Unassociated Document


    THIS
      WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
      BEEN
      REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED,
      SOLD, ASSIGNED OR TRANSFERRED, IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
      STATEMENT UNDER SAID ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
      COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT REGISTRATION UNDER SAID
      ACT
      IS NOT REQUIRED. 

    


     

    SERIES
      

     

    Warrant
      No.

     

    COMMON
      STOCK PURCHASE WARRANT

     

    To
      Purchase Shares of Common Stock of DRUGMAX, INC.

     

    THIS
      IS
      TO CERTIFY THAT ___________________________________, or registered assigns
      (the
“Holder”), is entitled, during the Exercise Period (as hereinafter defined), to
      purchase from DrugMax, Inc., a Nevada corporation (the “Company”), the Warrant
      Stock (as hereinafter defined and subject to adjustment as provided herein),
      in
      whole or in part, at a purchase price of $.__  per share, all on and
      subject to the terms and conditions hereinafter set forth.

     

    1. Definitions.
      As used
      in this Warrant, the following terms have the respective meanings set forth
      below: 

     

    “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. 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.


     

    “Appraised
      Value”
means,
      in respect of any share of Common Stock on any date herein specified, the fair
      saleable value of such share of Common Stock (determined without giving effect
      to the discount for (i) a minority interest or (ii) any lack of liquidity of
      the
      Common Stock or to the fact that the Company may have no class of equity
      registered under the Exchange Act) as of the last day of the most recent fiscal
      month ending prior to such date specified, based on the value of the Company
      on
      a fully-diluted basis, as determined by a nationally recognized investment
      banking firm selected by the Company’s Board of Directors and having no prior
      relationship with the Company. 

     

    “Business
      Day”
means
      any day except Saturday, Sunday and any day which shall be a legal holiday
      or a
      day on which banking institutions in the State of New York generally are
      authorized or required by law or other government actions to close.


     

    “Change
      of Control”
means
      the (i) acquisition by an individual or legal entity or group (as set forth
      in
      Section 13(d) of the Exchange Act) of more than one-half of the voting rights
      or
      equity interests in the Company; or (ii) sale, conveyance, or other disposition
      of all or substantially all of the assets, property or business of the Company
      or the merger into or consolidation with any other corporation (other than
      a
      wholly owned subsidiary corporation) or effectuation of any transaction or
      series of related transactions where holders of the Company’s voting securities
      prior to such transaction or series of transactions fail to continue to hold
      at
      least 50% of the voting power of the Company. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Closing
      Date”
means
      June 23, 2006.

     

    “Commission”
means
      the Securities and Exchange Commission or any other federal agency then
      administering the Securities Act and other federal securities laws.


     

    “Common
      Stock”
means
      (except where the context otherwise indicates) the Common Stock, $0.001 par
      value per share, of the Company as constituted on the Closing Date, and any
      capital stock into which such Common Stock may thereafter be changed or
      converted, and shall also include (i) capital stock of the Company of any other
      class (regardless of how denominated) issued to the holders of shares of Common
      Stock upon any reclassification thereof which is also not preferred as to
      dividends or assets on liquidation over any other class of stock of the Company
      and which is not subject to redemption and (ii) shares of common stock of any
      successor or acquiring corporation received by or distributed to the holders
      of
      Common Stock of the Company in the circumstances contemplated by Section 4.4.
      

     

    “Current
      Market Price”
means,
      in respect of any share of Common Stock on any date herein specified,


     

    (1) if
      there
      shall not then be a public market for the Common Stock, the higher of


     

    (a)
      the
      book value per share of Common Stock at such date, and 

     

    (b)
      the
      Appraised Value per share of Common Stock at such date, 

     

    or

     

    (2) if
      there
      shall then be a public market for the Common Stock, the higher of (x) the book
      value per share of Common Stock at such date, and (y) the average of the daily
      market prices for the 20 consecutive trading days immediately before such date.
      The daily market price for each such trading day shall be (i) the closing bid
      price on such day on the principal stock exchange (including Nasdaq) on which
      such Common Stock is then listed or admitted to trading, or quoted, as
      applicable, (ii) if no sale takes place on such day on any such exchange, the
      last reported closing bid price on such day as officially quoted on any such
      exchange (including Nasdaq), (iii) if the Common Stock is not then listed or
      admitted to trading on any stock exchange, the last reported closing bid price
      on such day in the over-the-counter market, as furnished by the National
      Association of Securities Dealers Automatic Quotation System or the National
      Quotation Bureau, Inc., (iv) if neither such corporation at the time is engaged
      in the business of reporting such prices, as furnished by any similar firm
      then
      engaged in such business, or (v) if there is no such firm, as furnished by
      any
      member of the National Association of Securities Dealers, Inc. (the “NASD”)
      selected mutually by the holder of this Warrant and the Company or, if they
      cannot agree upon such selection, as selected by two such members of the NASD,
      one of which shall be selected by holder of this Warrant and one of which shall
      be selected by the Company. 

     

    
      
        
        

      

      
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    “Current
      Warrant Price”
means,
      in respect of a share of Common Stock at any date herein specified, the price
      at
      which a share of Common Stock may be purchased pursuant to this Warrant on
      such
      date. Until the Current Warrant Price is adjusted pursuant to the terms herein,
      the initial Current Warrant Price shall be $.61 per share of Common Stock.
      

     

    “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended, or any similar federal statute,
      and the rules and regulations of the Commission thereunder, all as the same
      shall be in effect from time to time. 

     

    “Exercise
      Period”
means
      the period during which this Warrant is exercisable pursuant to Section 2.1.
      

     

    “Expiration
      Date”
means
      June 23, 2011.

     

    “NASD”
means
      the National Association of Securities Dealers, Inc., or any successor
      corporation thereto. 

     

    “Other
      Property”
has
      the
      meaning set forth in Section 4.5. 

     

    “Person”
means
      any individual, sole proprietorship, partnership, joint venture, trust,
      incorporated organization, association, corporation, limited liability company,
      institution, public benefit corporation, entity or government (whether federal,
      state, county, city, municipal or otherwise, including, without limitation,
      any
      instrumentality, division, agency, body or department thereof). 

     

    “Purchase
      Agreement”
means
      that certain Note and Warrant Purchase Agreement dated as of June 23, 2006
      among
      the Company, Deerfield Special Situations Fund, L.P., and Deerfield Special
      Situations Fund International, Limited, pursuant to which this Warrant was
      originally issued. 

     

    “Restricted
      Common Stock”
means
      shares of Common Stock which are, or which upon their issuance upon the exercise
      of any Warrant would be required to be, evidenced by a certificate bearing
      the
      restrictive legend set forth in Section 3.2. 

     

    “Securities
      Act”
means
      the Securities Act of 1933, as amended, or any similar federal statute, and
      the
      rules and regulations of the Commission thereunder, all as the same shall be
      in
      effect at the time. 

     

    “Trading
      Day”
means
      any day on which the primary market on which shares of Common Stock are listed
      is open for trading. 

     

    “Transfer”
means
      any disposition of any Warrant or Warrant Stock or of any interest in either
      thereof, which would constitute a sale thereof within the meaning of the
      Securities Act. 

     

    
      
        
        

      

      
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    “Warrants”
means
      this Warrant and all warrants issued upon transfer, division or combination
      of,
      or in substitution for, any thereof. All Warrants shall at all times be
      identical as to terms and conditions and date, except as to the number of shares
      of Common Stock for which they may be exercised. 

     

    “Warrant
      Price”
means
      an amount equal to (i) the number of shares of Common Stock being purchased
      upon
      exercise of this Warrant pursuant to Section 2.1, multiplied by (ii) the Current
      Warrant Price. 

     

    “Warrant
      Stock”
means
      the 2,004,000 shares of Common Stock to be purchased upon the exercise hereof,
      subject to adjustment as provided herein. 

     

    2. Exercise
      of Warrant.
      

     

    2.1. Manner
      of Exercise.
      From
      and after the issuance hereof and until 5:00 P.M., New York time, on the
      Expiration Date (the “Exercise Period”), the Holder may exercise this Warrant,
      on any Business Day, for all or any part of the number of shares of Warrant
      Stock purchasable hereunder. 

     

    In
      order
      to exercise this Warrant, in whole or in part, the Holder shall deliver to
      the
      Company at its principal office or at the office or agency designated by the
      Company pursuant to Section 11, (i) a written notice of the Holder’s election to
      exercise this Warrant, which notice shall specify the number of shares of
      Warrant Stock to be purchased, (ii) payment of the Warrant Price as provided
      herein, and (iii) this Warrant. Such notice shall be substantially in the form
      of the subscription form appearing at the end of this Warrant as Exhibit
      A,
      duly
      executed by the Holder or its agent or attorney. Upon receipt thereof, the
      Company shall, as promptly as practicable, and in any event within three
      Business Days thereafter, execute or cause to be executed and deliver or cause
      to be delivered to the Holder a certificate or certificates representing the
      aggregate number of full shares of Warrant Stock issuable upon such exercise,
      together with cash in lieu of any fraction of a share, as hereinafter provided.
      The stock certificate or certificates so delivered shall be, to the extent
      possible, in such denomination or denominations as the Holder shall request
      in
      the notice and shall be registered in the name of the Holder or such other
      name
      as shall be designated in the notice. This Warrant shall be deemed to have
      been
      exercised and such certificate or certificates shall be deemed to have been
      issued, and the Holder or any other Person so designated to be named therein
      shall be deemed to have become a Holder of record of such shares for all
      purposes, as of the date when the notice, together with the payment of the
      Warrant Price and this Warrant, is received by the Company as described above.
      If this Warrant shall have been exercised in part, the Company shall, at the
      time of delivery of the certificate or certificates representing Warrant Stock,
      deliver to the Holder a new Warrant evidencing the rights of the Holder to
      purchase the unpurchased shares of Common Stock called for by this Warrant,
      which new Warrant shall in all other respects be identical with this Warrant,
      or
      at the request of the Holder, appropriate notation may be made on this Warrant
      and the same returned to the Holder.

     

    Payment
      of the Warrant Price may be made at the option of the Holder by: (i) certified
      or official bank check payable to the order of the Company, (ii) wire transfer
      to the account of the Company or (iii) the surrender and cancellation of a
      portion of shares of Common Stock then held by the Holder or issuable upon
      such
      exercise of this Warrant, which shall be valued and credited toward the total
      Warrant Price due the Company for the exercise of the Warrant based upon the
      Current Market Price of the Common Stock;
      provided, however, that payment of the Warrant Price under this clause (iii)
      may
      only be made if all of the amounts owed by the Company under the promissory
      notes issued under the Purchase Agreement have been paid in full. All shares
      of
      Common Stock issuable upon the exercise of this Warrant pursuant to the terms
      hereof shall be validly issued and, upon payment of the Warrant Price, shall
      be
      fully paid and nonassessable and not subject to any preemptive
      rights.

     

    
      
        
        

      

      
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    2.2. Fractional
      Shares.
      The
      Company shall not be required to issue a fractional share of Common Stock upon
      exercise of any Warrant. As to any fraction of a share which the Holder of
      one
      or more Warrants, the rights under which are exercised in the same transaction,
      would otherwise be entitled to purchase upon such exercise, the Company shall
      pay an amount in cash equal to the Current Market Price per share of Common
      Stock on the date of exercise multiplied by such fraction. 

     

    2.3. Restrictions
      on Exercise Amount.
      

     

    (i) Unless
      a
      Holder delivers to the Company irrevocable written notice at least sixty-one
      days prior to the effective date of the exercise of this Warrant that this
      Section 2.3(i) shall not apply to such Holder, the Holder may not acquire a
      number of shares of Warrant Stock to the extent that, upon such exercise, the
      number of shares of Common Stock then beneficially owned by such 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 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)
      exceeds
      9.95% of
      the total number of shares of Common Stock of the Company then issued and
      outstanding. 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, 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.
      Each delivery of a notice of exercise by a Holder will constitute a
      representation by such Holder that it has evaluated the limitation set forth
      in
      this paragraph and determined, based on the most recent public filings by the
      Company with the Commission, that the issuance of the full number of shares
      of
      Warrant Stock requested in such notice of exercise is permitted under this
      paragraph. 

     

    (ii) In
      the
      event the Company is prohibited from issuing shares of Warrant Stock as a result
      of any restrictions or prohibitions under applicable law or the rules or
      regulations of any stock exchange, interdealer quotation system or other
      self-regulatory organization, the Company shall as soon as possible seek the
      approval of its stockholders and take such other action to authorize the
      issuance of the full number of shares of Common Stock issuable upon exercise
      of
      this Warrant.

     

    3. Transfer,
      Division and Combination.
      

     

    3.1. Transfer.
      The
      Warrants and the Warrant Stock shall be freely transferable, subject to
      compliance with all applicable laws, including, but not limited to the
      Securities Act. If, at the time of the surrender of this Warrant in connection
      with any transfer of this Warrant or the resale of the Warrant Stock, this
      Warrant or the Warrant Stock, as applicable, shall not be registered under
      the
      Securities Act, the Company may require, as a condition of allowing such
      transfer (i) that the Holder or transferee of this Warrant or the Warrant Stock
      as the case may be, furnish to the Company a written opinion of counsel that
      is
      reasonably acceptable to the Company to the effect that such transfer may be
      made without registration under the Securities Act, (ii) that the Holder or
      transferee execute and deliver to the Company an investment letter in form
      and
      substance acceptable to the Company and substantially in the form attached
      as
Exhibit
      C
      hereto
      and (iii) that the transferee be an “accredited investor” as defined in Rule
      501(a) promulgated under the Securities Act. Transfer of this Warrant and all
      rights hereunder, in whole or in part, in accordance with the foregoing
      provisions, shall be registered on the books of the Company to be maintained
      for
      such purpose, upon surrender of this Warrant at the principal office of the
      Company referred to in Section 2.1 or the office or agency designated by the
      Company pursuant to Section 11, together with a written assignment of this
      Warrant substantially in the form of Exhibit
      B
      hereto
      duly executed by the Holder or its agent or attorney and funds sufficient to
      pay
      any transfer taxes payable upon the making of such transfer. Upon such surrender
      and, if required, such payment, the Company shall execute and deliver a new
      Warrant or Warrants in the name of the assignee or assignees and in the
      denomination specified in such instrument of assignment, and shall issue to
      the
      assignor a new Warrant evidencing the portion of this Warrant not so assigned,
      and this Warrant shall promptly be cancelled. Following a transfer that complies
      with the requirements of this Section 3.1, the Warrant may be exercised by
      a new
      Holder for the purchase of shares of Common Stock regardless of whether the
      Company issued or registered a new Warrant on the books of the Company.


     

    
      
        
        

      

      
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    3.2. Restrictive
      Legends.
      Each
      certificate for Warrant Stock initially issued upon the exercise of this
      Warrant, and each certificate for Warrant Stock issued to any subsequent
      transferee of any such certificate, shall be stamped or otherwise imprinted
      with
      legends in substantially the following form: 

     

    “THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, ASSIGNED
      OR
      TRANSFERRED, IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID
      ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY
      SATISFACTORY TO THE COMPANY THAT REGISTRATION UNDER SAID ACT IS NOT REQUIRED.”


     

    “THE
      SALE, TRANSFER OR ASSIGNMENT OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
      IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN INVESTOR RIGHTS AGREEMENT
      DATED AS OF JUNE 23, 2006, AS AMENDED FROM TIME TO TIME, AMONG THE COMPANY,
      DEERFIELD SPECIAL SITUATIONS FUND, L.P., AND DEERFIELD SPECIAL SITUATIONS FUND
      INTERNATIONAL, LIMITED. 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.” 

     

    3.3. Division
      and Combination; Expenses; Books.
      This
      Warrant may be divided or combined with other Warrants upon presentation hereof
      at the aforesaid office or agency of the Company, together with a written notice
      specifying the names and denominations in which new Warrants are to be issued,
      signed by the Holder or its agent or attorney. Subject to compliance with
      Section 3.1 as to any transfer which may be involved in such division or
      combination, the Company shall execute and deliver a new Warrant or Warrants
      in
      exchange for the Warrant or Warrants to be divided or combined in accordance
      with such notice. The Company shall prepare, issue and deliver at its own
      expense the new Warrant or Warrants under this Section 3. The Company agrees
      to
      maintain, at its aforesaid office or agency, books for the registration and
      the
      registration of transfer of the Warrants. 

     

    
      
        
        

      

      
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    4. Adjustments.
      The
      number of shares of Common Stock for which this Warrant is exercisable, and
      the
      price at which such shares may be purchased upon exercise of this Warrant,
      shall
      be subject to adjustment from time to time as set forth in this Section 4.
      The
      Company shall give the Holder notice of any event described below which requires
      an adjustment pursuant to this Section 4 in accordance with Sections 5.1 and
      5.2. 

     

    4.1. Stock
      Dividends, Subdivisions and Combinations.
      If at
      any time while this Warrant is outstanding the Company shall: 

     

    (i) declare
      a
      dividend or make a distribution on its outstanding shares of Common Stock in
      shares of Common Stock, 

     

    (ii) subdivide
      its outstanding shares of Common Stock into a larger number of shares of Common
      Stock, or 

     

    (iii) combine
      its outstanding shares of Common Stock into a smaller number of shares of Common
      Stock, then: 

     

    (1) the
      number of shares of Common Stock acquirable upon exercise of this Warrant
      immediately after the occurrence of any such event shall be adjusted to equal
      the number of shares of Common Stock which a record holder of the same number
      of
      shares of Common Stock that would have been acquirable under this Warrant
      immediately prior to the record date for such dividend or distribution or the
      effective date of such subdivision or combination would own or be entitled
      to
      receive after such record date or the effective date of such subdivision or
      combination, as applicable, and 

     

    (2) the
      Warrant Price shall be adjusted to equal: 

     

    (A) the
      Current Warrant Price in effect at the time of the record date for such dividend
      or distribution or of the effective date of such subdivision or combination,
      multiplied by the number of shares of Common Stock into which this Warrant
      is
      exercisable immediately prior to the adjustment, divided by 

     

    (B) the
      number of shares of Common Stock into which this Warrant is exercisable
      immediately after such adjustment. 

     

    Any
      adjustment made pursuant to clause (i) of this paragraph shall become effective
      immediately after the record date for the determination of stockholders entitled
      to receive such dividend or distribution, and any adjustment pursuant to clauses
      (ii) or (iii) of this paragraph shall become effective immediately after the
      effective date of such subdivision or combination. 

     

    
      
        
        

      

      
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    4.2. Securities
      Issuances.
      In the
      event that the Company or any of its subsidiaries (A) issues or sells any Common
      Stock or convertible securities, warrants, options or other rights to subscribe
      for or to purchase or exchange for, shares of Common Stock (“Convertible
      Securities”) or (B) directly or indirectly effectively reduces the conversion,
      exercise or exchange price for any Convertible Securities which are currently
      outstanding, at or to an effective Per Share Selling Price (as defined below)
      which is less than the greater of (I) the closing sale price per share of the
      Common Stock on the principal market on which the Common Stock is traded the
      trading day next preceding such issue or sale or, in the case of issuances
      to
      holders of its Common Stock, the date fixed for the determination of
      stockholders entitled to receive such warrants, rights, or options (“Fair Market
      Price”), or (II) the Current Warrant Price, then in each such case the Current
      Warrant Price in effect immediately prior to such issue or sale or record date,
      as applicable, shall be automatically reduced effective concurrently with such
      issue or sale to an amount determined by multiplying the Current Warrant Price
      then in effect by a fraction, (x) the numerator of which shall be the sum of
      (1)
      the number of shares of Common Stock outstanding immediately prior to such
      issue
      or sale, plus (2) the number of shares of Common Stock which the aggregate
      consideration received by the Company for such additional shares would purchase
      at such Fair Market Price or Current Warrant Price, as the case may be, and
      (y)
      the denominator of which shall be the number of shares of Common Stock of the
      Company outstanding immediately after such issue or sale. The foregoing
      provision shall not apply to any issuances or sales of Common Stock or
      Convertible Securities (i) pursuant to any Convertible Securities currently
      outstanding on the date hereof in accordance with the terms of such Convertible
      Securities in effect on the date hereof, or (ii) to any officer, director or
      employee of the Company pursuant to a bona fide option or equity incentive
      plan
      duly adopted by the Company. The Company shall give to the Holder written notice
      of any such sale of Common Stock within 24 hours of the closing of any such
      sale
      and shall within such 24 hour period issue a press release announcing such
      sale
      if such sale is a material event for, or otherwise material to, the
      Company.

     

    For
      the
      purposes of the foregoing adjustments, in the case of the issuance of any
      Convertible Securities, the maximum number of shares of Common Stock issuable
      upon exercise, exchange or conversion of such Convertible Securities shall
      be
      deemed to be outstanding, provided that no further adjustment shall be made
      upon
      the actual issuance of Common Stock upon exercise, exchange or conversion of
      such Convertible Securities, and provided further that to the extent such
      Convertible Securities expire or terminate unconverted or unexercised, then
      at
      such time the Current Warrant Price shall be readjusted as if such portion
      of
      such Convertible Securities had not been issued.

     

    For
      purposes of this Section 4.2, if an event occurs that triggers more than one
      of
      the above adjustment provisions, then only one adjustment shall be made and
      the
      calculation method which yields the greatest downward adjustment in the Current
      Warrant Price shall be used.

     

    
      
        
        

      

      
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    “Per
      Share Selling Price” shall include the amount actually paid by third parties for
      each share of Common Stock in a sale or issuance by the Company. In the event
      a
      fee is paid by the Company in connection with such transaction directly or
      indirectly to such third party or its affiliates, any such fee shall be deducted
      from the selling price pro rata to all shares sold in the transaction to arrive
      at the Per Share Selling Price. A sale of shares of Common Stock shall include
      the sale or issuance of Convertible Securities, and in such circumstances the
      Per Share Selling Price of the Common Stock covered thereby shall also include
      the exercise, exchange or conversion price thereof (in addition to the
      consideration received by the Company upon such sale or issuance less the fee
      amount as provided above). In case of any such security issued in a transaction
      in which the purchase price or the conversion, exchange or exercise price is
      directly or indirectly subject to adjustment or reset based on a future date,
      future trading prices of the Common Stock, specified or contingent events
      directly or indirectly related to the business of the Company or the market
      for
      the Common Stock, or otherwise (but excluding standard stock split anti-dilution
      provisions), the Per Share Selling Price shall be deemed to be the lowest
      conversion, exchange, exercise or reset price at which such securities are
      converted, exchanged, exercised or reset or might have been converted,
      exchanged, exercised or reset, or the lowest adjustment, as the case may be,
      over the life of such securities. If shares are issued for a consideration
      other
      than cash, the Per Share Selling Price shall be the fair value of such
      consideration as determined in good faith by independent certified public
      accountants mutually acceptable to the Company and the Holder. In the event
      the
      Company directly or indirectly effectively reduces the conversion, exercise
      or
      exchange price for any Convertible Securities which are currently outstanding,
      then the Per Share Selling Price shall equal such effectively reduced
      conversion, exercise or exchange price. 

     

    4.3. Other
      Provisions Applicable to Adjustments.
      The
      following provisions shall be applicable to the making of adjustments of the
      number of shares of Common Stock into which this Warrant is exercisable and
      the
      Current Warrant Price provided for in Section 4: 

     

    (a)
      When
      Adjustments to Be Made.
      The
      adjustments required by Section 4 shall be made whenever and as often as any
      specified event requiring an adjustment shall occur, except that any that would
      otherwise be required may be postponed (except in the case of a subdivision
      or
      combination of shares of the Common Stock, as provided for in Section 4.1)
      up
      to, but not beyond the date of exercise if such adjustment either by itself
      or
      with other adjustments not previously made adds or subtracts less than 1% of
      the
      shares of Common Stock into which this Warrant is exercisable immediately prior
      to the making of such adjustment. Any adjustment representing a change of less
      than such minimum amount (except as aforesaid) which is postponed shall be
      carried forward and made as soon as such adjustment, together with other
      adjustments required by this Section 4 and not previously made, would result
      in
      a minimum adjustment or on the date of exercise. For the purpose of any
      adjustment, any specified event shall be deemed to have occurred at the close
      of
      business on the date of its occurrence. 

     

    (b)
      Fractional
      Interests.
      In
      computing adjustments under this Section 4, fractional interests in Common
      Stock
      shall be taken into account to the nearest 1/100th of a share. 

     

    (c)
      When
      Adjustment Not Required.
      If the
      Company undertakes a transaction contemplated under this Section 4 and as a
      result takes a record of the holders of its Common Stock for the purpose of
      entitling them to receive a dividend or distribution or subscription or purchase
      rights or other benefits contemplated under this Section 4 and shall, thereafter
      and before the distribution to stockholders thereof, legally abandon its plan
      to
      pay or deliver such dividend, distribution, subscription or purchase rights
      or
      other benefits contemplated under this Section 4, then thereafter no adjustment
      shall be required by reason of the taking of such record and any such adjustment
      previously made in respect thereof shall be rescinded and annulled.


     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    4.4. Reorganization,
      Reclassification, Merger, Consolidation or Disposition of Assets.
      

     

    (a)
      If
      there shall occur a Change of Control and, pursuant to the terms of such Change
      of Control, shares of common stock of the successor or acquiring corporation,
      or
      any cash, shares of stock or other securities or property of any nature
      whatsoever (including warrants or other subscription or purchase rights) in
      addition to or in lieu of common stock of the successor or acquiring corporation
      (“Other Property”), are to be received by or distributed to the holders of
      Common Stock of the Company, then the Holder of this Warrant shall have the
      right thereafter to receive, upon the exercise of the Warrant, the number of
      shares of common stock of the successor or acquiring corporation or of the
      Company, if it is the surviving corporation, and the Other Property receivable
      upon or as a result of such Change of Control by a holder of the number of
      shares of Common Stock into which this Warrant is exercisable immediately prior
      to such event. 

     

    (b)
      In
      case of any such Change of Control described in Section 4.4(a) above, the
      successor or acquiring corporation (if other than the Company) shall expressly
      assume the due and punctual observance and performance of each and every
      covenant and condition of contained in this Warrant to be performed and observed
      by the Company and all the obligations and liabilities hereunder, subject to
      such modifications as may be deemed appropriate (as determined by resolution
      of
      the Board of Directors of the Company) in order to provide for adjustments
      of
      shares of the Common Stock into which this Warrant is exercisable which shall
      be
      as nearly equivalent as practicable to the adjustments provided for in Section
      4. For purposes of Section 4, common stock of the successor or acquiring
      corporation shall include stock of such corporation of any class which is not
      preferred as to dividends or assets on liquidation over any other class of
      stock
      of such corporation and which is not subject to redemption and shall also
      include any evidences of indebtedness, shares of stock or other securities
      which
      are convertible into or exchangeable for any such stock, either immediately
      or
      upon the arrival of a specified date or the happening of a specified event
      and
      any warrants or other rights to subscribe for or purchase any such stock. The
      foregoing provisions of this Section 4 shall similarly apply to successive
      Change of Control transactions. 

     

    (c)
      At
      the Holder’s option and request, in lieu of the successor or acquiring
      corporation expressly assuming the due and punctual observance and performance
      of each and every covenant and condition of contained in this Warrant to be
      performed and observed by the Company and all the obligations and liabilities
      hereunder as set forth in Section 4.4(b), the successor or acquiring corporation
      shall purchase from the Holder for a purchase price, payable in cash within
      five
      (5) Trading Days after such request (or, if later, on the effective date of
      the
      Change of Control), equal to the Black Sholes value (with an assumed volatility
      equal to the greater of (i) 50% or (ii) the Bloomberg calculated then prevailing
      100 day historical realized volatility) of the remaining unexercised portion
      of
      this Warrant on the date of such request.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    4.5. Certain
      Limitations.
      Notwithstanding anything herein to the contrary, the Company agrees not to
      enter
      into any transaction which, by reason of any adjustment hereunder, would cause
      the Current Warrant Price to be less than the par value per share of Common
      Stock. 

     

    4.6. Stock
      Transfer Taxes.
      The
      issue of stock certificates upon exercise of this Warrant shall be made without
      charge to the holder for any tax in respect of such issue. The Company shall
      not, however, be required to pay any tax which may be payable in respect of
      any
      transfer involved in the issue and delivery of shares in any name other than
      that of the holder of this Warrant, and the Company shall not be required to
      issue or deliver any such stock certificate unless and until the person or
      persons requesting the issue thereof shall have paid to the Company the amount
      of such tax or shall have established to the satisfaction of the Company that
      such tax has been paid. 

     

    5. Notices
      to Warrant Holders.
      

     

    5.1. Certificate
      as to Adjustments.
      Upon
      the occurrence of each adjustment or readjustment of the Current Warrant Price,
      the Company, at its expense, shall promptly compute such adjustment or
      readjustment in accordance with the terms hereof and prepare and furnish to
      the
      Holder of this Warrant a certificate setting forth such adjustment or
      readjustment and showing in detail the facts upon which such adjustment or
      readjustment is based. The Company shall, upon the written request at any time
      of the Holder of this Warrant, furnish or cause to be furnished to such Holder
      a
      like certificate setting forth (i) such adjustments and readjustments, (ii)
      the
      Current Warrant Price at the time in effect and (iii) the number of shares
      of
      Common Stock and the amount, if any, or other property which at the time would
      be received upon the exercise of Warrants owned by such Holder. 

     

    5.2. Notice
      of Corporate Action.
      If at
      any time: 

     

    (a) the
      Company shall take a record of the holders of its Common Stock for the purpose
      of entitling them to receive a dividend (other than a cash dividend payable
      out
      of earnings or earned surplus legally available for the payment of dividends
      under the laws of the jurisdiction of incorporation of the Company) or other
      distribution, or any right to subscribe for or purchase any evidences of its
      indebtedness, any shares of stock of any class or any other securities or
      property, or to receive any other right, or 

     

    (b) there
      shall be any capital reorganization of the Company, any reclassification or
      recapitalization of the capital stock of the Company or any consolidation or
      merger of the Company with, or any sale, transfer or other disposition of all
      or
      substantially all the property, assets or business of the Company to, another
      corporation, or

     

    (c) there
      shall be a voluntary or involuntary dissolution, liquidation or winding up
      of
      the Company; 

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    then,
      in
      any one or more of such cases, the Company shall give to the Holder (subject
      to
      the Holder’s execution of a reasonable confidentiality agreement) (i) at least
      10 days’ prior written notice of the record date for such dividend, distribution
      or right or for determining rights to vote in respect of any such
      reorganization, reclassification, merger, consolidation, sale, transfer,
      disposition, dissolution, liquidation or winding up, and (ii) in the case of
      any
      such reorganization, reclassification, merger, consolidation, sale, transfer,
      disposition, dissolution, liquidation or winding up, at least 10 days’ prior
      written notice of the date when the same shall take place. Such notice in
      accordance with the foregoing clause also shall specify (i) the record date
      for
      such dividend, distribution or right, the date on which the holders of Common
      Stock shall be entitled to any such dividend, distribution or right, and the
      amount and character thereof, and (ii) the date on which any such
      reorganization, reclassification, merger, consolidation, sale, transfer,
      disposition, dissolution, liquidation or winding up is to take place and the
      time, if any such time is to be fixed, as of which the holders of Common Stock
      shall be entitled to exchange their shares of Common Stock for securities or
      other property deliverable upon such reorganization, reclassification, merger,
      consolidation, sale, transfer, disposition, dissolution, liquidation or winding
      up. Each such written notice shall be sufficiently given if addressed to the
      Holder at the last address of the Holder appearing on the books of the Company
      and delivered in accordance with Section 13.2. 

     

    5.3. No
      Rights as Stockholder.
      This
      Warrant does not entitle the Holder to any voting or other rights as a
      stockholder of the Company prior to exercise and payment for the Warrant Price
      in accordance with the terms hereof.

     

    6. No
      Impairment.
      The
      Company shall not by any action, including, without limitation, amending its
      articles of incorporation or through any reorganization, transfer of assets,
      consolidation, merger, dissolution, issue or sale of securities or any other
      voluntary action, avoid or seek to avoid the observance or performance of any
      of
      the terms of this Warrant, but will at all times in good faith assist in the
      carrying out of all such terms and in the taking of all such actions as may
      be
      necessary or appropriate to protect the rights of the Holder against impairment.
      Without limiting the generality of the foregoing, the Company will (a) not
      increase the par value of any shares of Common Stock receivable upon the
      exercise of this Warrant above the amount payable therefor upon such exercise
      immediately prior to such increase in par value, (b) take all such action as
      may
      be necessary or appropriate in order that the Company may validly and legally
      issue fully paid and nonassessable shares of Common Stock upon the exercise
      of
      this Warrant, and (c) use its best efforts to obtain all such authorizations,
      exemptions or consents from any public regulatory body having jurisdiction
      thereof as may be necessary to enable the Company to perform its obligations
      under this Warrant. Upon the request of the Holder, the Company will at any
      time
      during the period this Warrant is outstanding acknowledge in writing, in form
      satisfactory to the Holder, the continuing validity of this Warrant and the
      obligations of the Company hereunder.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    7. Reservation
      and Authorization of Common Stock; Registration With Approval of Any
      Governmental Authority.
      From
      and after the Closing Date, the Company shall at all times reserve and keep
      available for issue upon the exercise of Warrants such number of its authorized
      but unissued shares of Common Stock as will be sufficient to permit the exercise
      in full of all outstanding Warrants (without regard to any ownership limitations
      provided in Section 2.3(i)). All shares of Common Stock which shall be so
      issuable, when issued upon exercise of any Warrant and payment therefor in
      accordance with the terms of such Warrant, shall be duly and validly issued
      and
      fully paid and nonassessable, and not subject to preemptive rights. Before
      taking any action which would cause an adjustment reducing the Current Warrant
      Price below the then par value, if any, of the shares of Common Stock issuable
      upon exercise of the Warrants, the Company shall take any corporate action
      which
      may be necessary in order that the Company may validly and legally issue fully
      paid and non-assessable shares of such Common Stock at such adjusted Current
      Warrant Price. Before taking any action which would result in an adjustment
      in
      the number of shares of Common Stock for which this Warrant is exercisable
      or in
      the Current Warrant Price, the Company shall obtain all such authorizations
      or
      exemptions thereof, or consents thereto, as may be necessary from any public
      regulatory body or bodies having jurisdiction thereof. If any shares of Common
      Stock required to be reserved for issuance upon exercise of Warrants require
      registration or qualification with any governmental authority under any federal
      or state law before such shares may be so issued (other than as a result of
      a
      prior or contemplated distribution by the Holder of this Warrant), the Company
      will in good faith and as expeditiously as possible and at its expense endeavor
      to cause such shares to be duly registered.

     

    8. Taking
      of Record; Stock and Warrant Transfer Books.
      In the
      case of all dividends or other distributions by the Company to the holders
      of
      its Common Stock with respect to which any provision of Section 4 refers to
      the
      taking of a record of such holders, the Company will in each such case take
      such
      a record and will take such record as of the close of business on a Business
      Day. The Company will not at any time, except upon dissolution, liquidation
      or
      winding up of the Company, close its stock transfer books or Warrant transfer
      books so as to result in preventing or delaying the exercise or transfer of
      any
      Warrant. 

     

    9. Registration
      Rights.
      The
      resale
      of the
      Warrant
      Stock shall be registered in accordance with the terms and conditions contained
      in that
      certain
      Investor Rights Agreement dated of even date hereof, among Deerfield Special
      Situations Fund, L.P., Deerfield Special Situations Fund International, Limited
      and the Company (the “Investor Rights Agreement”). The Holder acknowledges that
      pursuant to the Investor Rights Agreement, the Company has the right to request
      that the Holder furnish information regarding such Holder and the distribution
      of the Warrant Stock as is required by law or the Commission to be disclosed
      in
      the Registration Statement (as such term is defined in the Investor Rights
      Agreement), and the Company may exclude from such registration the shares of
      Warrant Stock acquirable hereunder if Holder fails to furnish such information
      within a reasonable time prior to the filing of each Registration Statement,
      supplemented prospectus included therein and/or amended Registration Statement.
      

     

    10. Loss
      or Mutilation.
      Upon
      receipt by the Company from the Holder of evidence reasonably satisfactory
      to it
      of the ownership of and the loss, theft, destruction or mutilation of this
      Warrant and indemnity or security reasonably satisfactory to it and
      reimbursement to the Company of all reasonable expenses incidental thereto
      and
      in case of mutilation upon surrender and cancellation hereof, the Company will
      execute and deliver in lieu hereof a new Warrant of like tenor to the Holder;
      provided, however, that in the case of mutilation, no indemnity shall be
      required if this Warrant in identifiable form is surrendered to the Company
      for
      cancellation. 

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    11. Office
      of the Company.
      As long
      as any of the Warrants remain outstanding, the Company shall maintain an office
      or agency (which may be the principal executive offices of the Company) where
      the Warrants may be presented for exercise, registration of transfer, division
      or combination as provided in this Warrant. 

     

    12. Limitation
      of Liability.
      No
      provision hereof, in the absence of affirmative action by the Holder to purchase
      shares of Common Stock, and no enumeration herein of the rights or privileges
      of
      the Holder hereof, shall give rise to any liability of the Holder for the
      purchase price of any Common Stock, whether such liability is asserted by the
      Company or by creditors of the Company.

     

    13. Miscellaneous.
      

     

    13.1 Nonwaiver
      and Expenses.
      No
      course of dealing or any delay or failure to exercise any right hereunder on
      the
      part of the Holder shall operate as a waiver of such right or otherwise
      prejudice Holder’s rights, powers or remedies. If the Company fails to make,
      when due, any payments provided for hereunder, or fails to comply with any
      other
      provision of this Warrant, the Company shall pay to the Holder such amounts
      as
      shall be sufficient to cover any third party costs and expenses including,
      but
      not limited to, reasonable attorneys’ fees, including those of appellate
      proceedings, incurred by the Holder in collecting any amounts due pursuant
      hereto or in otherwise enforcing any of its rights, powers or remedies
      hereunder. 

     

    13.2 Notice
      Generally.
      All
      notices, requests, demands or other communications provided for herein shall
      be
      in writing and shall be given in the manner and to the addresses set forth
      in
      the Purchase Agreement.

     

    13.3 Successors
      and Assigns.
      Subject
      to compliance with the provisions of Section 3.1, this Warrant and the rights
      evidenced hereby shall inure to the benefit of and be binding upon the
      successors of the Company and 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.
      

     

    13.4 Amendment.
      This
      Warrant may be modified or amended or the provisions of this Warrant waived
      with
      the written consent of both the Company and the Holder. 

     

    13.5 Severability.
      Wherever possible, each provision of this Warrant shall be interpreted in such
      manner as to be effective and valid under applicable law, but if any provision
      of this Warrant shall be prohibited by or invalid under applicable law, such
      provision shall be modified to the extent of such prohibition or invalidity,
      without invalidating the remainder of such provision or the remaining provisions
      of this Warrant. 

     

    13.6 Headings.
      The
      headings used in this Warrant are for the convenience of reference only and
      shall not, for any purpose, be deemed a part of this Warrant. 

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    13.7 Governing
      Law.
      This
      Warrant and the transactions contemplated hereby shall be governed by and
      interpreted in accordance with the laws of the State of New York without regard
      to the provisions thereof relating to conflicts of laws. The Company hereby
      irrevocably consents to the exclusive jurisdiction of the State and Federal
      courts located in New York City, New York in connection with any action or
      proceeding arising out of or relating to this Warrant. In any such litigation
      the Company agrees that the service thereof may be made by certified or
      registered mail directed to the Company pursuant to Section 13.2. 

     

    [Signature
      Page Follows]

     

     

    IN
      WITNESS WHEREOF, DrugMax, Inc. has caused this_________________________
      Warrant to be executed by its duly authorized officer and attested by its
      Secretary.

     

    Dated:
      June 23, 2006

    


    


    DRUGMAX,
      INC. 

     

     

    By:______________________________
      

    Name:

    Title:
      

    


    Attest:
      

    


    


    


    By:______________________________

    Name:

    Title:
      Secretary 

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    


    EXHIBIT
      A

     

    SUBSCRIPTION
      FORM

    [To
      be
      executed only upon exercise of Warrant]

     

    DrugMax,
      Inc.

    312
      Farmington Avenue

    Farmington,
      CT 06032-1968

    Attention:
      ___________

    Facsimile
      No.: ____________

    


    The
      undersigned registered owner of this Warrant exercises this Warrant for the
      purchase of ________________ shares of Common Stock of DrugMax, Inc. (“Common
      Stock”), and herewith makes payment therefor, all at the price and on the terms
      and conditions specified in this Warrant and requests that certificates for
      the
      shares of Common Stock hereby purchased (and any securities or other property
      issuable upon such exercise) be issued in the name of and delivered to
      ____________________________________________________ and whose address is
      ___________________________________________________________, and, if such shares
      of Common Stock shall not include all of the shares of Common Stock issuable
      as
      provided in this Warrant, that a new Warrant of like tenor and date for the
      balance of the shares of Common Stock issuable hereunder be delivered to the
      undersigned.

     

    (Delete
      following paragraph if not applicable:)

     

    Holder
      hereby represents to you that it has sold or has current plans to resell all
      of
      such Common Shares received upon this exercise of this Warrant, solely in
      accordance with the terms of the Registration Statement filed with the U.S.
      Securities and Exchange Commission by the Company covering such Common Shares
      as
      described under the section entitled "Plan of Distribution"
      therein.

    


    _____________________________________

    (Name
      of
      Registered Owner) 

    


    _____________________________________

    (Signature
      of Registered Owner) 

    


    _____________________________________

    (Street
      Address) 

    


    _____________________________________

    (State)
      (Zip Code) 

    


    NOTICE:
      The signature on this subscription must correspond with the name as written
      upon
      the face of the Warrant in every particular, without alteration or enlargement
      or any change whatsoever. 

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      B

     

    ASSIGNMENT
      FORM

     

    FOR
      VALUE
      RECEIVED the undersigned registered owner of this Warrant for the purchase
      of
      shares of common stock of DrugMax, Inc. hereby sells, assigns and transfers
      unto
      the Assignee named below all of the rights of the undersigned under this
      Warrant, with respect to the number of shares of common stock set forth
      below:

    


    


    _______________________________________

    


    _______________________________________

    


    _______________________________________

    (Name
      and
      Address of Assignee)

    


    _______________________________________

    (Number
      of Shares of Common Stock)

    


    


    and
      does
      hereby irrevocably constitute and appoint ____________ attorney-in-fact to
      register such transfer on the books of the Company, maintained for the purpose,
      with full power of substitution in the premises. 

    


    


    Dated:_________________________________

    


    ______________________________________

    (Print
      Name and Title)

    


    ______________________________________

    (Signature)
      

    


    ______________________________________

    (Witness)

    


    


    NOTICE:
      The signature on this assignment must correspond with the name as written upon
      the face of the Warrant in every particular, without alteration or enlargement
      or any change whatsoever. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    EXHIBIT
      C

     

    FORM
      OF
      INVESTMENT REPRESENTATION LETTER

     

    
      	
              Re:

            	
              Common
                Stock, par value $0.001 per share (“Common Stock”), of DrugMax, Inc., a
                Nevada corporation
                (“Company”).

            


    

     

    In
      connection with the acquisition by the undersigned (“Transferee”)
      of:

     

    
      	□  	
              warrants
                (“Warrants”) to purchase _______ shares of Common Stock,
                or

            


    

     

    
      	□  	
              _______
                shares of Common Stock issued upon the exercise of
                Warrants,

            


    

     

    the
      Transferee hereby represents and warrants to the Company as follows:


     

    The
      Transferee (i) is an “Accredited Investor” as that term is defined in Rule 501
      of Regulation D promulgated under the Securities Act of 1933, as amended (the
      “Act”); and (ii) has the ability to bear the economic risks of such Transferee’s
      prospective investment, including a complete loss of Transferee’s investment in
      the Warrants and/or the shares of Common Stock issuable upon the exercise
      thereof (collectively, the “Securities”).

     

    The
      Transferee, by acceptance of the Securities, represents and warrants to the
      Company that the Securities and all other securities acquired upon any and
      all
      exercises of the Warrants are purchased for the Transferee’s own account, and
      not with view to distribution of either the Securities or any other securities
      purchasable upon exercise of the Warrants in violation of applicable securities
      laws. 

     

    The
      Transferee acknowledges that (i) the Securities have not been registered under
      the Act, (ii) the Securities are “restricted securities” and the certificate(s)
      representing the Securities shall bear the following legend, or a similar legend
      to the same effect, until (i) in the case of the shares of Common Stock
      underlying the Warrants, such shares shall have been registered for resale
      by
      the Transferee under the Act and effectively been disposed of in accordance
      with
      a registration statement that has been declared effective; or (ii) in the
      opinion of counsel for the Company such Securities may be sold without
      registration under the Act:

     

    “The
      securities represented by this certificate have not been registered under the
      Securities Act of 1933, as amended (the “Act”), and all such securities are
      subject to restrictions on transferability as set forth in this certificate.
      The
      securities represented hereby may not be sold, transferred, or otherwise
      disposed of in the absence of an effective registration statement under the
      Act
      or an opinion of counsel, reasonably acceptable to counsel for the company,
      to
      the effect that the proposed sale, transfer, or disposition may be effectuated
      without registration under the Act.” 

     

    IN
      WITNESS WHEREOF, the Transferee has caused this Investment Representation Letter
      to be duly executed this __ day of __________ 20__. 

     

    Transferee
      Name: __________________________

    


    


    By:
      _______________________

    Name:

    Title: