EX-4.10 Warrant to Purchase Common Stock






Exhibit 4.10




WARRANT




NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES
INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH
COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A
UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.



LIBERATOR MEDICAL HOLDINGS, INC.




Warrant To Purchase Common Stock




Warrant No.: MM-1

Number of Shares of Common Stock: 1,166,667

Date of Issuance: October 17, 2008 (“Issuance Date”)




     Liberator Medical Holdings, Inc., a Nevada corporation (the “Company”), hereby certifies that,
for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
MILLENNIUM PARTNERS, L.P., the registered holder hereof or its permitted assigns (the “Holder”), is
entitled, subject to the terms set forth below, to purchase from the Company, at the Exercise Price
(as defined below) then in effect, upon surrender of this Warrant to Purchase Common Stock
(including any Warrants to Purchase Common Stock issued in exchange, transfer or replacement
hereof, the “Warrant”), at any time or times on or after the date hereof but not after 11:59 p.m.,
New York time, on the Expiration Date (as defined below), ONE MILLION ONE HUNDRED SIXTY-SIX
THOUSAND SIX HUNDRED AND SIXTY SEVEN (1,166,667) fully paid nonassessable shares of Common Stock
(as defined below) (the “Warrant Shares”). This Warrant is one of the Warrants to purchase Common
Stock (the “SPA Warrants”) issued pursuant to Section 1 of that certain Securities Purchase
Agreement, dated as of October 17, 2008 (the “Subscription Date”), by and among the Company, as
issuer, Liberator Medical Supply, Inc. and Liberator Health and Education Services, Inc., as
guarantors, and the investors (the “Buyers”) referred to therein (the “Securities Purchase
Agreement”). Except as otherwise defined herein, capitalized terms in this Warrant shall have the
meanings set forth in Section 15.



 









 





     1. EXERCISE OF WARRANT.




          (a) Mechanics of Exercise. Subject to the terms and conditions hereof
(including, without limitation, the limitations set forth in Section 1(f)), this Warrant may
be exercised by the Holder on any day on or after the date hereof, in whole or in part, by (i)
delivery of a written notice, in the form attached hereto as Exhibit A (the “Exercise
Notice”), of the Holder’s election to exercise this Warrant and (ii) (A) payment to the
Company of an amount equal to the applicable Exercise Price multiplied by the number of
Warrant Shares as to which this Warrant is being exercised (the “Aggregate Exercise Price”) in
cash or by wire transfer of immediately available funds or (B) by notifying the Company that
this Warrant is being exercised pursuant to a Cashless Exercise (as defined in Section 1(d)).
The Holder shall not be required to deliver the original Warrant in order to effect an
exercise hereunder. Execution and delivery of the Exercise Notice with respect to less than
all of the Warrant Shares shall have the same effect as cancellation of the original Warrant
and issuance of a new Warrant evidencing the right to purchase the remaining number of Warrant
Shares. On or before the second (2nd) Business Day following the date on which the
Company has received each of the Exercise Notice and the Aggregate Exercise Price (or notice
of a Cashless Exercise) (the “Exercise Delivery Documents”), the Company shall transmit by
facsimile an acknowledgment of confirmation of receipt of the Exercise Delivery Documents to
the Holder and the Company’s transfer agent (the “Transfer Agent”). On or before the third
(3rd) Trading Day following the date on which the Company has received all of the
Exercise Delivery Documents (the “Share Delivery Date”), the Company shall (X) provided that
the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated
Securities Transfer Program, upon the request of the Holder, credit such aggregate number of
Warrant Shares to which the Holder is entitled pursuant to such exercise to the Holder’s or
its designee’s balance account with DTC through its Deposit Withdrawal Agent Commission
system, or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and dispatch by overnight courier to the address as specified in the
Exercise Notice, a certificate, registered in the Company’s share register in the name of the
Holder or its designee, for the number of shares of Common Stock to which the Holder is
entitled pursuant to such exercise. Upon delivery of the Exercise Delivery Documents, the
Holder shall be deemed for all corporate purposes to have become the holder of record of the
Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date
such Warrant Shares are credited to the Holder’s DTC account or the date of delivery of the
certificates evidencing such Warrant Shares, as the case may be. If this Warrant is submitted
in connection with any exercise pursuant to this Section 1(a) and the number of Warrant Shares
represented by this Warrant submitted for exercise is greater than the number of Warrant
Shares being acquired upon an exercise, then the Company shall as soon as practicable and in
no event later than three (3) Business Days after any exercise and at its own expense, issue a
new Warrant (in accordance with Section 7(d)) representing the right to purchase the number of
Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the
number of Warrant Shares with respect to which this Warrant is
exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but rather the
number of shares of Common Stock to be issued shall be rounded up to the nearest whole number.
The Company shall pay any and all taxes which may be payable with respect to the issuance
and delivery of Warrant Shares upon exercise of this Warrant.



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          (b) Exercise Price. For purposes of this Warrant, “Exercise Price” means One
Dollar and Thirty Cents ($1.25), subject to adjustment as provided herein.




          (c) Company’s Failure to Timely Deliver Securities. If within three (3) Trading
Days after the Company’s receipt of the Exercise Delivery Documents the Company shall fail to
issue and deliver a certificate to the Holder or credit the Holder’s balance account with DTC
for the number of shares of Common Stock to which the Holder is entitled upon such Holder’s
exercise of this Warrant, and if on or after such Trading Day the Holder purchases (in an open
market transaction or otherwise) Common Stock to deliver in satisfaction of a sale by the
Holder of Common Stock issuable upon such exercise that the Holder anticipated receiving from
the Company (a “Buy-In”), then the Company shall, within three (3) Business Days after the
Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an
amount equal to the Holder’s total purchase price (including brokerage commissions and other
out-of-pocket expenses, 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 Weighted Average Price on the date of
exercise.




          (d) Cashless Exercise. Notwithstanding anything contained herein to the
contrary, at any time and from time to time on or after the six (6) month anniversary of the
Issuance Date, if a registration statement covering the resale of the Warrant Shares that are
the subject of the Exercise Notice by the Holder pursuant to the 1933 Act (the “Unavailable
Warrant Shares”) is not available for the resale of such Unavailable Warrant Shares, the
Holder may, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of
making the cash payment otherwise contemplated to be made to the Company upon such exercise in
payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net
Number” of shares of Common Stock determined according to the following formula (a “Cashless
Exercise”):



	 	 	 	 	 
	Net Number =

	 	(A x B) — (A x C)
	 	 
	 

	 	 	 	 
	 

	 	B	 	 
	 
	 	 	 	 
	For purposes of the foregoing formula:	 	 







	 	 	 	A= the total number of shares with respect to which
this Warrant is then being exercised.
	 
	 	 	 	B= the Weighted Average Price of the shares of Common
Stock (as reported by Bloomberg) on the date immediately preceding
the 
     date of the Exercise Notice.
	 
	 	 	 	C= the Exercise Price then in effect for
the applicable Warrant Shares at the time of such
exercise.




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          (e) Disputes. In the case of a dispute as to the determination of the Exercise
Price or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to
the Holder the number of Warrant Shares that are not disputed and resolve such dispute in
accordance with Section 13.




          (f) Limitations on Exercises; Beneficial Ownership. The Company shall not effect
the exercise of this Warrant, and the Holder shall not have the right to exercise this
Warrant, to the extent that after giving effect to such exercise, such Person (together with
such Person’s affiliates) would beneficially own in excess of 9.99% (the “Maximum Percentage”)
of the shares of Common Stock outstanding immediately after giving effect to such exercise.
For purposes of the foregoing sentence, the aggregate number of shares of Common Stock
beneficially owned by such Person and its affiliates shall include the number of shares of
Common Stock issuable upon exercise of this Warrant with respect to which the determination of
such sentence is being made, but shall exclude shares of Common Stock which would be issuable
upon (x) exercise of the remaining, unexercised portion of this Warrant beneficially owned by
such Person and its affiliates and (y) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Company beneficially owned by such Person
and its affiliates (including, without limitation, any convertible notes or convertible
preferred stock or warrants) subject to a limitation on conversion or exercise analogous to
the limitation contained herein. Except as set forth in the preceding sentence, for purposes
of this paragraph, beneficial ownership shall be calculated in accordance with Section 13(d)
of the Securities Exchange Act of 1934, as amended. For purposes of this Warrant, in
determining the number of outstanding shares of Common Stock, the Holder may rely on the
number of outstanding shares of Common Stock as reflected in (1) the Company’s most recent
Form 10-K, Form 10-KSB, Form 10-Q, Form 10-QSB, Current Report on Form 8-K or other public
filing with the Securities and Exchange Commission (“SEC”) as the case may be, (2) a more
recent public announcement by the Company or (3) any other notice by the Company or the
Transfer Agent setting forth the number of shares of Common Stock outstanding. For any reason
at any time, upon the written or oral request of the Holder, the Company shall within two (2)
Business Days confirm orally and in writing to the Holder the number of shares of Common Stock
then outstanding. In any case, the number of outstanding shares of Common Stock shall be
determined after giving effect to the conversion or exercise of securities of the Company by
the Holder and its affiliates since the date as of which such number of outstanding shares of
Common Stock was reported. By written notice to the Company, the Holder may from time to time
increase or decrease the Maximum Percentage to any other percentage specified in such notice;
provided that any such increase will not be effective until the sixty-first (61st)
day after such notice is delivered to the Company.



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          (g) Insufficient Authorized Shares. If at any time while this Warrant remains
outstanding the Company does not have a sufficient number of authorized and unreserved shares
of Common Stock to satisfy its obligation to reserve for issuance upon exercise of this
Warrant at least a number of shares of Common Stock equal to 110% (the
“Required Reserve Amount”) of the number of shares of Common Stock as shall from time to
time be necessary to effect the exercise of all of this Warrant then outstanding (an
“Authorized Share Failure”), then the Company shall immediately take all action necessary to
increase the Company’s authorized shares of Common Stock to an amount sufficient to allow the
Company to reserve the Required Reserve Amount for this Warrant then outstanding. Without
limiting the generality of the foregoing sentence, as soon as practicable after the date of
the occurrence of an Authorized Share Failure, but in no event later than ninety (90) days
after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its
stockholders for the approval of an increase in the number of authorized shares of Common
Stock. In connection with such meeting, the Company shall provide each stockholder with a
proxy statement and shall use its best efforts to solicit its stockholders’ approval of such
increase in authorized shares of Common Stock and to cause its board of directors to recommend
to the stockholders that they approve such proposal.



     2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise Price and
the number of Warrant Shares shall be adjusted from time to time as follows:




          (a) Adjustment upon Issuance of shares of Common Stock. If and whenever the
Company issues or sells, or in accordance with this Section 2 is deemed to have issued or
sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock
owned or held by or for the account of the Company, but excluding shares of Common Stock
issued or sold or deemed to have been issued or sold by the Company in connection with any
Excluded Securities (as defined in the SPA Securities)) for a consideration per share less
than a price (the “Applicable Price”) equal to both the Exercise Price in effect immediately
prior to such issue or sale or deemed issuance or sale and the Closing Sale Price for any of
the ten (10) consecutive Trading Days immediately preceding such issuance or sale or deemed
issuance or sale (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive
Issuance, the Exercise Price in effect immediately prior to such Dilutive Issuance shall be
reduced to an amount equal to the product of (A) the Exercise Price in effect immediately
prior to such Dilutive Issuance and (B) the quotient determined by dividing (1) the sum of (I)
the product derived by multiplying the lower of (x) the volume weighted average Closing Sale
Price for the ten (10) consecutive Trading Days immediately preceding such Dilutive Issuance
and (y) the Exercise Price in effect immediately prior to such Dilutive Issuance (such lower
amount, the “Adjustment Price”), by the number of shares of Common Stock Deemed Outstanding
immediately prior to such Dilutive Issuance plus (II) the consideration, if any, received by
the Company upon such Dilutive Issuance, by (2) the product derived by multiplying (I) the
Adjustment Price by (II) the number of shares of Common Stock Deemed Outstanding immediately
after such Dilutive Issuance. Upon each such adjustment of the Exercise Price hereunder, the
number of Warrant Shares shall be adjusted to the number of shares of Common Stock determined
by multiplying the Exercise Price in effect immediately prior to such adjustment by the number
of Warrant Shares acquirable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from such
adjustment. For purposes of determining the adjusted Exercise Price under this Section 2(a),
the following shall be applicable:



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(i) Issuance of Options. If the Company in any manner grants any
Options and the lowest price per share for which one share of Common Stock
is issuable upon the exercise of any such Option or upon conversion,
exercise or exchange of any Convertible Securities issuable upon exercise of
any such Option is less than the Applicable Price, then such share of Common
Stock shall be deemed to be outstanding and to have been issued and sold by
the Company at the time of the granting or sale of such Option for such
price per share. For purposes of this Section 2(a)(i), the “lowest price
per share for which one share of Common Stock is issuable upon exercise of
such Options or upon conversion, exercise or exchange of such Convertible
Securities issuable upon exercise of any such Option” shall be equal to the
sum of the lowest amounts of consideration (if any) received or receivable
by the Company with respect to any one share of Common Stock upon the
granting or sale of the Option, upon exercise of the Option and upon
conversion, exercise or exchange of any Convertible Security issuable upon
exercise of such Option. No further adjustment of the Exercise Price or
number of Warrant Shares shall be made upon the actual issuance of
such shares of Common Stock or of such Convertible Securities upon the exercise
of such Options or upon the actual issuance of such shares of Common Stock
upon conversion, exercise or exchange of such Convertible Securities.




(ii) Issuance of Convertible Securities. If the Company in any
manner issues or sells any Convertible Securities and the lowest price per
share for which one share of Common Stock is issuable upon the conversion,
exercise or exchange thereof is less than the Applicable Price, then such
share of Common Stock shall be deemed to be outstanding and to have been
issued and sold by the Company at the time of the issuance or sale of such
Convertible Securities for such price per share. For the purposes of this
Section 2(a)(ii), the “lowest price per share for which one share of Common
Stock is issuable upon the conversion, exercise or exchange thereof” shall
be equal to the sum of the lowest amounts of consideration (if any) received
or receivable by the Company with respect to one share of Common Stock upon
the issuance or sale of the Convertible Security and upon conversion,
exercise or exchange of such Convertible Security. No further adjustment of
the Exercise Price or number of Warrant Shares shall be made upon the actual
issuance of such shares of Common Stock upon conversion, exercise or
exchange of such Convertible Securities, and if any such issue or sale of
such Convertible Securities is made upon exercise of any Options for which
adjustment of this Warrant has been or is to be made pursuant to other
provisions of this Section 2(a), no further adjustment of the Exercise Price
or number of Warrant Shares shall be made by reason of such issue or sale.



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(iii) Change in Option Price or Rate of Conversion. If the purchase
price provided for in any Options, the additional consideration, if any,
payable upon the issue, conversion, exercise or exchange of any
Convertible Securities, or the rate at which any Convertible Securities are
convertible into or exercisable or exchangeable for shares of Common Stock
increases or decreases at any time, the Exercise Price and the number of
Warrant Shares in effect at the time of such increase or decrease shall be
adjusted to the Exercise Price and the number of Warrant Shares which would
have been in effect at such time had such Options or Convertible Securities
provided for such increased or decreased purchase price, additional
consideration or increased or decreased conversion rate, as the case may be,
at the time initially granted, issued or sold. For purposes of this Section
2(a)(iii), if the terms of any Option or Convertible Security that was
outstanding as of the date of issuance of this Warrant are increased or
decreased in the manner described in the immediately preceding sentence,
then such Option or Convertible Security and the shares of Common Stock
deemed issuable upon exercise, conversion or exchange thereof shall be
deemed to have been issued as of the date of such increase or decrease. No
adjustment pursuant to this Section 2(a) shall be made if such adjustment
would result in an increase of the Exercise Price then in effect or a
decrease in the number of Warrant Shares.




(iv) Calculation of Consideration Received. In case any Option is
issued in connection with the issue or sale of other securities of the
Company, together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the
Options will be deemed to have been issued for a consideration of $0.01. If
any shares of Common Stock, Options or Convertible Securities are issued or
sold or deemed to have been issued or sold for cash, the consideration
received therefor will be deemed to be the net amount received by the
Company therefor. If any shares of Common Stock, Options or Convertible
Securities are issued or sold for a consideration other than cash, the
amount of such consideration received by the Company will be the fair value
of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the
Company will be the Weighted Average Price of such security on the date of
receipt. If any shares of Common Stock, Options or Convertible Securities
are issued to the owners of the non-surviving entity in connection with any
merger in which the Company is the surviving entity, the amount of
consideration therefor will be deemed to be the fair value of such portion
of the net assets and business of the non-surviving entity as is
attributable to such shares of Common Stock, Options or Convertible
Securities, as the case may be. The fair value of any consideration other
than cash or securities will be determined jointly by the Company and the
Required Holders. If such parties are unable to reach agreement within ten
(10) days after the occurrence of an event requiring valuation (the
“Valuation Event”), the fair value of such consideration will be determined
within five (5) Business Days after the tenth (10th) day
following the Valuation Event by an independent,
reputable appraiser jointly selected by the Company and the Required
Holders. The determination of such appraiser shall be final and binding
upon all parties absent manifest error and the fees and expenses of such
appraiser shall be borne by the Company.



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(v)
Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in shares of Common Stock, Options or
in Convertible Securities or (B) to subscribe for or purchase shares of
Common Stock, Options or Convertible Securities, then such record date will
be deemed to be the date of the issue or sale of the shares of Common Stock
deemed to have been issued or sold upon the declaration of such dividend or
the making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.




          (b) Adjustment upon Subdivision or Combination of Common Stock. If the Company
at any time on or after the Subscription Date subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock
into a greater number of shares, the Exercise Price in effect immediately prior to such
subdivision will be proportionately reduced and the number of Warrant Shares will be
proportionately increased. If the Company at any time on or after the Subscription Date
combines (by combination, reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in
effect immediately prior to such combination will be proportionately increased and the number
of Warrant Shares will be proportionately decreased. Any adjustment under this Section 2(b)
shall become effective at the close of business on the date the subdivision or combination
becomes effective.




          (c) Other Events. If any event occurs of the type contemplated by the provisions
of this Section 2 but not expressly provided for by such provisions (including, without
limitation, the granting of stock appreciation rights, phantom stock rights or other rights
with equity features), then the Company’s Board of Directors will make an appropriate
adjustment in the Exercise Price and the number of Warrant Shares so as to protect the rights
of the Holder; provided that no such adjustment pursuant to this Section 2(c) will increase
the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant
to this Section 2.




          (d) De Minimis Adjustments. No adjustment in the Conversion Price shall be
required unless such adjustment would require an increase or decrease of at least $0.01 in
such price; provided, however, that any adjustment which by reason of this Section 7(d) is not
required to be made shall be carried forward and taken into account in any subsequent
adjustments under this Section 7. All calculations under this Section 7 shall be made by the
Company in good faith and shall be made to the nearest cent or to the nearest one hundredth of
a share, as applicable. No adjustment need be made for a change in the par value or no par
value of the Company’s Common Stock.



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     3. RIGHTS UPON DISTRIBUTION OF ASSETS. If the Company shall declare or make any
dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares
of Common Stock (other than in connection with the issuance, exercise, exchange or conversion of
Excluded Securities), by way of return of capital or otherwise (including, without limitation, any
distribution of cash, stock or other securities, property or options by way of a dividend, spin
off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction)
(a “Distribution”), at any time after the issuance of this Warrant, then, in each such case:




          (a) any Exercise Price in effect immediately prior to the close of business on the record
date fixed for the determination of holders of shares of Common Stock entitled to receive the
Distribution shall be reduced, effective as of the close of business on such record date, to a
price determined by multiplying such Exercise Price by a fraction of which (i) the numerator
shall be the Weighted Average Price of the shares of Common Stock on the Trading Day
immediately preceding such record date minus the value of the Distribution (as determined in
good faith by the Company’s Board of Directors) applicable to one share of Common Stock, and
(ii) the denominator shall be the Weighted Average Price of the shares of Common Stock on the
Trading Day immediately preceding such record date; and




          (b) the number of Warrant Shares shall be increased to a number of shares equal to the
number of shares of Common Stock obtainable immediately prior to the close of business on the
record date fixed for the determination of holders of shares of Common Stock entitled to
receive the Distribution multiplied by the reciprocal of the fraction set forth in the
immediately preceding paragraph (a); provided that in the event that
the Distribution is of shares of Common Stock (or common stock) (“Other Shares of Common Stock”) of a company whose
common shares are traded on a national securities exchange or a national automated quotation
system, then the Holder may elect to receive a warrant to purchase Other Shares of Common
Stock in lieu of an increase in the number of Warrant Shares, the terms of which shall be
identical to those of this Warrant, except that such warrant shall be exercisable into the
number of shares of Other Shares of Common Stock that would have been payable to the Holder
pursuant to the Distribution had the Holder exercised this Warrant immediately prior to such
record date and with an aggregate exercise price equal to the product of the amount by which
the exercise price of this Warrant was decreased with respect to the Distribution pursuant to
the terms of the immediately preceding paragraph (a) and the number of Warrant Shares
calculated in accordance with the first part of this paragraph (b).



     4. FUNDAMENTAL TRANSACTIONS.




          (a) Fundamental Transactions. The Company shall not enter into or be party to a
Fundamental Transaction unless (i) the Successor Entity assumes in writing all of the
obligations of the Company under this Warrant and the other Transaction Documents (as defined
in the Securities Purchase Agreement) in accordance with the provisions of this Section (4)(a)
pursuant to written agreements in form and substance satisfactory to the Required Holders and
approved by the Required Holders prior to such Fundamental Transaction, including agreements
to deliver to each holder of the SPA



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Warrants in exchange for such Warrants a security of the Successor Entity evidenced by a
written instrument substantially similar in form and substance to this Warrant, including,
without limitation, an adjusted exercise price equal to the value for the shares of Common
Stock reflected by the terms of such Fundamental Transaction, and exercisable for a
corresponding number of shares of capital stock equivalent to the shares of Common Stock
acquirable and receivable upon exercise of this Warrant (without regard to any limitations on
the exercise of this Warrant) prior to such Fundamental Transaction, and satisfactory to the
Required Holders and (ii) the Successor Entity (including its Parent Entity) is a publicly
traded corporation whose common stock is quoted on or listed for trading on an Eligible
Market. Upon the occurrence of any Fundamental Transaction, the Successor Entity shall
succeed to, and be substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Warrant referring to the “Company” shall refer instead to
the Successor Entity), and may exercise every right and power of the Company and shall assume
all of the obligations of the Company under this Warrant with the same effect as if such
Successor Entity had been named as the Company herein. Upon consummation of the Fundamental
Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall be
issued upon exercise of this Warrant at any time after the consummation of the Fundamental
Transaction, in lieu of the shares of the Common Stock (or other securities, cash, assets or
other property) issuable upon the exercise of the Warrant prior to such Fundamental
Transaction, such shares of the publicly traded Common Stock (or its equivalent) of the
Successor Entity (including its Parent Entity) which the Holder would have been entitled to
receive upon the happening of such Fundamental Transaction had this Warrant been converted
immediately prior to such Fundamental Transaction, as adjusted in accordance with the
provisions of this Warrant. In addition to and not in substitution for any other rights
hereunder, prior to the consummation of any Fundamental Transaction pursuant to which holders
of shares of Common Stock are entitled to receive securities or other assets with respect to
or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make
appropriate provision to insure that the Holder will thereafter have the right to receive upon
an exercise of this Warrant at any time after the consummation of the Fundamental Transaction
but prior to the Expiration Date, in lieu of the shares of the Common Stock (or other
securities, cash, assets or other property) issuable upon the exercise of this Warrant prior
to such Fundamental Transaction, such shares of stock, securities, cash, assets or any other
property whatsoever (including warrants or other purchase or subscription rights) which the
Holder would have been entitled to receive upon the happening of such Fundamental Transaction
had this Warrant been exercised immediately prior to such Fundamental Transaction. Provision
made pursuant to the preceding sentence shall be in a form and substance reasonably
satisfactory to the Holder. The provisions of this Section shall apply similarly and equally
to successive Fundamental Transactions and Corporate Events and shall be applied without
regard to any limitations on the exercise of this Warrant.




          5. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will
not, by amendment of its Certificate of Incorporation, Bylaws or through any reorganization,
transfer of assets, consolidation, merger, scheme of arrangement, 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, and will at all times in good faith carry out all the provisions
of this Warrant and take all action as may be required to protect the rights of the



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Holder. Without limiting the generality of the foregoing, the Company (i) shall not increase
the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the
Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant and (iii) shall, so long as any of the SPA Warrants
are outstanding, take all action necessary to reserve and keep available out of its authorized and
unissued shares of Common Stock, solely for the purpose of effecting the exercise of the SPA
Warrants, 110% of the number of shares of Common Stock as shall from time to time be necessary to
effect the exercise of the SPA Warrants then outstanding (without regard to any limitations on
exercise).



     6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise specifically provided
herein, the Holder, solely in such Person’s capacity as a holder of this Warrant, shall not be
entitled to vote or receive dividends or be deemed the holder of share capital of the Company for
any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder,
solely in such Person’s capacity as the Holder of this Warrant, any of the rights of a shareholder
of the Company or any right to vote, give or withhold consent to any corporate action (whether any
reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or
otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise,
prior to the issuance to the Holder of the Warrant Shares which such Person is then entitled to
receive upon the due exercise of this Warrant. In addition, nothing contained in this Warrant
shall be construed as imposing any liabilities on the Holder to purchase any securities (upon
exercise of this Warrant or otherwise) or as a shareholder of the Company, whether such liabilities
are asserted by the Company or by creditors of the Company. Notwithstanding this Section 6, the
Company shall provide the Holder with copies of the same notices and other information given to the
shareholders of the Company generally, contemporaneously with the giving thereof to the
shareholders.



     7. REISSUANCE OF WARRANTS.




          (a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall
surrender this Warrant to the Company, whereupon the Company will forthwith issue and deliver
upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as
the Holder may request, representing the right to purchase the number of Warrant Shares being
transferred by the Holder and, if less than the total number of Warrant Shares then underlying
this Warrant is being transferred, a new Warrant (in accordance with Section 7(d)) to the
Holder representing the right to purchase the number of Warrant Shares not being transferred.




          (b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this
Warrant, and, in the case of loss, theft or destruction, of any indemnification undertaking by
the Holder to the Company in customary form and, in the case of mutilation, upon surrender and
cancellation of this Warrant, the Company shall execute and deliver to the Holder a new
Warrant (in accordance with Section 7(d)) representing the right to purchase the Warrant
Shares then underlying this Warrant.



-11-









 






          (c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the
surrender hereof by the Holder at the principal office of the Company, for a new Warrant or
Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase
the number of Warrant Shares then underlying this Warrant, and each such new Warrant will
represent the right to purchase such portion of such Warrant Shares as is designated by the
Holder at the time of such surrender; provided, however, that no Warrants for fractional
            shares of Common Stock shall be given.




          (d) Issuance of New Warrants. Whenever the Company is required to issue a new
Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor
with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the
right to purchase the Warrant Shares then underlying this Warrant (or in the case of a new
Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated
by the Holder which, when added to the number of shares of Common Stock underlying the other
new Warrants issued in connection with such issuance, does not exceed the number of Warrant
Shares then underlying this Warrant), (iii) shall have an issuance date, as indicated on the
face of such new Warrant which is the same as the Issuance Date, and (iv) shall have the same
rights and conditions as this Warrant.



     8. COMPANY CALL. If the Closing Sale Price of the Common Stock shall be above $3.00
(subject to adjustment corresponding to adjustments made to the Exercise Price under Sections 2(b)
and (c) above) (as for 90 calendar days, then the Company shall have the right, but not the
obligation, to call all or a portion of the Warrant Shares underlying this Warrant (prior to the
issuance thereof) at the Exercise Price for each Warrant Share the Company elects not to have this
Warrants exercisable for. Upon its election to exercise its option pursuant to this Section 8, the
Company shall provide written notice of such election to the Holder not more than sixty (60) days
nor less than ten (10) days before such call setting forth the payment date, the amount of payment
to be made and the portion of this Warrant to be called (if less than all, indicating such number
of whole shares to be called).



     9. NOTICES. Whenever notice is required to be given under this Warrant, unless
otherwise provided herein, such notice shall be given in accordance with Section 9(f) of the
Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of
all actions taken pursuant to this Warrant, including in reasonable detail a description of such
action and the reason therefore. Without limiting the generality of the foregoing, the Company
will give written notice to the Holder (i) immediately upon any adjustment of the Exercise Price,
setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at
least fifteen (15) days prior to the date on which the Company closes its books or takes a record
(A) with respect to any dividend or distribution upon the shares of Common Stock, (B) with respect
to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase
stock, warrants, securities or other property to holders of shares of Common Stock (other than
Excluded Securities) or (C) for determining rights to vote with respect to any Fundamental
Transaction, dissolution or liquidation, provided in each case that such information shall be made
known to the public prior to or in conjunction with such notice being provided to the Holder.



-12-









 





     10. AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions of this
Warrant may be amended and the Company may take any action herein prohibited, or omit to perform
any act herein required to be performed by it, only if the Company has obtained the written consent
of the Required Holders; provided that no such action may increase the exercise price of
any SPA Warrant or decrease the number of shares or class of stock obtainable upon exercise of any
SPA Warrant without the written consent of the Holder. No such amendment shall be effective to the
extent that it applies to less than all of the holders of the SPA Warrants then outstanding.



     11. GOVERNING LAW. This Warrant shall be governed by and construed and enforced in
accordance with, and all questions concerning the construction, validity, interpretation and
performance of this Warrant shall be governed by, the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.



     12. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly drafted by the
Company and all the Buyers and shall not be construed against any person as the drafter hereof.
The headings of this Warrant are for convenience of reference and shall not form part of, or affect
the interpretation of, this Warrant.



     13. DISPUTE RESOLUTION. In the case of a dispute as to the determination of the
Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall submit the
disputed determinations or arithmetic calculations via facsimile within five (5) Business Days of
receipt of the Exercise Notice giving rise to such dispute, as the case may be, to the Holder. If
the Holder and the Company are unable to agree upon such determination or calculation of the
Exercise Price or the Warrant Shares within three Business Days of such disputed determination or
arithmetic calculation being submitted to the Holder, then the Company shall, within two (2)
Business Days submit via facsimile (a) the disputed determination of the Exercise Price to an
independent, reputable investment bank selected by the Company and approved by the Holder or (b)
the disputed arithmetic calculation of the Warrant Shares to the Company’s independent, outside
accountant. The Company shall cause at its expense the investment bank or the accountant, as the
case may be, to perform the determinations or calculations and notify the Company and the Holder of
the results no later than ten Business Days from the time it receives the disputed determinations
or calculations. Such investment bank’s or accountant’s determination or calculation, as the case
may be, shall be binding upon all parties absent demonstrable error.



     14. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies
provided in this Warrant shall be cumulative and in addition to all other remedies available under
this Warrant and the other Transaction Documents, at law or in equity (including a decree of
specific performance and/or other injunctive relief), and nothing herein shall limit the right of
the Holder right to pursue actual damages for any failure by the Company to comply with the terms
of this Warrant. The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Holder and that the remedy at law for any such breach may be
inadequate. The Company therefore agrees that, in the event of any such breach or threatened
breach, the holder of this Warrant shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach, without the necessity of
showing economic loss and without any bond or other security being required.



-13-









 






          (a) TRANSFER. This Warrant may be offered for sale, sold, transferred or assigned
without the consent of the Company, except as may otherwise be required by Section 2(f) of the
Securities Purchase Agreement.




          15. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall have
the following meanings:




          (a) “1933 Act” means the Securities Act of 1933, as amended.




          (b) “Bloomberg” means Bloomberg Financial Markets.




          (c) “Business Day” means any day other than Saturday, Sunday or other day on which
commercial banks in The City of New York are authorized or required by law to remain closed.




          (d) “Closing Sale Price” means, for any security as of any date, the last closing trade
price for such security on the Principal Market, as reported by Bloomberg, or, if the
Principal Market begins to operate on an extended hours basis and does not designate the
closing trade price then the last trade price of such security prior to 4:00:00 p.m., New York
time, as reported by Bloomberg, or, if the Principal Market is not the principal securities
exchange or trading market for such security, the last trade price of such security on the
principal securities exchange or trading market where such security is listed or traded as
reported by Bloomberg, or if the foregoing do not apply, the last trade price of such security
in the over-the-counter market on the electronic bulletin board for such security as reported
by Bloomberg, or, if no last trade price is reported for such security by Bloomberg, the
average of the bid prices, or the ask prices, respectively, of any market makers for such
security as reported in the “pink sheets”. If the Closing Sale Price cannot be calculated for
a security on a particular date on any of the foregoing bases, the Closing Sale Price of such
security on such date shall be the fair market value as mutually determined by the Company and
the Holder. If the Company and the Holder are unable to agree upon the fair market value of
such security, then such dispute shall be resolved pursuant to Section 13. All such
determinations to be appropriately adjusted for any stock dividend, stock split, stock
combination or other similar transaction during the applicable calculation period.




          (e) “Common Stock” means (i) the Company’s shares of common stock, par value $0.001 per
share, and (ii) any share capital into which such common stock shall have been changed or any
share capital resulting from a reclassification of such common stock.




          (f) “Common Stock Deemed Outstanding” means, at any given time, the number of shares of
Common Stock actually outstanding at such time, plus the number of shares of Common Stock
deemed to be outstanding pursuant to Sections 2(a)(i) and 2(a)(ii) hereof regardless of
whether the Options or Convertible Securities are actually
exercisable at such time, but excluding any shares of Common Stock owned or held by or
for the account of the Company or issuable upon exercise of the SPA Warrants.



-14-









 






          (g) “Convertible Securities” means any stock or securities (other than Options) directly
or indirectly convertible into or exercisable or exchangeable for shares of Common Stock.




          (h) “Eligible Market” means The New York Stock Exchange, Inc., the American Stock
Exchange, The NASDAQ Global Market, The NASDAQ Global Select Market, The NASDAQ Capital Market
or the OTC Bulletin Board.




          (i) “Expiration Date” means the date three (3) years after the Issuance Date or, if such
date falls on a day other than a Business Day or on which trading does not take place on the
Principal Market (a “Holiday”), the next date that is not a Holiday.




          (j) “Fundamental Transaction” means that the Company shall, directly or indirectly, in
one or more related transactions, (i) consolidate or merge with or into (whether or not the
Company is the surviving corporation) another Person or Persons, if the holders of the Voting
Stock (not including any shares of Voting Stock held by the Person or Persons making or party
to, or associated or affiliated with the Persons making or party to, such consolidation or
merger) immediately prior to such consolidation or merger shall hold or have the right to
direct the voting of less than 50% of the Voting Stock or such voting securities of such other
surviving Person immediately following such transaction, or (ii) sell, assign, transfer,
convey or otherwise dispose of all or substantially all of the properties or assets of the
Company to another Person, or (iii) allow another Person to make a purchase, tender or
exchange offer that is accepted by the holders of more than the 50% of the outstanding shares
of Voting Stock (not including any shares of Voting Stock held by the Person or Persons making
or party to, or associated or affiliated with the Persons making or party to, such purchase,
tender or exchange offer), or (iv) consummate a stock purchase agreement or other business
combination (including, without limitation, a reorganization, recapitalization, spin-off or
scheme of arrangement) with another Person whereby such other Person acquires more than the
50% of the outstanding shares of Voting Stock (not including any shares of Voting Stock held
by the other Person or other Persons making or party to, or associated or affiliated with the
other Persons making or party to, such stock purchase agreement or other business
combination), (v) reorganize, recapitalize or reclassify its Common Stock or (vi) any “person”
or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended) is or shall become the “beneficial owner” (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended), directly or indirectly, of
50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock.




          (k) “Options” means any rights, warrants or options to subscribe for or purchase shares
of Common Stock or Convertible Securities.




          (l) “Parent Entity” of a Person means an entity that, directly or indirectly, controls
the applicable Person and whose common stock or equivalent equity
security is quoted or listed on an Eligible Market, or, if there is more than one such
Person or Parent Entity, the Person or Parent Entity with the largest public market
capitalization as of the date of consummation of the Fundamental Transaction.



-15-









 






          (m) “Person” means an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization, any other entity and a
government or any department or agency thereof.




          (n) “Principal Market” means Pink OTC Markets Inc. or any Eligible Market the Common
Stock is then listed on.




          (o) “Required Holders” means the holders of the SPA Warrants representing at least
two-thirds of shares of Common Stock underlying the SPA Warrants then outstanding.




          (p) “SPA Securities” means the Notes issued pursuant to the Securities Purchase
Agreement.




          (q) “Successor Entity” means the Person (or, if so elected by the Required Holders, the
Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the
Person (or, if so elected by the Required Holders, the Parent Entity) with which such
Fundamental Transaction shall have been entered into.




          (r) “Trading Day” means any day on which the Common Stock are traded on the Principal
Market, or, if the Principal Market is not the principal trading market for the Common Stock,
then on the principal securities exchange or securities market on which the Common Stock are
then traded; provided that “Trading Day” shall not include any day on which the Common Stock
are scheduled to trade on such exchange or market for less than 4.5 hours or any day that the
Common Stock are suspended from trading during the final hour of trading on such exchange or
market (or if such exchange or market does not designate in advance the closing time of
trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York
time).




          (s) “Voting Stock” of a Person means capital stock of such Person of the class or classes
pursuant to which the holders thereof have the general voting power to elect, or the general
power to appoint, at least a majority of the board of directors, managers or trustees of such
Person (irrespective of whether or not at the time capital stock of any other class or classes
shall have or might have voting power by reason of the happening of any contingency).



-16-









 






          (t) “Weighted Average Price” means, for any security as of any date, the dollar
volume-weighted average price for such security on the Principal Market during the period
beginning at 9:30:01 a.m., New York City time, and ending at 4:00:00 p.m., New York City time,
as reported by Bloomberg through its “Volume at Price” function or, if the foregoing does not
apply, the dollar volume-weighted average price of such security in the over-the-counter
market on the electronic bulletin board for such security during the period beginning at
9:30:01 a.m., New York City time, and ending at 4:00:00 p.m., New York City time, as reported
by Bloomberg, or, if no dollar volume-
weighted average price is reported for such security by Bloomberg for such hours, the
average of the highest closing bid price and the lowest closing ask price of any of the market
makers for such security as reported in the “pink sheets”. If the Weighted Average Price
cannot be calculated for such security on such date on any of the foregoing bases, the
Weighted Average Price of such security on such date shall be the fair market value as
mutually determined by the Company and the Required Holders. If the Company and the Required
Holders are unable to agree upon the fair market value of such security, then such dispute
shall be resolved pursuant to Section 13 with the term “Weighted Average Price” being
substituted for the term “Exercise Price.” All such determinations shall be appropriately
adjusted for any share dividend, share split or other similar transaction during such period.



[Signature Page Follows.]





-17-









 








     IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly
executed as of the Issuance Date set out above.



	 	 	 	 	 
	 	LIBERATOR MEDICAL HOLDINGS, INC.

 	 
	 	By:  	/s/ Mark A. Libratore
 	 
	 	 	Name:  	Mark A. Libratore 	 
	 	 	Title:  	President 	 



-18-









 






	 	 	 	 	 



EXHIBIT A




EXERCISE NOTICE




TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK




LIBERATOR MEDICAL HOLDINGS, INC.





     The undersigned holder hereby exercises the right to purchase                                          of the shares
of Common Stock (“Warrant Shares”) of Liberator Medical Holdings, Inc., a Nevada corporation (the
“Company”), evidenced by the attached Warrant to Purchase Common Stock (the “Warrant”).
Capitalized terms used herein and not otherwise defined shall have the respective meanings set
forth in the Warrant.



     1. Form of Exercise Price. The Holder intends that payment of the Exercise Price shall be
made as:




			
	                                                  	 	a “Cash Exercise” with respect to                                          Warrant
Shares; and/or






			
	                                                  	 	a “Cashless Exercise” with respect to                                          Warrant
Shares.





     2. Payment of Exercise Price. In the event that the holder has elected a Cash Exercise with
respect to some or all of the Warrant Shares to be issued pursuant hereto, the holder shall pay the
Aggregate Exercise Price in the sum of $                                         to the Company in accordance with the
terms of the Warrant.



     3. Maximum Exercise Percentage. The Holder represents and warrants to the Company that the
Holder, together with the Holder’s affiliates, will not beneficially own in excess of 9.99% of the
shares of Common Stock of the Company outstanding immediately after giving effect to the exercise
of the Warrant for the number of Warrant Shares to be issued pursuant to this Exercise Notice.



     4. Delivery of Warrant Shares. The Company shall deliver to the holder                                Warrant
Shares in accordance with the terms of the Warrant.



Date:                                                    ,                     




	 	 	 	 	 
	 	 
	
 	 
	Name of Registered Holder 	 
	 	 
	 
	 	 
	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 



 









 






	 	 	 	 	 



ACKNOWLEDGMENT





     The Company hereby acknowledges this Exercise Notice and hereby directs Standard Registrar &
Transfer, Inc. to issue the above indicated number of shares of Common Stock in accordance with the
Transfer Agent Instructions dated October 17, 2008 from the Company and acknowledged and agreed to
by Standard Registrar & Transfer, Inc.



	 	 	 	 	 
	 	LIBERATOR MEDICAL HOLDINGS, INC.

 	 
	 	By:  	/s/
 	 
	 	 	Name:  	 	 
	 	 	Title: