exv4w1






Exhibit 4.1



THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAW, AND MAY NOT
BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS
PURSUANT TO (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS, OR (II) AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE
STATE SECURITIES LAWS.



AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. HOLDERS MUST RELY ON THEIR OWN
ANALYSIS OF THE INVESTMENT AND ASSESSMENT OF THE RISKS INVOLVED.




			
	 	 	 
	Warrant to Purchase

[                    ] shares
	 	Warrant Number [___]






Warrant to Purchase Common Stock

of

INSULET CORPORATION



THIS CERTIFIES that [                    ] or any subsequent holder hereof (“Holder”) has the right to
purchase from INSULET CORPORATION, a Delaware corporation, (the “Company”), [______(___)]
fully paid and nonassessable shares of the Company’s common stock, $0.001 par value per share
(“Common Stock”), subject to adjustment as provided herein, at a price equal to the Exercise Price
as defined in Section 3 below, at any time during the Term (as defined below).



Holder agrees with the Company that this Warrant to Purchase Common Stock of the Company (this
“Warrant” or this “Agreement”) is issued and all rights hereunder shall be held subject to all of
the conditions, limitations and provisions set forth herein.



1. Date of Issuance and Term.



This Warrant shall be deemed to be issued on March 13, 2009 (“Date of Issuance”). The term of this
Warrant begins on the Date of Issuance and ends at 5:00 p.m., New York City time, on the date that
is six (6) years after the Date of Issuance (the “Term”). This Warrant was issued in conjunction
with that certain Facility Agreement (the “Facility Agreement”) and the Registration Rights
Agreement (“Registration Rights Agreement”) by and between the Company and [                    ], each
dated March 13, 2009, entered into in conjunction herewith.



(a) 9.98% Cap. Notwithstanding anything herein to the contrary, the Company shall not issue to
the Holder, and the Holder may not acquire, a number of shares of Common Stock upon exercise of
this Warrant to the extent that, upon such exercise, the number of shares of Common Stock then
beneficially owned by the Holder and its Affiliates and any other persons or entities whose
beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of
Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (including
shares held by any “group” of which the Holder is a member, but excluding shares beneficially owned
by virtue of the ownership of securities or rights to acquire securities that have limitations on
the right to convert, exercise or purchase similar to the limitation set forth herein) would exceed
9.98% of the total number of shares of Common Stock then issued and outstanding (the “9.98% Cap”);
provided, however, that the 9.98% Cap shall not apply with respect to the issuance of shares of
Common Stock pursuant to a Cashless Major Exercise (as defined below) in connection with a
Qualified Change of Control Transaction (as defined below) to the extent that the number of shares
beneficially owned by the Holder and its affiliates in the successor entity immediately following
consummation of such Qualified Change of Control Transaction does not exceed 9.98% of the
outstanding common stock of such successor entity and provided, further, that the 9.98% Cap shall
only apply to the extent that the


1









 






Common Stock is deemed to constitute an “equity security” pursuant to Rule 13d-1(i) promulgated
under the Exchange Act. For purposes hereof, “group” has the meaning set forth in Section 13(d) of
the Exchange Act and applicable regulations of the Securities and Exchange Commission (the “SEC”),
and the percentage held by the Holder shall be determined in a manner consistent with the
provisions of Section 13(d) of the Exchange Act. Upon the written request of the Holder, the
Company shall, within two (2) Trading Days, confirm orally and in writing to the Holder the number
of shares of Common Stock then outstanding.



“Affiliate” means any person or entity that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a person or entity, as
such terms are used in and construed under Rule 144 under the Securities Act of 1933, as amended
(the “Securities Act”). With respect to a Holder of Warrants, any investment fund or managed
account that is managed on a discretionary basis by the same investment manager as such Holder will
be deemed to be an Affiliate of such Holder.



“Holder” means [                    ] and any transferee or assignee pursuant to the terms of this Warrant.



(b) Exchange Cap. Notwithstanding anything herein to the contrary, the number of shares of Common
Stock issuable by the Company and acquirable by the Holder pursuant to the terms of this Warrant
and all other Warrants issued pursuant to the Facility Agreement between the Company and lenders
named therein dated as of March 13, 2009 shall not exceed 5,565,009 shares of the Company’s Common
Stock (subject to appropriate adjustment for stock splits, stock dividends, or other similar
recapitalizations affecting the Common Stock) (the “Exchange Cap”). The Company shall not be
obligated to issue such shares of Common Stock in excess of the Exchange Cap.



2. Exercise.



(a) Manner of Exercise. During the Term, this Warrant may be Exercised as to all or any lesser
number of whole shares of Common Stock covered hereby (the “Warrant Shares” or the “Shares”) upon
surrender of this Warrant, with the Exercise Form attached hereto as Exhibit A (the
“Exercise Form”) duly completed and executed, together with the full Exercise Price (as defined
below, which may be satisfied by a Cash Exercise or a Cashless Exercise, as each is defined below)
for each share of Common Stock as to which this Warrant is Exercised, at the office of the Company,
Insulet Corporation, 9 Oak Park Drive, Bedford, MA 01730; Phone: (781) 457-5000, Fax:
(781) 457-5011, or at such other office or agency as the Company may designate in writing, by
overnight mail, with an advance copy of the Exercise Form sent to the Company and its transfer
agent (“Transfer Agent”) by facsimile (such surrender and payment of the Exercise Price hereinafter
called the “Exercise” of this Warrant).



(b) Date of Exercise. The “Date of Exercise” of the Warrant shall be defined as the date that the
Exercise Form attached hereto as Exhibit A, completed and executed, is sent by facsimile to
the Company, provided that the original Warrant and Exercise Form are received by the Company and
the Exercise Price is satisfied, each as soon as practicable thereafter. Alternatively, the Date of
Exercise shall be defined as the date the original Exercise Form is received by the Company, if
Holder has not sent advance notice by facsimile. Upon delivery of the Exercise Form to the Company
by facsimile or otherwise, 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 Depository Trust Company
(“DTC”) account or the date of delivery of the certificates evidencing such Warrant Shares, as the
case may be; provided, however, that in the event of a Cashless Major Exercise in respect of a
Qualified Change of Control Transaction, the Holder shall be deemed to have become the holder of
record of the shares issuable upon such exercise immediately prior to the consummation of such
Qualified Change of Control Transaction and provided, further, that in the event of a Cashless
Major Exercise triggered by an event set forth in Section 5(c)(i)(G), the Holder shall be deemed to
have become the holder of record of the shares issuable upon such exercise immediately following
the occurrence of the Major Transaction.



(c) Delivery of Common Stock Upon Exercise. Within three (3) business days after any Date of
Exercise, or in the case of a Cashless Major Exercise or a Cashless Default Exercise (each as
defined in Section 5(c) below), within the period provided in Section 5(c)(iv) or Section 3(c), as
applicable (the “Delivery Period”), the Company shall issue and deliver (or cause its Transfer
Agent to issue and deliver) in accordance with the terms hereof to or upon the order of the Holder
that number of shares of Common Stock (“Exercise Shares”) for the portion of this Warrant converted
as shall be determined in accordance herewith. Upon the Exercise of this Warrant or any part
hereof, the Company shall, at its own cost and expense, take all necessary action, including
obtaining and delivering an opinion


 









 






of counsel, to assure that the Transfer Agent shall issue stock certificates in the name of Holder
(or its nominee) or such other persons as designated by Holder and in such denominations to be
specified at Exercise representing the number of shares of Common Stock issuable upon such
Exercise. The Company warrants that no instructions other than these instructions have been or will
be given to the Transfer Agent and that, unless waived by the Holder, this Warrant and the Exercise
Shares will be free-trading, and freely transferable, and will not contain a legend restricting the
resale or transferability of the Exercise Shares if the Unrestricted Conditions (as defined below)
are met.



(d) Delivery Failure. In addition to any other remedies which may be available to the Holder, in
the event that the Company fails for any reason to effect delivery of the Exercise Shares by the
end of the Delivery Period (a “Delivery Failure”), the Holder will be entitled to revoke all or
part of the relevant Exercise Form by delivery of a notice to such effect to the Company whereupon
the Company and the Holder shall each be restored to their respective positions immediately prior
to the delivery of such notice, except that the liquidated damages described herein shall be
payable through the date notice of revocation or rescission is given to the Company.



(e) Legends.



(i) Restrictive Legend. The Holder understands that until such time as this Warrant, the
Exercise Shares and the Failure Payment Shares have been registered under the Securities Act as
contemplated by the Registration Rights Agreement or otherwise may be sold pursuant to Rule 144
under the Securities Act or an exemption from registration under the Securities Act without any
restriction as to the number of securities as of a particular date that can then be immediately
sold (including following a sale or transfer pursuant to a “4(1) and half” transaction referred to
in Section 8(b) , this Warrant, the Exercise Shares and the Failure Payment Shares, as applicable,
may bear a restrictive legend in substantially the following form (and a stop-transfer order may be
placed against transfer of the certificates for such securities):





“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER SAID ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SAID
ACT INCLUDING, WITHOUT LIMITATION, PURSUANT TO RULES 144 OR 144A UNDER SAID ACT OR PURSUANT
TO A PRIVATE SALE EFFECTED UNDER APPLICABLE FORMAL OR INFORMAL SEC INTERPRETATION OR
GUIDANCE, SUCH AS A SO-CALLED “4(1) AND A HALF” SALE.”




“THE SALE, TRANSFER, PLEDGE, ASSIGNMENT, HYPOTHECATION OR OTHER DISPOSITION OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN REGISTRATION RIGHTS AGREEMENT DATED AS OF MARCH 13, 2009, AS AMENDED FROM TIME TO
TIME, AMONG THE COMPANY AND CERTAIN HOLDERS OF ITS OUTSTANDING SECURITIES. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS
CERTIFICATE TO THE SECRETARY OF THE COMPANY.”


(ii) Removal of Restrictive Legends. This Warrant and the certificates evidencing the
Exercise Shares and the Failure Payment Shares, as applicable, shall not contain any legend
restricting the transfer thereof (including the legend set forth above in subsection 2(e)(i)):
(A) while a registration statement (including a Registration Statement, as defined in the
Registration Rights Agreement) covering the sale or resale of such security is effective under the
Securities Act, or (B) following any sale of such Warrant, Exercise Shares and/or Failure Payment
Shares pursuant to Rule 144, or (C) if such Warrant, Exercise Shares and/or Failure Payment Shares
are eligible for sale under Rule 144(b)(1), or (D) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and pronouncements issued by
the staff of the SEC) (collectively, the “Unrestricted Conditions”). If the Unrestricted
Conditions are met at the time of issuance of this Warrant, the Exercise Shares or the Failure
Payment Shares, then such Warrant, Exercise Shares or Failure Payment Shares, as applicable, shall
be issued free of all legends. The Company agrees that following the Effective Date at such time
as the Unrestricted Conditions are met or such legend is otherwise no longer required under this
Section 2(e), it will, no later than three




 









 







(3) Trading Days following the delivery (the “Unlegended Shares Delivery Deadline”) by the Holder
to the Company or the Transfer Agent of this Warrant and a certificate representing Exercise Shares
and/or Failure Payment Shares, as applicable, issued with a restrictive legend (such third Trading
Day, the “Legend Removal Date”), deliver or cause to be delivered to such Holder this Warrant
and/or a certificate (or electronic transfer) representing such shares that is free from all
restrictive and other legends. For purposes hereof, “Effective Date” shall mean the date that the
Registration Statement that the Company is required to file pursuant to the Registration Rights
Agreement has been declared effective by the SEC.



(iii) Sale of Unlegended Shares. Holder agrees that the removal of the restrictive legend
from this Warrant and any certificates representing securities as set forth in Section 2(e) above
is predicated upon the Company’s reliance that the Holder will sell this Warrant or any Exercise
Shares and/or any Failure Payment Shares, as applicable, pursuant to either the registration
requirements of the Securities Act, including any applicable prospectus delivery requirements, or
an exemption therefrom, and that if such securities are sold pursuant to a Registration Statement,
they will be sold in compliance with the plan of distribution set forth therein.



(f) Cancellation of Warrant. This Warrant shall be canceled upon the full Exercise, of this
Warrant, and, as soon as practical after the Date of Exercise, Holder shall be entitled to receive
Common Stock for the number of shares purchased upon such Exercise of this Warrant, and if this
Warrant is not Exercised in full, Holder shall be entitled to receive a new Warrant (containing
terms identical to this Warrant) representing any unexercised portion of this Warrant in addition
to such Common Stock.



(g) Holder of Record. Each person in whose name any Warrant for shares of Common Stock is issued
shall, for all purposes, be deemed to be the Holder of record of such shares on the Date of
Exercise of this Warrant, irrespective of the date of delivery of the Common Stock purchased upon
the Exercise of this Warrant.



(h) Delivery of Electronic Shares. In lieu of delivering physical certificates representing the
Common Stock issuable upon Exercise or legend removal, or representing Failure Payment Shares,
provided the Transfer Agent is participating in the DTC Fast Automated Securities Transfer (“FAST”)
program, upon written request of the Holder, the Company shall use its best efforts to cause its
Transfer Agent to electronically transmit the Common Stock issuable upon Exercise to the Holder by
crediting the account of the Holder’s prime broker with DTC through its Deposit Withdrawal Agent
Commission (DWAC) system. The time periods for delivery and penalties described herein shall apply
to the electronic transmittals described herein. Any delivery not effected by electronic
transmission shall be effected by delivery of physical certificates.



(i) Buy-In. If the Company fails to cause its Transfer Agent to transmit to the Holder a
certificate or certificates, or electronic shares through DWAC, representing the Exercise Shares
pursuant to an Exercise on or before the Delivery Period, and if after such date the Holder is
required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s
brokerage firm otherwise purchases shares of Common Stock to deliver in satisfaction of a sale by
the Holder of the Exercise Shares which the Holder anticipated receiving upon such Exercise (a
“Buy-In”), then the Company shall pay in cash to the Holder the amount by which (x) the Holder’s
total purchase price (including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (y) the amount obtained by multiplying (A) the number of Exercise Shares that the
Company was required to deliver to the Holder in connection with the Exercise at issue times and
(B) the price at which the sell order giving rise to such purchase obligation was executed. For
example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted Exercise to cover the sale of Common Stock with an aggregate
sale price giving rise to such purchase obligation of $10,000, the Company shall be required to pay
the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts
payable to the Holder in respect of the Buy-In, together with applicable confirmations and other
evidence reasonably requested by the Company. Nothing herein shall limit a Holder’s right to pursue
any other remedies available to it hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief with respect to the Company’s failure to
timely deliver certificates representing shares of Common Stock upon Exercise of the Warrant as
required pursuant to the terms hereof.




 









 







3. Payment of Warrant Exercise Price for Cash Exercise or Cashless Exercise; Cashless Major
Exercise and Cashless Default Exercise.



(a) Exercise Price. The Exercise Price (“Exercise Price”) shall initially equal $3.13 per share,
subject to adjustment pursuant to the terms hereof, including but not limited to Section 5 below.



Payment of the Exercise Price may be made by either of the following, or a combination thereof, at
the election of Holder:



(i) Cash Exercise: The Holder may exercise this Warrant in cash, bank or cashier’s check
or wire transfer (a “Cash Exercise”); or



(ii) Cashless Exercise: The Holder, at its option, may exercise this Warrant in a cashless
exercise transaction. In order to effect a Cashless Exercise, the Holder shall surrender this
Warrant at the principal office of the Company together with notice of cashless election, in which
event the Company shall issue Holder a number of shares of Common Stock computed using the
following formula (a “Cashless Exercise”):




X = Y (A-B)/A





			
	where:	 	X = the number of shares of Common Stock to be issued to Holder.


Y = the number of shares of Common Stock for which this Warrant is being Exercised.






A = the Market Price of one (1) share of Common Stock (for purposes of this
Section 3(a)(ii), where “Market Price,” as of any date, means the Volume Weighted Average
Price (as defined herein) of the Company’s Common Stock during the ten (10) consecutive
Trading Day period immediately preceding the date in question.




B = the Exercise Price.




As used herein, the “Volume Weighted Average Price” for the Common Stock as of any date
means the volume weighted average sale price (based on trades occurring during regular hours
trading during a Trading Day) of the Common Stock on the NASDAQ Global Select Market
(“NASDAQ”) as reported by Bloomberg Financial L.P. using the AQR function or an equivalent,
reliable reporting service mutually acceptable to and hereafter designated by Holders of a
majority in interest of the Warrants and the Company (“Bloomberg”) or, if NASDAQ is not the
principal trading market for the Common Stock, the volume weighted average sale price of the
Common Stock on the principal securities exchange or trading market where such security is
listed or traded as reported by Bloomberg, or, if no volume weighted average sale price is
reported for the Common Stock, then the last closing trade price of such security as
reported by Bloomberg, or, if no last closing trade price is reported for the Common Stock
by Bloomberg, the average of the bid prices of any market makers for such security that are
listed in the over the counter market by the Financial Industry Regulatory Authority, Inc.
or in the “pink sheets” maintained by the Pink OTC Market, Inc. If the Volume Weighted
Average Price cannot be calculated for the Common Stock on such date in the manner provided
above, the volume weighted average price shall be the fair market value as mutually
determined by the Company and the Holders of a majority in interest of the Warrants being
Exercised for which the calculation of the volume weighted average price is required in
order to determine the Exercise Price of such Warrants. “Trading Day” shall mean any day
on which the Common Sock is traded for any period on NASDAQ, or on the principal securities
exchange or other securities market on which the Common Stock is then being traded.


For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is intended, understood and
acknowledged that the Common Stock issuable upon Exercise of this Warrant in a Cashless Exercise
transaction shall be deemed to have been acquired at the time this Warrant was issued. Moreover, it
is intended, understood and acknowledged that the holding period for the Common Stock issuable upon
Exercise of this Warrant in a Cashless Exercise transaction shall be deemed to have commenced on
the date this Warrant was issued.




 









 







(b) Cashless Major Exercise: To the extent the Holder shall exercise this Warrant or any portion
thereof as a Cashless Major Exercise pursuant to Section 5(c)(i) below, the Holder shall surrender
this Warrant at the principal office of the Company together with the Exercise Form indicating that
the Holder is exercising this Warrant (or such portion thereof) pursuant to a Cashless Major
Exercise, in which event the Company shall issue a number of shares of Common Stock equal to the
Black-Scholes Value (as defined in Section 5(c)(iii) below) of the Warrant (or such applicable
portion being exercised) divided by 95% of the closing price of the Common Stock on the principal
securities exchange or other securities market on which the Common Stock is then traded on the
Trading Day immediately preceding the date on which the applicable Major Transaction is
consummated.



(c) Cashless Default Exercise. To the extent the Holder exercises this Warrant as a Cashless
Default Exercise pursuant to Section 11(b)(i) below, the Holder shall surrender this Warrant to the
principal office of the Company together with the Exercise Form indicating that the Holder is
exercising this Warrant pursuant to a Cashless Default Exercise, in which event the Company shall
issue to the Holder, within five (5) Trading Days of the applicable Default Notice, a number of
shares of Common Stock (which shares shall be valued at 95% of the Volume Weighted Average Price
for the five (5) Trading Days prior to the applicable Default Notice) equal to the greater of (A)
the Black-Scholes value (determined by use of the Black-Scholes Option Pricing Model using the
criteria set forth on Schedule I hereto) of the remaining unexercised portion of this Warrant on
the date of such Default Notice and (B) the Black-Scholes value (determined by use of the
Black-Scholes Option Pricing Model using the criteria set forth on Schedule I hereto) of the
remaining unexercised portion of this Warrant on the Trading Day immediately preceding the date
that the Exercise Shares in respect of such Cashless Default Exercise are issued to the Holder.



(d) Dispute Resolution. In the case of a dispute as to the determination of the closing price or
the Volume Weighted Average Price of the Company’s Common Stock or the arithmetic calculation of
the Exercise Price, Market Price or any Major Transaction Warrant Early Termination Price, the
Company shall submit the disputed determinations or arithmetic calculations via facsimile within
two (2) business days of receipt, or deemed receipt, of the Exercise Notice or Major Transaction
Early Termination Notice, or other event 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
within two (2) 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
(i) the disputed determination of the closing price or the Volume Weighted Average Price of the
Company’s Common Stock to an independent, reputable investment bank selected by the Company and
approved by the Holder, which approval shall not be unreasonably withheld or (ii) the disputed
arithmetic calculation of the Exercise Price, Market Price or any Major Transaction Warrant Early
Termination Price to the Company’s independent, outside accountant. The Company shall cause 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 five (5) 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.



4. Transfer and Registration.



(a) Transfer Rights. Subject to the provisions of Section 8 of this Warrant, this Warrant may be
transferred on the books of the Company, in whole or in part, in person or by attorney, upon
surrender of this Warrant properly completed and endorsed. This Warrant shall be canceled upon such
surrender and, as soon as practicable thereafter, the person to whom such transfer is made shall be
entitled to receive a new Warrant or Warrants as to the portion of this Warrant transferred, and
Holder shall be entitled to receive a new Warrant as to the portion hereof retained.



(b) Registrable Securities. The Common Stock issuable upon the Exercise of this Warrant has
registration rights pursuant to the Registration Rights Agreement.



5. Adjustments Upon Certain Events.



(a) Participation. The Holder, as the holder of this Warrant, shall be entitled to receive such
dividends paid and distributions of any kind made to the holders of Common Stock of the Company to
the same extent as if the Holder had Exercised this Warrant into Common Stock (without regard to
any limitations on exercise herein or elsewhere and without regard to whether or not a sufficient
number of shares are authorized and reserved to effect any such exercise and issuance) and had held
such shares of Common Stock on the record date for such dividends and


 









 






distributions. Payments under the preceding sentence shall be made concurrently with the dividend
or distribution to the holders of Common Stock.



(b) Recapitalization or Reclassification. If the Company shall at any time effect a stock split,
payment of stock dividend, recapitalization, reclassification or other similar transaction of such
character that the shares of Common Stock shall be changed into or become exchangeable for a larger
or smaller number of shares, then upon the effective date thereof, the number of shares of Common
Stock which Holder shall be entitled to purchase upon Exercise of this Warrant shall be increased
or decreased, as the case may be, in direct proportion to the increase or decrease in the number of
shares of Common Stock by reason of such stock split, payment of stock dividend, recapitalization,
reclassification or similar transaction, and the Exercise Price shall be, in the case of an
increase in the number of shares, proportionally decreased and, in the case of decrease in the
number of shares, proportionally increased. The Company shall give Holder the same notice it
provides to holders of Common Stock of any transaction described in this Section 5(b).



(c) Rights Upon Major Transaction.



(i) Major Transaction. In the event that a Major Transaction (as defined below) occurs,
then (1) in the case of a Cash-Out Major Transaction (as defined below) and in the case of a Mixed
Major Transaction to the extent of the percentage of the cash consideration in the Mixed Major
Transaction (determined in accordance with the definition of a Mixed Major Transaction below), the
Holder, at its option, may require the Company to redeem that portion the Holder’s outstanding
Warrants described in Section 5(c)(iii) below and (2) in the case of all other Major Transactions
and in the case of a Mixed Major Transaction to the extent of the percentage of the consideration
represented by securities of a Successor Entity in the Mixed Major Transaction, the Holder shall
have the right to exercise this Warrant as a Cashless Major Exercise. Any Major Transaction
covered by the provisions of Section 5(c)(i)(A)(1) below in which the Company is not the surviving
entity (a “Qualified Change of Control Transaction”) shall be treated as an Assumption (as defined
below) in accordance with Section 5(c)(ii) if the Company and the Holder agree in writing to such
treatment and the Holder shall not have exercised any of its rights under clause (1) or (2) above.
Notwithstanding anything herein to the contrary, the Holder may waive its rights under this Section
5(c)(i) with respect to any Major Transaction. Each of the following events shall constitute a
“Major Transaction”:



(A) a consolidation, merger, exchange of shares, recapitalization, reorganization, business
combination or other similar event, (1) following which the holders of Common Stock immediately
preceding such consolidation, merger, exchange, recapitalization, reorganization, combination or
event either (a) no longer hold a majority of the shares of Common Stock or (b) no longer have the
ability to elect a majority of the board of directors of the Company or (2) as a result of which
shares of Common Stock shall be changed into (or the shares of Common Stock become entitled to
receive) the same or a different number of shares of the same or another class or classes of stock
or securities of the Company or another entity (collectively, a “Change of Control Transaction”);



(B) the sale or transfer of significant assets of the Company which shall mean a sale or transfer
of assets in one transaction or a series of related transactions for a purchase price of more than
$50, 000,000 or a sale or transfer of more than 50% of the Company’s assets;



(C) a purchase, tender or exchange offer made to the holders of outstanding shares of Common
Stock, such that following such purchase, tender or exchange offer a Change of Control Transaction
shall have occurred;



(D) any issuance of shares of Common Stock or securities convertible or exercisable for Common
Stock; other than an issuance (1) pursuant to a registered public offering or shelf takedown, (2)
in a transaction that does not require shareholder approval, (3) to partners in connection with a
joint venture, distribution or other partnering arrangement in a transaction that does not require
shareholder approval, (4) upon the exercise of options granted to the Company’s employees,
officers, directors and consultants, (5) of restricted stock to, or purchases, of Common Stock
under the Company’s employee stock purchase plan by, employees, officers, directors or consultants
or (6) upon the exercise of this Warrant.



(E) the liquidation, bankruptcy, insolvency, dissolution or winding-up (or the occurrence of any
analogous proceeding) affecting the Company;




 









 







(F) the shares of Common Stock cease to be listed, traded or publicly quoted on NASDAQ and are not
promptly re-listed or requoted on either the New York Stock Exchange, the NYSE Alternext U.S., the
NASDAQ Global Select Market or the NASDAQ Capital Market; or



(G) the Common Stock ceases to be registered under Section 12 of the Exchange Act.



(ii) Termination; Assumption. The Company shall not enter into or be party to a Qualified
Change of Control Transaction that is to be treated as an Assumption pursuant to Section 5(c)(i)
unless any Successor Entity (1) assumes in writing all of the obligations of the Company under this
Warrant, the Facility Agreement and the Registration Rights Agreement  in accordance with the
provisions of this Section (ii) pursuant to written agreements in form and substance satisfactory
to the Holder and approved by the Holder prior to such Qualified Change of Control Transaction,
including agreements to deliver to each holder of Warrants in exchange for such Warrants a security
of the Successor Entity evidenced by a written instrument substantially similar in form and
substance to the Warrants, including, without limitation, representing the appropriate number of
shares of the Successor Entity, having similar exercise rights as the Warrants (including but not
limited to a similar Exercise Price and similar Exercise Price adjustment provisions based on the
price per share or conversion ratio to be received by the holders of Common Stock in the Major
Transaction) and similar registration rights as provided by the Registration Rights Agreement ,
satisfactory to the Holder and (2) is a publicly traded corporation whose common stock is quoted on
or listed for trading on an Eligible Market. Upon the occurrence of any assumption of the Warrant,
any Successor Entity shall succeed to, and be substituted for (so that from and after the date of
such Major Transaction, the provisions of this Warrant and the Registration Rights Agreement
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
the assumption of this Warrant, the Successor Entity shall deliver to the Holder confirmation that
there shall be issued upon exercise or redemption of this Warrant at any time after the
consummation of the Qualified Change of Control Transaction, in lieu of the shares of Common Stock
(or other securities, cash, assets or other property) issuable upon the exercise of the Warrants
prior to such Qualified Change of Control Transaction, such shares of publicly traded common stock
(or their equivalent) of the Successor Entity, as adjusted in accordance with the provisions of
this Warrant. The provisions of this Section shall apply similarly and equally to successive
Qualified Change of Control Transactions and shall be applied without regard to any limitations on
the exercise of this Warrant other than any applicable beneficial ownership limitations.
Immediately prior to the consummation of any Qualified Change of Control Transaction that is not to
be treated as an Assumption hereunder, any unexercised or unredeemed portion of this Warrant shall
be deemed to be exercised as a Cashless Major Exercise; provided, however, that in the case of a
Qualified Change of Control Transaction that constitutes a Cash-Out Major Transaction and in the
case of a Mixed Major Transaction that is a Qualified Change of Control Transaction, to the extent
of the percentage of the cash consideration in the Mixed Major Transaction (determined in
accordance with the definition of a Mixed Major Transaction below), the applicable unexercised or
unredeemed portion of this Warrant shall be treated as an Early Termination Upon Major Transaction
in exchange for the cash payment to the Holder, concurrently with the consummation of the Qualified
Change of Control Transaction, of the Major Transaction Warrant Early Termination Price. Any
assumption of Company obligations under this paragraph shall be referred to herein as an
“Assumption”



(iii) Notice; Major Transaction Early Termination Right; Notice of Cashless Major
Exercise. At least thirty (30) days prior to the consummation of any Major Transaction, but,
in any event, on the first to occur of (x) the date of the public announcement of such Major
Transaction if such announcement is made before 4:00 p.m., New York City time, or (y) the day
following the public announcement of such Major Transaction if such announcement is made on and
after 4:00 p.m., New York City time, the Company shall deliver written notice thereof via facsimile
and overnight courier to the Holder (a “Major Transaction Notice”). At any time during the period
beginning after the Holder’s receipt of a Major Transaction Notice and ending five (5) Trading Days
prior to the consummation of such Major Transaction (the “Early Termination Period”), the Holder
may require an early termination (an “Early Termination Upon Major Transaction”) of all or any
portion of this Warrant not eligible to be treated as a Cashless Major Exercise (without taking
into consideration the 9.98% Cap) by delivering written notice thereof (“Major Transaction Early
Termination Notice”) to the Company, which Major Transaction Early Termination Notice shall
indicate the portion of the Warrant that the Holder is electing to be subject to an Early
Termination Upon Major Transaction. The portion of this Warrant subject to early termination
pursuant to this Section 5(c)(iii) (the “Terminated Portion”), shall be terminated by the Company
at a price (the “Major Transaction Warrant Early


 









 






Termination Price”) payable to the Holder in cash equal to the “Black Scholes Value” of the
Terminated Portion determined by use of the Black Scholes Option Pricing Model using the criteria
set forth in Schedule 1 hereto (the “Black Scholes Value”). For the avoidance of doubt, in no
event shall the Holder be entitled to payment of the Major Transaction Warrant Early Termination
Price in cash in respect of a Major Transaction, other than with respect to a Cash-Out Major
Transaction and, in the case of a Mixed Major Transaction, to the extent of the percentage of cash
consideration in the Mixed Major Transaction (determined in accordance with the definition of a
Mixed Major Transaction).



To the extent the Holder shall elect to effect a Cashless Major Exercise in respect of a Major
Transaction, the Holder shall deliver its exercise notice in accordance with Section 3(b), within
the Early Termination Period.



(iv) Escrow; Payment of Major Transaction Warrant Early Termination Price. Following the
receipt of a Cashless Major Exercise from the Holder, the Company shall not effect a Major
Transaction that is being treated as a Cashless Major Exercise unless it shall first place into an
escrow account with an independent escrow agent, at least three (3) business days prior to the
closing date of the Major Transaction (the “Major Transaction Escrow Deadline”), an amount in
shares of Common Stock equal to the applicable Exercise Shares. The Company shall not consummate a
Major Transaction unless concurrently with the consummation of such Major Transaction, the Company
shall pay the Major Transaction Warrant Early Termination Price and shall instruct the escrow agent
to deliver the applicable Exercise Shares to the Holder. For purposes of determining the amount
required to be placed in escrow pursuant to the provisions of this subsection (iv) and without
affecting the amount of the actual applicable Exercise Shares, the calculation of the price
referred to in clause (1) of the first column of Schedule 1 hereto with respect to Stock Price
shall be determined (i) in the case of a Qualified Change of Control Transaction, based on the
closing market price for shares of the publicly traded Successor Entity on its principal securities
exchange on the Trading Day preceding the first public announcement of the Qualified Change of
Control Transaction and, (ii) in the case of all other Major Transactions, based on the Closing
Market Price (as defined on Schedule I) of the Common Stock on the Trading Day immediately
preceding the date that applicable Exercise Shares, as applicable, are deposited with the escrow
agent.



(v) Injunction. Following the receipt of a notice of a Cashless Major Exercise from the
Holder, in the event that the Company attempts to consummate a Major Transaction without placing
the applicable Exercise Shares in escrow in accordance with subsection (iv) above, the Holder shall
have the right to apply for an injunction in any state or federal courts sitting in the City of New
York, borough of Manhattan to prevent the closing of such Major Transaction until the applicable
Exercise Shares are delivered into escrow in accordance with subsection (iv) above.



An early termination required by this Section 5(c) shall be made in accordance with the provisions
of Section 12 and shall have priority to payments to holders of Common Stock in connection with a
Major Transaction except to the extent that a court of competent jurisdiction determines that the
Holder would be deemed to be a creditor of the Company, in which case the Holder shall be treated
on a pari passu basis with the holders of the Common Stock. Further, for the avoidance of doubt,
the Holder shall not have the rights senior to the Company’s common shareholders in any U.S.
bankruptcy proceedings of the Company, provided that nothing herein shall limit or shall be deemed
to limit Holder’s right to pursue remedies in the event of breach by the Company of its obligations
and agreements with respect to the Warrant; provided, further, that nothing herein shall limit or
be deemed to limit Holder’s rights in respect of any transactions other than the Warrant. To the
extent an early termination required of this Section 5(c) are deemed or determined by a court of
competent jurisdiction to be prepayments of the Warrant by the Company, such early termination
shall be deemed to be voluntary prepayments. Notwithstanding anything to the contrary in this
Section 5, until the Major Transaction Warrant Early Termination Price is paid in full, this
Warrant may be exercised, in whole or in part, by the Holder into shares of Common Stock. The
parties hereto agree that in the event of the Company’s early termination of any portion of the
Warrant under this Section 5(c), the Holder’s damages would be uncertain and difficult to estimate
because of the parties’ inability to predict future interest rates and the uncertainty of the
availability of a suitable substitute investment opportunity for the Holder. Accordingly, any
premium due under this Section 5(c) is intended by the parties to be, and shall be deemed, a
reasonable estimate of the Holder’s actual loss of its investment opportunity and not as a penalty.




 









 







For purposes hereof:



“Cash-Out Major Transaction” means a Major Transaction in which the consideration payable to the
Company and/or to holders of Common Stock in connection with the Major Transaction consists solely
of cash.



“Cashless Default Exercise” shall mean an exercise of this Warrant as a “Cashless Default Exercise”
in accordance with Section 3(c) and 11(b) hereof.



“Cashless Major Exercise” shall mean an exercise of this Warrant or portion thereof as a “Cashless
Major Exercise” in accordance with Section 3(b) , 5(c)(i) and (5 (c)(ii) hereof.



“Eligible Market” means the over the counter Bulletin Board, the New York Stock Exchange, Inc., the
NYSE Arca, the NASDAQ Capital Market, the NASDAQ Global Market, the NASDAQ Global Select Market or
the NYSE Alternext U.S.



“Mixed Major Transaction” means a Major Transaction in which the consideration payable to the
shareholders of the Company consists partially of cash and partially of securities of a Successor
Entity. If the Successor Entity is a Publicly Traded Successor Entity, the percentage of
consideration represented by securities of such Successor Entity shall be equal to the percentage
that the value of the aggregate anticipated number of shares of the Publicly Traded Successor
Entity to be issued to holders of Common Stock of the Company represents in comparison to the
aggregate value of all consideration, including cash consideration, in such Mixed Major
Transaction, as such values are set forth in any definitive agreement for the Mixed Major
Transaction that has been executed at the time of the first public announcement of the Major
Transaction or, if no such value is determinable from such definitive agreement, based on the
closing market price for shares of the Publicly Traded Successor Entity on its principal securities
exchange on the Trading Day preceding the first public announcement of the Mixed Major Transaction.
If the Successor Entity is a Private Successor Entity, the percentage of consideration represented
by securities of such Successor Entity shall be determined in good-faith by the Company’s Board of
Directors



“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 a Major
Transaction.



“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.



“Private Successor Entity” means a Successor Entity that is not a Publicly Traded Successor Entity.



“Publicly Traded Successor Entity” means a Successor Entity that is a publicly traded corporation
whose common stock is quoted on or listed for trading on an Eligible Market (as defined above).



“Successor Entity” means any Person purchasing the Company’s assets or Common Stock, or any
successor entity resulting from such Major Transaction, or if the Warrant is to be exercisable for
shares of capital stock of its Parent Entity (as defined above), its Parent Entity.



(d) Exercise Price Adjusted. As used in this Warrant, the term “Exercise Price” shall mean the
purchase price per share specified in Section 3(a) of this Warrant, until the occurrence of an
event stated in this Section 5 or otherwise set forth in this Warrant, and thereafter shall mean
said price as adjusted from time to time in accordance with the provisions of said subsection. No
adjustment made pursuant to any provision of this Section 5 shall have the net effect of increasing
the Exercise Price in relation to the split adjusted and distribution adjusted price of the Common
Stock.



(e) Adjustments: Additional Shares, Securities or Assets. In the event that at any time, as a
result of an adjustment made pursuant to this Section 5 or otherwise, Holder shall, upon Exercise
of this Warrant, become entitled to receive shares and/or other securities or assets (other than
Common Stock) then, wherever appropriate, all references herein


 









 






to shares of Common Stock shall be deemed to refer to and include such shares and/or other
securities or assets; and thereafter the number of such shares and/or other securities or assets
shall be subject to adjustment from time to time in a manner and upon terms as nearly equivalent as
practicable to the provisions of this Section 5.



(f) Notice of Adjustments. Whenever the Exercise Price is adjusted pursuant to the terms of this
Warrant, the Company shall promptly mail to the Holder a notice (an “Exercise Price Adjustment
Notice”) setting forth the Exercise Price after such adjustment and setting forth a statement of
the facts requiring such adjustment. The Company shall, upon the written request at any time of the
Holder, furnish to such Holder a like Warrant setting forth (i) such adjustment or readjustment,
(ii) the Exercise Price at the time in effect and (iii) the number of shares of Common Stock and
the amount, if any, of other securities or property which at the time would be received upon
Exercise of the Warrant. For purposes of clarification, whether or not the Company provides an
Exercise Price Adjustment Notice pursuant to this Section 5(f), upon the occurrence of any event
that leads to an adjustment of the Exercise Price, the Holder would be entitled to receive a number
of Exercise Shares based upon the new Exercise Price, as adjusted, for exercises occurring on or
after the date of such adjustment, regardless of whether the Holder accurately refers to the
adjusted Exercise Price in the Exercise Form.



6. Fractional Interests.



No fractional shares or scrip representing fractional shares shall be issuable upon the Exercise of
this Warrant, but on Exercise of this Warrant, Holder may purchase only a whole number of shares of
Common Stock. If, on Exercise of this Warrant, Holder would be entitled to a fractional share of
Common Stock or a right to acquire a fractional share of Common Stock, such fractional share shall
be disregarded and the number of shares of Common Stock issuable upon Exercise shall be the rounded
up or down to the next closest whole number of shares.



7. Reservation of Shares.



From and after the date hereof, the Company shall at all times reserve for issuance such number of
authorized and unissued shares of Common Stock (or other securities substituted therefor as herein
above provided) as shall be sufficient for the Exercise of this Warrant and payment of the Exercise
Price. If at any time the number of shares of Common Stock authorized and reserved for issuance is
below the number of shares sufficient for the Exercise of this Warrant (a “Share Authorization
Failure”) (based on the Exercise Price in effect from time to time), the Company will promptly take
all corporate action necessary to authorize and reserve a sufficient number of shares, including,
without limitation, calling a special meeting of stockholders to authorize additional shares to
meet the Company’s obligations under this Section 7, in the case of an insufficient number of
authorized shares, and using its best efforts to obtain stockholder approval of an increase in such
authorized number of shares. The Company covenants and agrees that upon the Exercise of this
Warrant, all shares of Common Stock issuable upon such Exercise shall be duly and validly issued,
fully paid and nonassessable and not subject to preemptive rights, rights of first refusal or
similar rights of any Person.



8. Restrictions on Transfer.



(a) Registration or Exemption Required. This Warrant has been issued in a transaction exempt from
the registration requirements of the Securities Act by virtue of Regulation D and exempt from state
registration or qualification under applicable state laws. None of the Warrant, the Exercise Shares
or Failure Payment Shares may be sold, transferred, assigned, pledged, hypothecated or otherwise
disposed of except pursuant to an effective registration statement under the Securities Act and
applicable state laws or an exemption to the registration requirements of the Securities Act and
applicable state laws including, without limitation, a so-called “4(1) and a half” transaction.



(b) Assignment. Subject to Section 8(a), the Holder may sell, transfer, assign, pledge, or
otherwise dispose of this Warrant, in whole or in part. Holder shall deliver a written notice to
Company, substantially in the form of the Assignment attached hereto as Exhibit B,
indicating the Person or Persons to whom the Warrant shall be assigned and the respective number of
warrants to be assigned to each assignee. The Company shall effect the assignment within three (3)
business days (the “Transfer Delivery Period”), and shall deliver to the assignee(s) designated by
Holder a Warrant or Warrants of like tenor and terms for the appropriate number of shares. This
Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the
successors and assigns of the Holder. The provisions of this Warrant are intended to be for the
benefit of all Holders from time to time of this Warrant,


 









 






and shall be enforceable by any such Holder. For avoidance of doubt, in the event Holder notifies
the Company that such sale or transfer is a so called “4(1) and half” transaction, the parties
hereto agree that a legal opinion from outside counsel for the Holder delivered to counsel for the
Company substantially in the form attached hereto as Exhibit C shall be the only
requirement to satisfy an exemption from registration under the Securities Act to effectuate such
“4(1) and half” transaction.



9. 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 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, and (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.



10. Events of Failure; Definition of Black Scholes Value.



(a) Definition.



The occurrence of each of the following shall be considered to be an “Event of Failure.”





(i) A Delivery Failure occurs, where a “Delivery Failure” shall be deemed to have
occurred if the Company fails to use its reasonable best efforts to deliver
Exercise Shares to the Holder within any applicable Delivery Period;




(ii) A Legend Removal Failure occurs, where a “Legend Removal Failure” shall be
deemed to have occurred if the Company fails to use its reasonable best efforts to
issue this Warrant and/or Exercise Shares without a restrictive legend, or fails to
use it reasonable best efforts to remove a restrictive legend, when and as required
under Section 2(e) hereof;




(iii) a Transfer Delivery Failure occurs, where a “Transfer Delivery Failure” shall
be deemed to have occurred if the Company fails to use its reasonable best efforts
to deliver a Warrant within any applicable Transfer Delivery Period; and




(iv) a Registration Failure (as defined below).


For purpose hereof, “Registration Failure” means that (A) the Company fails to file with the SEC on
or before the Filing Deadline (as defined in the Registration Rights Agreement) any Registration
Statement required to be filed pursuant to Section 2(a) of the Registration Rights Agreement,
(B) the Company fails to use its reasonable best efforts to obtain effectiveness with the SEC,
prior to the Registration Deadline (as defined in the Registration Rights Agreement), and if such
Registration Statement is not so filed prior to the Registration Deadline, as soon as possible
thereafter, of any Registration Statement (as defined in the Registration Rights Agreement) that
are required to be filed pursuant to Section 2(a) of the Registration Rights Agreement, or fails to
use its reasonable best efforts to keep such Registration Statement current and effective as
required in Section 3 of the Registration Rights Agreement, or (C) the Company fails to file any
additional Registration Statements required to be filed pursuant to Section 2(a)(ii) of the
Registration Rights Agreement on or before the Additional Filing Deadline or fails to use its
reasonable best efforts to cause such new Registration Statement to become effective on or before
the Additional Registration Deadline, and if such effectiveness does not occur within such period,
as soon as possible thereafter, and (D) the Company fails to file any amendment to any Registration
Statement required to be filed pursuant to Section 3(b) of the Registration Rights Agreement by the
Additional Filing Deadline or fails to use its best efforts to cause such amendment to become
effective within sixty (60) days of the applicable Registration Trigger Date, and, if such
effectiveness does not occur within such period, as soon as possible thereafter.



(b) Failure Payments; Black-Scholes Determination. The Company understands that any Event of
Failure (as defined above) could result in economic loss to the Holder. In the event that any Event
of Failure occurs, as


 









 






compensation to the Holder for such loss, the Company agrees to pay (as liquidated damages and not
as a penalty) to the Holder an amount payable, at the Company’s option, either (i) in cash or (ii)
in shares of Common Stock that are valued for these purposes at 95% of the Volume Weighted Average
Price on the date of such calculation (“Failure Payments”), in each case equal to 14% per annum (or
the maximum rate permitted by applicable law, whichever is less) of the Black-Scholes value (as
determined below) of the remaining unexercised portion of this Warrant on the date of such Event of
Failure (as recalculated on the first business day of each month thereafter for as long as Failure
Payments shall continue to accrue), which shall accrue daily from the date of such Event of Failure
until the Event of Failure is cured, accruing daily and compounded monthly, provided, however, the
Holder shall only receive up to such amount of shares of Common Stock in respect of Failure
Payments such that Holder and any other persons or entities whose beneficial ownership of Common
Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act
(including shares held by any “group” of which the Holder is a member, but excluding shares
beneficially owned by virtue of the ownership of securities or rights to acquire securities that
have limitations on the right to convert, exercise or purchase similar to the limitation set forth
herein) shall not collectively beneficially own greater than 9.98% of the total number of shares of
Common Stock of the Company then issued and outstanding and provided, further, that the foregoing
proviso shall not be construed to require any cash payment of the remaining Failure Payments. For
purposes of clarification, it is agreed and understood that Failure Payments shall continue to
accrue following any Event of Default until the applicable Default Amount is paid in full.



Notwithstanding the above, in the event that the Company (i) has, by the Filing Deadline (as
defined the Registration Rights Agreement) filed a Registration Statement (as defined in the
Registration Rights Agreement) covering the number of shares required by the Registration Rights
Agreement, and (ii) has responded in writing to any comments to the Registration Statement that the
Company has received from the SEC, within twenty (20) days of such receipt, and nevertheless the
SEC has not declared effective a Registration Statement covering the full number of Warrant Shares
issuable upon exercise of the Warrants by the Registration Deadline (as defined in the Registration
Rights Agreement) then, the Failure Payments attributable to such late Registration Effectiveness
shall be reduced from 14% to 11% (calculated as set forth above). The Company shall satisfy any
Failure Payments under this Section pursuant to Section 10(c) below. Failure Payments are in
addition to any Shares that the Holder is entitled to receive upon Exercise of this Warrant.



For purposes hereof, the “Black-Scholes” value of a Warrant shall be determined by use of the Black
Scholes Option Pricing Model using the criteria set forth on Schedule 1 hereto.



(c) Payment of Accrued Failure Payments. The Failure Payment Shares representing accrued Failure
Payments for each Event of Failure shall be issued and delivered on or before the fifth
(5th) business day of each month following a month in which Failure Payments accrued. Nothing
herein shall limit the Holder’s right to pursue actual damages (to the extent in excess of the
Failure Payments) for the Company’s Event of Failure, and the Holder shall have the right to pursue
all remedies available at law or in equity (including a decree of specific performance and/or
injunctive relief). Notwithstanding the above, if a particular Event of Failure results in an Event
of Default pursuant to Section 11 hereof, then the Failure Payment, for that Event of Failure only,
shall be considered to have been satisfied upon payment to the Holder of an amount equal to the
greater of (i) the Failure Payment, or (ii) the Default Amount, payable in accordance with
Section 11.



(d) Maximum Interest Rate. Nothing contained herein or in any document referred to herein or
delivered in connection herewith shall be deemed to establish or require the payment of a rate of
interest or other charges in excess of the maximum permitted by applicable law. In the event that
the rate of interest or dividends required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited against amounts
owed by the Company to the Holder and thus refunded to the Company.


11. Default.



(a) Events Of Default. Each of the following events shall be considered to be an “Event of
Default,” unless waived by the Holder:



(i) Failure To Effect Registration. With respect to all Registration Failures, a Registration
Failure occurs and remains uncured for a period of more than forty-five (45) days (or sixty (60)
days in the case where the Company (i) has, by the Filing Deadline (as defined the Registration
Rights Agreement) filed a Registration Statement (as


 









 






defined in the Registration Rights Agreement) covering this Warrant and the number of shares
required by the Registration Rights Agreement, and (ii) has responded in writing to any comments to
the Registration Statement that the Company has received from the SEC, within twenty (20) days of
such receipt, and nevertheless the SEC has not declared effective a Registration Statement covering
the this Warrant and the Shares by the Registration Deadline (as defined in the Registration Rights
Agreement)), and such Registration Failure relates solely to the Company’s failure to have
the Registration Statement declared effective by the Registration Deadline (as defined in the
Registration Rights Agreement) and with respect to a Registration Failure provided in clause (E) of
the definition of “Registration Failure”, such Registration Failure occurs and remains uncured for
a period of more than thirty (30) days.



(ii) Failure To Deliver Common Stock. A Delivery Failure (as defined above) occurs and
remains uncured for a period of more than twenty (20) days; or at any time, the Company announces
or states in writing that it will not honor its obligations to issue shares of Common Stock to the
Holder upon Exercise by the Holder of the Exercise rights of the Holder in accordance with the
terms of this Warrant.



(iii) Legend Removal Failure. A Legend Removal Failure (as defined above) occurs and
remains uncured for a period of twenty (20) days; and



(iv) Corporate Existence; Major Transaction. In the event that (A) the Company has failed
to place the Exercise Shares issuable upon exercise of a Cashless Major Exercise into escrow or to
instruct the escrow agent to release such shares to the Holder pursuant to Section 5(c)(iv), (B)
the Company has failed to pay the Major Transaction Warrant Early Termination Price to the Holder
pursuant to Section 5(c)(iv), or (C) with respect to a Major Transaction that is to be treated as
an Assumption under the terms hereof, the Company has failed to meet the Assumption requirements of
Section 5(c)(ii).



(b) Mandatory Early Termination.



(i) Mandatory Early Termination Amount; Cashless Default Exercise. If any Events of
Default shall occur then, unless waived by the Holder, upon the occurrence and during the
continuation of any Event of Default, at the option of the Holder, such option exercisable through
the delivery of written notice to the Company by such Holder (the “Default Notice”), the Company
shall have the right, but not the obligation, to terminate the outstanding amount of this Warrant
and pay to the Holder (a “Mandatory Early Termination”), in full satisfaction of its obligations
hereunder by delivery of a notice to such effect to the Holder within two (2) Business Days
following receipt of the Default Notice, an amount payable in cash (the “Mandatory Early
Termination Amount” or the “Default Amount”) equal to the greater of (i) the Black-Scholes value
(as determined in accordance with Section 10(b)) of the remaining unexercised portion of this
Warrant on the date of such Default Notice and (2) the Black-Scholes value (also as determined in
accordance with Section 10(b)) of the remaining unexercised portion of this Warrant on the Trading
Day immediately preceding the date that the Mandatory Early Termination Amount is paid to the
Holder. In the event the Company does not exercise its right to consummate a Mandatory Early
Termination, then the Holder shall have the right to exercise this Warrant pursuant to a Cashless
Default Exercise in accordance with Section 3(c) above.



The Mandatory Early Termination Amount shall be payable within five (5) Business Days following the
date of the applicable Default Notice.



(ii) Liquidated Damages. The parties hereto acknowledge and agree that the sums payable as
Failure Payments or pursuant to a Mandatory Early Termination shall give rise to liquidated damages
and not penalties. The parties further acknowledge that (i) the amount of loss or damages likely to
be incurred by the Holder is incapable or is difficult to precisely estimate, (ii) the amounts
specified bear a reasonable proportion and are not plainly or grossly disproportionate to the
probable loss likely to be incurred by the Holder, and (iii) the parties are sophisticated business
parties and have been represented by sophisticated and able legal and financial counsel and
negotiated this Agreement at arm’s length.



The Default Amount, together with all other amounts payable hereunder, shall immediately become due
and payable, all without demand, presentment or notice, all of which hereby are expressly waived,
together with all


 









 






costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall
be entitled to exercise all other rights and remedies available at law or in equity.



(c) Posting Of Bond. In the event that any Event of Default occurs hereunder, the Company may not
raise as a legal defense (in any Lawsuit, as defined below, or otherwise) or justification to such
Event of Default any claim that such Holder or any one associated or affiliated with such Holder
has been engaged in any violation of law, unless the Company has posted a surety bond (a “Surety
Bond”) for the benefit of such Holder in the amount of 100% of the aggregate Surety Bond Value (as
defined below) of all of the Holder’s Warrants (the “Bond Amount”), which Surety Bond shall remain
in effect until the completion of litigation of the dispute and the proceeds of which shall be
payable to such Holder to the extent Holder obtains judgment.



For purposes hereof, a “Lawsuit” shall mean any lawsuit, arbitration or other dispute resolution
filed by either party herein pertaining to any of this Warrant, the Facility Agreement and the
Registration Rights Agreement.



“Surety Bond Value,” for the Warrants shall mean 130% of the of the Black-Scholes value of the
remaining unexercised portion of this Warrant on the Trading Day immediately preceding the date
that such bond goes into effect).



(d) Injunction And Posting Of Bond. In the event that the Event of Default referred to in
subsection (c) above pertains to the Company’s failure to deliver unlegended shares of Common Stock
to the Holder pursuant to a Warrant Exercise, legend removal request, or otherwise, the Company may
not refuse such unlegended share delivery based on any claim that such Holder or any one associated
or affiliated with such Holder has been engaged in any violation of law, unless an injunction from
a court, on prior notice to Holder, restraining and or enjoining Exercise of all or part of said
Warrant shall have been sought and obtained by the Company and the Company has posted a Surety Bond
for the benefit of such Holder in the amount of the Bond Amount, which Surety Bond shall remain in
effect until the completion of litigation of the dispute and the proceeds of which shall be payable
to such Holder to the extent Holder obtains judgment.



(e) 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, the
Facility Agreement and the Registration Rights Agreement, 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 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.



12. Holder’s Early Terminations.



(a) Mechanics of Holder’s Early Terminations. In the event that the Company does not deliver the
applicable Major Transaction Warrant Early Termination Price or Default Amount or the Exercise
Shares in respect of a Cashless Major Exercise or a Cashless Default Exercise, as the case may be,
to the Holder within the time period or as otherwise required pursuant to the terms hereof, at any
time thereafter the Holder shall have the option, upon notice to the Company, in lieu of early
termination, Cashless Major Exercise or Cashless Default Exercise, as the case may be, to require
the Company to promptly return to the Holder all or any portion of this Warrant that was submitted
for early termination or exercise. Upon the Company’s receipt of such notice, (x) the applicable
early termination or exercise, as the case may be, shall be null and void with respect to such
applicable portion of this Warrant, (y) the Company shall immediately return this Warrant, or issue
a new Warrant to the Holder representing the portion of this Warrant that was submitted for early
termination or exercise and (z) the Exercise Price of this Warrant or such new Warrant shall be
adjusted to the lesser of (A) the Exercise Price as in effect on the date on which the applicable
early termination, default or exercise notice, as the case may be, is voided and (B) the lowest
closing price for the Common Stock on NASDAQ, or, if NASDAQ is not the principal trading market for
the Common Stock, the principal securities exchange or other securities market on which the Common
Stock is then being traded, during the period beginning on and including the date on which the
applicable early termination, default or exercise notice, as the case may be, is delivered to the
Company and ending on and including the date on


 









 






which the applicable early termination or exercise is voided. The Holder’s delivery of a notice
voiding an early termination or exercise and exercise of its rights following such notice shall not
affect the Company’s obligations to make any payments of Failure Payments which have accrued prior
to the date of such notice with respect to the Warrant subject to such notice.



13. Benefits of this Warrant.



Nothing in this Warrant shall be construed to confer upon any person other than the Company and
Holder any legal or equitable right, remedy or claim under this Warrant and this Warrant shall be
for the sole and exclusive benefit of the Company and Holder.



14. Governing Law.



All questions concerning the construction, validity, enforcement and interpretation of this
Agreement 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 this Agreement (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. Each party 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, 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 or is an inconvenient venue for such proceeding. Each party 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 Agreement 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 other manner permitted by law. The parties hereby waive all rights to a trial by
jury. If either party shall commence an action or proceeding to enforce any provisions of this
Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other
party for its reasonable attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.



15. Loss of Warrant.



Upon receipt by the Company of evidence of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) of indemnity or security reasonably
satisfactory to the Company, and upon surrender and cancellation of this Warrant, if mutilated, the
Company shall execute and deliver a new Warrant of like tenor and date.



16. Notice or Demands.



Notices or demands pursuant to this Warrant to be given or made by Holder to or on the Company
shall be sufficiently given or made if sent by certified or registered mail, return receipt
requested, postage prepaid, and addressed, until another address is designated in writing by the
Company, to the address set forth in Section 2(a) above. Notices or demands pursuant to this
Warrant to be given or made by the Company to or on Holder shall be sufficiently given or made if
sent by certified or registered mail, return receipt requested, postage prepaid, and addressed, to
the address of Holder set forth in the Company’s records, until another address is designated in
writing by Holder.



17. Warrant Holder Not Deemed a Stockholder.



Except as otherwise specifically provided herein, no Holder, as such, of this Warrant shall be
entitled to vote or be deemed the holder of shares of capital stock of the Company for any purpose,
nor shall anything contained in this Warrant be construed to confer upon the Holder hereof, as
such, any of the rights of a stockholder 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, or otherwise, prior to the issuance to the Holder of this Warrant of the Common
Stock which it 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 such Holder to
purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the
Company, whether such liabilities are asserted by the Company or by creditors of the Company.



18. Representations of Holder.



The Holder of this Warrant, by the acceptance hereof, represents that it is acquiring this Warrant
and the Warrant Shares for its own account for investment only and not with a view towards, or for
resale in connection with, the public sale or distribution of this Warrant or the Warrant Shares,
except pursuant to sales registered or exempted under the Securities Act. The Holder of this
Warrant further represents, by acceptance hereof, that, as of this date, such Holder is an
“accredited investor” as such term is defined in Rule 501(a)(1) of Regulation D promulgated by the
Securities and Exchange Commission under the Securities Act (an “Accredited Investor”). Upon
exercise of this Warrant, the Holder shall, if requested by the Company, confirm in writing, in a
form reasonably satisfactory to the Company, that any Common Stock acquired upon the exercise of
this Warrant so purchased are being acquired solely for the Holder’s own account and not as a
nominee for any other party, for investment and not with a view toward distribution or resale and
that such Holder is an Accredited Investor. If such Holder cannot make such representations
because it would be factually incorrect, it shall be a condition to such Holder’s exercise of this
Warrant that the Company receive such other representations as the Company considers reasonably
necessary to assure the Company that the issuance of its securities upon exercise of this Warrant
shall not violate any United Sates or state securities laws.



19. Hedging Limitations.



The Company shall notify the Holder of the scheduled date of the consummation of any Major
Transaction immediately following the close of regular hours of trading on the fourth Trading Day
preceding the scheduled consummation of a Major Transaction. During the next three Trading Days
following such notice Holder agrees that it will not enter into or engage in any short-selling
transaction or participate in any hedging activity with respect to the Common Stock. Holder agrees
that it will not enter into any transaction involving the Company’s Common Stock or any derivative
thereof while in possession of material nonpublic information.




 









 




IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the 13th day of
March, 2009.


	 	 	 	 	 
	 	INSULET CORPORATION

 	 
	 	By:  	 	 
	 	 	Print Name:  	  	 
	 	 	Title:  	 	 



The following Exhibits and Schedules
to the Warrant have been omitted in accordance with Item 601(b)(2) of Regulation S-K.


EXHIBITS


Exhibit A    Exercise Form for Warrant


Exhibit B    Assignment


Exhibit C    Form of Opinion


SCHEDULES


Schedule 1    Black-Scholes Value		


Insulet Corporation will furnish
supplementally a copy of any omitted or partially omitted schedule or exhibit to the Securities
and Exchange Commission upon request; provided, however, that Insulet Corporation may
request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended, for any schedule or exhibit so furnished.