Document:

EXHIBIT 10.2

                                December 8, 2003

Pannonian Energy, Inc.
14 Inverness Drive East,
Building H, Suite 236
Englewood, CO 80112

Attention:        King Grant, Chief Financial Officer

Ladies and Gentlemen:

         This letter confirms our  understanding and agreement (the "Agreement")
that Pannonian Energy, Inc. (together with its subsidiaries and affiliates,  the
"Company") has engaged Red Oak Capital  Management  LLC ("Red Oak"),  during the
duration of this Agreement,  to act as the Company's project financing  arranger
with respect to financing  drilling  programs,  as further defined hrein, in the
Company's  oil and gas leasehold  interests  covering  lands within  portions of
Carbon,  Duschene and Uintah Counties, Utah ("Contract Area"). The Contract Area
will be further described in an exhibit to the Joint Value Enhancement Agreement
("JVEA") that the Company  proposes to enter into with M-I, LLC ("M-I"),  Nabors
Drilling   USA,   LP    ("Nabors"),    Schlumberger    Technology    Corporation
("Schlumberger") and, collectively with M-I and Nabors, the "Service Providers")
and one or more partnerships to be formed by Red Oak ("Investment Partnership").
Capitalized  terms used in this  Agreement  and not  otherwise  defined have the
meaning assigned to such terms in the JVEA.

         The Company has identified two  Evaluation  Wells and,  pursuant to the
JVEA,  ten  additional  Project Wells will be  identified as the initial  Bundle
("Bundle"). Thereafter, in accordance with the JVEA, each additional Bundle will
consist of 10 Project Wells.  Pursuant to the JVEA,  the Service  Providers will
render  services  to the  Company  in  connection  with the  development  of the
Contract  Area as  described in the Field  Development  Plan in exchange for net
profits or similar  interests in the Bundles  ("NPIs").  In connection  with the
drilling of each  Project  Well,  the Company  will incur  obligations  to third
parties  other than the Service  Providers.  Red Oak proposes to arrange for the
Investment  Partnership  to agree  to  purchase  NPIs on the  same  terms as the
Service  Providers in an amount sufficient to fund up to 35% of the AFE for each
Project Well included in Bundles in which the Investment  Partnership  elects to
participate ("Financing").

         The Investment  Partnership  will be an  "accredited  investor" as such
term is defined in  Regulation D under the  Securities  Act of 1933,  as amended
("Securities  Act").  Red Oak will comply  with  applicable  securities  laws in
forming  the  Investment  Partnership  and  otherwise  in  connection  with  the
transactions contemplated hereunder.

                                       1
<PAGE>

         The Company has agreed to grant Red Oak the exclusive  right to arrange
all Financing  needed for each Bundle during the term of the JVEA.  Red Oak will
provide  the  Company  with a  written  commitment  executed  by the  Investment
Partnership  ("Investment  Election") stating that the Investment Partnership is
willing to invest an aggregate of $35,000,000 or more ("Election Amount") in the
Contract Area within 120 days ("Due  Diligence  Period")  after the execution of
this Agreement.  The Investment  Partnership will not be required to invest more
than 35% of the AFE for a  particular  Bundle and the  Investment  Partnership's
obligation  to fund  pursuant  to the  Investment  Election  will be  subject to
receipt of satisfactory conveyance documents, legal opinions and other customary
conditions, and satisfaction of the conditions to funding in the JVEA.

         As  compensation  for the services to be provided by Red Oak hereunder,
the  Company  agrees to pay Red Oak a  non-refundable  fee of $10,000 per month,
payable in advance on the first day of each month ("Work Fee"). In addition, the
Company agrees to pay the Investment Partnership a facilities fee equal to 3.25%
of the Election Amount  ("Facilities Fee"). The Work Fee shall be payable by the
Company  until  the  execution  of the  Investment  Election  by the  Investment
Partnership;  provided,  however, that the maximum amount of Work Fee payable by
the Company shall be $30,000.  All amounts  previously paid as Work Fees will be
subtracted  from the amount of the  Facilities  Fee. The  Facilities Fee will be
payable out of cash advances made to the Company by the  Investment  Partnership
pursuant to the JVEA as follows:

     -    The Investment  Partnership  will reduce the amount of each advance to
          the Company by 3.25% which amounts shall be retained by the Investment
          Partnership as Facilities Fees.

         If the Company  terminates the JVEA or other agreements with Red Oak or
the Investment  Partnership  regarding the Financing following the acceptance by
the Company of an Investment  Election or sells all or substantially  all of the
properties that constitute the Contract Area, and the Investment Partnership has
not defaulted in its  obligations  under the JVEA or other  agreements  with the
Company,  notwithstanding the prior paragraph, the Company shall immediately pay
to the Investment Partnership an amount equal to the difference, if any, between
$1,137,500  and  the  sum of all  of the  Facilities  Fee  paid  prior  to  such
termination or sale.

         The  Company  agrees  to  provide  to Red Oak all  financial  and other
information  regarding the development of the Contract Area reasonably requested
by Red Oak and reasonably  available to the Company for the purpose of Red Oak's
assignment  hereunder.  The Company  agrees and  represents  that (except to the
extent it notifies  Red Oak)  information  furnished to Red Oak pursuant to this
Agreement  shall be accurate and  complete in all material  respects at the time
provided,  and  that if such  information  becomes  inaccurate,  incomplete,  or
misleading during the term of Red Oak's engagement hereunder,  the Company shall
notify Red Oak in writing. In performing its services  hereunder,  Red Oak shall
be entitled to rely upon and assume,  without  assuming any  responsibility  for
independent verification,  the accuracy and completeness of all information that

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<PAGE>

is publicly  available and of all  information  that has been furnished to it by
the Company or  otherwise  reviewed by Red Oak, and Red Oak shall not assume any
responsibility or have any liability therefor.  Red Oak shall have no obligation
to conduct any valuation or appraisal of any assets or liabilities.

         Any financial  advice or services  rendered by Red Oak pursuant to this
Agreement is intended  solely for the benefit and use of the Company,  is not on
behalf of, and shall not confer rights or remedies  upon,  any person other than
the Company,  and may not be used or relied upon for any other purpose.  No such
financial advice or services may be disclosed publicly in any manner without Red
Oak's prior written approval unless required by law, and all such advice will be
treated by the Company as  confidential.  Red Oak understands that Gasco Energy,
Inc., the Company's parent company, may be required to describe this transaction
in its filings under the Securities Act and the Securities Exchange Act of 1934,
as  amended,  and may be  required  to file this  Agreement  and  certain  other
documents  executed  in  connection  with this  Agreement  as  exhibits  to such
filings.

         In order to coordinate our efforts with respect to possible  Financing,
during the Due  Diligence  Period  neither the  Company  nor any  representative
thereof (other than Red Oak) will initiate  discussions  regarding a transaction
to finance  obligations to third parties who render services or provide goods in
connection  with the  development of the Contract  Area,  other than the Service
Providers, using, in whole or in part, directly or indirectly, the sale of NPIs.

         The Company agrees to reimburse Red Oak promptly upon request from time
to time for all reasonable,  documented expenses (including, without limitation,
travel,  communication,  legal and document production expenses) incurred by Red
Oak in  performing  its  engagement  hereunder,  whether  or not any  Investment
Elections are accepted by the Company; provided, however, that such reimbursable
expenses  shall not exceed a total of $5,000  without  the prior  consent of the
Company. The Company also agrees to indemnify Red Oak and certain other entities
and persons as set forth on Exhibit A attached hereto.

         In addition,  if this  Agreement is  terminated by the Company prior to
the end of the Due  Diligence  Period,  the Company will pay to Red Oak an early
termination  fee of  $50,000,  in  addition  to the  reimbursement  of  expenses
provided  for in the  preceding  paragraph  and  any  amounts  of the  Work  Fee
previously paid or payable to Red Oak.

         This  Agreement  will  automatically  terminate upon the payment of the
full amount of the Facilities Fee due to the Investment  Partnership  and may be
terminated  by either  the  Company or Red Oak at any time upon  giving  written
notice to the other party. No such  termination will affect (i) Red Oak's or the
Investment   Partnership's   rights  to  receive  fees  accrued  prior  to  such
termination or to receive reimbursement of its expenses as set forth above, (ii)
the rights of Red Oak or any other  Indemnified  Person (as defined in Exhibit A
hereto) to receive  indemnification  and  contribution,  or (iii) the  Company's
confidentiality obligations hereunder. In addition, if at any time and from time
to time  prior  to the  expiration  of 12  months  after a  termination  of this
Agreement  by the  Company  that is not a  Permitted  Termination,  the  Company
finances  obligations  to third parties who render  services or provide goods in

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<PAGE>

connection  with the  development of the Contract  Area,  other than the Service
Providers, using, in whole or in part, directly or indirectly, the sale of NPIs.
(or similar payments or interests in properties),  the Company will promptly pay
Red Oak, in full, the fees contemplated by this Agreement and payable to Red Oak
and the Investment  Partnership as if Red Oak delivered and funded an Investment
Election in the amount so financed. For purposes of this Agreement, a "Permitted
Termination"  is a termination  of this  Agreement by the Company  following the
expiration  of the Due Diligence  Period if Red Oak does not provide  Investment
Elections sufficient to provide the full amount of the Financing for the initial
or subsequent  Bundles prior to the expiration of the Due Diligence Period or if
the Investment  Partnership  fails to perform any of its  obligations  under any
such Investment Election.

         This  Agreement  (including  Exhibit A hereto)  and any claims  related
directly or indirectly to this Agreement shall be governed by Texas law.

Very truly yours,

RED OAK CAPITAL MANAGEMENT LLC

By: /s/ James M. Whipkey
   --------------------------------------------------
Name: J.M. Whipkey
     ------------------------------------------------
Title: Managing Director
      -----------------------------------------------

Accepted as of the date first above written:

PANNONIAN ENERGY, INC.

By: /s/ W. King Grant
   --------------------------------------------------
Name: W. King Grant
     ------------------------------------------------
Title: CFO & EVP
      -----------------------------------------------

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<PAGE>

                                    Exhibit A

         Pannonian  Energy,  Inc. (the  "Company")  agrees to indemnify and hold
harmless Red Oak Capital Management LLC ("Red Oak") and its affiliates,  and the
respective  directors,  officers,  agents,  and  employees  of Red  Oak  and its
affiliates and each other entity or person,  if any,  controlling Red Oak or any
of its  affiliates  (Red Oak and each such entity or person being referred to as
an "Indemnified Person") from and against any losses, claims, demands,  damages,
or  liabilities  (or  actions or  proceedings  in respect  thereof)  of any kind
relating  to or  arising  out of  activities  performed  or  services  furnished
pursuant to the attached  engagement letter between the Company and Red Oak (the
"Agreement"),  the  transactions  contemplated  thereby  or Red  Oak's  role  in
connection therewith,  and to reimburse Red Oak and any other Indemnified Person
for  all  expenses   (including,   without   limitation,   reasonable  fees  and
disbursements  of  counsel)  reasonably  incurred  by Red Oak or any such  other
Indemnified Person in connection with investigating, preparing, or defending any
investigative,  administrative,  judicial, or regulatory action or proceeding in
any  jurisdiction,  whether or not in  connection  with  pending  or  threatened
litigation to which Red Oak (or any other Indemnified  Person) or the Company or
any of its  securityholders  is a  party,  in each  case as  such  expenses  are
incurred or paid. The Company will not,  however,  be  responsible  for any such
losses, claims, demands,  damages,  liabilities,  or expenses of any Indemnified
Person to the extent they are determined by final and nonappealable  judgment of
a court of competent jurisdiction to have resulted from actions taken or omitted
to be taken by such  Indemnified  Person in violation of this Agreement,  in bad
faith or from such Indemnified  Person's gross negligence or willful misconduct.
The Company  also agrees that no  Indemnified  Person  shall have any  liability
(whether direct or indirect,  in contract,  tort or otherwise) to the Company or
any of its securityholders or creditors for or in connection with the Agreement,
any  transactions  contemplated  thereby  or  Red  Oak's  role  or  services  in
connection  therewith,  except to the extent that any such liability for losses,
claims,  demands,  damages,  liabilities or expenses  incurred by the Company is
determined  by  final  and  nonappealable  judgment  of  a  court  of  competent
jurisdiction  to have resulted from actions taken or omitted to be taken by such
Indemnified  Person in  violation of this  Agreement,  in bad faith or from such
Indemnified Person's gross negligence or willful misconduct.

         Upon  receipt  by an  Indemnified  Person of actual  notice of a claim,
action  or  proceeding  against  such  Indemnified  Person in  respect  of which
indemnity may be sought hereunder; such Indemnified Person shall promptly notify
the Company  with respect  thereto.  In addition,  an  Indemnified  Person shall
promptly  notify the Company  after any action is  commenced  (by way of service
with a summons or other legal process  giving  information  as to the nature and
basis  of the  claim)  against  such  Indemnified  Person  in  respect  of which
indemnity may be sought hereunder.  In any event,  failure to notify the Company
shall not relieve the Company from any  liability  which the Company may have on
account of this  indemnity or otherwise,  except to the extent the Company shall
have been materially  prejudiced by such failure. The Company will, if requested
by any Indemnified Person, assume the defense of any litigation or proceeding in

                                       A-1
<PAGE>

respect of which indemnity may be sought hereunder,  including the employment of
counsel  reasonably  satisfactory  to Red Oak and the  payment  of the  fees and
expenses of such counsel,  in which event, except as provided below, the Company
shall not be liable for the fees and expenses of any other  counsel  retained by
any Indemnified Person in connection with such litigation or proceeding.  In any
such  litigation  or  proceeding  the defense of which the Company shall have so
assumed,  any  Indemnified  Person shall have the right to  participate  in such
litigation  or  proceeding  and to  retain  its own  counsel,  but the  fees and
expenses  of such  counsel  shall be at the expense of such  Indemnified  Person
unless (i) the Company and such Indemnified Person shall have mutually agreed in
writing to the retention of such counsel,  or (ii) the named parties to any such
litigation or proceeding  (including any impleaded  parties) include the Company
and such  Indemnified  Person  and  representation  of both  parties by the same
counsel  would,  in the  opinion  of  counsel  to such  Indemnified  Person,  be
inappropriate due to actual or potential differing interests between the Company
and such Indemnified  Person. The Company shall not be liable for any settlement
of any litigation or proceeding  effected  without its written  consent,  but if
settled with such consent or if there be a final judgment against an Indemnified
Person,  the Company agrees to indemnify the Indemnified Person from and against
any loss or liability by reason of such settlement or judgment. The Company will
not settle any claim,  action or proceeding in respect of which indemnity may be
sought  hereunder  without  Red  Oak's  written  consent,  which  shall  not  be
unreasonably  withheld,  provided  that if Red Oak withholds  such consent,  the
maximum  liability of the Company under the  indemnification  agreement shall be
limited to the amount of such proposed settlement.

         If the foregoing  indemnification  is for any reason  unavailable to an
Indemnified  Person (other than by reason of the terms hereof, the Company shall
contribute to the losses,  claims,  demands,  damages,  liabilities and expenses
referred to herein that are paid or payable by such  Indemnified  Person in such
proportion as is appropriate to reflect the relative  economic  interests of the
Company, on the one hand, and of Red Oak, on the other hand, in the transactions
contemplated  by the  Agreement  (whether  or not  consummated)  and  any  other
relevant equitable considerations.  For purposes of this paragraph, the relative
interests of the Company,  on the one hand,  and Red Oak, on the other hand,  in
the transactions contemplated by the Agreement shall be deemed to be in the same
proportion as (a) the total value paid or received or contemplated to be paid or
received  by the  Company  in the  transactions  contemplated  by the  Agreement
(whether or not any such transaction is consummated), bears to (b) the fees paid
or to be  paid to Red Oak and its  affiliates  under  the  Agreement;  provided,
however,  that to the extent  permitted by applicable law, in no event shall Red
Oak or any other  Indemnified  Person be required  to  contribute  an  aggregate
amount for all Indemnified Persons in excess of the aggregate fees actually paid
to Red Oak  and  its  affiliates  for  financial  advisory  services  under  the
Agreement.

         The provisions contained in this Exhibit IV shall be in addition to any
liability  which the Company may otherwise have to Red Oak, shall not be limited
by any rights of Red Oak or any other Indemnified Person that they may otherwise
have,  shall be  governed  by the laws of the State of Texas,  and shall  remain
operative  and in full  force and effect  regardless  of the  expiration  or any
termination of the Agreement or of Red Oak's engagement thereunder.

                                       A-2
<PAGE>Exhibit 4.1

 

EXHIBIT B

 

NEITHER THESE SECURITIES NOR THE SECURITIES
FOR WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.  THESE
SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY
SUCH SECURITIES.

 

 

WORLDGATE COMMUNICATIONS, INC.

 

WARRANT

 

	
  Warrant No. [  ]

  	
   

  	
  Dated: 
  [            
  ], 2004

  

 

WorldGate Communications, Inc., a Delaware
corporation (the “Company”),
hereby certifies that, for value received, [Name of Holder] or its registered
assigns (the “Holder”), is
entitled to purchase from the Company up to a total of
[          ](1) shares of
common stock, $0.01 par value per share (the “Common
Stock”), of the Company (each such share, a “Warrant Share” and all such shares, the “Warrant Shares”) at an exercise price equal
to $1.875 per share (as adjusted from time to time as provided in Section 9,
the “Exercise Price”), at any time
and from time to time from and after the date hereof and through and including
the date that is five years from the date of issuance hereof (the “Expiration Date”), and subject to the
following terms and conditions.  This
Warrant (this “Warrant”) is one of
a series of similar warrants issued pursuant to that certain Securities
Purchase Agreement, dated as of January [ 
], 2004, by and among the Company and the Purchasers identified therein
(the “Purchase Agreement”).  All such warrants are referred to herein,
collectively, as the “Warrants.”

 

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

 

2.                                       Registration
of Warrant.  The Company shall
register this Warrant, upon records to be maintained by the Company for that
purpose (the “Warrant Register”), in the name of
the record Holder hereof from time to time. 
The Company may deem and treat the registered Holder

 

(1) 30% warrant coverage for Purchase Agreement warrants.  5% warrant coverage for Additional
Investment Right warrants.

 

 

of this Warrant as the absolute owner hereof
for the purpose of any exercise hereof or any distribution to the Holder, and
for all other purposes, absent actual notice to the contrary.

 

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

 

4.                                       Exercise
and Duration of Warrants.

 

(a)                                  This
Warrant shall be exercisable by the registered Holder at any time and from time
to time on or after the date hereof to and including the Expiration Date.  At 5:30 P.M., New York City time on the
Expiration Date, the portion of this Warrant not exercised prior thereto shall
be and become void and of no value; provided that, if the average of the
Closing Prices for the five Trading Days immediately prior to (but not
including) the Expiration Date exceeds the Exercise Price on the Expiration
Date, then this Warrant shall be deemed to have been exercised in full (to the
extent not previously exercised) on a “cashless exercise” basis at 5:30 P.M.
New York City time on the Expiration Date if a “cashless exercise” may occur at
such time pursuant to Section 10 below. 
Notwithstanding anything to the contrary herein, the Expiration Date
shall be extended for each day following the Effective Date that the
Registration Statement is not effective.

 

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

 

5.                                       Delivery
of Warrant Shares.

 

(a)                                  Upon
exercise of this Warrant, the Company shall promptly (but in no event later
than three Trading Days after the Exercise Date) issue or cause to be issued
and cause to be delivered to or upon the written order of the Holder and in
such name or names as the Holder may designate, a certificate for the Warrant
Shares issuable upon such exercise, free of restrictive legends unless a
registration statement covering the resale of the Warrant Shares and

 

2

 

naming the Holder as a selling stockholder
thereunder is not then effective and the Warrant Shares are not freely
transferable without volume restrictions pursuant to Rule 144 under the
Securities Act.  The Holder, or any
Person so designated by the Holder to receive Warrant Shares, shall be deemed
to have become holder of record of such Warrant Shares as of the Exercise
Date.  The Company shall, upon request
of the Holder, use its best efforts to deliver Warrant Shares hereunder electronically
through the Depository Trust Corporation or another established clearing
corporation performing similar functions.

 

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

 

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

 

(d)                                 The
Company’s obligations to issue and deliver Warrant Shares in accordance with
the terms hereof are absolute and unconditional, irrespective of any action or
inaction by the Holder to enforce the same, any waiver or consent with respect
to any provision hereof, the recovery of any judgment against any Person or any
action to enforce the same, or any setoff, counterclaim, recoupment, limitation
or termination, or any breach or alleged breach by the Holder or any other Person
of any obligation to the Company or any violation or alleged violation of law
by the Holder or any other Person, and irrespective of any other circumstance
which might otherwise limit such obligation of the Company to the Holder in
connection with the issuance of Warrant Shares.  Nothing herein shall limit a Holder’s right to pursue any other
remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with
respect to the Company’s failure to timely deliver certificates representing
shares of Common Stock upon exercise of the Warrant  as required pursuant to the terms hereof.

 

6.                                       Charges,
Taxes and Expenses.   Issuance and
delivery of certificates for shares of Common Stock upon exercise of this
Warrant shall be made without charge to the Holder for any issue or transfer
tax, withholding tax, transfer agent fee or other incidental tax or expense in
respect of the issuance of such certificates, all of which taxes and expenses
shall be paid by the

 

3

 

Company; provided, however, that the Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the registration of any certificates for Warrant Shares or
Warrants in a name other than that of the Holder or an Affiliate thereof.  The Holder shall be responsible for all
other tax liability that may arise as a result of holding or transferring this
Warrant or receiving Warrant Shares upon exercise hereof.

 

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

 

8.                                       Reservation
of Warrant Shares.  The Company
covenants that it will at all times reserve and keep available out of the
aggregate of its authorized but unissued and otherwise unreserved Common Stock,
solely for the purpose of enabling it to issue Warrant Shares upon exercise of
this Warrant as herein provided, the number of Warrant Shares which are then
issuable and deliverable upon the exercise of this entire Warrant, free from
preemptive rights or any other contingent purchase rights of persons other than
the Holder (after giving effect to the adjustments and restrictions of Section 9,
if any). The Company covenants that all Warrant Shares so issuable and
deliverable shall, upon issuance and the payment of the applicable Exercise
Price in accordance with the terms hereof, be duly and validly authorized,
issued and fully paid and nonassessable. 
The Company will take all such
action as may be necessary to assure that such shares of Common Stock may be
issued as provided herein without violation of any applicable law or
regulation, or of any requirements of any securities exchange or automated
quotation system upon which the Common Stock may be listed.

 

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

 

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

 

(b)                                 Pro
Rata Distributions.  If the Company,
at any time while this Warrant is outstanding, distributes to holders of Common
Stock (i) evidences of its indebtedness, (ii) any

 

4

 

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

 

(c)                                  Fundamental
Transactions.  If, at any time while
this Warrant is outstanding, (i) the Company effects any merger or consolidation
of the Company with or into another Person, (ii) the Company effects any sale
of all or substantially all of its assets in one or a series of related
transactions, (iii) any tender offer or exchange offer (whether by the Company
or another Person) is completed pursuant to which holders of Common Stock are
permitted to tender or exchange their shares for other securities, cash or
property, or (iv) the Company effects any reclassification of the Common Stock
or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property
(other than as a result of a subdivision or combination of shares of Common
Stock covered by Section 9(a) above) (in any such case, a “Fundamental Transaction”), then the Holder shall have the
right thereafter to receive, upon exercise of this Warrant, the same amount and
kind of securities, cash or property as it would have been entitled to receive
upon the occurrence of such Fundamental Transaction if it had been, immediately
prior to such Fundamental Transaction, the holder of the number of Warrant
Shares then issuable upon exercise in full of this Warrant (the “Alternate Consideration”). 
The aggregate Exercise Price for this Warrant will not be affected by
any such Fundamental Transaction, but the Company shall apportion such
aggregate Exercise Price among the Alternate Consideration in a reasonable
manner reflecting the relative value of any different components of the
Alternate Consideration.  If holders of
Common Stock are given any choice as to the securities, cash or property to be
received in a Fundamental Transaction, then the Holder shall be given the same
choice as to the Alternate Consideration it receives upon any exercise of this
Warrant following such Fundamental Transaction.  At the Holder’s request, any successor to the Company or
surviving entity in such Fundamental Transaction shall issue to the Holder a
new warrant consistent with

 

5

 

the foregoing provisions and evidencing the
Holder’s right to purchase the Alternate Consideration for the aggregate
Exercise Price upon exercise thereof. 
The terms of any agreement pursuant to which a Fundamental Transaction
is effected shall include terms requiring any such successor or surviving
entity to comply with the provisions of this paragraph (c) and insuring that
the Warrant (or any such replacement security) will be similarly adjusted upon
any subsequent transaction analogous to a Fundamental Transaction. If any
Fundamental Transaction constitutes or results in a Change of Control, then at
the request of the Holder delivered before the 90th day after such Fundamental
Transaction, the Company (or any such successor or surviving entity) will
purchase the Warrant from the Holder for a purchase price, payable in cash
within five Trading Days after such request (or, if later, on the effective
date of the Fundamental Transaction), equal to the Black-Scholes value of the
remaining unexercised portion of this Warrant on the date of such request.

 

(d)                                 Subsequent
Equity Sales.

 

(i)                                     If,
at any time while this Warrant is outstanding, the Company or any Subsidiary
issues additional shares of Common Stock or rights, warrants, options or other
securities or debt convertible, exercisable or exchangeable for shares of
Common Stock or otherwise entitling any Person to acquire shares of Common
Stock (collectively, “Common Stock Equivalents”)
at an effective net price to the Company per share of Common Stock (the “Effective Price”) less than the Exercise Price (as adjusted
hereunder to such date), then the Exercise Price shall be reduced to equal the
lesser of (x) 125% of the Effective Price and (x) the Exercise Price.  If, at any time while this Warrant is
outstanding, the Company or any Subsidiary issues Common Stock or Common Stock
Equivalents at an Effective Price greater than the Exercise Price (as adjusted
hereunder to such date) but less than the average Closing Price over the five
Business Days prior to such issuance (the “Adjustment Price”),
then the Exercise Price shall be reduced to equal the product of (A) the
Exercise Price in effect immediately prior to such issuance of Common Stock or
Common Stock Equivalents times (B) a fraction, the numerator of which is the
sum of (1) the number of shares of Common Stock outstanding immediately prior
to such issuance, plus (2) the number of shares of Common Stock which the
aggregate Effective Price of the Common Stock issued (or deemed to be issued)
would purchase at the Adjustment Price, and the denominator of which is the
aggregate number of shares of Common Stock outstanding or deemed to be
outstanding immediately after such issuance. 
For purposes of this paragraph, in connection with any issuance of any
Common Stock Equivalents, (A) the maximum number of shares of Common Stock
potentially issuable at any time upon conversion, exercise or exchange of such
Common Stock Equivalents (the “Deemed Number”)
shall be deemed to be outstanding upon issuance of such Common Stock Equivalents,
(B) the Effective Price applicable to such Common Stock shall equal the
weighted average dollar value of consideration payable to the Company to
purchase such Common Stock Equivalents and to convert, exercise or exchange
them into Common Stock (net of any discounts, fees, commissions and other
expenses), divided by the Deemed Number, and (C) no further adjustment shall be
made to the Exercise Price upon the actual issuance of Common Stock upon
conversion, exercise or exchange of such Common Stock Equivalents.

 

6

 

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

 

(iii)                               Notwithstanding
the foregoing, no adjustment will be made under this paragraph (d) in respect
to any issuance of Common Stock or Common Stock Equivalents (A) upon exercise
or conversion of any options or other securities described in
Schedule 3.1(f) of the Purchase Agreement (provided that such exercise or
conversion occurs in accordance with the terms thereof, without amendment or
modification, and that the applicable exercise or conversion price or ratio is
described in such schedule) or otherwise pursuant to any employee benefit plan
described in the SEC Reports, Schedule 3.1(f) of the Purchase Agreement or
hereafter adopted by the Company and approved by its stockholders, (B) in connection
with any grant of options to employees, officers, directors or consultants of
the Company pursuant to a stock option plan duly adopted by the Company’s board
of directors or in respect of the issuance of Common Stock upon exercise of any
such options, or (C) the issuance of securities, in connection with a joint
venture or development agreement or strategic partnership, or similar agreement
approved by the Company’s board of directors, a primary purpose of which is not
to raise equity capital and to an entity whose primary business is other than
investing in other entities.

 

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

 

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

 

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

 

7

 

adjustment is based.  Upon written request, the Company will
promptly deliver a copy of each such certificate to the Holder and to the
Company’s Transfer Agent.

 

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

 

10.                                 Payment
of Exercise Price.  The Holder shall
pay the Exercise Price in immediately available funds; provided, however, that
the Holder may satisfy its obligation to pay the Exercise Price through a
“cashless exercise,” in which event the Company shall issue to the Holder the
number of Warrant Shares determined as follows:

 

	
   

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

  
	
  where:

  	
   

  
	
   

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

  
	
   

  	
   

  
	
   

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

  
	
   

  	
   

  
	
   

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

  
	
   

  	
   

  
	
   

  	
  B = the Exercise Price.

  

 

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

 

11.                                 Limitation on Exercise.

 

(a)                                  Notwithstanding
anything to the contrary contained herein, the number of shares of Common Stock
that may be acquired by the Holder upon any exercise of this Warrant (or
otherwise in respect hereof) shall be limited to the extent necessary to insure
that, following

 

8

 

such exercise (or other issuance), the total
number of shares of Common Stock then beneficially owned by such Holder and its
Affiliates and any other Persons whose beneficial ownership of Common Stock would
be aggregated with the Holder’s for purposes of Section 13(d) of the
Exchange Act, does not exceed 4.999% (the “Maximum
Percentage”) of the total number of issued and outstanding shares of
Common Stock (including for such purpose the shares of Common Stock issuable
upon such exercise).  For such purposes,
beneficial ownership shall be determined in accordance with Section 13(d)
of the Exchange Act and the rules and regulations promulgated thereunder.  The Company shall, instead of issuing shares
of Common Stock in excess of the limitation referred to in this
Section 11,  pay to such Holder an
amount in cash equal to the fair market value, less the Exercise Price, of the
number of shares of Common Stock in excess of such limitation; provided,
however, that the Holder may, at its option, elect to waive the
requirement to deliver such cash and the Company’s obligation to issue shares
in excess of the foregoing limitation shall be suspended until such time, if
any, as such shares of Common Stock may be issued in compliance with such
limitation.  Additionally, by written
notice to the Company, the Holder may waive the provisions of this
Section 11 or increase or decrease the Maximum Percentage to any other
percentage specified in such notice, but (i) any such waiver or increase will
not be effective until the 61st day after such notice is delivered to the
Company, and (ii) any such waiver or increase or decrease will apply only to
the Holder and not to any other holder of Warrants.

 

(b)                                 Notwithstanding
anything to the contrary contained herein, the maximum number of shares of
Common Stock that the Company may issue pursuant to the Transaction Documents
and the December 2003 Purchase Agreement, at an effective purchase price
less than the Closing Price on the Trading Day immediately preceding the
Closing Date shall equal 19.99% of the shares of Common Stock outstanding on
December 1, 2003 (the “Issuable Maximum”), unless the Company
obtains the necessary stockholder approvals required by the rules and
regulations of the Trading Market.  If,
at the time any Holder requests an exercise of any of the Warrants, the Actual
Minimum (excluding any shares issued or issuable at an effective purchase price
in excess of the Closing Price on the Trading Day immediately preceding the
Closing Date) exceeds the Issuable Maximum (and if the Company has not
previously obtained the required stockholder approval), then the Company shall
issue to the Holder requesting such exercise a number of shares of Common Stock
not exceeding such Holder’s pro-rata portion of the Issuable Maximum (based on
such Holder’s share (vis-à-vis other Holders) of the aggregate purchase price
paid under the Purchase Agreement and taking into account any Warrant Shares
previously issued to such Holder).  For
the purposes hereof, “Actual Minimum”
shall mean, as of any date, the maximum aggregate number of shares of Common
Stock then issued or potentially issuable in the future pursuant to the
Transaction Documents, including any Underlying Shares issuable upon exercise
in full of all Warrants, without giving effect to any limits on the number of
shares of Common Stock that may be owned by a Holder at any one time.

 

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

 

9

 

13.                                 Notices.  Any and all notices or other communications
or deliveries hereunder (including without limitation any Exercise Notice)
shall be in writing and shall be deemed given and effective on the earliest of
(i) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified in this Section prior to 5:30
p.m. (New York City time) on a Trading Day, (ii) the next Trading Day after the
date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified in this Section on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any
Trading Day, (iii) the Trading Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given.  The address for such notices or communications
shall be as set forth in the Purchase Agreement.

 

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

 

15.                                 Miscellaneous.

 

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

 

(b)                                 The
Company will not, by amendment of its governing documents or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holder against impairment.  Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any Warrant Shares above the amount payable
therefor on such exercise, (ii) will take all such action as may be reasonably
necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable Warrant Shares on the exercise of this
Warrant, and (iii) will not close its stockholder books or records in any
manner which interferes with the timely exercise of this Warrant.

 

10

 

(c)                                  GOVERNING
LAW; VENUE; WAIVER OF JURY TRIAL. 
ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND
INTERPRETATION OF THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.  EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK,
BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED
HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION
DOCUMENTS), AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY
SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER.  EACH PARTY HEREBY IRREVOCABLY
WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY
SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR
CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY
AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT
SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE
THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT
TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.  THE COMPANY HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY.

 

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

 

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

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,

SIGNATURE PAGE FOLLOWS]

 

11

 

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

 

 

	
   

  	
  WORLDGATE COMMUNICATIONS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

12

 

FORM OF EXERCISE NOTICE

 

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

 

To: 
WORLDGATE COMMUNICATIONS, INC.

 

The undersigned is the Holder of Warrant No.
            (the “Warrant”) issued by Worldgate
Communications, Inc., a Delaware corporation (the “Company”).  Capitalized
terms used herein and not otherwise defined have the respective meanings set
forth in the Warrant.

 

1.                                       The
Warrant is currently exercisable to purchase a total of
                    
Warrant Shares.

 

2.                                       The
undersigned Holder hereby exercises its right to purchase
                       
Warrant Shares pursuant to the Warrant.

 

3.                                       The
Holder intends that payment of the Exercise Price shall be made as (check one):

 

           ”Cash
Exercise” under Section 10

 

           ”Cashless
Exercise” under Section 10

 

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

 

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

 

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

 

 

	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  	
  Name of Holder:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Print)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature must conform in all respects to

  name of holder as specified on the face of the

  Warrant)

  
												

 

 

FORM OF ASSIGNMENT

 

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

 

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

 

 

	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Signature must conform in all respects to
  name

  of holder as specified on the face of the Warrant)

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address of Transferee

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  In the presence of:

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