock and other securities so
issuable upon exercise of this Warrant, all rights applicable to registration of the Common
Stock issuable upon exercise of this Warrant shall apply to the Alternate Consideration.


If, in the case of any Fundamental Transaction, the Alternate Consideration includes shares of
stock, other securities, other property or assets of a Person other than the Company or any such
successor or purchasing Person, as the case may be, in such Fundamental Transaction, then such
written agreement shall also be executed by such other Person and shall contain such additional
provisions to protect the interests of the Holder as the Board of Directors of the Company shall
reasonably consider necessary by reason of the foregoing. At the Holder’s request, 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 purchase the
Alternate Consideration for the aggregate Exercise Price upon exercise thereof. 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 (c) and insuring
that the Warrant (or any such replacement security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction. If any Fundamental Transaction constitutes or
results in a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the Exchange Act with respect
to the Company in which the consideration issued consists principally of cash or stock in a
non-public company, then at the request of the Holder delivered before the 90th day after such
Fundamental Transaction, the Company (or any such successor or surviving entity) will purchase the
Warrant from the Holder for a purchase price, payable in cash within five Trading Days after such
request (or, if later, on the effective date of the Fundamental Transaction), equal to the
Black-Scholes value of the remaining unexercised portion of this Warrant on the date of such
request.




               (d) Subsequent Equity Sales.




          (i) If, at any time while this Warrant is outstanding, the Company or any Subsidiary
issues additional shares of Common Stock or rights, warrants, options or other securities or
debt convertible, exercisable or exchangeable for shares of Common Stock or otherwise
entitling any Person to acquire shares of Common Stock (collectively, “Common Stock
Equivalents”) at an effective net price to the Company per share of Common Stock (the
“Effective Price”) less than the Exercise Price (as adjusted hereunder to such date), then
the Exercise Price shall be reduced to equal the product of (A) the Exercise Price in effect
immediately prior to such issuance of shares of Common Stock or Common Stock Equivalents
times (B) a fraction, the numerator of which is the sum of (1) the number of shares of
Common Stock outstanding immediately prior to such issuance, plus (2) the number of shares
of Common Stock which the aggregate Effective Price of the shares of Common Stock issued (or
deemed to be issued) would purchase at the Exercise Price, and the denominator of which is
the aggregate number of shares of



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Common Stock outstanding or deemed to be outstanding immediately after such issuance.
For purposes of this paragraph, in connection with any issuance of any Common Stock
Equivalents, (A) the maximum number of shares of Common Stock potentially issuable at any
time upon conversion, exercise or exchange of such Common Stock Equivalents (the “Deemed
Number”) shall be deemed to be outstanding upon issuance of such Common Stock Equivalents,
(B) the Effective Price applicable to such Common Stock shall equal the minimum dollar value
of consideration payable to the Company to purchase such Common Stock Equivalents and to
convert, exercise or exchange them into Common Stock (net of any discounts, fees,
commissions and other expenses), divided by the Deemed Number, and (C) no further adjustment
shall be made to the Exercise Price upon the actual issuance of Common Stock upon
conversion, exercise or exchange of such Common Stock Equivalents. The Effective Price of
Common Stock or Common Stock Equivalents issued in any transaction in which more than one
type of securities are issued shall give effect to the allocation by the Company of the
aggregate amount paid for such securities among the different securities issued in such
transaction.




          (ii) If, at any time while this Warrant is outstanding, the Company or any Subsidiary
issues Common Stock Equivalents with an Effective Price or a number of underlying shares
that floats or resets or otherwise varies or is subject to adjustment based (directly or
indirectly) on market prices of the Common Stock (a “Floating Price Security”), then for
purposes of applying the preceding paragraph in connection with any subsequent exercise, the
Effective Price will be determined separately on each Exercise Date and will be deemed to
equal the lowest Effective Price at which any holder of such Floating Price Security is
entitled to acquire Common Stock on such Exercise Date (regardless of whether any such
holder actually acquires any shares on such date).




          (iii) Notwithstanding the foregoing, no adjustment will be made under this paragraph in
respect of any Excluded Stock.



               (e) Number of Warrant Shares. Simultaneously with any adjustments to the Exercise
Price pursuant to paragraphs (a) or (b) of this Section, the number of Warrant Shares that may be
purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that
after such adjustment the aggregate Exercise Price payable hereunder for the increased or decreased
number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately
prior to such adjustment.



               (f) Calculations. All calculations under this Section 9 shall be made to the
nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by or for the account of
the Company, and the disposition of any such shares shall be considered an issue or sale of Common
Stock.



               (g) Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this
Section 9, the Company at its expense will promptly compute such adjustment in accordance
with the terms of this Warrant and prepare a certificate setting forth such adjustment, including a
statement of the adjusted Exercise Price and adjusted number or type of Warrant



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Shares or other securities issuable upon exercise of this Warrant (as applicable), describing
the transactions giving rise to such adjustments and showing in detail the facts upon which such
adjustment is based. Upon written request, the Company will promptly deliver a copy of each such
certificate to the Holder and to the Company’s Transfer Agent.




               (h) Notice of Corporate Events. If the Company (i) declares a dividend or any other
distribution of cash, securities or other property in respect of its Common Stock, including
without limitation any granting of rights or warrants to subscribe for or purchase any capital
stock of the Company or any Subsidiary, (ii) authorizes or approves, enters into any agreement
contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes
the voluntary dissolution, liquidation or winding up of the affairs of the Company, then the
Company shall deliver to the Holder a notice describing the material terms and conditions of such
transaction, at least 20 calendar days prior to the applicable record or effective date on which a
Person would need to hold Common Stock in order to participate in or vote with respect to such
transaction, and the Company will take all steps reasonably necessary in order to insure that the
Holder is given the practical opportunity to exercise this Warrant prior to such time so as to
participate in or vote with respect to such transaction; provided, however, that the failure to
deliver such notice or any defect therein shall not affect the validity of the corporate action
required to be described in such notice.



     10. Payment of Exercise Price. The Holder shall pay the Exercise Price in immediately
available funds; provided, however, if at anytime after the Required Effectiveness Date there is no
effective Registration Statement registering, or no current prospectus available for, the resale of
the Warrant Shares by the Holder, the Holder may satisfy its obligation to pay the Exercise Price
through a “cashless exercise,” in which event the Company shall issue to the Holder the number of
Warrant Shares determined as follows:



	 	 	 	 	 
	

	 	 	 	X = Y [(A-B)/A]
	 
	 	 	 	 
	

	 	where:	 	 
	 
	 	 	 	 
	

	 	 	 	X = the number of Warrant Shares to be issued to the Holder.
	 
	 	 	 	 
	

	 	 	 	Y = the number of Warrant Shares with respect to which this Warrant is being exercised.
	 
	 	 	 	 
	

	 	 	 	A = the arithmetic average of the Closing Prices for the five Trading Days
immediately prior to (but not including) the Exercise Date.
	 
	 	 	 	 
	

	 	 	 	B = the Exercise Price.






               For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and
acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to
have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to
have commenced, on the date this Warrant was originally issued pursuant to the Purchase Agreement.



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     11. Limitation on Exercise. (a) Notwithstanding anything to the contrary contained
herein, the number of shares of Common Stock that may be acquired by the Holder upon any exercise
of this Warrant (or otherwise in respect hereof) shall be limited to the extent necessary to insure
that, following such exercise (or other issuance), the total number of shares of Common Stock then
beneficially owned by such Holder and its Affiliates and any other Persons whose beneficial
ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of
the Exchange Act, does not exceed 4.999% (the “Threshold Percentage”) or 9.999% (the “Maximum
Percentage”) of the total number of issued and outstanding shares of Common Stock (including for
such purpose the shares of Common Stock issuable upon such exercise). For such purposes,
beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder. Each delivery of an Exercise Notice hereunder
will constitute a representation by the Holder that it has evaluated the limitations set forth in
this paragraph and determined that issuance of the full number of Warrant Shares requested in such
Exercise Notice is permitted under this paragraph. The Company’s obligation to issue shares of
Common Stock in excess of the limitation referred to in this Section shall be suspended (and shall
not terminate or expire notwithstanding any contrary provisions hereof) until such time, if any, as
such shares of Common Stock may be issued in compliance with such limitation. By written notice to
the Company, the Holder shall have the right (x) at any time and from time to time to reduce its
Maximum Percentage immediately upon notice to the Company in the event and only to the extent that
Section 16 of the Exchange Act or the rules promulgated thereunder (or any successor statute or
rules) is changed to reduce the beneficial ownership percentage threshold thereunder to a
percentage less than 9.999% and (y) at any time and from time to time, to waive the provisions of
this Section insofar as they relate to the Threshold Percentage or to increase or decrease its
Threshold Percentage (but not in excess of the Maximum Percentage) unless the Holder shall have, by
written instrument delivered to the Company, irrevocably waived its rights to so increase or
decrease its Threshold Percentage, but (i) any such waiver, increase or decrease will not be
effective until the 61st day after such notice is delivered to the Company, and (ii) any such
waiver or increase or decrease will apply only to the Holder and not to any other holder of
Warrants.



               (b) Notwithstanding anything to the contrary contained herein, the maximum number of shares of
Common Stock that the Company may issue pursuant to the Transaction Documents at an effective
purchase price less than the Closing Price on the Trading Day immediately preceding the Closing
Date equals 19.99% of the outstanding shares of Common Stock immediately preceding the Closing Date
(the “Issuable Maximum”), unless the Company obtains shareholder approval in accordance with the
rules and regulations of such Trading Market. If, at the time any Holder requests an exercise of
any of the Warrants, the Actual Minimum (excluding any shares issued or issuable at an effective
purchase price in excess of the Closing Price on the Trading Day immediately preceding the Closing
Date) exceeds the Issuable Maximum (and if the Company has not previously obtained the required
shareholder approval), then the Company shall issue to the Holder requesting such exercise a number
of shares of Common Stock not exceeding such Holder’s pro-rata portion of the Issuable Maximum
(based on such Holder’s share (vis-à-vis other Holders) of the aggregate purchase price paid under
the Purchase Agreement and taking into account any Warrant Shares previously issued to such
Holder). For the purposes hereof, “Actual Minimum” shall mean, as of any date, the maximum
aggregate number of shares of Common Stock then issued or potentially issuable in the future



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pursuant to the Transaction Documents, including any Underlying Shares issuable upon exercise
in full of all Warrants, without giving effect to any limits on the number of shares of Common
Stock that may be owned by a Holder at any one time.




     12. Fractional Shares. The Company shall not be required to issue or cause to be
issued fractional Warrant Shares on the exercise of this Warrant. If any fraction of a Warrant
Share would, except for the provisions of this Section, be issuable upon exercise of this Warrant,
the number of Warrant Shares to be issued will be rounded up to the nearest whole share.



     13. Notices. Any and all notices or other communications or deliveries hereunder
(including without limitation any Exercise Notice) shall be in writing and shall be deemed given
and effective on the earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number specified in this Section prior to 6:30 p.m. (New
York City time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number specified in this
Section on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any
Trading Day, (iii) the Trading Day following the date of mailing, if sent by nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required
to be given. The address for such notices or communications shall be as set forth in the Purchase
Agreement.



     14. Warrant Agent. The Company shall serve as warrant agent under this Warrant. Upon
30 days’ notice to the Holder, the Company may appoint a new warrant agent. Any corporation into
which the Company or any new warrant agent may be merged or any corporation resulting from any
consolidation to which the Company or any new warrant agent shall be a party or any corporation to
which the Company or any new warrant agent transfers substantially all of its corporate trust or
shareholders services business shall be a successor warrant agent under this Warrant without any
further act. Any such successor warrant agent shall promptly cause notice of its succession as
warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s
last address as shown on the Warrant Register.



     15. Miscellaneous.



               (a) Subject to the restrictions on transfer set forth on the first page hereof, this Warrant
may be assigned by the Holder. This Warrant may not be assigned by the Company except to a
successor in the event of a Fundamental Transaction. This Warrant shall be binding on and inure to
the benefit of the parties hereto and their respective successors and assigns. Subject to the
preceding sentence, nothing in this Warrant shall be construed to give to any Person other than the
Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant.
This Warrant may be amended only in writing signed by the Company and the Holder and their
successors and assigns.



               (b) The Company will not, by amendment of its governing documents 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 action as may be necessary or appropriate in order to



10









 




protect the rights of the Holder against impairment. Without limiting the generality of the
foregoing, the Company (i) will not increase the par value of any Warrant Shares above the amount
payable therefor on such exercise, (ii) will take all such action as may be reasonably necessary or
appropriate in order that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares on the exercise of this Warrant, and (iii) will not close its shareholder books or
records in any manner which interferes with the timely exercise of this Warrant.




               (c) Governing Law; Venue; Waiver Of Jury Trial. All questions
concerning the construction, validity, enforcement and interpretation of this Warrant shall be
governed by and construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party agrees that all
legal proceedings concerning the interpretations, enforcement and defense of the transactions
contemplated by any of the Transaction Documents (whether brought against a party hereto or its
respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of New York, Borough of Manhattan.
Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of this Warrant), and hereby irrevocably waives,
and agrees not to assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or proceeding is improper.
Each party hereto hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Warrant and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall be deemed to
limit in any way any right to serve process in any manner permitted by law. Each party hereto
hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to
trial by jury in any legal proceeding arising out of or relating to this Warrant or any of the
Transaction Documents or the transactions contemplated hereby or thereby. If either party shall
commence an action or proceeding to enforce any provisions of this Warrant or any Transaction
Document, then the prevailing party in such action or proceeding shall be reimbursed by the other
party for its reasonable attorneys fees and other reasonable costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.



               (d) The headings herein are for convenience only, do not constitute a part of this Warrant and
shall not be deemed to limit or affect any of the provisions hereof.



               (e) In case any one or more of the provisions of this Warrant shall be invalid or
unenforceable in any respect, the validity and enforceability of the remaining terms and provisions
of this Warrant shall not in any way be affected or impaired thereby and the parties



11









 




will attempt in good faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Warrant.




12









 








     IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized
officer as of the date first indicated above.



	 	 	 	 	 	 	 
	 	 	Ace*Comm Corporation	 	 
	 
	 	 	 	 	 	 
	 	 	By: /s/ Steven R. Delmar	 	 
	

	 	 	 	

	 	 
	 	 	Name: Steven R. Delmar	 	 
	 	 	Title: Chief Financial Officer	 	 






13









 






Exhibit 4.1




FORM OF EXERCISE NOTICE



(To be executed by the Holder to exercise the right to purchase shares of Common Stock under the
foregoing Warrant)




To: Ace*Comm Corporation



The undersigned is the Holder of Warrant No.                      (the “Warrant”) issued by Ace*Comm
Corporation, a Maryland corporation (the “Company”). Capitalized terms used herein and not
otherwise defined have the respective meanings set forth in the Warrant.





	1.  	The Warrant is currently exercisable to purchase a total of                                          Warrant Shares.
	 
	2.  	The undersigned Holder hereby exercises its right to purchase                                          Warrant
Shares pursuant to the Warrant.
	 
	3.  	The Holder intends that payment of the Exercise Price shall be made as (check one):






       “Cash Exercise” under Section 10




       “Cashless Exercise” under Section 10 (if permitted)




	4.  	If the holder has elected a Cash Exercise, the holder shall pay the sum of $                     to
the Company in accordance with the terms of the Warrant.






	5.  	Pursuant to this exercise, the Company shall deliver to the holder                                          Warrant
Shares in accordance with the terms of the Warrant.






	6.  	Following this exercise, the Warrant shall be exercisable to purchase a total of
                     Warrant Shares.





	 	 	 	 	 	 	 	 	 	 	 
	Dated:	 	                    ,      	 	Name of Holder:
	 
	 	 	 	 	 	 	 	 	 	 
	

	 	 	 	(Print)	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	

	 	 	 	By:	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 	 	 
	

	 	 	 	Name:	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 	 	 
	

	 	 	 	Title:	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	(Signature must conform in all respects to name of holder as
specified on the face of the Warrant)






 









 






FORM OF ASSIGNMENT




     [To be completed and signed only upon transfer of Warrant]



     FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
                                                             the right represented by the within Warrant to purchase
                     shares of Common Stock of Ace*Comm Corporation to which the within Warrant relates and
appoints                      attorney to transfer said right on the books of Ace*Comm Corporation with
full power of substitution in the premises.



	 	 	 	 
	Dated:                      ,       
	 	 	 
	 
	 	 	 
	

	 	 	 
	

	 	(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)	 
	 
	 	 	 
	

	 	 	 
	

	 	Address of Transferee	 
	 
	 	 	 
	

	 	 	 
	 
	 	 	 
	

	 	 	 






In the presence of:




                                        





 









 






Exhibit 4.1




Execution Version




NEITHER THESE SECURITIES NOR THE SECURITIES FOR WHICH THESE SECURITIES ARE 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 COMPLIANCE
WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. THESE SECURITIES AND THE SECURITIES ISSUABLE
UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY SUCH SECURITIES.




Ace*Comm Corporation




WARRANT




			
	Warrant No. B-[ ]
	 	Dated: March 31, 2005






     Ace*Comm Corporation, a Maryland corporation (the “Company”), hereby certifies that, for value
received, [Name of Holder] or its registered assigns (the “Holder”), is entitled to purchase from
the Company (a) up to a total of
[      ]1 shares of common stock (the “Common
Stock”), of the Company (each such share, a “Warrant Share” and all such shares, the “Warrant
Shares”) at an exercise price equal to $2.50 per share (as adjusted from time to time as provided
in Section 9, the “Exercise Price”), and (b) only as part of and in connection with the
purchase of the Warrant Shares, warrants in the form attached to the Purchase Agreement (as
hereinafter defined) as Exhibit C to acquire up to 0.50 shares of Common Stock for each
Warrant Share purchased (the “Additional Warrants”), at any time and from time to time from and
after the date hereof and through and including the 180th day following the Effective
Date, but not including the Effective Date (the “Expiration Date”), and subject to the following
terms and conditions. This Warrant (this “Warrant “) is one of a series of similar warrants issued
pursuant to that certain Securities Purchase Agreement, dated as of the date hereof, by and among
the Company and the Purchasers identified therein (the “Purchase Agreement”). All such Warrants
are referred to herein, collectively, as the “Warrants.” Common Stock issuable upon exercise of the
Additional Warrants shall be known herein as the “Additional Warrant Shares”.


     1. Definitions. In addition to the terms defined elsewhere in this Warrant,
capitalized terms that are not otherwise defined herein have the meanings given to such terms in
the Purchase Agreement.








	1	 	Up to Holder’s pro rata share of $2.5MM divided by the Per Unit Purchase Price.






 









 










     2. Registration of Warrant . 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.



     3. Registration of Transfers. The Company shall register the assignment and transfer
of any portion of this Warrant in the Warrant Register, upon surrender of this Warrant, with the
Form of Assignment attached hereto duly completed and signed, to the Transfer Agent or to the
Company at its address specified herein. Upon any such registration or transfer, a new warrant to
purchase Common Stock, in substantially the form of this Warrant (any such new warrant, a “New
Warrant “), evidencing the portion of this Warrant so transferred shall be issued to the transferee
and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any,
shall be issued to the transferring Holder. The acceptance of the New Warrant by the transferee
thereof shall be deemed the acceptance by such transferee of all of the rights and obligations of a
holder of a Warrant .



     4. Exercise and Duration of Warrants.



          (a) This Warrant shall be exercisable by the registered Holder at any time and from time to
time on or after the date hereof to and including the Expiration Date. At 6:30 P.M., New York City
time on the Expiration Date, the portion of this Warrant not exercised prior thereto shall be and
become void and of no value.




          (b) The Holder may exercise this Warrant by delivering to the Company (i) an exercise notice,
in the form attached hereto (the “Exercise Notice”), appropriately completed and duly signed, and
(ii) payment of the Exercise Price for the number of Warrant Shares and Additional Warrants as to
which this Warrant is being exercised, and the date such items are delivered to the Company (as
determined in accordance with the notice provisions hereof) is an “Exercise Date.” The Holder
shall not be required to deliver the original Warrant in order to effect an exercise hereunder. The
Holder shall have the right upon execution and delivery of the Exercise Notice, to surrender the
original Warrant and cause the Company to issue a New Warrant evidencing the right to purchase the
remaining number of Warrant Shares and Additional Warrants.




     5. Delivery of Warrant Shares and Additional Warrants.



          (a) Upon exercise of this Warrant, the Company shall promptly (but in no event later than
three Trading Days after the Exercise Date) issue or cause to be issued and cause to be delivered
to or upon the written order of the Holder and in such name or names as the Holder may designate, a
certificate for the Warrant Shares and Additional Warrants issuable upon such exercise, free of
restrictive legends unless a registration statement covering the resale of the Warrant Shares, the
Additional Warrant Shares and naming the Holder as a selling stockholder thereunder is not then effective and the Warrant Shares and Additional Warrant
Shares, respectively, are not freely transferable without volume restrictions pursuant to Rule 144
under the Securities Act. The Holder, or any Person so designated by the Holder to receive Warrant
Shares and Additional Warrants, shall be deemed to have become holder of record of




2









 








such Warrant Shares and Additional Warrants as of the Exercise Date. The Company shall, upon request of the
Holder, use its reasonable best efforts to deliver Warrant Shares and Additional Warrants hereunder
electronically through the Depository Trust Corporation or another established clearing corporation
performing similar functions.




          (b) This Warrant is exercisable, either in its entirety or, from time to time, for a portion
of the number of Warrant Shares and Additional Warrants. Upon surrender of this Warrant following
one or more partial exercises, the Company shall issue or cause to be issued, at its expense, a New
Warrant evidencing the right to purchase the remaining number of Warrant Shares and Additional
Warrants.




          (c) In addition to any other rights available to a Holder, if the Company fails to deliver to
the Holder a certificate representing Warrant Shares by the third Trading Day after the date on
which delivery of such certificate is required by this Warrant or any Additional Warrant, and if
after such third Trading Day the Holder purchases (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
that the Holder anticipated receiving from the Company (a “Buy-In”), then the Company shall, within
three Trading Days after the Holder’s request and in the Company’s discretion, either (i) pay cash
to the Holder in an amount equal to the Holder’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which
point the Company’s obligation to deliver such certificate (and to issue such Common Stock) shall
terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or
certificates representing such Common Stock and pay cash to the Holder in an amount equal to the
excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock,
times (B) the Closing Price on the date of the event giving rise to the Company’s obligation to
deliver such certificate.




          (d) The Company’s obligations to issue and deliver Warrant Shares and Additional Warrants in
accordance with the terms hereof are absolute and unconditional, irrespective of any action or
inaction by the Holder to enforce the same, any waiver or consent with respect to any provision
hereof, the recovery of any judgment against any Person or any action to enforce the same, or any
setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the
Holder or any other Person of any obligation to the Company or any violation or alleged violation
of law by the Holder or any other Person, and irrespective of any other circumstance which might
otherwise limit such obligation of the Company to the Holder in connection with the issuance of
Warrant Shares and Warrants. 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.




     6. Charges, Taxes and Expenses. Issuance and delivery of certificates for shares of
Common Stock and Additional Warrants upon exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax, withholding tax, transfer agent fee or
other incidental tax or expense in respect of the issuance of such certificates, all of which taxes
and expenses shall be paid by the Company; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer involved in the



3









 





registration of any certificates for Warrant Shares, Warrants or any Additional Warrants in a name
other than that of the Holder or an Affiliate thereof. The Holder shall be responsible for all
other tax liability that may arise as a result of holding or transferring this Warrant or receiving
Warrant Shares and Additional Warrants upon exercise hereof.




     7. Replacement of Warrant . If this Warrant is mutilated, lost, stolen or destroyed,
the Company shall issue or cause to be issued in exchange and substitution for and upon
cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon
receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and
customary and reasonable bond or indemnity, if requested. Applicants for a New Warrant under such
circumstances shall also comply with such other reasonable regulations and procedures and pay such
other reasonable third-party costs as the Company may prescribe.



     8. Reservation of Warrant Shares and Additional Warrant Shares. The Company covenants
that it will at all times reserve and keep available out of the aggregate of its authorized but
unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue
Warrant Shares upon exercise of this Warrant and Additional Warrants as provided herein or in the
Additional Warrant Shares upon exercise of the Additional Warrants as provided in the Additional
Warrants, the number of Warrant Shares which are then issuable and deliverable upon the exercise of
this entire Warrant and the number of Additional Warrant Shares issuable and deliverable upon the
exercise of any Additional Warrants, free from preemptive rights or any other contingent purchase
rights of persons other than the Holder (taking into account the adjustments and restrictions of
Section 9). The Company covenants that all Warrant Shares and Additional Warrant Shares so
issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in
accordance with the terms hereof, or the Additional Warrants be duly and validly authorized, issued
and fully paid and nonassessable.



     9. Certain Adjustments. The Exercise Price and number of Warrant Shares issuable upon
exercise of this Warrant are subject to adjustment from time to time as set forth in this
Section 9. The exercise price and number of this Additional Warrant Shares issuable upon
exercise of the Additional Warrants shall be subject to adjustment from time to time as set forth
in Section 9 of the Additional Warrants.



          (a) Stock Dividends and Splits. If the Company, at any time while this Warrant is
outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any
class of capital stock that is payable in shares of Common Stock, (ii) subdivides outstanding
shares of Common Stock into a larger number of shares, or (iii) combines outstanding shares of
Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of Common Stock
outstanding immediately before such event and of which the denominator shall be the number of
shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to
clause (i) of this paragraph shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clauses (ii) or (iii) of this
paragraph shall become effective immediately after the effective date of such subdivision or
combination.




4









 








          (b) Pro Rata Distributions. If the Company, at any time while this Warrant is
outstanding, distributes to all holders of Common Stock (i) evidences of its indebtedness, (ii) any
security (other than a distribution of Common Stock covered by the preceding paragraph), (iii)
rights or warrants to subscribe for or purchase any security, or (iv) any other asset (in each
case, “Distributed Property”), then in each such case the Exercise Price in effect immediately
prior to the record date fixed for determination of stockholders entitled to receive such
distribution shall be adjusted (effective on such record date) to equal the product of such
Exercise Price times a fraction of which the denominator shall be the average of the Closing Prices
for the five Trading Days immediately prior to (but not including) such record date and of which
the numerator shall be such average less the then fair market value of the Distributed Property
distributed in respect of one outstanding share of Common Stock, as determined by the Company’s
independent certified public accountants that regularly examine the financial statements of the
Company (an “Appraiser”). In such event, the Holder, after receipt of the determination by the
Appraiser, shall have the right to select an additional appraiser (which shall be a nationally
recognized accounting firm) at the Holder’s sole expense to determine such fair market value, in
which case such fair market value shall be deemed to equal the average of the values determined by
each of the Appraiser and such appraiser. As an alternative to the foregoing adjustment to the
Exercise Price, at the request of the Holder delivered before the 90th day after such record date,
upon exercise by the Holder of this Warrant, the Company will deliver to such Holder, within five
Trading Days after such request (or, if later, on the effective date of such distribution), the
Distributed Property that such Holder would have been entitled to receive in respect of the Warrant
Shares for which this Warrant is exercised. If such Distributed Property is not delivered to a
Holder pursuant to the preceding sentence, then upon expiration of or any exercise of the Warrant
that occurs after such record date, such Holder shall remain entitled to receive, in addition to
the Warrant Shares otherwise issuable upon such exercise (if applicable), such Distributed
Property.




          (c) Fundamental Transactions. If, at any time while this Warrant is outstanding, (i)
the Company effects any merger or consolidation of the Company with or into another Person, (ii)
the Company effects any sale of all or substantially all of its assets in one or a series of
related transactions, (iii) 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 (iv) 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 (other than
as a result of a subdivision or combination of shares of Common Stock covered by Section 9(a)
above) (in any such case, a “Fundamental Transaction”), then the Holder shall have the right
thereafter to receive, upon exercise of this Warrant, the same amount and kind of securities, cash
or property as it would have been entitled to receive upon the occurrence of such Fundamental
Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the
number of Warrant Shares then issuable upon exercise in full of this Warrant (the “Alternate
Consideration”). The aggregate Exercise Price for this Warrant will not be affected by any such
Fundamental Transaction, but the Company shall apportion such aggregate 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




5









 








Alternate Consideration it receives upon any exercise of this Warrant following
such Fundamental Transaction. In the event of a Fundamental Transaction, the Company or the
successor or purchasing Person, as the case may be, shall execute with the Holder a written
agreement providing that:





     (x) this Warrant shall thereafter entitle the Holder to purchase the Alternate
Consideration in accordance with this section 9(c),




     (y) in the case of any such successor or purchasing Person, upon such consolidation,
merger, statutory exchange, combination, sale or conveyance such successor or purchasing
Person shall be jointly and severally liable with the Company for the performance of all of
the Company’s obligations under this Warrant and the Purchase Agreement, and




     (z) if registration or qualification is required under the Exchange Act or applicable
state law for the public resale by the Holder of shares of stock and other securities so
issuable upon exercise of this Warrant, all rights applicable to registration of the Common
Stock upon exercise of this Warrant shall apply to the Alternate Consideration.



If, in the case of any Fundamental Transaction, the Alternate Consideration includes shares of
stock, other securities, other property or assets of a Person other than the Company or any such
successor or purchasing Person, as the case may be, in such Fundamental Transaction, then such
written agreement shall also be executed by such other Person and shall contain such additional
provisions to protect the interests of the Holder as the Board of Directors of the Company shall
reasonably consider necessary by reason of the foregoing. At the Holder’s request, 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 purchase the
Alternate Consideration for the aggregate Exercise Price upon exercise thereof. 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 (c) and insuring
that the Warrant (or any such replacement security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction. If any Fundamental Transaction constitutes or
results in a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the Exchange Act with respect
to the Company in which the consideration issued consists principally of cash or stock in a
non-public company, then at the request of the Holder delivered before the 90th day after such
Fundamental Transaction, the Company (or any such successor or surviving entity) will purchase the
Warrant from the Holder for a purchase price, payable in cash within five Trading Days after such
request (or, if later, on the effective date of the Fundamental Transaction), equal to the
Black-Scholes value of the remaining unexercised portion of this Warrant on the date of such
request.




          (d) Subsequent Equity Sales.





     (i) If, at any time while this Warrant is outstanding, the Company or any Subsidiary
issues additional shares of Common Stock or rights, Warrants, options or



6









 






other securities or
debt convertible, exercisable or exchangeable for shares of Common Stock or otherwise
entitling any Person to acquire shares of Common Stock (collectively, “Common Stock
Equivalents”) at an effective net price to the Company per share of Common Stock (the
“Effective Price”) less than the Exercise Price (as adjusted hereunder to such date), then
the Exercise Price shall be reduced to equal the product of (A) the Exercise Price in effect
immediately prior to such issuance of shares of Common Stock or Common Stock Equivalents
times (B) a fraction, the numerator of which is the sum of (1) the number of shares of
Common Stock outstanding immediately prior to such issuance, plus (2) the number of shares
of Common Stock which the aggregate Effective Price of the shares of Common Stock issued (or
deemed to be issued) would purchase at the Exercise Price, and the denominator of which is
the aggregate number of shares of Common Stock outstanding or deemed to be outstanding
immediately after such issuance. For purposes of this paragraph, in connection with any
issuance of any Common Stock Equivalents, (A) the maximum number of shares of Common Stock
potentially issuable at any time upon conversion, exercise or exchange of such Common Stock
Equivalents (the “Deemed Number”) shall be deemed to be outstanding upon issuance of such
Common Stock Equivalents, (B) the Effective Price applicable to such Common Stock shall
equal the minimum dollar value of consideration payable to the Company to purchase such
Common Stock Equivalents and to convert, exercise or exchange them into Common Stock (net of
any discounts, fees, commissions and other expenses), divided by the Deemed Number, and (C)
no further adjustment shall be made to the Exercise Price upon the actual issuance of Common
Stock upon conversion, exercise or exchange of such Common Stock Equivalents. The Effective
Price of Common Stock or Common Stock Equivalents issued in any transaction in which more
than one type of securities are issued shall give effect to the allocation by the Company of
the aggregate amount paid for such securities among the different securities issued in such
transaction.




     (ii) If, at any time while this Warrant is outstanding, the Company or any Subsidiary
issues Common Stock Equivalents with an Effective Price or a number of underlying shares
that floats or resets or otherwise varies or is subject to adjustment based (directly or
indirectly) on market prices of the Common Stock (a “Floating Price Security”), then for
purposes of applying the preceding paragraph in connection with any subsequent exercise, the
Effective Price will be determined separately on each Exercise Date and will be deemed to
equal the lowest Effective Price at which any holder of such Floating Price Security is
entitled to acquire Common Stock on such Exercise Date (regardless of whether any such
holder actually acquires any shares on such date).




     (iii) Notwithstanding the foregoing, no adjustment will be made under this paragraph (d) in respect of any Excluded Stock.



          (e) Number of Warrant Shares. Simultaneously with any adjustments to the Exercise
Price pursuant to paragraphs (a) or (b) of this Section, the number of Warrant Shares that may be
purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder
for





7









 








the increased or decreased number of Warrant Shares shall be the same as the aggregate Exercise
Price in effect immediately prior to such adjustment.




          (f) Calculations. All calculations under this Section 9 shall be made to the
nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by or for the account of
the Company, and the disposition of any such shares shall be considered an issue or sale of Common
Stock.




          (g) Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this
Section 9, the Company at its expense will promptly compute such adjustment in accordance
with the terms of this Warrant and prepare a certificate setting forth such adjustment, including a
statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other
securities issuable upon exercise of this Warrant (as applicable), describing the transactions
giving rise to such adjustments and showing in detail the facts upon which such adjustment is
based. Upon written request, the Company will promptly deliver a copy of each such certificate to
the Holder and to the Company’s Transfer Agent.




          (h) Notice of Corporate Events. If the Company (i) declares a dividend or any other
distribution of cash, securities or other property in respect of its Common Stock, including
without limitation any granting of rights or warrants to subscribe for or purchase any capital
stock of the Company or any Subsidiary, (ii) authorizes or approves, enters into any agreement
contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes
the voluntary dissolution, liquidation or winding up of the affairs of the Company, then the
Company shall deliver to the Holder a notice describing the material terms and conditions of such
transaction, at least 20 calendar days prior to the applicable record or effective date on which a
Person would need to hold Common Stock in order to participate in or vote with respect to such
transaction, and the Company will take all steps reasonably necessary in order to insure that the
Holder is given the practical opportunity to exercise this Warrant prior to such time so as to
participate in or vote with respect to such transaction; provided, however, that the failure to
deliver such notice or any defect therein shall not affect the validity of the corporate action
required to be described in such notice.




     10. Payment of Exercise Price. The Holder shall pay the Exercise Price in immediately
available funds.



     11. Limitation on Exercise. (a) Notwithstanding anything to the contrary contained
herein, the number of shares of Common Stock that may be acquired by the Holder upon any exercise
of this Warrant (or otherwise in respect hereof) shall be limited to the extent necessary to insure
that, following such exercise (or other issuance), the total number of shares of Common Stock then
beneficially owned by such Holder and its Affiliates and any other Persons whose beneficial
ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of
the Exchange Act, does not exceed 4.999% (the “Threshold Percentage”) or 9.999% (the “Maximum
Percentage”) of the total number of issued and outstanding shares of Common Stock (including for
such purpose the shares of Common Stock issuable upon such exercise). For such purposes,
beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. Each



8









 





delivery of an Exercise Notice hereunder will constitute a representation by the Holder that it has
evaluated the limitations set forth in this paragraph and determined that issuance of the full
number of Warrant Shares requested in such Exercise Notice is permitted under this paragraph. The
Company’s obligation to issue shares of Common Stock in excess of the limitations referred to in
this Section shall be suspended (and shall not terminate or expire notwithstanding any contrary
provisions hereof) until such time, if any, as such shares of Common Stock may be issued in
compliance with such limitation. By written notice to the Company, the Holder shall have the right
(x) at any time and from time to time to reduce its Maximum Percentage immediately upon notice to
the Company in the event and only to the extent that Section 16 of the Exchange Act or the rules
promulgated thereunder (or any successor statute or rules) is changed to reduce the beneficial
ownership percentage threshold thereunder to a percentage less than 9.999% and (y) at any time and
from time to time, to waive the provisions of this Section insofar as they relate to the Threshold
Percentage or to increase or decrease its Threshold Percentage (but not in excess of the Maximum
Percentage) unless the Holder shall have, by written instrument delivered to the Company,
irrevocably waived its rights to so increase or decrease its Threshold Percentage, but (i) any such
waiver, increase or decrease will not be effective until the 61st day after such notice is
delivered to the Company, and (ii) any such waiver or increase or decrease will apply only to the
Holder and not to any other holder of Warrants.




          (b) Notwithstanding anything to the contrary contained herein, the maximum number of shares of
Common Stock that the Company may issue pursuant to the Transaction Documents at an effective
purchase price less than the Closing Price on the Trading Day immediately preceding the Closing
Date equals 19.99% of the outstanding shares of Common Stock immediately preceding Closing Date
(the “Issuable Maximum”), unless the Company obtains shareholder approval in accordance with the
rules and regulations of such Trading Market. If, at the time any Holder requests an exercise of
any of the Warrants, the Actual Minimum (excluding any shares issued or issuable at an effective
purchase price in excess of the Closing Price on the Trading Day immediately preceding the Closing
Date) exceeds the Issuable Maximum (and if the Company has not previously obtained the required
shareholder approval), then the Company shall issue to the Holder requesting such exercise a number
of shares of Common Stock not exceeding such Holder’s pro-rata portion of the Issuable Maximum
(based on such Holder’s share (vis-à-vis other Holders) of the aggregate purchase price paid under
the Purchase Agreement and taking into account any Warrants Shares and any Additional Warrant
Shares previously issued to such Holder). For the purposes hereof, “Actual Minimum” shall mean, as
of any date, the maximum aggregate number of shares of Common Stock then issued or potentially
issuable in the future pursuant to the Transaction Documents, including any Underlying Shares
issuable upon exercise in full of all Warrants, without giving effect to any limits on the number
of shares of Common Stock that may be owned by a Holder at any one time.




     12. Fractional Shares. The Company shall not be required to issue or cause to be
issued fractional Warrant Shares or Additional Warrants to purchase fractional Additional Warrant
Shares on the exercise of this Warrant . If any fraction of a Warrant Share or if any Additional
Warrant to purchase a fraction of an Additional Warrant Share would, except for the provisions of
this Section, be issuable upon exercise of this Warrant, the number of Warrant Shares and/or Additional Warrant Shares issuable upon exercise of the Additional Warrants, as



9









 





the case may be, to be issued will be rounded up to the nearest whole share or right to purchase
the nearest whole share, as the case may be.




     13. Notices. Any and all notices or other communications or deliveries hereunder
(including without limitation any Exercise Notice) shall be in writing and shall be deemed given
and effective on the earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number specified in this Section prior to 6:30 p.m. (New
York City time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number specified in this
Section on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any
Trading Day, (iii) the Trading Day following the date of mailing, if sent by a nationally
recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice
is required to be given. The address for such notices or communications shall be as set forth in
the Purchase Agreement.



     14. Warrant Agent. The Company shall serve as warrant agent under this Warrant .
Upon 30 days’ notice to the Holder, the Company may appoint a new warrant agent. Any corporation
into which the Company or any new warrant agent may be merged or any corporation resulting from any
consolidation to which the Company or any new warrant agent shall be a party or any corporation to
which the Company or any new warrant agent transfers substantially all of its corporate trust or
shareholders services business shall be a successor warrant agent under this Warrant without any
further act. Any such successor warrant agent shall promptly cause notice of its succession as
warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s
last address as shown on the Warrant Register.



     15. Miscellaneous.



          (a) Subject to the restrictions on transfer set forth on the first page hereof, this Warrant
may be assigned by the Holder. This Warrant may not be assigned by the Company except to a
successor in the event of a Fundamental Transaction. This Warrant shall be binding on and inure to
the benefit of the parties hereto and their respective successors and assigns. Subject to the
preceding sentence, nothing in this Warrant shall be construed to give to any Person other than the
Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant .
This Warrant may be amended only in writing signed by the Company and the Holder and their
successors and assigns.




          (b) The Company will not, by amendment of its governing documents 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 action as may be necessary or appropriate in order to protect
the rights of the Holder against impairment. Without limiting the generality of the foregoing, the
Company (i) will not increase the par value of any Warrant Shares or Additional Warrant Shares
above the amount payable therefor on such exercise, (ii) will take all such action as may be
reasonably necessary or appropriate in order that the Company may validly and legally issue fully
paid and nonassessable Warrant Shares or Additional Warrant Shares on the exercise of this Warrant and the Additional Warrants, respectively, and (iii) will not close
its




10









 








shareholder books or records in any manner which interferes with the timely exercise of this
Warrant .




          (c)  Governing Law; Venue; Waiver Of Jury Trial. All questions
concerning the construction, validity, enforcement and interpretation of this Warrant shall be
governed by and construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party agrees that all
legal proceedings concerning the interpretations, enforcement and defense of the transactions
contemplated by any of the Transaction Documents (whether brought against a party hereto or its
respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of New York, Borough of Manhattan.
Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of this Warrant ), and hereby irrevocably waives,
and agrees not to assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or proceeding is improper.
Each party hereto hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Warrant and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall be deemed to
limit in any way any right to serve process in any manner permitted by law. Each party hereto
hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to
trial by jury in any legal proceeding arising out of or relating to this Warrant or any of the
Transaction Documents or the transactions contemplated hereby or thereby. If either party shall
commence an action or proceeding to enforce any provisions of this Warrant or any Transaction
Document, then the prevailing party in such action or proceeding shall be reimbursed by the other
party for its reasonable attorneys fees and other reasonable costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.




          (d) The headings herein are for convenience only, do not constitute a part of this Warrant and
shall not be deemed to limit or affect any of the provisions hereof.




          (e) In case any one or more of the provisions of this Warrant shall be invalid or
unenforceable in any respect, the validity and enforceability of the remaining terms and provisions
of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt
in good faith to agree upon a valid and enforceable provision which shall be a commercially
reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision
in this Warrant .




11









 








     IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized
officer as of the date first indicated above.



	 	 	 	 	 
	 	 	Ace*Comm Corporation
	 
	 	 	 	 
	 	 	By:  /s/ Steven R. Delmar
	

	 	 	 	 
	 	 	Name: Steven R. Delmar
	 	 	Title: Chief Financial Officer







12









 








FORM OF EXERCISE NOTICE




(To be executed by the Holder to exercise the right to purchase shares of Common Stock under the
foregoing Warrant )



To: Ace*Comm Corporation




     The undersigned is the Holder of Warrant No.                      (the “Warrant “) issued by Ace*Comm
Corporation, a Maryland corporation (the “Company”). Capitalized terms used herein and not
otherwise defined have the respective meanings set forth in the Warrant .




	1.  	The Warrant is currently exercisable to purchase a total of                      Warrant Shares.
	 
	2.  	The undersigned Holder hereby exercises its right to purchase                      Warrant Shares pursuant to the
Warrant and Additional Warrants exercisable for                      shares of Common Stock.
	 
	3.  	The Holder intends that payment of the Exercise Price shall be made in immediately available
funds, and shall pay the sum of $                     to the Company in accordance with the terms of
the Warrant .
	 
	4.  	Pursuant to this exercise, the Company shall deliver to the holder                      Warrant Shares and
Additional Warrants exercisable for                      shares of Common Stock.
	 
	5.  	Following this exercise, the Warrant shall be exercisable to purchase a total of                      Warrant Shares
and Additional Warrants exercisable for                      shares of Common Stock .





	 	 	 	 	 	 	 
	Dated:                     ,                     	 	 	 	Name of Holder:
	 
	 	 	 	 	 	 
	

	 	 	 	(Print)	 	 
	

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	By:	 	 
	

	 	 	 	 	 	 
	

	 	 	 	Name:	 	 
	

	 	 	 	 	 	 
	

	 	 	 	Title:	 	 
	

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	(Signature must conform in all respects to name of holder as specified on the face of the Warrant )






 









 






FORM OF ASSIGNMENT




          [To be completed and signed only upon transfer of Warrant ]




          FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
                     the right represented by the within Warrant to purchase
                     shares of Common Stock and warrants to purchase shares of the Common Stock of Ace*Comm
Corporation to which the within Warrant relates and appoints                      attorney to transfer
said right on the books of Ace*Comm Corporation with full power of substitution in the premises.




	 	 	 	 	 
	Dated:                     ,                     
	 	 	 	 
	 
	 	 	 	 
	

	 	 	 	 
	

	 	 	 	(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant )
	 
	 	 	 	 
	

	 	 	 	 
	

	 	 	 	Address of Transferee
	 
	 	 	 	 
	

	 	 	 	 
	 
	 	 	 	 
	

	 	 	 	 
	 
	 	 	 	 
	In the presence of:
	 	 	 	 
	 
	 	 	 	 
	


	 	 	 	 







 










 






Exhibit 4.1




Execution Version




EXHIBIT C



NEITHER THESE SECURITIES NOR THE SECURITIES FOR WHICH THESE SECURITIES ARE 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 COMPLIANCE
WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. THESE SECURITIES AND THE SECURITIES ISSUABLE
UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY SUCH SECURITIES.




ACE*COMM CORPORATION




WARRANT




			
	Warrant No.C-[ ]
	 	Dated: March 31, 2005






     Ace*Comm Corporation, a Maryland corporation (the “Company”), hereby certifies that, for value
received, [Name of Holder] or its registered assigns (the “Holder”), is entitled to purchase from
the Company up to a total of [
      ]1 shares of common stock, $0.01 par value per
share (the “Common Stock”), of the Company (each such share, a “Warrant Share” and all such shares,
the “Warrant Shares”) at an exercise price equal to $[3.53]2 per share (as adjusted from
time to time as provided in Section 9, the “Exercise Price”), at any time and from time to
time from and after the date hereof and through and including the fifth anniversary of the date of
issuance hereof (the “Expiration Date”), and subject to the following terms and conditions. This
Warrant (this “Warrant”) is one of a series of similar warrants issued pursuant to that certain
Securities Purchase Agreement, dated as of the date hereof, by and among the Company and the
Purchasers identified therein (the “Purchase Agreement”). All such warrants are referred to
herein, collectively, as the “Warrants.”



     1. Definitions. In addition to the terms defined elsewhere in this Warrant, capitalized terms that are not
otherwise defined herein have the meanings given to such terms in the Purchase Agreement.









	1          Equal to 50% warrant coverage based on total
shares acquired by Holder on the issuance date hereof upon exercise of such
Holder’s Warrant-B
	 
	2          110% of the arithmetic average of the Closing
Prices for the five day period immediately preceding the Closing Date.




 









 










     2. Registration of Warrant. 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.



     3. Registration of Transfers. The Company shall register the transfer of any portion
of this Warrant in the Warrant Register, upon surrender of this Warrant, with the Form of
Assignment attached hereto duly completed and signed, to the Transfer Agent or to the Company at
its address specified herein. Upon any such registration or transfer, a new warrant to purchase
Common Stock, in substantially the form of this Warrant (any such new warrant, a “New Warrant”),
evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New
Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be
issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof
shall be deemed the acceptance by such transferee of all of the rights and obligations of a holder
of a Warrant.



     4. Exercise and Duration of Warrants.



          (a) This Warrant shall be exercisable by the registered Holder at any time and from time to
time on or after the date hereof to and including the Expiration Date. At 6:30 P.M., New York City
time on the Expiration Date, the portion of this Warrant not exercised prior thereto shall be and
become void and of no value.



          (b) A Holder may exercise this Warrant by delivering to the Company (i) an exercise notice, in
the form attached hereto (the “Exercise Notice”), appropriately completed and duly signed, and (ii)
payment of the Exercise Price for the number of Warrant Shares as to which this Warrant is being
exercised (which may take the form of a “cashless exercise”
if so indicated in the Exercise Notice and if a “cashless
exercise” may occur at such time pursuant to this Section 10
below), and the date such items are delivered to the Company (as determined in accordance with the notice
provisions hereof) is an “Exercise Date.” The Holder shall not be required to deliver the
original Warrant in order to effect an exercise hereunder. The Holder shall have the right upon
execution and delivery of the Exercise Notice, to surrender the original Warrant and cause the
Company to issue a New Warrant evidencing the right to purchase the remaining number of Warrant
Shares.



     5. Delivery of Warrant Shares.



          (a) Upon exercise of this Warrant, the Company shall promptly (but in no event later than
three Trading Days after the Exercise Date) issue or cause to be issued and cause to be delivered
to or upon the written order of the Holder and in such name or names as the Holder may designate, a
certificate for the Warrant Shares issuable upon such exercise, free of restrictive legends unless
a registration statement covering the resale of the Warrant Shares and
naming the Holder as a selling stockholder thereunder is not then effective and the Warrant Shares are not freely
transferable without volume restrictions pursuant to Rule 144 under the Securities Act. The
Holder, or any Person so designated by the Holder to receive Warrant Shares, shall be deemed to
have become holder of record of such Warrant Shares as of the




2









 








Exercise Date. The Company shall, upon request of the Holder, use its reasonable best efforts
to deliver Warrant Shares hereunder electronically through the Depository Trust Corporation or
another established clearing corporation performing similar functions.



          (b) This Warrant is exercisable, either in its entirety or, from time to time, for a portion
of the number of Warrant Shares. Upon surrender of this Warrant following one or more partial
exercises, the Company shall issue or cause to be issued, at its expense, a New Warrant evidencing
the right to purchase the remaining number of Warrant Shares.




          (c) In addition to any other rights available to a Holder, if the Company fails to deliver to
the Holder a certificate representing Warrant Shares by the third Trading Day after the date on
which delivery of such certificate is required by this Warrant, and if after such third Trading Day
the Holder purchases (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 that the Holder anticipated receiving
from the Company (a “Buy-In”), then the Company shall, within three Trading Days after the Holder’s
request and in the Company’s discretion, either (i) pay cash to the Holder in an amount equal to
the Holder’s total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the “Buy-In Price”), at which point the Company’s obligation to deliver
such certificate (and to issue such Common Stock) shall terminate, or (ii) promptly honor its
obligation to deliver to the Holder a certificate or certificates representing such Common Stock
and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the
product of (A) such number of shares of Common Stock, times (B) the Closing Price on the date of
the event giving rise to the Company’s obligation to deliver such certificate.




          (d) The Company’s obligations to issue and deliver Warrant Shares in accordance with the terms
hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to
enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any
judgment against any Person or any action to enforce the same, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other
Person of any obligation to the Company or any violation or alleged violation of law by the Holder
or any other Person, and irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the Holder in connection with the issuance of Warrant Shares. 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.




     6. Charges, Taxes and Expenses. Issuance and delivery of certificates for shares of
Common Stock upon exercise of this Warrant shall be made without charge to the Holder for any issue
or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect
of the issuance of such certificates, all of which taxes and expenses shall be paid by the
Company; provided, however, that the Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the registration of any certificates for Warrant Shares or
Warrants in a name other than that of the Holder or an Affiliate thereof. The Holder



3









 





shall be responsible for all other tax liability that may arise as a result of holding or
transferring this Warrant or receiving Warrant Shares upon exercise hereof.



     7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed,
the Company shall issue or cause to be issued in exchange and substitution for and upon
cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon
receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and
customary and reasonable bond or indemnity, if requested. Applicants for a New Warrant under such
circumstances shall also comply with such other reasonable regulations and procedures and pay such
other reasonable third-party costs as the Company may prescribe.



     8. Reservation of Warrant Shares. The Company covenants that it will at all times
reserve and keep available out of the aggregate of its authorized but unissued and otherwise
unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon
exercise of this Warrant as herein provided, the number of Warrant Shares which are then issuable
and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other
contingent purchase rights of persons other than the Holder (taking into account the adjustments
and restrictions of Section 9). The Company covenants that all Warrant Shares so issuable
and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance
with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable.



     9. Certain Adjustments. The Exercise Price and number of Warrant Shares issuable upon
exercise of this Warrant are subject to adjustment from time to time as set forth in this
Section 9.



          (a) Stock Dividends and Splits. If the Company, at any time while this Warrant is
outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any
class of capital stock that is payable in shares of Common Stock, (ii) subdivides outstanding
shares of Common Stock into a larger number of shares, or (iii) combines outstanding shares of
Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of Common Stock
outstanding immediately before such event and of which the denominator shall be the number of
shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to
clause (i) of this paragraph shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution, and any adjustment
pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the
effective date of such subdivision or combination.




          (b) Pro Rata Distributions. If the Company, at any time while this Warrant is
outstanding, distributes to all holders of Common Stock (i) evidences of its indebtedness, (ii) any
security (other than a distribution of Common Stock covered by the preceding paragraph), (iii)
rights or warrants to subscribe for or purchase any security, or (iv) any other asset (in each
case, “Distributed Property”), then in each such case the Exercise Price in effect immediately
prior to the record date fixed for determination of stockholders entitled to receive such
distribution shall be adjusted (effective on such record date) to equal the product of such
Exercise Price times a fraction of which the denominator shall be the average of the Closing




4









 








Prices for the five Trading Days immediately prior to (but not including) such record date and of which the numerator
shall be such average less the then fair market value of the Distributed Property distributed in
respect of one outstanding share of Common Stock, as determined by the Company’s independent
certified public accountants that regularly examine the financial statements of the Company (an
“Appraiser”). In such event, the Holder, after receipt of the determination by the Appraiser,
shall have the right to select an additional appraiser (which shall be a nationally recognized
accounting firm) at the Holder’s sole expense to determine such fair market value, in which case
such fair market value shall be deemed to equal the average of the values determined by each of the
Appraiser and such appraiser. As an alternative to the foregoing adjustment to the Exercise Price,
at the request of the Holder delivered before the 90th day after such record date, upon exercise by
the Holder of this Warrant, the Company will deliver to such Holder, within five Trading Days after
such request (or, if later, on the effective date of such distribution), the Distributed Property
that such Holder would have been entitled to receive in respect of the Warrant Shares for which
this Warrant is exercised. If such Distributed Property is not delivered to a Holder pursuant to
the preceding sentence, then upon any exercise of the Warrant that occurs after such record date,
such Holder shall remain entitled to receive, in addition to the Warrant Shares otherwise issuable
upon such exercise (if applicable), such Distributed Property.



          (c) Fundamental Transactions. If, at any time while this Warrant is outstanding, (i)
the Company effects any merger or consolidation of the Company with or into another Person, (ii)
the Company effects any sale of all or substantially all of its assets in one or a series of
related transactions, (iii) 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 (iv) 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 (other than
as a result of a subdivision or combination of shares of Common Stock covered by Section 9(a)
above) (in any such case, a “Fundamental Transaction”), then the Holder shall have the right
thereafter to receive, upon exercise of this Warrant, the same amount and kind of securities, cash
or property as it would have been entitled to receive upon the occurrence of such Fundamental
Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the
number of Warrant Shares then issuable upon exercise in full of this Warrant (the “Alternate
Consideration”). The aggregate Exercise Price for this Warrant will not be affected by any such
Fundamental Transaction, but the Company shall apportion such aggregate 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. In the event of a Fundamental Transaction, the
Company or the successor or purchasing Person, as the case may be, shall offer to execute with the
Holder a written agreement providing that:





          (x) this Warrant shall thereafter entitle the Holder to purchase the Alternate
Consideration in accordance with this section 9(c),



5









 






          (y) in the case of any such successor or purchasing Person, upon such consolidation,
merger, statutory exchange, combination, sale or conveyance such successor or purchasing
Person shall be jointly and severally liable with the Company for the performance of all of
the Company’s obligations under this Warrant and the Purchase Agreement, and




          (z) if registration or qualification is required under the Exchange Act or applicable
state law for the public resale by the Holder of shares of stock and other securities so
issuable upon exercise of this Warrant, all rights applicable to registration of the Common
Stock issuable upon exercise of this Warrant shall apply to the Alternate Consideration.


If, in the case of any Fundamental Transaction, the Alternate Consideration includes shares of
stock, other securities, other property or assets of a Person other than the Company or any such
successor or purchasing Person, as the case may be, in such Fundamental Transaction, then such
written agreement shall also be executed by such other Person and shall contain such additional
provisions to protect the interests of the Holder as the Board of Directors of the Company shall
reasonably consider necessary by reason of the foregoing. At the Holder’s request, 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 purchase the
Alternate Consideration for the aggregate Exercise Price upon exercise thereof. 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 (c) and insuring
that the Warrant (or any such replacement security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction. If any Fundamental Transaction constitutes or
results in a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the Exchange Act with respect
to the Company in which the consideration issued consists principally of cash or stock in a
non-public company, then at the request of the Holder delivered before the 90th day after such
Fundamental Transaction, the Company (or any such successor or surviving entity) will purchase the
Warrant from the Holder for a purchase price, payable in cash within five Trading Days after such
request (or, if later, on the effective date of the Fundamental Transaction), equal to the
Black-Scholes value of the remaining unexercised portion of this Warrant on the date of such
request.




          (d) Subsequent Equity Sales.





               (i) If, at any time while this Warrant is outstanding, the Company or any Subsidiary
issues additional shares of Common Stock or rights, warrants, options or other securities or
debt convertible, exercisable or exchangeable for shares of Common Stock or otherwise
entitling any Person to acquire shares of Common Stock (collectively, “Common Stock
Equivalents”) at an effective net price to the Company per share of Common Stock (the
“Effective Price”) less than the Exercise Price (as adjusted hereunder to such date), then
the Exercise Price shall be reduced to equal the product of (A) the Exercise Price in effect
immediately prior to such issuance of shares of Common Stock or Common Stock Equivalents
times (B) a fraction, the numerator of which is the sum of (1) the number of shares of
Common Stock outstanding immediately prior to such



6









 






issuance, plus (2) the number of shares of Common Stock which the aggregate Effective Price of the shares of Common Stock issued (or deemed to be issued) would purchase at
the Exercise Price, and the denominator of which is the aggregate number of shares of Common
Stock outstanding or deemed to be outstanding immediately after such issuance. For purposes
of this paragraph, in connection with any issuance of any Common Stock Equivalents, (A) the
maximum number of shares of Common Stock potentially issuable at any time upon conversion,
exercise or exchange of such Common Stock Equivalents (the “Deemed Number”) shall be deemed
to be outstanding upon issuance of such Common Stock Equivalents, (B) the Effective Price
applicable to such Common Stock shall equal the minimum dollar value of consideration
payable to the Company to purchase such Common Stock Equivalents and to convert, exercise or
exchange them into Common Stock (net of any discounts, fees, commissions and other
expenses), divided by the Deemed Number, and (C) no further adjustment shall be made to the
Exercise Price upon the actual issuance of Common Stock upon conversion, exercise or
exchange of such Common Stock Equivalents. The Effective Price of Common Stock or Common
Stock Equivalents issued in any transaction in which more than one type of securities are
issued shall give effect to the allocation by the Company of the aggregate amount paid for
such securities among the different securities issued in such transaction.




               (ii) If, at any time while this Warrant is outstanding, the Company or any Subsidiary
issues Common Stock Equivalents with an Effective Price or a number of underlying shares
that floats or resets or otherwise varies or is subject to adjustment based (directly or
indirectly) on market prices of the Common Stock (a “Floating Price Security”), then for
purposes of applying the preceding paragraph in connection with any subsequent exercise, the
Effective Price will be determined separately on each Exercise Date and will be deemed to
equal the lowest Effective Price at which any holder of such Floating Price Security is
entitled to acquire Common Stock on such Exercise Date (regardless of whether any such
holder actually acquires any shares on such date).




               (iii) Notwithstanding the foregoing, no adjustment will be made under this paragraph in
respect of any Excluded Stock.



          (e) Number of Warrant Shares. Simultaneously with any adjustments to the Exercise
Price pursuant to paragraphs (a) or (b) of this Section, the number of Warrant Shares that may be
purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that
after such adjustment the aggregate Exercise Price payable hereunder for the increased or decreased
number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately
prior to such adjustment.




          (f) Calculations. All calculations under this Section 9 shall be made to the
nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by or for the account
of the Company, and the disposition of any such shares shall be considered an issue or sale of Common
Stock.




7









 








          (g) Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this
Section 9, the Company at its expense will promptly compute such adjustment in
accordance with the terms of this Warrant and prepare a certificate setting forth such
adjustment, including a statement of the adjusted Exercise Price and adjusted number or type of
Warrant Shares or other securities issuable upon exercise of this Warrant (as applicable),
describing the transactions giving rise to such adjustments and showing in detail the facts upon
which such adjustment is based. Upon written request, the Company will promptly deliver a copy of
each such certificate to the Holder and to the Company’s Transfer Agent.




          (h) Notice of Corporate Events. If the Company (i) declares a dividend or any other
distribution of cash, securities or other property in respect of its Common Stock, including
without limitation any granting of rights or warrants to subscribe for or purchase any capital
stock of the Company or any Subsidiary, (ii) authorizes or approves, enters into any agreement
contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes
the voluntary dissolution, liquidation or winding up of the affairs of the Company, then the
Company shall deliver to the Holder a notice describing the material terms and conditions of such
transaction, at least 20 calendar days prior to the applicable record or effective date on which a
Person would need to hold Common Stock in order to participate in or vote with respect to such
transaction, and the Company will take all steps reasonably necessary in order to insure that the
Holder is given the practical opportunity to exercise this Warrant prior to such time so as to
participate in or vote with respect to such transaction; provided, however, that the failure to
deliver such notice or any defect therein shall not affect the validity of the corporate action
required to be described in such notice.




     10. Payment of Exercise Price. The Holder shall pay the Exercise Price in immediately
available funds; provided, however, if at anytime after the Required Effectiveness Date there is no
effective Registration Statement registering, or no current prospectus available for, the resale of
the Warrant Shares by the Holder, the Holder may satisfy its obligation to pay the Exercise Price
through a “cashless exercise,” in which event the Company shall issue to the Holder the number of
Warrant Shares determined as follows:



	 	 	 
	

	 	X = Y [(A-B)/A]
	where:

	 	 
	

	 	X = the number of Warrant Shares to be
issued to the Holder.
	 
	 	 
	

	 	Y = the number of Warrant Shares with
respect to which this Warrant is being
exercised.
	 
	 	 
	

	 	A = the arithmetic average of the Closing
Prices for the five Trading Days
immediately prior to (but not including)
the Exercise Date.
	 
	 	 
	

	 	B = the Exercise Price.






          For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and
acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to
have been acquired by the Holder, and the holding period for the Warrant




8









 








Shares shall be deemed to
have commenced, on the date this Warrant was originally issued pursuant to the Purchase Agreement.



     11. Limitation on Exercise. (a) Notwithstanding anything to the contrary contained
herein, the number of shares of Common Stock that may be acquired by the Holder upon any exercise
of this Warrant (or otherwise in respect hereof) shall be limited to the extent necessary to insure
that, following such exercise (or other issuance), the total number of shares of Common Stock then
beneficially owned by such Holder and its Affiliates and any other Persons whose beneficial
ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of
the Exchange Act, does not exceed 4.999% (the “Threshold Percentage”) or 9.999% (the “Maximum
Percentage”) of the total number of issued and outstanding shares of Common Stock (including for
such purpose the shares of Common Stock issuable upon such exercise). For such purposes,
beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder. Each delivery of an Exercise Notice hereunder
will constitute a representation by the Holder that it has evaluated the limitations set forth in
this paragraph and determined that issuance of the full number of Warrant Shares requested in such
Exercise Notice is permitted under this paragraph. The Company’s obligation to issue shares of
Common Stock in excess of the limitation referred to in this Section shall be suspended (and shall
not terminate or expire notwithstanding any contrary provisions hereof) until such time, if any, as
such shares of Common Stock may be issued in compliance with such limitation. By written notice to
the Company, the Holder shall have the right (x) at any time and from time to time to reduce its
Maximum Percentage immediately upon notice to the Company in the event and only to the extent that
Section 16 of the Exchange Act or the rules promulgated thereunder (or any successor statute or
rules) is changed to reduce the beneficial ownership percentage threshold thereunder to a
percentage less than 9.999% and (y) at any time and from time to time, to waive the provisions of
this Section insofar as they relate to the Threshold Percentage or to increase or decrease its
Threshold Percentage (but not in excess of the Maximum Percentage) unless the Holder shall have, by
written instrument delivered to the Company, irrevocably waived its rights to so increase or
decrease its Threshold Percentage, but (i) any such waiver, increase or decrease will not be
effective until the 61st day after such notice is delivered to the Company, and (ii) any such
waiver or increase or decrease will apply only to the Holder and not to any other holder of
Warrants.



          (b) Notwithstanding anything to the contrary contained herein, the maximum number of shares of
Common Stock that the Company may issue pursuant to the Transaction Documents at an effective
purchase price less than the Closing Price on the Trading Day immediately preceding the Closing
Date equals 19.99% of the outstanding shares of Common Stock immediately preceding the Closing Date
(the “Issuable Maximum”), unless the Company obtains shareholder approval in accordance with the
rules and regulations of such Trading Market. If, at the time any Holder requests an exercise of
any of the Warrants, the Actual Minimum (excluding any shares issued or issuable at an effective
purchase price in excess of the Closing Price on the Trading Day immediately preceding the Closing
Date) exceeds the Issuable Maximum (and if the Company has not previously obtained the required
shareholder approval), then the Company shall issue to the Holder requesting such exercise a number
of shares of Common Stock not exceeding such Holder’s pro-rata portion of the Issuable Maximum
(based on such Holder’s share (vis-à-vis other Holders) of the aggregate purchase price paid under
the




9









 








Purchase Agreement and taking into account any Warrant Shares previously issued to such
Holder). For the purposes hereof, “Actual Minimum” shall mean, as of any date, the maximum
aggregate number of shares of Common Stock then issued or potentially issuable in the future
pursuant to the Transaction Documents, including any Underlying Shares issuable upon exercise
in full of all Warrants, without giving effect to any limits on the number of shares of Common
Stock that may be owned by a Holder at any one time.



     12. Fractional Shares. The Company shall not be required to issue or cause to be
issued fractional Warrant Shares on the exercise of this Warrant. If any fraction of a Warrant
Share would, except for the provisions of this Section, be issuable upon exercise of this Warrant,
the number of Warrant Shares to be issued will be rounded up to the nearest whole share.



     13. Notices. Any and all notices or other communications or deliveries hereunder
(including without limitation any Exercise Notice) shall be in writing and shall be deemed given
and effective on the earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number specified in this Section prior to 6:30 p.m. (New
York City time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number specified in this
Section on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any
Trading Day, (iii) the Trading Day following the date of mailing, if sent by nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required
to be given. The address for such notices or communications shall be as set forth in the Purchase
Agreement.



     14. Warrant Agent. The Company shall serve as warrant agent under this Warrant. Upon
30 days’ notice to the Holder, the Company may appoint a new warrant agent. Any corporation into
which the Company or any new warrant agent may be merged or any corporation resulting from any
consolidation to which the Company or any new warrant agent shall be a party or any corporation to
which the Company or any new warrant agent transfers substantially all of its corporate trust or
shareholders services business shall be a successor warrant agent under this Warrant without any
further act. Any such successor warrant agent shall promptly cause notice of its succession as
warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s
last address as shown on the Warrant Register.



     15. Miscellaneous.



          (a) Subject to the restrictions on transfer set forth on the first page hereof, this Warrant
may be assigned by the Holder. This Warrant may not be assigned by the Company except to a
successor in the event of a Fundamental Transaction. This Warrant shall be binding on and inure to
the benefit of the parties hereto and their respective successors and assigns. Subject to the
preceding sentence, nothing in this Warrant shall be construed to give to any Person other than the
Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant.
This Warrant may be amended only in writing signed by the Company and the Holder and their
successors and assigns.




          (b) The Company will not, by amendment of its governing documents or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of




10









 








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 action as may be necessary or appropriate in order to
protect the rights of the Holder against impairment. Without limiting the generality of the
foregoing, the Company (i) will not increase the par value of any Warrant Shares above the amount
payable therefor on such exercise, (ii) will take all such action as may be reasonably necessary or
appropriate in order that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares on the exercise of this Warrant, and (iii) will not close its shareholder books or
records in any manner which interferes with the timely exercise of this Warrant.



          (c) Governing Law; Venue; Waiver Of Jury Trial. All questions
concerning the construction, validity, enforcement and interpretation of this Warrant shall be
governed by and construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party agrees that all
legal proceedings concerning the interpretations, enforcement and defense of the transactions
contemplated by any of the Transaction Documents (whether brought against a party hereto or its
respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of New York, Borough of Manhattan.
Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of this Warrant), and hereby irrevocably waives,
and agrees not to assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or proceeding is improper.
Each party hereto hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Warrant and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall be deemed to
limit in any way any right to serve process in any manner permitted by law. Each party hereto
hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to
trial by jury in any legal proceeding arising out of or relating to this Warrant or any of the
Transaction Documents or the transactions contemplated hereby or thereby. If either party shall
commence an action or proceeding to enforce any provisions of this Warrant or any Transaction
Document, then the prevailing party in such action or proceeding shall be reimbursed by the other
party for its reasonable attorneys fees and other reasonable costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.




          (d) The headings herein are for convenience only, do not constitute a part of this Warrant and
shall not be deemed to limit or affect any of the provisions hereof.





11









 








          (e) In case any one or more of the provisions of this Warrant shall be invalid or
unenforceable in any respect, the validity and enforceability of the remaining terms and provisions
of this Warrant shall not in any way be affected or impaired thereby and the parties
will attempt in good faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Warrant.




12









 








     IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized
officer as of the date first indicated above.



	 	 	 	 	 	 	 
	 	 	Ace*Comm Corporation	 	 
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ Steven R. Delmar	 	 
	

	 	 	 	 	 	 
	

	 	Name:
	 	Steven R. Delmar	 	 
	

	 	Title:
	 	Chief Financial Officer
	

	 	 	 	 	 	 






13









 






Exhibit 4.1




FORM OF EXERCISE NOTICE



(To be executed by the Holder to exercise the right to purchase shares of Common Stock under the
foregoing Warrant)




To: Ace*Comm Corporation



The undersigned is the Holder
of Warrant No. ______ (the “Warrant”) issued by Ace*Comm
Corporation, a Maryland corporation (the “Company”). Capitalized terms used herein and not
otherwise defined have the respective meanings set forth in the Warrant.





	1.  	The Warrant is currently exercisable to purchase a total of
______ Warrant Shares.
	 
	2.  	The undersigned Holder hereby exercises its right to purchase
______ Warrant
Shares pursuant to the Warrant.
	 
	3.  	The Holder intends that payment of the Exercise Price shall be made as (check one):





	 	 	 	 	 
	

	 	___
	 	“Cash Exercise” under Section 10
	 
	 	 	 	 
	

	 	___
	 	“Cashless Exercise” under Section 10 (if permitted)







	4.  	If the holder has elected a Cash Exercise, the holder shall
pay the sum of $______ to
the Company in accordance with the terms of the Warrant.
	 
	5.  	Pursuant to this exercise, the Company shall deliver to the
holder ______ Warrant
Shares in accordance with the terms of the Warrant.
	 
	6.  	Following this exercise, the Warrant shall be exercisable to purchase a total of
______ Warrant Shares.





	 	 	 	 	 
	Dated:_______________, _____	 	Name of Holder:
	 
	 	 	 	 
	

	 	(Print)	 	 
	

	 	 	 	 
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	 
	

	 	Name:	 	 
	

	 	 	 	 
	

	 	Title:	 	 
	

	 	 	 	 
	 
	 	 	 	 
	 	 	(Signature must conform in all respects to name of holder as
specified on the face of the Warrant)






 









 






FORM OF ASSIGNMENT




     [To be completed and signed only upon transfer of Warrant]



     FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
_________ the right represented by the within Warrant to purchase
_________ shares of Common Stock of Ace*Comm Corporation to which the within Warrant relates and
appoints _______ attorney to transfer said right on the books of Ace*Comm Corporation with
full power of substitution in the premises.



	 	 	 	 	 
	Dated:_________,
___
	 	 	 	 
	

	 	 	 	 
	 	 	(Signature must conform in all respects to name of holder
as specified on the face of the Warrant)
	 
	 	 	 	 
	

	 	 	 	 
	

	 	Address of Transferee	 	 
	 
	 	 	 	 
	

	 	 	 	 
	 
	 	 	 	 
	

	 	 	 	 
	In the presence of: