EXHIBIT 4.7


FOR
NEGOTIATION AND 

DISCUSSION PURPOSES ONLY

NOT AN OFFER OR SALE OF SECURITIES


 [FORM
OF SERIES B WARRANT]


NOVADEL
PHARMA INC.


WARRANT TO PURCHASE COMMON STOCK


Series B
Warrant No.: ___________ 

Date of Issuance: February [___], 2011 (“Issuance Date”)


          NovaDel
Pharma Inc., a Delaware corporation (the “Company”), hereby certifies that, for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, [IROQUOIS MASTER FUND LTD.], [OTHER BUYERS], 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 exercise 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 Issuance Date, but not after 11:59 p.m., New York time,
on the Expiration Date (as defined below), [______________]1 (subject to
adjustment as provided herein) fully paid and non-assessable shares of Common
Stock (as defined below) (the “Warrant
Shares”). Except as otherwise defined herein, capitalized terms in
this Warrant shall have the meanings set forth in Section 16. This Warrant is
one of the Series B Warrants to Purchase Common Stock (the “SPA Warrants”)
issued pursuant to Section 1 of that certain Securities Purchase Agreement,
dated as of February [___], 2011, by and among the Company and the investors
(the “Buyers”)
referred to therein (the “Securities Purchase
Agreement”).


	
  

 	
  

 
	
 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 Issuance Date, in
whole or in part, by delivery (whether via facsimile or otherwise) of a written
notice, in the form attached hereto as Exhibit
A (the “Exercise Notice”),
of the Holder’s election to exercise this Warrant. Within one (1) Trading Day
following an exercise of this Warrant as aforesaid, the Holder shall deliver
payment to the Company of an amount equal to the Exercise Price in effect on
the date of such exercise multiplied by the number of Warrant Shares as to
which this Warrant was so exercised (the “Aggregate
Exercise Price”) in cash or via wire transfer of immediately
available funds if the Holder did not notify the Company in such Exercise
Notice that such exercise was made pursuant to a Cashless Exercise (as defined
in Section 1(d)). The Holder shall not be required to deliver the original of
this Warrant in order to effect an exercise hereunder. Execution and delivery
of an Exercise Notice with respect to less than all of the Warrant Shares shall
have the same effect as cancellation of the original of this Warrant and
issuance of a new Warrant  


	
  

 	
  

 
	

 

 

 
	
 1

 	
 100%
 warrant coverage. 

 










evidencing the right to purchase the remaining number of Warrant
Shares. Execution and delivery of an Exercise Notice for all of the
then-remaining Warrant Shares shall have the same effect as cancellation of the
original of this Warrant after delivery of the Warrant Shares in accordance
with the terms hereof. On or before the first (1st) Trading Day
following the date on which the Company has received an Exercise Notice, the
Company shall transmit by facsimile an acknowledgment of confirmation of
receipt of such Exercise Notice, in the form attached hereto as Exhibit B, 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 such Exercise Notice (provided that the Aggregate
Exercise Price with respect thereto has been delivered to the Company by the
Holder on or prior to such third (3rd) Trading Day if the Holder did
not notify the Company in such Exercise Notice that such exercise was made
pursuant to a Cashless Exercise), 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 shares
of Common Stock 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 at Custodian system, or (Y) if the Transfer Agent is not
participating in the DTC Fast Automated Securities Transfer Program, issue and
deliver to the Holder or, at the Holder’s instruction pursuant to the Exercise
Notice, the Holder’s agent or designee, in each case, sent by reputable
overnight courier to the address as specified in the applicable Exercise
Notice, a certificate, registered in the Company’s share register in the name of
the Holder or its designee (as indicated in the applicable Exercise Notice),
for the number of shares of Common Stock to which the Holder is entitled
pursuant to such exercise. Upon delivery of an Exercise Notice, 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, at the request of the
Holder, 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 and
deliver to the Holder (or its designee) 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
and fees which may be payable with respect to the issuance and delivery of
Warrant Shares upon exercise of this Warrant. 


          (b)
Exercise Price. For purposes of this Warrant, “Exercise Price” means $0.10, subject to
adjustment as provided herein. 


          (c)
Company’s Failure to Timely Deliver Securities. If the Company shall
fail, for any reason or for no reason, to issue to the Holder within three (3)
Trading Days after receipt of the applicable Exercise Notice (provided that the
Aggregate Exercise Price with respect thereto has been delivered to the Company
by the Holder on or prior to such third (3rd) Trading Day if the
Holder did not notify the Company in such Exercise Notice that such exercise
was made 


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pursuant to a Cashless Exercise), a certificate for the number of
shares of Common Stock to which the Holder is entitled and register such shares
of Common Stock on the Company’s share register or to credit the Holder’s
balance account with DTC for such number of shares of Common Stock to which the
Holder is entitled upon the Holder’s exercise of this Warrant (as the case may
be), then, in addition to all other remedies available to the Holder, the
Company shall pay in cash to the Holder on each day after such third (3rd)
Trading Day that the issuance of such shares of Common Stock is not timely
effected an amount equal to 2% of the product of (A) the aggregate number of
shares of Common Stock not issued to the Holder on a timely basis and to which
the Holder is entitled and (B) the Closing Sale Price of the Common Stock on
the Trading Day immediately preceding the last possible date on which the
Company could have issued such shares of Common Stock to the Holder without
violating Section 1(a). In addition to the foregoing, if within three (3)
Trading Days after the Company’s receipt of the applicable Exercise Notice
(provided that the Aggregate Exercise Price with respect thereto has been
delivered to the Company by the Holder on or prior to such third (3rd)
Trading Day if the Holder did not notify the Company in such Exercise Notice
that such exercise was made pursuant to a Cashless Exercise), the Company shall
fail to issue and deliver a certificate to the Holder and register such shares
of Common Stock on the Company’s share register or credit the Holder’s balance
account with DTC for the number of shares of Common Stock to which the Holder
is entitled upon the Holder’s exercise hereunder (as the case may be), and if
on or after such third (3rd) Trading Day the Holder (or any other
Person in respect, or on behalf, of the Holder) purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of
a sale by the Holder of all or any portion of the number of shares of Common
Stock, or a sale of a number of shares of Common Stock equal to all or any
portion of the number of shares of Common Stock, issuable upon such exercise
that the Holder so anticipated receiving from the Company, then, in addition to
all other remedies available to the Holder, 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 (including, without
limitation, by any other Person in respect, or on behalf, of the Holder) (the
“Buy-In Price”), at which point the Company’s obligation to so issue and
deliver such certificate or credit the Holder’s balance account with DTC for
the number of shares of Common Stock to which the Holder is entitled upon the
Holder’s exercise hereunder (as the case may be) (and to issue such shares of
Common Stock) shall terminate, or (ii) promptly honor its obligation to so
issue and deliver to the Holder a certificate or certificates representing such
shares of Common Stock or credit the Holder’s balance account with DTC for the
number of shares of Common Stock to which the Holder is entitled upon the Holder’s
exercise hereunder (as the case may be) 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
multiplied by (B) the lowest Closing Sale Price of the Common Stock on any
Trading Day during the period commencing on the date of the applicable Exercise
Notice and ending on the date of such issuance and payment under this clause
(ii). 


          (d)
Cashless Exercise. Notwithstanding anything contained herein to the
contrary (other than Section 1(f) below), if at the time of exercise hereof a
registration statement is not effective (or the prospectus contained therein is
not available for use) for the issuance by the Company to the Holder of all of
the Warrant Shares, then the Holder may, in its sole discretion, exercise this
Warrant in whole or in part and, in lieu of making the cash payment otherwise 


3





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= as
 applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day
 immediately preceding the date of the applicable Exercise Notice if such
 Exercise Notice is (1) both executed and delivered pursuant to Section 1(a)
 hereof on a day that is not a Trading Day or (2) both executed and delivered
 pursuant to Section 1(a) hereof on a Trading Day prior to the opening of
 “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMS
 promulgated under the federal securities laws) on such Trading Day, (ii) the
 Bid Price of the Common Stock as of the time of the Holder’s execution of the
 applicable Exercise Notice if such Exercise Notice is executed during
 “regular trading hours” on a Trading Day and is delivered within two (2)
 hours thereafter pursuant to Section 1(a) hereof or (iii) the Closing Sale
 Price of the Common Stock on the date of the applicable Exercise Notice if
 the date of such Exercise Notice is a Trading Day and such Exercise Notice is
 both executed and delivered pursuant to Section 1(a) hereof after the close
 of “regular trading hours” on such Trading Day. 

 
	
  

 	
  

 
	
  

 	
 C= the
 Exercise Price then in effect for the applicable Warrant Shares at the time
 of such exercise. 

 


          (e) Disputes.
In the case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the number of Warrant Shares to be issued pursuant to
the terms hereof, 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. Notwithstanding anything to the contrary contained in this
Warrant, this Warrant shall not be exercisable by the Holder hereof to the
extent (but only to the extent) that the Holder or any of its affiliates would
beneficially own in excess of 4.9% (the “Maximum
Percentage”) of the Common Stock. To the extent the above limitation
applies, the determination of whether this Warrant shall be exercisable
(vis-à-vis other convertible, exercisable or exchangeable securities owned by
the Holder or any of its affiliates) and of which such securities shall be
exercisable (as among all such securities owned by the Holder) shall, subject
to such Maximum Percentage limitation, be determined on the basis of the first
submission to the Company for conversion, exercise or exchange (as the case may
be). No prior inability to exercise this Warrant pursuant to this paragraph
shall have any effect on the applicability of the provisions of this paragraph
with respect to any subsequent determination of exercisability. For the
purposes of this paragraph, beneficial ownership and all determinations 


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and calculations (including, without limitation, with respect to
calculations of percentage ownership) shall be determined in accordance with
Section 13(d) of the 1934 Act (as defined in the Securities Purchase Agreement)
and the rules and regulations promulgated thereunder. The provisions of this
paragraph shall be implemented in a manner otherwise than in strict conformity
with the terms of this paragraph to correct this paragraph (or any portion
hereof) which may be defective or inconsistent with the intended Maximum
Percentage beneficial ownership limitation herein contained or to make changes
or supplements necessary or desirable to properly give effect to such Maximum
Percentage limitation. The limitations contained in this paragraph shall apply
to a successor Holder of this Warrant. The holders of Common Stock shall be
third party beneficiaries of this paragraph and the Company may not waive this
paragraph without the consent of holders of a majority of its Common Stock. For
any reason at any time, upon the written or oral request of the Holder, the
Company shall within one (1) Business Day confirm orally and in writing to the
Holder the number of shares of Common Stock then outstanding, including by
virtue of any prior conversion or exercise of convertible or exercisable
securities into Common Stock, including, without limitation, pursuant to this
Warrant or securities issued pursuant to the Securities Purchase Agreement. 


          (g) Insufficient
Authorized Shares. The Company shall at all times keep reserved for
issuance under this Warrant a number of shares of Common Stock as shall be
necessary to satisfy the Company’s obligation to issue shares of Common Stock
hereunder (without regard to any limitation otherwise contained herein with
respect to the number of shares of Common Stock that may be acquirable upon
exercise of this Warrant). If, notwithstanding the foregoing, and not in
limitation thereof, at any time while any of the SPA Warrants remain
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 the SPA Warrants at least a number of shares of
Common Stock equal to the number of shares of Common Stock as shall from time
to time be necessary to effect the exercise of all of the SPA Warrants then
outstanding (the “Required Reserve Amount”)
(an “Authorized Share Failure”),
then the Company shall promptly 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 all the SPA Warrants
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 eighty (80) 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 reasonable 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 number of
Warrant Shares issuable upon exercise of this Warrant are subject to adjustment
from time to time as set forth in this Section 2. 


          (a) Stock
Dividends and Splits. Without limiting any provision of Section 2(b) or
Section 4, if the Company, at any time on or after the date of the Securities
Purchase Agreement, (i) pays a stock dividend on one or more classes of its
then outstanding shares of Common Stock or otherwise makes a distribution on
any class of capital stock that is payable in shares of 


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Common Stock, (ii) subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its then outstanding
shares of Common Stock into a larger number of shares or (iii) combines (by
combination, reverse stock split or otherwise) one or more classes of its then
outstanding shares of Common Stock into a smaller number of shares, then in
each such case the Exercise Price shall be multiplied by a fraction of which
the numerator shall be the number of shares of Common Stock outstanding
immediately before such event and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such event. Any
adjustment made pursuant to clause (i) of this paragraph shall become effective
immediately after the record date for the determination of stockholders
entitled to receive such dividend or distribution, and any adjustment pursuant
to clause (ii) or (iii) of this paragraph shall become effective immediately
after the effective date of such subdivision or combination. If any event
requiring an adjustment under this paragraph occurs during the period that an
Exercise Price is calculated hereunder, then the calculation of such Exercise
Price shall be adjusted appropriately to reflect such event. 


          (b) Adjustment
Upon Issuance of Shares of Common Stock. If and whenever on or after the
date of the Securities Purchase Agreement, 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 any Excluded
Securities (as defined in the Securities Purchase Agreement) issued or sold or
deemed to have been issued or sold) for a consideration per share (the “New Issuance Price”) less than a price equal
to the Exercise Price in effect immediately prior to such issue or sale or
deemed issuance or sale (such Exercise Price then in effect is referred to as
the “Applicable Price”) (the
foregoing a “Dilutive Issuance”),
then immediately after such Dilutive Issuance, the Exercise Price then in
effect shall be reduced to an amount equal to the New Issuance Price. For all
purposes of the foregoing (including, without limitation, determining the
adjusted Exercise Price and consideration per share under this Section 2(b)),
the following shall be applicable: 


	
  

 	
  

 
	
  

 	
           (i) Issuance
 of Options. If the Company in any manner grants or sells 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(b)(i), the “lowest price per share for which one
 share of Common Stock is issuable upon the exercise of any such Options or
 upon conversion, exercise or exchange of any Convertible Securities issuable
 upon exercise of any such Option” shall be equal to (1) the lower of (x) 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 such Option, upon exercise of such Option and upon conversion,
 exercise or exchange of any Convertible Security issuable upon exercise of
 such Option and (y) the lowest exercise price set forth in such Option for
 which one share of Common Stock is issuable upon the exercise of any such
 Options or upon conversion, exercise or exchange of any Convertible
 Securities issuable upon exercise of any such Option minus (2) the sum of all
 amounts paid or payable to the holder of such Option (or any other Person)
 upon the 

 


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 granting or sale of such Option, upon exercise of such Option and
 upon conversion, exercise or exchange of any Convertible Security issuable
 upon exercise of such Option plus the value of any other consideration
 received or receivable by, or benefit conferred on, the holder of such Option
 (or any other Person). Except as contemplated below, no further adjustment of
 the Exercise Price 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 purposes of this Section 2(b)(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 (1) the lower of (x) 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 and (y) the lowest conversion price set forth in such
 Convertible Security for which one share of Common Stock is issuable upon
 conversion, exercise or exchange thereof minus (2) the sum of all amounts
 paid or payable to the holder of such Convertible Security (or any other
 Person) upon the issuance or sale of such Convertible Security plus the value
 of any other consideration received or receivable by, or benefit conferred
 on, the holder of such Convertible Security (or any other Person). Except as
 contemplated below, no further adjustment of the Exercise Price 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(b), except as contemplated below, no further
 adjustment of the Exercise Price shall be made by reason of such issue or
 sale. 

 
	
  

 	
  

 
	
  

 	
           (iii) Change
 in Option Price or Rate of Conversion. If the purchase or exercise 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 in effect at the time of such
 increase or decrease shall be adjusted to the Exercise Price 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(b)(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 

 


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 decrease. No
 adjustment pursuant to this Section 2(b) shall be made if such adjustment
 would result in an increase of the Exercise Price then in effect. 

 
	
  

 	
  

 
	
  

 	
           (iv)
 Calculation of Consideration Received. If any Option or Convertible
 Security is issued in connection with the issuance or sale or deemed issuance
 or sale of any other securities of the Company, together comprising one
 integrated transaction, (x) such Option or Convertible Security (as
 applicable) will be deemed to have been issued for consideration equal to the
 Black Scholes Consideration Value thereof and (y) the other securities issued
 or sold or deemed to have been issued or sold in such integrated transaction
 shall be deemed to have been issued for consideration equal to the difference
 of (I) the aggregate consideration received by the Company minus (II) the
 Black Scholes Consideration Value of each such Option or Convertible Security
 (as applicable). 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 gross amount of
 consideration 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 publicly traded securities, in which case the
 amount of consideration received by the Company for such securities will be
 the arithmetic average of the VWAPs of such security for each of the five (5)
 Trading Days immediately preceding 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 publicly traded securities will be
 determined jointly by the Company and the Holder. 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) Trading Days after the tenth
 (10th) day following such Valuation Event by an independent,
 reputable appraiser jointly selected by the Company and the Holder. 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. 

 
	
  

 	
  

 
	
  

 	
           (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). 

 



          (c)
Number of Warrant Shares. Simultaneously with any adjustment to the
Exercise Price pursuant to paragraphs (a) or (b) of this Section 2, the number
of Warrant Shares that may be purchased upon exercise of this Warrant shall be
increased or decreased proportionately, so 


8





that after such adjustment the aggregate Exercise Price payable
hereunder for the adjusted number of Warrant Shares shall be the same as the
aggregate Exercise Price in effect immediately prior to such adjustment
(without regard to any limitations on exercise contained herein). 


          (d) Other
Events. In the event that the Company (or any Subsidiary (as defined in the
Securities Purchase Agreement)) shall take any action to which the provisions
hereof are not strictly applicable, or, if applicable, would not operate to
protect the Holder from dilution or 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 shall in good faith determine
and implement an appropriate adjustment in the Exercise Price and the number of
Warrant Shares (if applicable) so as to protect the rights of the Holder,
provided that no such adjustment pursuant to this Section 2(d) will increase
the Exercise Price or decrease the number of Warrant Shares as otherwise
determined pursuant to this Section 2, provided further that if the Holder does
not accept such adjustments as appropriately protecting its interests hereunder
against such dilution, then the Company’s board of directors and the Holder
shall agree, in good faith, upon an independent investment bank of nationally
recognized standing to make such appropriate adjustments, whose determination
shall be final and binding and whose fees and expenses shall be borne by the
Company. 


          (e) Calculations.
All calculations under this Section 2 shall be made by rounding to the nearest
cent or the nearest 1/100th of a share, as applicable. The number of
shares of Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Company, and the disposition of any
such shares shall be considered an issue or sale of Common Stock. 


3. RIGHTS UPON DISTRIBUTION OF ASSETS. In addition to any
adjustments pursuant to Section 2 above, 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, 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, the Holder shall be entitled to participate
in such Distribution to the same extent that the Holder would have participated
therein if the Holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Warrant (without regard to any limitations on
exercise hereof, including without limitation, the Maximum Percentage)
immediately before the date on which a record is taken for such Distribution,
or, if no such record is taken, the date as of which the record holders of
shares of Common Stock are to be determined for the participation in such
Distribution (provided, however, to the extent that the Holder’s right to
participate in any such Distributions would result in the Holder exceeding the
Maximum Percentage, then the Holder shall not be entitled to participate in
such Distribution to such extent (or the beneficial ownership of any such
shares of Common Stock as a result of such Distribution to such extent) and
such Distribution to such extent shall be held in abeyance for the benefit of
the Holder until such time, if ever, as its right thereto would not result in
the Holder exceeding the Maximum Percentage, provided further that such
Distribution shall be held in abeyance for the benefit of the Holder until such
time as the 


9





Holder exercises this Warrant (whether in whole or in part), and
subject to the foregoing proviso, upon each exercise of this Warrant the
Company shall make such Distribution to the Holder with respect to each Warrant
Share for which this Warrant is so exercised until such time as this Warrant
has been exercised in full). 


4. PURCHASE
RIGHTS; FUNDAMENTAL TRANSACTIONS. 


          (a) Purchase
Rights. In addition to any adjustments pursuant to Section 2 above, if at
any time the Company grants, issues or sells any Options, Convertible
Securities or rights to purchase stock, warrants, securities or other property
pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be
entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which the Holder could have acquired if the Holder
had held the number of shares of Common Stock acquirable upon complete exercise
of this Warrant (without regard to any limitations on exercise hereof,
including without limitation, the Maximum Percentage) immediately before the
date on which a record is taken for the grant, issuance or sale of such
Purchase Rights, or, if no such record is taken, the date as of which the
record holders of shares of Common Stock are to be determined for the grant,
issue or sale of such Purchase Rights (provided, however, to the extent that
the Holder’s right to participate in any such Purchase Right would result in
the Holder exceeding the Maximum Percentage, then the Holder shall not be
entitled to participate in such Purchase Right to such extent (or beneficial
ownership of such shares of Common Stock as a result of such Purchase Right to
such extent) and such Purchase Right to such extent shall be held in abeyance
for the Holder until such time, if ever, as its right thereto would not result
in the Holder exceeding the Maximum Percentage, provided further, such Purchase
Right shall be held in abeyance for the benefit of the Holder until such time
as the Holder exercises this Warrant (whether in whole or in part), and subject
to the foregoing proviso, upon each exercise of this Warrant the Company shall
distribute such Purchase Right to the Holder with respect to each Warrant Share
for which this Warrant is so exercised until such time as this Warrant has been
exercised in full). 


          (b) 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(b) pursuant to written agreements in form and
substance satisfactory to the Holder and approved by the Holder prior to such
Fundamental Transaction, including agreements to deliver to the Holder in
exchange for this Warrant a security of the Successor Entity evidenced by a
written instrument substantially similar in form and substance to this Warrant,
including, without limitation, which is 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
with an exercise price which applies the exercise price hereunder to such
shares of capital stock (but taking into account the relative value of the shares
of Common Stock pursuant to such Fundamental Transaction and the value of such
shares of capital stock, such adjustments to the number of shares of capital
stock and such exercise price being for the purpose of protecting the economic
value of this Warrant immediately prior to the consummation of such Fundamental
Transaction) and (ii) the Successor Entity (including its Parent Entity) is a
publicly traded 


10





corporation whose common stock is quoted on or listed for trading on an
Eligible Market. Upon the consummation of each Fundamental Transaction, the
Successor Entity shall succeed to, and be substituted for (so that from and
after the date of the applicable Fundamental Transaction, the provisions of
this Warrant and the other Transaction Documents 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 and the other Transaction Documents with the same effect as
if such Successor Entity had been named as the Company herein. Upon
consummation of each 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 applicable Fundamental
Transaction, in lieu of the shares of Common Stock (or other securities, cash,
assets or other property (except such items still issuable under Sections 3 and
4(a) above, which shall continue to be receivable thereafter)) issuable upon
the exercise of this Warrant prior to the applicable Fundamental Transaction,
such shares of 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 the applicable Fundamental
Transaction had this Warrant been exercised immediately prior to the applicable
Fundamental Transaction (without regard to any limitations on the exercise of
this Warrant), 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 each 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 applicable 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 (except such items still issuable
under Sections 3 and 4(a) above, which shall continue to be receivable
thereafter)) issuable upon the exercise of the 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 the applicable Fundamental Transaction had this Warrant been exercised
immediately prior to the applicable Fundamental Transaction (without regard to
any limitations on the exercise of this Warrant). Provision made pursuant to
the preceding sentence shall be in a form and substance reasonably satisfactory
to the Holder. 


          (c) Black
Scholes Value. Notwithstanding the foregoing and the provisions of Section
4(b) above, at the request of the Holder delivered at any time commencing on
the earliest to occur of (x) the public disclosure of any Fundamental
Transaction, (y) the consummation of any Fundamental Transaction and (z) the
Holder first becoming aware of any Fundamental Transaction through the date
that is ninety (90) days after the public disclosure of the consummation of
such Fundamental Transaction by the Company pursuant to a Current Report on
Form 8-K filed with the SEC, the Company or the Successor Entity (as the case
may be) shall purchase this Warrant from the Holder on the date of such request
by paying to the Holder cash in an amount equal to the Black Scholes Value. 


          (d) Application.
The provisions of this Section 4 shall apply similarly and equally to
successive Fundamental Transactions and Corporate Events and shall be applied
as if this Warrant (and any such subsequent warrants) were fully exercisable
and without regard to any 


11





limitations on the exercise of this Warrant (provided that the Holder
shall continue to be entitled to the benefit of the Maximum Percentage, applied
however with respect to shares of capital stock registered under the 1934 Act
and thereafter receivable upon exercise of this Warrant (or any such other
warrant)). 


5. NONCIRCUMVENTION. The Company hereby covenants and agrees
that the Company will not, by amendment of its Certificate of Incorporation (as
defined in the Securities Purchase Agreement), Bylaws (as defined in the
Securities Purchase Agreement) 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, (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 non-assessable 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, the maximum 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 its 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 its
capacity as the Holder of this Warrant, 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,
receive dividends or subscription rights, or otherwise, prior to the issuance
to the Holder of the Warrant Shares 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 the 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. Notwithstanding this Section 6, the
Company shall provide the Holder with copies of the same notices and other
information given to the stockholders of the Company generally,
contemporaneously with the giving thereof to the stockholders. 


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 


12





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 (as to which a written certification and the
indemnification contemplated below shall suffice as such evidence), and, in the
case of loss, theft or destruction, of any indemnification undertaking by the
Holder to the Company in customary and reasonable 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. 


          (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, 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.  NOTICES. Whenever notice is required to be
given under this Warrant, unless otherwise provided herein, such notice shall
be given in accordance with Section 8(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 therefor. Without limiting the generality of the
foregoing, the Company will give written notice to the Holder (i) immediately
upon each adjustment of the Exercise Price and the number of Warrant Shares,
setting forth in reasonable detail, and certifying, the calculation of such
adjustment(s) 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 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 and (iii) at least ten (10)
Trading Days prior to the consummation of any Fundamental Transaction. To the
extent that any notice provided hereunder constitutes, or contains, material,
non-public 


13





information regarding the Company or any of its Subsidiaries, the
Company shall simultaneously file such notice with the SEC (as defined in the
Securities Purchase Agreement) pursuant to a Current Report on Form 8-K. It is
expressly understood and agreed that the time of execution specified by the
Holder in each Exercise Notice shall be definitive and may not be disputed or
challenged by the Company. 


9. AMENDMENT AND WAIVER. Except as otherwise provided herein,
the provisions of this Warrant (other than Section 1(f)) 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 Holder. The Holder shall be entitled, at its option, to
the benefit of any amendment of any other similar warrant issued under the
Securities Purchase Agreement. No waiver shall be effective unless it is in
writing and signed by an authorized representative of the waiving party. 


10. SEVERABILITY. If any
provision of this Warrant is prohibited by law or otherwise determined to be
invalid or unenforceable by a court of competent jurisdiction, the provision
that would otherwise be prohibited, invalid or unenforceable shall be deemed
amended to apply to the broadest extent that it would be valid and enforceable,
and the invalidity or unenforceability of such provision shall not affect the
validity of the remaining provisions of this Warrant so long as this Warrant as
so modified continues to express, without material change, the original
intentions of the parties as to the subject matter hereof and the prohibited
nature, invalidity or unenforceability of the provision(s) in question does not
substantially impair the respective expectations or reciprocal obligations of
the parties or the practical realization of the benefits that would otherwise
be conferred upon the parties. The parties will endeavor in good faith
negotiations to replace the prohibited, invalid or unenforceable provision(s)
with a valid provision(s), the effect of which comes as close as possible to
that of the prohibited, invalid or unenforceable provision(s).  


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. The Company 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 brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner permitted
by law. THE COMPANY HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY.


14





12. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be
jointly drafted by the Company and the Holder 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. Terms used in this Warrant but defined in the
other Transaction Documents shall have the meanings ascribed to such terms on
the Closing Date (as defined in the Securities Purchase Agreement) in such
other Transaction Documents unless otherwise consented to in writing by the
Holder. 


13. DISPUTE RESOLUTION. In the case of a dispute as to the
determination of the Exercise Price, the Closing Sale Price, the Bid Price or
fair market value or the arithmetic calculation of the Warrant Shares (as the
case may be), the Company or the Holder (as the case may be) shall submit the
disputed determinations or arithmetic calculations (as the case may be) via
facsimile (i) within two (2) Business Days after receipt of the applicable
notice giving rise to such dispute to the Company or the Holder (as the case
may be) or (ii) if no notice gave rise to such dispute, at any time after the
Holder learned of the circumstances giving rise to such dispute (including,
without limitation, as to whether any issuance or sale or deemed issuance or
sale was an issuance or sale or deemed issuance or sale of Excluded
Securities). If the Holder and the Company are unable to agree upon such
determination or calculation (as the case may be) of the Exercise Price, the
Closing Sale Price, the Bid Price or fair market value or the number of Warrant
Shares (as the case may be) within three (3) Business Days of such disputed
determination or arithmetic calculation being submitted to the Company or the
Holder (as the case may be), then the Company shall, within two (2) Business
Days submit via facsimile (a) the disputed determination of the Exercise Price,
the Closing Sale Price, the Bid Price or fair market value (as the case may be)
to an independent, reputable investment bank selected 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 (as the case may be) and notify the Company and
the Holder of the results no later than ten (10) Business Days from the time it
receives such disputed determinations or calculations (as the case may be).
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, CHARACTERIZATION, 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 to pursue actual damages for any failure by the
Company to comply with the terms of this Warrant. The Company covenants to the
Holder that there shall be no characterization concerning this instrument other
than as expressly provided herein. Amounts set forth or provided for herein
with respect to payments, exercises and the like (and the computation thereof)
shall be the amounts to be received by the Holder and shall not, except as
expressly provided herein, be subject to any other obligation of the Company
(or the performance thereof). 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 


15





loss and without any bond or other security being required. The Company
shall provide all information and documentation to the Holder that is requested
by the Holder to enable the Holder to confirm the Company’s compliance with the
terms and conditions of this Warrant (including, without limitation, compliance
with Section 2 hereof). The issuance of shares and certificates for shares as
contemplated hereby upon the exercise of this Warrant shall be made without
charge to the Holder or such shares for any issuance tax or other costs in
respect thereof, provided that the Company shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than the Holder or its agent on its
behalf. 


15. TRANSFER. This Warrant may be offered for sale, sold,
transferred or assigned without the consent of the Company. 


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


          (a) “Bid Price” means, for any security as of
the particular time of determination, the bid price for such security on the
Principal Market as reported by Bloomberg as of such time of determination, or,
if the Principal Market is not the principal securities exchange or trading
market for such security, the bid price of such security on the principal
securities exchange or trading market where such security is listed or traded
as reported by Bloomberg as of such time of determination, or if the foregoing
does not apply, the bid price of such security in the over-the-counter market
on the electronic bulletin board for such security as reported by Bloomberg as
of such time of determination, or, if no bid price is reported for such
security by Bloomberg as of such time of determination, the average of the bid
prices of any market makers for such security as reported in the “pink sheets”
by OTC Markets Inc. (formerly Pink Sheets LLC) as of such time of
determination. If the Bid Price cannot be calculated for a security as of the
particular time of determination on any of the foregoing bases, the Bid Price
of such security as of such time of determination 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 in accordance with the procedures in
Section 13. All such determinations shall be appropriately adjusted for any
stock dividend, stock split, stock combination or other similar transaction
during such period. 


          (b) “Black Scholes Consideration Value” means
the value of the applicable Option or Convertible Security (as the case may be)
as of the date of issuance thereof calculated using the Black Scholes Option
Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an
underlying price per share equal to the Closing Sale Price of the Common Stock
on the Trading Day immediately preceding the public announcement of the
execution of definitive documents with respect to the issuance of such Option
or Convertible Security (as the case may be), (ii) a risk-free interest rate
corresponding to the U.S. Treasury rate for a period equal to the remaining
term of such Option or Convertible Security (as the case may be) as of the date
of issuance of such Option or Convertible Security (as the case may be) and
(iii) an expected volatility equal to the greater of 100% and the 100 day
volatility obtained from the HVT function on Bloomberg (determined utilizing a
365 day annualization factor) as of the Trading Day immediately following the
date of issuance of such Option or Convertible Security (as the case may be). 


16





          (c) “Black Scholes Value” means the value of the
unexercised portion of this Warrant remaining on the date of the Holder’s
request pursuant to Section 4(c), which value is calculated using the Black
Scholes Option Pricing Model obtained from the “OV” function on Bloomberg
utilizing (i) an underlying price per share equal to the greater of (1) the
highest Closing Sale Price of the Common Stock during the period beginning on
the Trading Day immediately preceding the earliest to occur of (x) the public
disclosure of the applicable Fundamental Transaction, (y) the consummation of
the applicable Fundamental Transaction and (z) the date on which the Holder
first became aware of the applicable Fundamental Transaction and ending on the
Trading Day of the Holder’s request pursuant to Section 4(c) and (2) the sum of
the price per share being offered in cash in the applicable Fundamental
Transaction (if any) plus the value of the non-cash consideration being offered
in the applicable Fundamental Transaction (if any), (ii) a strike price equal
to the Exercise Price in effect on the date of the Holder’s request pursuant to
Section 4(c), (iii) a risk-free interest rate corresponding to the U.S.
Treasury rate for a period equal to the greater of (1) the remaining term of
this Warrant as of the date of the Holder’s request pursuant to Section 4(c)
and (2) the remaining term of this Warrant as of the date of consummation of
the applicable Fundamental Transaction or as of the date of the Holder’s
request pursuant to Section 4(c) if such request is prior to the date of the
consummation of the applicable Fundamental Transaction and (iv) an expected
volatility equal to the greater of 100% and the 100 day volatility obtained
from the HVT function on Bloomberg (determined utilizing a 365 day
annualization factor) as of the Trading Day immediately following the earliest
to occur of (x) the public disclosure of the applicable Fundamental
Transaction, (y) the consummation of the applicable Fundamental Transaction and
(z) the date on which the Holder first became aware of the applicable
Fundamental Transaction. 


          (d) “Bloomberg” means Bloomberg, L.P. 


          (e) “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. 


          (f) “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
does 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 ask prices of any market makers for such security
as reported in the “pink sheets” by OTC Markets Inc. (formerly Pink Sheets
LLC). 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 in accordance with the procedures in Section 13. All such determinations
shall be 


17





appropriately adjusted for any stock dividend, stock split, stock
combination or other similar transaction during such period. 


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


          (h) “Convertible Securities” means any stock or
other security (other than Options) that is at any time and under any
circumstances, directly or indirectly, convertible into, exercisable or
exchangeable for, or which otherwise entitles the holder thereof to acquire,
any shares of Common Stock. 


          (i) “Eligible Market” means The New York Stock
Exchange, the NYSE Amex, the Nasdaq Global Select Market, the Nasdaq Global
Market, the Nasdaq Capital Market or the Principal Market. 


          (j) “Expiration Date” means the date that is the
first (1st) anniversary of 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. 


          (k) “Fundamental Transaction” means that (i) the
Company or any of its Subsidiaries shall, directly or indirectly, in one or
more related transactions, (1) consolidate or merge with or into (whether or
not the Company or any of its Subsidiaries is the surviving corporation) any
other Person, or (2) sell, lease, license, assign, transfer, convey or
otherwise dispose of all or substantially all of its respective properties or
assets to any other Person, or (3) allow any other Person to make a purchase,
tender or exchange offer that is accepted by the holders of more than 50% of
the outstanding shares of Voting Stock of the Company (not including any shares
of Voting Stock of the Company 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 (4) consummate a stock or share
purchase agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme of
arrangement) with any other Person whereby such other Person acquires more than
50% of the outstanding shares of Voting Stock of the Company (not including any
shares of Voting Stock of the Company 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 or share purchase agreement or other business
combination), or (5) (I) reorganize, recapitalize or reclassify the Common
Stock, (II) effect or consummate a stock combination, reverse stock split or
other similar transaction involving the Common Stock or (III) make any public
announcement or disclosure with respect to any stock combination, reverse stock
split or other similar transaction involving the Common Stock (including,
without limitation, any public announcement or disclosure of (x) any potential,
possible or actual stock combination, reverse stock split or other similar
transaction involving the Common Stock or (y) board or stockholder approval
thereof, or the intention of the Company to seek board or stockholder approval
of any stock combination, reverse stock split or other similar transaction
involving the Common Stock), or (ii) any “person” or “group” (as these terms
are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules
and regulations promulgated thereunder) is or shall become the “beneficial
owner” (as defined in Rule 13d-3 


18





under the 1934 Act), directly or indirectly, of 50% of the aggregate
ordinary voting power represented by issued and outstanding Voting Stock of the
Company. 


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


          (m) “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. 


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


          (o) “Principal Market” means the OTC Bulletin
Board. 


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


          (q) “Trading Day” means any day on which the
Common Stock is 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 is then
traded, provided that “Trading Day” shall not include any day on which the
Common Stock is scheduled to trade on such exchange or market for less than 4.5
hours or any day that the Common Stock is 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) unless such
day is otherwise designated as a Trading Day in writing by the Holder. 


          (r) “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). 


          (s) “VWAP” means, for any security as of any
date, the dollar volume-weighted average price for such security on the
Principal Market (or, if the Principal Market is not the principal trading
market for such security, then on the principal securities exchange or
securities market on which such security is then traded) during the period
beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York
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 time, and
ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no
dollar volume-weighted average price 


19





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” by OTC Markets
Inc. (formerly Pink Sheets LLC). If VWAP cannot be calculated for such security
on such date on any of the foregoing bases, the VWAP 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 in
accordance with the procedures in Section 13. All such determinations shall be
appropriately adjusted for any stock dividend, stock split, stock combination
or other similar transaction during such period. 


[signature
page follows]


20





          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. 


	
  

 	
  

 	
  

 
	
  

 	
 NOVADEL PHARMA INC.

 
	
  

 	
  

 
	
  

 	
 By:

 	
  

 
	
  

 	
  

 	

 


 
	
  

 	
 Name:

 
	
  

 	
 Title:

 









EXHIBIT A


EXERCISE NOTICE


TO BE EXECUTED BY THE REGISTERED HOLDER TO
EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK


NOVADEL PHARMA INC.


          The
undersigned holder hereby exercises the right to purchase _________________ of
the shares of Common Stock (“Warrant Shares”)
of NovaDel Pharma Inc., a Delaware corporation (the “Company”), evidenced by Series B Warrant No. _______ (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.

 


          In the
event that the Holder has elected a Cashless Exercise with respect to some or
all of the Warrant Shares to be issued pursuant hereto, the Holder hereby
represents and warrants that (i) this Exercise Notice was executed by the
Holder at __________ [a.m.][p.m.] on the date set forth below and (ii) if
applicable, the Bid Price as of such time of execution of this Exercise Notice
was $________.


          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. Delivery
of Warrant Shares. The Company shall deliver to Holder, or its designee or
agent as specified below, __________ Warrant Shares in accordance with the
terms of the Warrant. Delivery shall be made to Holder, or for its benefit, to
the following address:


	
  

 
	

 


 
	
  

 
	

 


 
	
  

 
	

 


 
	
  

 
	

 


 



Date:
_______________ __, ______


	
  

 
	

 


 
	
      Name
 of Registered Holder

 













	
  

 	
  

 
	
 By:

 	
  

 
	
  

 	

 


 
	
  

 	
 Name:

 
	
  

 	
 Title:

 










EXHIBIT B


ACKNOWLEDGMENT


          The Company
hereby acknowledges this Exercise Notice and hereby directs ______________ to
issue the above indicated number of shares of Common Stock in accordance with
the Transfer Agent Instructions dated _________, 20__, from the Company and
acknowledged and agreed to by _______________.


	
  

 	
  

 	
  

 
	
  

 	
 NOVADEL PHARMA INC.

 
	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
  

 
	
  

 	
  

 	

 


 
	
  

 	
 Name:

 
	
  

 	
 Title: