Document:

d1048183_ex4-21.htm

     

     

    Exhibit
4.21

    

    PURCHASE
AGREEMENT

    

    This
Purchase Agreement (the "Agreement") is made as of the 10th day
of November, 2009, by and between Paragon Shipping Inc., a Marshall Islands
corporation (the "Company" or "Paragon"), Allseas Marine S.A., a Liberian
corporation ("Allseas") and Loretto Finance Inc., a Marshall Islands corporation
("Loretto").

     

    W I T N E S S E T H:

    

    WHEREAS,
the Company is engaged directly and/or through its subsidiaries (collectively
the "Paragon Group") primarily in the ownership, operation, management and
chartering of drybulk carriers (the "Paragon Group Business"); and

     

    WHEREAS,
Allseas has expertise in the shipping industry and in the financing of vessels
generally; and

     

    WHEREAS,
the Company has requested Allseas, and Allseas has agreed, to provide services
to the Paragon Group in connection with the management and administration of the
Paragon Group Business; and

     

    WHEREAS,
the Paragon Group and Allseas are parties to commercial and technical management
agreements for the Paragon Group Business; and

     

    WHEREAS,
the Company has determined that services provided to the Paragon Group by
Allseas, pursuant to the technical and commercial management agreements, are of
significant value to the Company and that the continued service of Allseas
should be sought through the issuance and sale of that number of the Company's
Class A common stock, par value $0.001 per share (the "Common Shares") equal to
2% of the Company's total issued and outstanding Common Shares, subject to
dilution protection and restrictions on transferability, to Allseas, through its
wholly-owned subsidiary Loretto.

     

    NOW,
THEREFORE, the parties hereby agree as follows:

     

    1. Transaction.  The
Company shall issue to Loretto 1,023,801 Common Shares, equivalent to 2% of the
Company's total issued and outstanding Common Shares as of the date hereof, or
as promptly as practicable thereafter, in exchange for a payment to the Company
of $3,767,588 or US$ 3,68 per share. In the event of a capital increase
("Increase"),  or of any future equity offerings by the Company
("Equity Offerings"), or in the event that the Company shall issue additional
Common Shares to any third party or parties after the date hereof (a "Third
Party Issuance"), the Company shall also issue to Loretto at the time of such
Increase, or Equity Offerings, or Third Party Issuance, at no cost whatsoever, a
number of additional Common Shares, each  an ("Additional Allseas
Issuance"), which will maintain Loretto's shareholding at 2% (two percent) of
the Company's total issued and outstanding Common Shares  following
any Increase or any Equity Offerings or Third Party Issuance.  The
Common Shares issued to Loretto pursuant to this Agreement may not be
transferred for a period of one year from their date of issuance and shall not
be registered during such period of one year with the Securities and Exchange
Commission.  The certificates for such Common Shares shall bear the
appropriate restrictive legends to such effect.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2. Term.  This
Agreement shall come into effect commencing on the date hereof and shall
continue for the period that Allseas serves as commercial and technical manager
of the Paragon Group Business (unless sooner terminated on the basis of any
other provision of this Agreement) (the "Term").

     

    3. Termination.  This
Agreement, unless otherwise agreed in writing between the parties, shall be
terminated as follows:

     

    (a)           At
the end of the Term unless extended by mutual agreement in writing.

     

    
      	
               
      

            	
              (b)

            	
              The
      parties, by mutual agreement, may terminate this Agreement at any
      time.

            

    

     

    (c)           The
Company may terminate this Agreement at any time without cause.

     

    (d)           Either
party may terminate this Agreement for any material breach of its terms and
provisions by the other party.

     

    4. Confidentiality.  None
of the parties will make any public announcement concerning this
Agreement.  Notwithstanding the foregoing, the parties agree that the
execution of this Agreement shall be disclosed by the Company promptly in
accordance with the filing requirements of the Nasdaq and SEC rules and
regulations.  This Agreement is
not assignable by either party without the prior written consent of the
other.

     

    5. Entire
Agreement.  This Agreement constitutes the entire and only
agreement between the parties in relation to its subject matter and replaces and
extinguishes all prior agreements, undertakings, arrangements, understandings or
statements of any nature made by the parties or any of them whether oral or
written with respect to such subject matter.

     

    6. Amendments.  No
modification, alteration or waiver of any of the provisions of this Agreement
shall be effective unless in writing and signed on behalf of each of the
parties. The headings in this Agreement do not form part thereof.

     

    7. Notices.  Every
notice, request, demand or other communication under this Agreement
shall:

     

    (a)           be
in writing delivered personally, by courier or served through a process
server;

     

    (b)           be
deemed to have been when delivered personally or through courier or served at
the address below; and

     

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (c)           be
sent:

     

    (i) If to
the Company, to:

    PARAGON
SHIPPING INC.

    15
Karamanli Ave.,

    Voula
16673,

    Athens,
Greece

    

    (ii) If
to Allseas, to:

    ALLSEAS
MARINE S.A.

    15
Karamanli Ave.,

    Voula
16673,

    Athens,
Greece

    

    (iii) If
to Loretto, to:

    LORETTO
FINANCE INC.

    c/o
ALLSEAS MARINE S.A.

    15
Karamanli Ave.,

    Voula
16673,

    Athens,
Greece

    

    or to
such other person or address, as is notified by the relevant party to the other
parties to this Agreement and such notification shall not become effective until
notice of such change is actually received by the other
parties.  Until such change of person or address is notified, any
notification to the above addresses are agreed to be validly effected for the
purposes of this Agreement.

     

    8. Governing Law and
Jurisdiction.

     

    This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York without regard to conflict of laws principles.  Any
legal action or proceeding in connection with this Agreement or the performance
hereof may be brought in the state and federal courts located in the Borough of
Manhattan, City, County and State of New York, and the parties hereby
irrevocably submit to the non-exclusive jurisdiction of such courts for the
purpose of any such action or proceeding.  The parties hereby
irrevocably waive trial by jury in any action, proceeding or claim brought by
any party hereto or beneficiary hereof on any matter whatsoever arising out of
or in an way connected with this agreement.

     

    [Signature Page
Follows]

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    

     

    This
Agreement may be executed in written counterparts which together shall
constitute one instrument.

     

    IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first above written.

     

    

    PARAGON
SHIPPING INC.

    

    

    By  /s/
Christopher J. Thomas

       ____________________________

       Name:
Christopher J. Thomas

       Title:
Chief Financial Officer

     

    

    ALLSEAS
MARINE S.A.

    

    

    By   /s/
Maria Stefanou

       ____________________________

       Name:
Maria Stefanou

       Title:
Director

    
 

    LORETTO
FINANCE INC.

    

    

    By   /s/
Maria Stefanou

       ____________________________

       Name:
Maria Stefanou

       Title:
Director

    

    

    

    SK 25744 0001 1048183 v2

    

    
      
         

      

      
        4ex10-7.htm

    Exhibit
10.7

    

    

    Director
Fee Arrangements for 2010

    

     

    Each
director of Sound Financial, Inc. (the “Company”) also is a director of Sound
Community Bank (the “Bank”).  For 2010, each non-employee director
will receive an annual fee of $12,000, plus a meeting fee of $1,030 for each
Board Meeting attended for serving on the Company’s Board of
Directors.  Directors are not compensated for their service on the
Company’s Board of Directors.Exhibit 4.1

 [FORM OF SERIES A WARRANT]

NOVADEL PHARMA INC.

WARRANT TO PURCHASE COMMON STOCK

	
  

 
	
 Series A
 Warrant No.: _____________

 
	
 Date of
 Issuance: March 31, 2010 (“Issuance Date”)

 

          Novadel
Pharma Inc., a Delaware corporation (the “Company”),
hereby certifies that, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, [IROQUOIS MASTER FUND LTD.] [OTHER
BUYERS], the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms
set forth below, to purchase from the Company, at the Exercise Price (as
defined below) then in effect, upon exercise of this Warrant to Purchase Common
Stock (including any Warrants to Purchase Common Stock issued in exchange,
transfer or replacement hereof, the “Warrant”),
at any time or times on or after the Issuance Date, but not after 11:59 p.m.,
New York time, on the Expiration Date (as defined below), [______________]1
(subject to adjustment as provided herein) fully paid and nonassessable shares
of Common Stock (as defined below) (the “Warrant
Shares”). Except as otherwise defined herein, capitalized terms in
this Warrant shall have the meanings set forth in Section 16. This Warrant is
one of the Warrants to Purchase Common Stock (the “SPA Warrants”) issued pursuant to Section 1 of that certain
Securities Purchase Agreement, dated as of March 31, 2010 (the “Subscription Date”), by and among the
Company and the investors (the “Buyers”)
referred to therein (the “Securities Purchase
Agreement”).

1. EXERCISE
OF WARRANT.

          (a)
Mechanics of Exercise. Subject to the terms and conditions hereof
(including, without limitation, the limitations set forth in Section 1(f)),
this Warrant may be exercised by the Holder on any day on or after the Issuance
Date, in whole or in part, by delivery (whether via facsimile or otherwise) of
a written notice, in the form attached hereto as Exhibit A (the “Exercise
Notice”), of the Holder’s election to exercise this Warrant. Within
one (1) Trading Day following an exercise of this Warrant as aforesaid, the
Holder shall deliver payment to the Company of an amount equal to the Exercise
Price in effect on the date of such exercise multiplied by the number of
Warrant Shares as to which this Warrant was so exercised (the “Aggregate Exercise Price”) in cash or via
wire transfer of immediately available funds if the Holder did not notify the
Company in such Exercise Notice that such exercise was made pursuant to a
Cashless Exercise (as defined in Section 1(d)). The Holder shall not be
required to deliver the original of this Warrant in order to effect an exercise
hereunder. Execution and delivery of an Exercise Notice with respect to less
than all of the Warrant Shares shall have the same effect as cancellation of
the original of this Warrant and issuance of a new Warrant evidencing the right
to purchase the remaining number of Warrant Shares. Execution and delivery of
an Exercise Notice for all of the then-remaining Warrant Shares shall have the
same

1 Insert number equal
to 50% of the number of Common Shares issued on the Issuance Date

effect as
cancellation of the original of this Warrant after delivery of the Warrant
Shares in accordance with the terms hereof. On or before the first (1st)
Trading Day following the date on which the Company has received an Exercise
Notice, the Company shall transmit by facsimile an acknowledgment of
confirmation of receipt of such Exercise Notice to the Holder and the Company’s
transfer agent (the “Transfer Agent”).
On or before the third (3rd) Trading Day following the date on which
the Company has received such Exercise Notice, the Company shall (X) provided
that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer
Program, upon the request of the Holder, credit such aggregate number of shares
of Common Stock to which the Holder is entitled pursuant to such exercise to
the Holder’s or its designee’s balance account with DTC through its Deposit/
Withdrawal at Custodian system, or (Y) if the Transfer Agent is not
participating in the DTC Fast Automated Securities Transfer Program, issue and
deliver to the Holder or, at the Holder’s instruction pursuant to the Exercise
Notice, the Holder’s agent or designee, in each case, sent by reputable
overnight courier to the address as specified in the applicable Exercise
Notice, a certificate, registered in the Company’s share register in the name
of the Holder or its designee (as indicated in the applicable Exercise Notice),
for the number of shares of Common Stock to which the Holder is entitled
pursuant to such exercise. Upon delivery of an Exercise Notice, the Holder
shall be deemed for all corporate purposes to have become the holder of record
of the Warrant Shares with respect to which this Warrant has been exercised,
irrespective of the date such Warrant Shares are credited to the Holder’s DTC
account or the date of delivery of the certificates evidencing such Warrant
Shares (as the case may be). If this Warrant is submitted in connection with
any exercise pursuant to this Section 1(a) and the number of Warrant Shares
represented by this Warrant submitted for exercise is greater than the number
of Warrant Shares being acquired upon such exercise, then, at the request of
the Holder, the Company shall as soon as practicable and in no event later than
three (3) Business Days after any exercise and at its own expense, issue and
deliver to the Holder (or its designee) a new Warrant (in accordance with
Section 7(d)) representing the right to purchase the number of Warrant Shares
purchasable immediately prior to such exercise under this Warrant, less the
number of Warrant Shares with respect to which this Warrant is exercised. No
fractional shares of Common Stock are to be issued upon the exercise of this
Warrant, but rather the number of shares of Common Stock to be issued shall be
rounded up to the nearest whole number. The Company shall pay any and all taxes
which may be payable with respect to the issuance and delivery of Warrant
Shares upon exercise of this Warrant. Notwithstanding the foregoing, if the
Holder did not notify the Company in such Exercise Notice that such exercise
was made pursuant to a Cashless Exercise (as defined in Section 1(d)), the
Company’s failure to deliver Warrant Shares to the Holder on or prior to the
Trading Day in which the Company receives the Aggregate Exercise Price shall
not be deemed to be a breach of this Warrant.

          (b)
Exercise Price. For purposes of this Warrant, “Exercise Price” means $0.25, subject to
adjustment as provided herein.

          (c)
Company’s Failure to Timely Deliver Securities. If the Company shall
fail, for any reason or for no reason, to issue to the Holder within the later
of (i) three (3) Trading Days after receipt of the applicable Exercise Notice
and (ii) two (2) Trading Days after the Company’s receipt of the Aggregate
Exercise Price (or valid notice of a Cashless Exercise) (such later date, the “Share Delivery Deadline”), a certificate
for the number of shares of Common Stock to which the Holder is entitled and
register such shares of Common Stock on the Company’s share

2

register or to
credit the Holder’s balance account with DTC for such number of shares of
Common Stock to which the Holder is entitled upon the Holder’s exercise of this
Warrant (as the case may be), and if on or after such Share Delivery Deadline
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 shares of
Common Stock issuable upon such exercise that the Holder anticipated receiving
from the Company, then, in addition to all other remedies available to the
Holder, the Company shall, within three (3) Business Days after the Holder’s
request and in the Holder’s discretion, either (i) pay cash to the Holder in an
amount equal to the Holder’s total purchase price (including brokerage
commissions, 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 or credit the Holder’s balance
account with DTC for the number of shares of Common Stock to which the Holder
is entitled upon the Holder’s exercise hereunder (as the case may be) (and to
issue such shares of Common Stock) shall terminate, or (ii) promptly honor its
obligation to deliver to the Holder a certificate or certificates representing
such shares of Common Stock or credit the Holder’s balance account with DTC for
the number of shares of Common Stock to which the Holder is entitled upon the
Holder’s exercise hereunder (as the case may be) and pay cash to the Holder in
an amount equal to the excess (if any) of the Buy-In Price over the product of
(A) such number of shares of Common Stock times (B) the Closing Sale Price of
the Common Stock on the Trading Day immediately preceding the date of the
applicable Exercise Notice.

          (d)
Cashless Exercise. Notwithstanding anything contained herein to the
contrary (other than Section 1(f) below), if at the time of exercise hereof the
Registration Statement (as defined in the Securities Purchase Agreement) is not
effective (or the prospectus contained therein is not available for use) for the issuance by the
Company to the Holder of all of the Warrant Shares and all of the Warrant Shares are not then
registered for resale by the Holder into the market at market prices from time
to time on an effective registration statement for use on a continuous basis
(or the prospectus contained therein is not available for use), then the
Holder may, in its sole discretion, exercise this Warrant in whole or in part
and, in lieu of making the cash payment otherwise contemplated to be made to
the Company upon such exercise in payment of the Aggregate Exercise Price,
elect instead to receive upon such exercise the “Net Number” of shares of
Common Stock determined according to the following formula (a “Cashless Exercise”):

	
  

 	
  

 
	
 Net Number = 

 	
  (A x B) - (A x C)  

 
	
  

 	
 

 
	
  

 	
             B

 
	
  

 	
  

 
	
  For purposes
 of the foregoing formula:

 

	
  

 	
  

 
	
  

 	
 A = the total
 number of shares with respect to which this Warrant is then being exercised.

 
	
  

 	
  

 
	
  

 	
 B = as
 applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day
 immediately preceding the date of the applicable Exercise Notice if such
 Exercise Notice is (1) both executed and delivered pursuant to Section 1(a)
 hereof on a day that is not a Trading Day or (2) both executed and delivered
 pursuant to Section 1(a) hereof on a Trading Day prior to the opening of
 “regular trading

 

3

	
  

 	
  

 
	
  

 	
 hours” (as
 defined in Rule 600(b)(64) of Regulation NMS promulgated under the federal
 securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock
 as of the time of the Holder’s execution of the applicable Exercise Notice if
 such Exercise Notice is executed during “regular trading hours” on a Trading
 Day and is delivered within two (2) hours thereafter pursuant to Section 1(a)
 hereof and (iii) the Closing Sale Price of the Common Stock on the date of
 the applicable Exercise Notice if the date of such Exercise Notice is a
 Trading Day and such Exercise Notice is both executed and delivered pursuant
 to Section 1(a) hereof after the close of “regular trading hours” on such
 Trading Day.

 
	
  

 	
  

 
	
  

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

 

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

          (f)
[Limitations on Exercises. Notwithstanding anything to the contrary
contained in this Warrant, this Warrant shall not be exercisable by the Holder
hereof to the extent (but only to the extent) that the Holder together with any
of its affiliates would beneficially own in excess of 4.99% (the “Maximum
Percentage”) of the Common Stock
after giving effect to such exercise. To the extent the above limitation
applies, the determination of whether this Warrant shall be exercisable
(vis-à-vis other convertible, exercisable or exchangeable securities owned
by the Holder or any of its affiliates) and of which such securities shall be
exercisable (as among all such securities owned by the Holder) shall, subject
to such Maximum Percentage limitation, be determined on the basis of the first
submission to the Company for conversion, exercise or exchange (as the case may
be). No prior inability to exercise this Warrant pursuant to this paragraph
shall have any effect on the applicability of the provisions of this
paragraph with respect to any subsequent determination of exercisability.
For the purposes of this paragraph, beneficial ownership and all determinations
and calculations (including, without limitation, with respect to calculations
of percentage ownership) shall be determined in accordance with Section 13(d)
of the 1934 Act (as defined in the Securities Purchase Agreement) and the rules
and regulations promulgated thereunder. The provisions of this paragraph shall
be implemented in a manner otherwise than in strict conformity with the terms
of this paragraph to correct this paragraph (or any portion hereof) which may
be defective or inconsistent with the intended Maximum Percentage beneficial
ownership limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such Maximum Percentage
limitation. The limitations contained in this paragraph shall apply to a
successor Holder of this Warrant. The holders of Common Stock shall be third
party beneficiaries of this paragraph and the Company may not waive this
paragraph without the consent of holders of a majority of its Common Stock. For
any reason at any time, upon the written or oral request of the Holder, the
Company shall within one (1) Business Day confirm orally and in writing to the
Holder the number of shares of Common Stock then outstanding, including by
virtue of any prior conversion or exercise of convertible or exercisable
securities into Common Stock, including, without limitation, pursuant to this
Warrant or securities issued pursuant to the Securities Purchase Agreement. [By
written notice to the Company, any Holder may increase or decrease

4

the Maximum
Percentage to any other percentage not in excess of 9.99% specified in such
notice; provided that (i) any such increase will not be effective until the
61st day after such notice is delivered to the Company, and (ii) any such
increase or decrease will apply only to the Holder sending such notice and not
to any other holder of SPA Warrants.]2]

          (g)
Insufficient Authorized Shares. The Company shall at all times keep
reserved for issuance under this Warrant 120% of such number of shares of
Common Stock as shall be necessary to satisfy the Company’s obligation to issue
shares of Common Stock hereunder (without regard to any limitation otherwise
contained herein with respect to the number of shares of Common Stock that may
be acquirable upon exercise of this Warrant). If, notwithstanding the
foregoing, and not in limitation thereof, at any time while any of the SPA
Warrants remain outstanding the Company does not have a sufficient number of
authorized and unreserved shares of Common Stock to satisfy its obligation to
reserve for issuance upon exercise of the SPA Warrants at least a number of
shares of Common Stock (the “Required Reserve
Amount”) equal to the number of shares of Common Stock as shall from
time to time be necessary to effect the exercise of all of the SPA Warrants
then outstanding (an “Authorized Share
Failure”), then the Company shall promptly take all action necessary
to increase the Company’s authorized shares of Common Stock to an amount
sufficient to allow the Company to reserve the Required Reserve Amount for all
the SPA Warrants then outstanding. Without limiting the generality of the
foregoing sentence, as soon as practicable after the date of the occurrence of
an Authorized Share Failure, but in no event later than ninety (90) days after
the occurrence of such Authorized Share Failure, the Company shall hold a
meeting of its stockholders for the approval of an increase in the number of
authorized shares of Common Stock. In connection with such meeting, the Company
shall provide each stockholder with a proxy statement and shall use its
reasonable best efforts to solicit its stockholders’ approval of such increase
in authorized shares of Common Stock and to cause its board of directors to
recommend to the stockholders that they approve such proposal.

2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF
WARRANT SHARES. The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section 2.

          (a)
Stock Dividends and Splits. Without limiting any provision of Section 4,
if the Company, at any time on or after the date of the Securities Purchase
Agreement, (i) pays a stock dividend on one or more classes of its then
outstanding shares of Common Stock or otherwise makes a distribution on any
class of capital stock that is payable in shares of Common Stock, (ii)
subdivides (by any stock split, stock dividend, recapitalization or otherwise)
one or more classes of its then outstanding shares of Common Stock into a
larger number of shares or (iii) combines (by combination, reverse stock split
or otherwise) one or more classes of its then outstanding shares of Common
Stock into a smaller number of shares, then in each such case the Exercise
Price shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding immediately before such event and
of which the denominator shall be the number of shares of Common Stock
outstanding immediately after such event. Any adjustment made pursuant to
clause (i) of this paragraph shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
dividend or distribution, and any adjustment pursuant to clause (ii) or (iii)
of this paragraph shall become effective immediately after the effective date
of such subdivision or combination. If any event

____________________________________

  2 Holder may elect
    to not have this provision included or the entire blocker included prior
    to the issuance

5

requiring an
adjustment under this paragraph occurs during the period that an Exercise Price
is calculated hereunder, then the calculation of such Exercise Price shall be
adjusted appropriately to reflect such event.

          (b)
Adjustment Upon Issuance of Shares of Common Stock. If and whenever on
or after the date of the Securities Purchase Agreement, the Company issues or
sells, or in accordance with this Section 2
is deemed to have issued or sold, any shares of Common Stock (including the
issuance or sale of shares of Common Stock owned or held by or for the account
of the Company, but excluding any Excluded Securities issued or sold or deemed
to have been issued or sold) for a consideration per share (the “New Issuance Price”) less than a price
equal to the Exercise Price in effect immediately prior to such issue or sale
or deemed issuance or sale (such Exercise Price then in effect is referred to
as the “Applicable Price”) (the
foregoing a “Dilutive Issuance”),
then immediately after such Dilutive Issuance, the Exercise Price then in
effect shall be reduced to an amount equal to the New Issuance Price. For
purposes of determining the adjusted Exercise Price under this Section 2(b),
the following shall be applicable:

	
  

 	
  

 
	
  

 	
           (i)
 Issuance of Options. If the Company in any manner grants or sells any
 Options and the lowest price per share for which one share of Common Stock is
 issuable upon the exercise of any such Option or upon conversion, exercise or
 exchange of any Convertible Securities issuable upon exercise of any such
 Option is less than the Applicable Price, then such share of Common Stock
 shall be deemed to be outstanding and to have been issued and sold by the
 Company at the time of the granting or sale of such Option for such price per
 share. For purposes of this Section 2(b)(i), the “lowest price per share for
 which one share of Common Stock is issuable upon the exercise of any such
 Options or upon conversion, exercise or exchange of any Convertible
 Securities issuable upon exercise of any such Option” shall be equal to the
 lower of (x) the exercise price set forth in such Option for which one share
 of Common Stock is issuable upon the exercise of any such Options or upon
 conversion, exercise or exchange of any Convertible Securities issuable upon
 exercise of any such Option and (y) the sum of the lowest amounts of
 consideration (if any) received or receivable by the Company with respect to
 any one share of Common Stock upon the granting or sale of such Option, upon
 exercise of such Option and upon conversion, exercise or exchange of any
 Convertible Security issuable upon exercise of such Option. Except as
 contemplated below, no further adjustment of the Exercise Price shall be made
 upon the actual issuance of such shares of Common Stock or of such
 Convertible Securities upon the exercise of any such Option or upon the
 actual issuance of such shares of Common Stock upon conversion, exercise or
 exchange of such Convertible Securities. For clarification purposes and
 without limiting the foregoing, in calculating the “lowest price per share
 for which one share of Common Stock is issuable upon the exercise of any such
 Options or upon conversion, exercise or exchange of any Convertible
 Securities issuable upon exercise of any such Option” paid or payable to the
 Company pursuant to this Section 2(b), any amounts paid or payable to the
 holder of such Option (or any other Person) upon such conversion, exercise or
 exchange of such Option shall reduce the value of the consideration paid or
 payable to the Company in such conversion, exercise or exchange and/or, as
 the case may be, the value of any other consideration or benefit conferred.

 

6

	
  

 	
  

 
	
  

 	
           (ii)
 Issuance of Convertible Securities. If the Company in any manner
 issues or sells any Convertible Securities and the lowest price per share for
 which one share of Common Stock is issuable upon the conversion, exercise or
 exchange thereof is less than the Applicable Price, then such share of Common
 Stock shall be deemed to be outstanding and to have been issued and sold by
 the Company at the time of the issuance or sale of such Convertible
 Securities for such price per share. For the purposes of this Section
 2(b)(ii), the “lowest price per share for which one share of Common Stock is
 issuable upon the conversion, exercise or exchange thereof” shall be equal to
 the lower of (x) the conversion price set forth in such Convertible Security
 for which one share of Common Stock is issuable upon the conversion, exercise
 or exchange thereof and (y) the sum of the lowest amounts of consideration
 (if any) received or receivable by the Company with respect to one share of
 Common Stock upon the issuance or sale of such Convertible Security and upon
 conversion, exercise or exchange of such Convertible Security. Except as
 contemplated below, no further adjustment of the Exercise Price shall be made
 upon the actual issuance of such shares of Common Stock upon conversion,
 exercise or exchange of such Convertible Securities, and if any such issue or
 sale of such Convertible Securities is made upon exercise of any Options for which
 adjustment of this Warrant has been or is to be made pursuant to other
 provisions of this Section 2(b), except as contemplated below, no further
 adjustment of the Exercise Price shall be made by reason of such issue or
 sale. For clarification purposes and without limiting the foregoing, in
 calculating the “lowest price per share for which one share of Common Stock
 is issuable upon the conversion, exercise or exchange thereof” paid or
 payable to the Company pursuant to this Section 2(b), any amounts paid or
 payable to the holder of such Convertible Security (or any other Person) upon
 conversion or exercise (as applicable) of such Convertible Security shall
 reduce the value of the consideration paid or payable to the Company in such
 conversion, exercise or exchange and/or, as the case may be, the value of any
 other consideration or benefit conferred.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
           (iv)
 Calculation of Consideration Received. If any Option or Convertible
 Security or Adjustment Right is issued in connection with the issuance or
 sale or deemed

 

7

	
  

 	
  

 
	
  

 	
 issuance or
 sale of any other securities of the Company, together comprising one
 integrated transaction, (x) such Option or Convertible Security (as
 applicable) or Adjustment Right (as applicable) will be deemed to have been
 issued for consideration equal to the Black Scholes Consideration Value
 thereof and (y) the other securities issued or sold or deemed to have been
 issued or sold in such integrated transaction shall be deemed to have been
 issued for consideration equal to the difference of (I) the aggregate
 consideration received or receivable by the Company minus (II) the Black
 Scholes Consideration Value of each such Option or Convertible Security (as
 applicable) or Adjustment Right (as applicable). If any shares of Common
 Stock, Options or Convertible Securities are issued or sold or deemed to have
 been issued or sold for cash, the consideration received therefor will be
 deemed to be the gross amount of consideration received by the Company
 therefor. If any shares of Common Stock, Options or Convertible Securities
 are issued or sold for a consideration other than cash, the amount of such
 consideration received by the Company will be the fair value of such
 consideration, except where such consideration consists of publicly traded
 securities, in which case the amount of consideration received by the Company
 for such securities will be the arithmetic average of the VWAPs of such
 security for each of the five (5) Trading Days immediately preceding the date
 of receipt. If any shares of Common Stock, Options or Convertible Securities
 are issued to the owners of the non-surviving entity in connection with any
 merger in which the Company is the surviving entity, the amount of
 consideration therefor will be deemed to be the fair value of such portion of
 the net assets and business of the non-surviving entity as is attributable to
 such shares of Common Stock, Options or Convertible Securities, as the case
 may be. The fair value of any consideration other than cash or publicly
 traded securities will be determined jointly by the Company and the Holder.
 If such parties are unable to reach agreement within ten (10) days after the
 occurrence of an event requiring valuation (the “Valuation Event”), the fair value of such consideration will
 be determined within five (5) Trading Days after the tenth (10th)
 day following such Valuation Event by an independent, reputable appraiser
 jointly selected by the Company and the Holder. The determination of such
 appraiser shall be final and binding upon all parties absent manifest error
 and the fees and expenses of such appraiser shall be borne by the Company.

 
	
  

 	
  

 
	
  

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

 

          (c)
Number of Warrant Shares. Simultaneously with any adjustment to the
Exercise Price pursuant to paragraphs (a), (b) or (d) of this Section 2, the number of Warrant Shares that
may be purchased upon exercise of this Warrant shall be increased or decreased
proportionately, so that after such adjustment the aggregate Exercise Price
payable hereunder for the adjusted number of Warrant Shares shall be the same
as the aggregate Exercise Price in effect

8

immediately
prior to such adjustment (without regard to any limitations on exercise
contained herein).

          (d)
Holder’s Right of Alternative Exercise Price Following Issuance of Certain
Options or Convertible Securities. Subject to Section 4(n) of the
Securities Purchase Agreement, in addition to and not in limitation of the
other provisions of this Section 2, if the Company in any manner issues or
sells any Options or Convertible Securities (any such securities, “Variable Price Securities”) after the
Subscription Date that are convertible into or exchangeable or exercisable for
shares of Common Stock at a price which varies or may vary with the market
price of the Common Shares (as defined in the Securities Purchase Agreement),
including by way of one or more reset(s) to a fixed price, but exclusive of
such formulations reflecting customary anti-dilution provisions (such as share
splits, share combinations, share dividends and similar transactions) (each of
the formulations for such variable price being herein referred to as, the “Variable Price”), the Company shall provide
written notice thereof via facsimile and overnight courier to the Holder on the
date of issuance of such Convertible Securities or Options. Subject to Section
4(n) of the Securities Purchase Agreement, from and after the date the Company
issues any such Convertible Securities or Options with a Variable Price, the
Holder shall have the right, but not the obligation, in its sole discretion to
substitute the Variable Price for the Exercise Price upon Exercise of this
Warrant by designating in the Exercise Notice delivered upon any Exercise of
this Warrant that solely for purposes of such Exercise the Holder is relying on
the Variable Price rather than the Exercise Price then in effect. The Holder’s
election to rely on a Variable Price for a particular Exercise of this Warrant
shall not obligate the Holder to rely on a Variable Price for any future Exercises
of this Warrant.

          (e)
Other Events. In the event that the Company (or any Subsidiary thereof)
shall take any action to which the provisions hereof are not strictly
applicable, or, if applicable, would not operate to protect the Holder from
dilution or if any event occurs of the type contemplated by the provisions of
this Section 2 but not expressly provided for by such provisions (including,
without limitation, the granting of stock appreciation rights, phantom stock
rights or other rights with equity features), then the Company’s board of
directors shall in good faith determine and implement an appropriate adjustment
in the Exercise Price and the number of Warrant Shares (if applicable) so as to
protect the rights of the Holder, provided that no such adjustment pursuant to
this Section 2(e) will increase the Exercise Price or decrease the number of
Warrant Shares as otherwise determined pursuant to this Section 2, provided
further that if the Holder does not accept such adjustments as appropriately
protecting its interests hereunder against such dilution, then the Company’s
board of directors and the Holder shall agree, in good faith, upon an
independent investment bank of nationally recognized standing to make such
appropriate adjustments, whose determination shall be final and binding and
whose fees and expenses shall be borne by the Company.

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

9

3. RIGHTS UPON
DISTRIBUTION OF ASSETS. Except with respect to such dividend or other
distributions in which an adjustment has been made to the Exercise Price, if
the Company shall declare or make any dividend or other distribution of its
assets (or rights to acquire its assets) to holders of shares of Common Stock,
by way of return of capital or otherwise (including, without limitation, any
distribution of cash, stock or other securities, property or options by way of
a dividend, spin off, reclassification, corporate rearrangement, scheme of
arrangement or other similar transaction) (a “Distribution”),
at any time after the issuance of this Warrant, then, in each such case, the
Holder shall be entitled to participate in such Distribution to the same extent
that the Holder would have participated therein if the Holder had held the
number of shares of Common Stock acquirable upon complete exercise of this
Warrant (without regard to any limitations on exercise hereof, including
without limitation, the Maximum Percentage) immediately before the date on
which a record is taken for such Distribution, or, if no such record is taken,
the date as of which the record holders of shares of Common Stock are to be
determined for the participation in such Distribution (provided, however, to
the extent that the Holder’s right to participate in any such Distributions
would result in the Holder exceeding the Maximum Percentage, then the Holder
shall not be entitled to participate in such Distribution to such extent (or
the beneficial ownership of any such shares of Common Stock as a result of such
Distribution to such extent) and such Distribution to such extent shall be held
in abeyance for the benefit of the Holder until such time, if ever, as its
right thereto would not result in the Holder exceeding the Maximum Percentage).

4. PURCHASE
RIGHTS; FUNDAMENTAL TRANSACTIONS.

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

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

10

Holder in
exchange for this Warrant a security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to this Warrant, including, without limitation, which is
exercisable for a corresponding number of shares of capital stock equivalent to
the shares of Common Stock acquirable and receivable upon exercise of this
Warrant (without regard to any limitations on the exercise of this Warrant)
prior to such Fundamental Transaction, and with an exercise price which applies
the exercise price hereunder to such shares of capital stock (but taking into
account the relative value of the shares of Common Stock pursuant to such
Fundamental Transaction and the value of such shares of capital stock, such
adjustments to the number of shares of capital stock and such exercise price
being for the purpose of protecting the economic value of this Warrant
immediately prior to the consummation of such Fundamental Transaction). Upon the consummation of each
Fundamental Transaction, the Successor Entity shall succeed to, and be
substituted for (so that from and after the date of the applicable Fundamental
Transaction, the provisions of this Warrant and the other Transaction Documents
referring to the “Company” shall refer instead to the Successor Entity), and
may exercise every right and power of the Company and shall assume all of the
obligations of the Company under this Warrant and the other Transaction
Documents with the same effect as if such Successor Entity had been named as
the Company herein. Upon consummation of each Fundamental Transaction,
the Successor Entity shall deliver to the Holder confirmation that there shall
be issued upon exercise of this Warrant
at any time after the consummation of the applicable Fundamental
Transaction, in lieu of the shares of Common Stock (or other securities, cash,
assets or other property (except such items still issuable under Sections 3 and
4(a) above, which shall continue to be receivable thereafter)) issuable upon
the exercise of this Warrant prior
to the applicable Fundamental Transaction, such shares of publicly traded
common stock (or its equivalent) of the Successor Entity (including its Parent
Entity) which the Holder would have been entitled to receive upon the happening
of the applicable Fundamental Transaction had this Warrant been exercised immediately prior to the applicable
Fundamental Transaction (without
regard to any limitations on the exercise of this Warrant), as adjusted
in accordance with the provisions of this Warrant. Notwithstanding the foregoing, and without
limiting Section 9 hereof, the Holder may elect, at its sole option, by
delivery of written notice to the Company to waive this Section 4(b) to permit
the Fundamental Transaction without the assumption of this Warrant. In addition
to and not in substitution for any other rights hereunder, prior to the
consummation of each Fundamental Transaction pursuant to which holders of
shares of Common Stock are entitled to receive securities or other assets with
respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make
appropriate provision to insure that the Holder will thereafter have the right
to receive upon an exercise of this Warrant at any time after the consummation
of the applicable Fundamental Transaction but prior to the Expiration Date, in
lieu of the shares of the Common Stock (or other securities, cash, assets or
other property (except such items still issuable under Sections 3 and 4(a)
above, which shall continue to be receivable thereafter)) issuable upon the
exercise of the Warrant prior to such Fundamental Transaction, such shares of
stock, securities, cash, assets or any other property whatsoever (including
warrants or other purchase or subscription rights) which the Holder would have
been entitled to receive upon the happening of the applicable Fundamental
Transaction had this Warrant been exercised immediately prior to the applicable
Fundamental Transaction (without
regard to any limitations on the exercise of this Warrant). Provision
made pursuant to the preceding sentence shall be in a form and substance
reasonably satisfactory to the Holder.

11

          (c)
Black Scholes Value. Notwithstanding the foregoing and the provisions of
Section 4(b)
above, in the event of either (x) a Fundamental Transaction in which the Successor Entity (including its
Parent Entity) is not a publicly traded corporation whose common stock
is quoted on or listed for trading on an Eligible Market or (y) a Change of
Control (each, a “Redemption Right Event”),
if the Holder has not exercised this Warrant in full prior to the consummation
of such Redemption Right Event, at the request of the Holder delivered before
the ninetieth (90th) day after the consummation of such Redemption
Right Event, the Company or the Successor Entity (as the case may be) shall
purchase this Warrant from the Holder on the date of such request by paying to
the Holder cash in an amount equal to the Black Scholes Value of the
unexercised portion of this Warrant that remained on the date of the
consummation of such Redemption Right Event.

          (d)
Application. The provisions of this Section 4 shall apply similarly and
equally to successive Fundamental Transactions and Corporate Events and shall
be applied as if this Warrant (and any such subsequent warrants) were fully
exercisable and without regard to any limitations on the exercise of this Warrant (provided that the Holder
shall continue to be entitled to the benefit of the Maximum Percentage, applied
however with respect to shares of capital stock registered under the 1934 Act
and thereafter receivable upon exercise of this Warrant (or any such other
warrant)).

5. NONCIRCUMVENTION.
The Company hereby covenants and agrees that the Company will not, by amendment
of its Articles of Incorporation (as defined in the Securities Purchase
Agreement), Bylaws (as defined in the Securities Purchase Agreement) or through
any reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the
terms of this Warrant, and will at all times in good faith carry out all the
provisions of this Warrant and take all action as may be required to protect
the rights of the Holder. Without limiting the generality of the foregoing, the
Company (i) shall not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, (ii) shall take all such actions as may be reasonably necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant, and
(iii) shall, so long as any of the SPA Warrants are outstanding, take all
action necessary to reserve and keep available out of its authorized and
unissued shares of Common Stock, solely for the purpose of effecting the
exercise of the SPA Warrants, the maximum number of shares of Common Stock as
shall from time to time be necessary to effect the exercise of the SPA Warrants
then outstanding (without regard to any limitations on exercise).

6. WARRANT
HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise specifically provided
herein, the Holder, solely in its capacity as a holder of this Warrant, shall
not be entitled to vote or receive dividends or be deemed the holder of share
capital of the Company for any purpose, nor shall anything contained in this
Warrant be construed to confer upon the Holder, solely in its capacity as the
Holder of this Warrant, any of the rights of a stockholder of the Company or
any right to vote, give or withhold consent to any corporate action (whether
any reorganization, issue of stock, reclassification of stock, consolidation,
merger, conveyance or otherwise), receive notice of meetings, receive dividends
or subscription rights, or otherwise, prior to the issuance to the Holder of
the Warrant Shares which it is then

12

entitled to
receive upon the due exercise of this Warrant. In addition, nothing contained
in this Warrant shall be construed as imposing any liabilities on the Holder to
purchase any securities (upon exercise of this Warrant or otherwise) or as a
stockholder of the Company, whether such liabilities are asserted by the
Company or by creditors of the Company. Notwithstanding this Section 6, the
Company shall provide the Holder with copies of the same notices and other
information given to the stockholders of the Company generally,
contemporaneously with the giving thereof to the stockholders.

7. REISSUANCE
OF WARRANTS.

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

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

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

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

13

8. NOTICES.
Whenever notice is required to be given under this Warrant, unless otherwise
provided herein, such notice shall be given in accordance with Section 9(f) of
the Securities Purchase Agreement. The Company shall provide the Holder with
prompt written notice of all actions taken pursuant to this Warrant, including
in reasonable detail a description of such action and the reason therefor.
Without limiting the generality of the foregoing, the Company will give written
notice to the Holder (i) immediately upon each adjustment of the Exercise Price
and the number of Warrant Shares, setting forth in reasonable detail, and
certifying, the calculation of such adjustment(s) and (ii) at least fifteen
(15) days prior to the date on which the Company closes its books or takes a
record (A) with respect to any dividend or distribution upon the shares of
Common Stock, (B) with respect to any grants, issuances or sales of any
Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property to holders of shares of Common Stock or (C) for
determining rights to vote with respect to any Fundamental Transaction,
dissolution or liquidation, provided in each case that such information shall
be made known to the public prior to or in conjunction with such notice being
provided to the Holder and (iii) at least ten (10) Trading Days prior to the
consummation of any Fundamental Transaction. To the extent that any notice
provided hereunder constitutes, or contains, material, non-public information
regarding the Company or any of its subsidiaries, the Company shall
simultaneously file such notice with the SEC (as defined in the Securities
Purchase Agreement) pursuant to a Current Report on Form 8-K. It is expressly
understood and agreed that the time of execution specified by the Holder in
each Exercise Notice shall be definitive and may not be disputed or challenged
by the Company.

9. AMENDMENT
AND WAIVER. Except as otherwise provided herein, the provisions of this
Warrant (other than Section 1(f)) may be amended and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
Holder. No consideration shall be offered
or paid to the Holder to amend or consent to a waiver or modification of any
provision of this Warrant unless the same consideration is also offered to all
of the holders of the other SPA Warrants. No waiver shall be effective
unless it is in writing and signed by an authorized representative of the
waiving party.

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

11. GOVERNING
LAW. This Warrant shall be governed by and construed and enforced in accordance
with, and all questions concerning the construction, validity, interpretation
and

14

performance of
this Warrant shall be governed by, the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the State of New
York.

12. CONSTRUCTION;
HEADINGS. This Warrant shall be deemed to be jointly drafted by the Company
and the Holder and shall not be construed against any Person as the drafter
hereof. The headings of this Warrant are for convenience of reference and shall
not form part of, or affect the interpretation of, this Warrant. Terms used in
this Warrant but defined in the other Transaction Documents shall have the
meanings ascribed to such terms on the Closing Date (as defined in the
Securities Purchase Agreement) in such other Transaction Documents unless
otherwise consented to in writing by the Holder.

13. DISPUTE
RESOLUTION. In the case of a dispute as to the determination of the
Exercise Price, the Closing Sale Price, the Bid Price or fair market value or
the arithmetic calculation of the Warrant Shares (as the case may be), the
Company or the Holder (as the case may be) shall submit the disputed
determinations or arithmetic calculations (as the case may be) via facsimile
(i) within two (2) Business Days after receipt of the applicable notice giving
rise to such dispute to the Company or the Holder (as the case may be) or (ii)
if no notice gave rise to such dispute, at any time after the Holder learned of
the circumstances giving rise to such dispute (including, without limitation,
as to whether any issuance or sale or deemed issuance or sale was an issuance
or sale or deemed issuance or sale of Excluded Securities). If the Holder and
the Company are unable to agree upon such determination or calculation (as the
case may be) of the Exercise Price, the Closing Sale Price, the Bid Price or
fair market value or the number of Warrant Shares (as the case may be) within
three (3) Business Days of such disputed determination or arithmetic
calculation being submitted to the Company or the Holder (as the case may be),
then the Company shall, within two (2) Business Days submit via facsimile (a)
the disputed determination of the Exercise Price, the Closing Sale Price, the
Bid Price or fair market value (as the case may be) to an independent,
reputable investment bank selected by the Company and approved by the Holder or
(b) the disputed arithmetic calculation of the Warrant Shares to the Company’s
independent, outside accountant. The Company shall cause at its expense the
investment bank or the accountant (as the case may be) to perform the
determinations or calculations (as the case may be) and notify the Company and
the Holder of the results no later than ten (10) Business Days from the time it
receives such disputed determinations or calculations (as the case may be).
Such investment bank’s or accountant’s determination or calculation (as the
case may be) shall be binding upon all parties absent demonstrable error.

14. REMEDIES,
CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The
remedies provided in this Warrant shall be cumulative and in addition to all other
remedies available under this Warrant and the other Transaction Documents, at
law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder to
pursue actual damages for any failure by the Company to comply with the terms
of this Warrant. The Company covenants to the Holder that there shall be no
characterization concerning this instrument other than as expressly provided
herein. Amounts set forth or provided for herein with respect to payments,
exercises and the like (and the computation thereof) shall be the amounts to be
received by the Holder and shall not, except as expressly provided herein, be
subject to any other obligation of the Company (or the

15

performance
thereof). The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder and that the remedy at law
for any such breach may be inadequate. The Company therefore agrees that, in
the event of any such breach or threatened breach, the holder of this Warrant
shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach, without the necessity of showing economic
loss and without any bond or other security being required. The Company shall
provide all information and documentation to the Holder that is requested by
the Holder to enable the Holder to confirm the Company’s compliance with the
terms and conditions of this Warrant (including, without limitation, compliance
with Section 2 hereof). The issuance of shares and certificates for shares as
contemplated hereby upon the exercise of this Warrant shall be made without
charge to the Holder or such shares for any issuance tax or other costs in
respect thereof, provided that the Company shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than the Holder or its agent on its
behalf.

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

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

          (a)
“Adjustment Right” means any right
granted with respect to any securities issued in connection with, or with
respect to, any issuance or sale (or deemed issuance or sale in accordance with
Section 2) of Common Stock (other than rights of the type described in Section
3 an 4 hereof) that could result in a decrease in the net consideration
received by the Company in connection with, or with respect to, such securities
(including, without limitation, any cash settlement rights, cash adjustment or
other similar rights).

          (b)
“Approved Share Plan” means any
employee benefit plan which has been approved by the board of directors of the
Company prior to or subsequent to the date hereof pursuant to which shares of
Common Stock, options to purchase Common Stock, restricted stock or restricted
stock units may be issued to any employee, officer or director for services
provided to the Company in their capacity as such. 

          (c)
“Bid Price” means, for any
security as of the particular time of determination, the bid price for such
security on the Principal Market as reported by Bloomberg as of such time of
determination, or, if the Principal Market is not the principal securities
exchange or trading market for such security, the bid price of such security on
the principal securities exchange or trading market where such security is
listed or traded as reported by Bloomberg as of such time of determination, or
if the foregoing does not apply, the bid price of such security in the
over-the-counter market on the electronic bulletin board for such security as reported
by Bloomberg as of such time of determination, or, if no bid price is reported
for such security by Bloomberg as of such time of determination, the average of
the bid prices of any market makers for such security as reported in the “pink
sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.) as of
such time of determination. If the Bid Price cannot be calculated for a
security as of the particular time of determination on any of the foregoing
bases, the Bid Price of such security as of such time of determination shall be
the fair market value as mutually determined by the

16

Company and
the Holder. If the Company and the Holder are unable to agree upon the fair
market value of such security, then such dispute shall be resolved in accordance
with the procedures in Section 13. All such determinations shall be
appropriately adjusted for any stock dividend, stock split, stock combination
or other similar transaction during such period.

          (d)
“Black Scholes Consideration Value”
means the value of the applicable Option or Convertible Security (as the case
may be) based on the Black Scholes Option Pricing Model obtained from the “OV”
function on Bloomberg determined as of the close of business on the Trading Day
immediately following the public announcement of the execution of definitive
documents with respect to the issuance of such Option or Convertible Security
(as the case may be) and reflecting (i) a risk-free interest rate corresponding
to the U.S. Treasury rate for a period equal to the remaining term of such
Option or Convertible Security (as the case may be) as of the date of issuance
of such Option or Convertible Security (as the case may be), (ii) an expected
volatility equal to the greater of 100% and the 100 day volatility obtained
from the HVT function on Bloomberg (using 360 as the input for the
annualization factor and the Rogers-Satchell volatility estimator model) and
(iii) the underlying price per share used in such calculation shall be the
highest Closing Bid Price for any Trading Day during the ten (10) Trading Day
period ending on and including the Trading Day immediately preceding the public
announcement of the execution of definitive documents with respect to the
issuance of such Option or Convertible Security (as the case may be).

          (e)
“Black Scholes Value” means the
value of this Warrant based on the Black Scholes Option Pricing Model obtained
from the “OV” function on Bloomberg determined as of the day of consummation of
the applicable Fundamental Transaction for pricing purposes and reflecting (i)
a risk-free interest rate corresponding to the U.S. Treasury rate for a period
equal to the remaining term of this Warrant as of the date of the Holder’s
request pursuant to Section 4(c), (ii) an expected volatility equal to the
greater of 100% and the 100 day volatility obtained from the HVT function on
Bloomberg as of the Trading Day immediately following the public announcement
of the applicable Fundamental Transaction (using 360 as the input for the annualization
factor and the Rogers-Satchell volatility estimator model) and, if applicable,
(iii) the underlying price per share used in such calculation shall be the sum
of the price per share being offered in cash, if any, plus the value of any
non-cash consideration, if any, being offered in the applicable Fundamental
Transaction.

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

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

          (h)
“Change of Control” means any
Fundamental Transaction other than (A) any merger of the Company or any of
its direct or indirect wholly-owned Subsidiaries with or into any of the
foregoing Persons, (B) any reorganization, recapitalization or
reclassification of the Common Stock, in which holders of the Company’s voting
power immediately prior to such reorganization, recapitalization or
reclassification continue after such reorganization, recapitalization or
reclassification to hold publicly traded securities and, directly or
indirectly, the voting power of the surviving entity or entities necessary to
elect a majority of the members

17

of the board
of directors (or their equivalent if other than a corporation) of such entity
or entities, (C) pursuant to a migratory merger effected solely for the purpose
of changing the jurisdiction of incorporation of the Company or (D) a merger in
connection with a bona fide acquisition by the Company of any Person in which
(x) the gross consideration paid, directly or indirectly, by the Company (as
calculated in accordance with Section 2(b)(iv) above, but treating any
assumption of indebtedness, directly or indirectly, by the Company as an
increase in the consideration paid on a dollar-for-dollar basis) in such
acquisition is not greater than 20% of the Company’s market capitalization as
calculated on each of (1) the date of the public announcement of such merger
and (2) the date of the consummation of such merger and (y) such merger does
not contemplate any change to the identity of the board of directors of the
Company or any of the members of the senior management of the Company,
including, without limitation, the chief executive officer and the chief financial
officer of the Company.

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

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

          (k)
“Common Stock Equivalents” means
any capital stock or other security of the Company or any of its Subsidiaries
that is at any time and under any circumstances directly or indirectly
convertible into, exercisable or exchangeable for, or which otherwise entitles
the holder thereof to acquire, any capital stock or other security of the
Company (including, without limitation, Common Stock) or any of its
Subsidiaries.

18

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

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

          (n)
“Excluded Securities” means any
Common Stock issued or issuable: (i) to directors, officers or employees of the
Company in their capacity as such pursuant to an Approved Share Plan, (ii) upon
the conversion or exercise of Common Stock Equivalents (other than standard
Options to purchase Common Stock issued pursuant to an Approved Share Plan that
are covered by clause (i) above) issued prior to the date hereof, provided that
the conversion price of any such Common Stock Equivalents is not lowered, none
of such Common Stock Equivalents are amended to increase the number of shares
issuable thereunder and none of the terms or conditions of any such Common
Stock Equivalents are otherwise materially changed in any manner that adversely
affects the Holder or any of the Buyers; and (iii) the Warrant Shares issuable
upon exercise of any Warrant, provided that the exercise price of such Warrant
is not lowered and such Warrant is not amended to increase the number of shares
issuable thereunder.

          (o)
“Expiration Date” means the date
that is the fifth (5th) anniversary of the Issuance Date or, if such
date falls on a day other than a Business Day or on which trading does not take
place on the Principal Market (a “Holiday”),
the next date that is not a Holiday.

          (p)
“Fundamental Transaction” means
that (i) the Company or any of its Subsidiaries shall, directly or indirectly, in one or
more related transactions, (1) consolidate or merge with or into (whether or
not the Company or any of its Subsidiaries is the surviving corporation) any other Person, or (2) sell,
lease, license, assign, transfer, convey or otherwise dispose of all or
substantially all of its respective properties or assets to any other Person,
or (3) allow any other Person to make a purchase, tender or exchange
offer that is accepted by the holders of more than 50% of the outstanding
shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by
the Person or Persons making or party to, or associated or affiliated with the
Persons making or party to, such purchase, tender or exchange offer), or (4)
consummate a stock or share purchase agreement or other business
combination (including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with any other Person whereby such other Person acquires more
than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the
Company held by the other Person or other Persons making or party to, or
associated or affiliated with the other Persons making or party to, such stock
or share purchase agreement or other business combination), or (5) reorganize, recapitalize
or reclassify the Common Stock, or (ii) any “person” or “group” (as
these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act
and the rules and regulations promulgated thereunder) is or shall become the
“beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or
indirectly, of 50% of the aggregate ordinary voting power represented by issued
and outstanding Voting Stock of the Company.

19

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

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

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

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

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

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

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

          (x)
“VWAP” means, for any security as
of any date, the dollar volume-weighted average price for such security on the
Principal Market (or, if the Principal Market is not the principal trading
market for such security, then on the principal securities exchange or
securities market on which such security is then traded) during the period
beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York
time, as reported by Bloomberg through its “Volume at Price” function or, if
the foregoing does not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the electronic bulletin board for
such security during the period beginning at 9:30:01 a.m., New York time, and
ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no dollar
volume-weighted average price is reported for such security by Bloomberg for
such hours, the average of the highest closing bid price and the lowest closing
ask price of any of the market makers for such security as reported

20

in the “pink
sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If
VWAP cannot be calculated for such security on such date on any of the
foregoing bases, the VWAP of such security on such date shall be the fair
market value as mutually determined by the Company and the Holder. If the
Company and the Holder are unable to agree upon the fair market value of such
security, then such dispute shall be resolved in accordance with the procedures
in Section 13. All such determinations shall be appropriately adjusted for any
stock dividend, stock split, stock combination or other similar transaction
during such period.

[signature
page follows]

21

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

	
  

 	
  

 	
  

 
	
  

 	
 NOVADEL PHARMA INC. 

 
	
  

 	
  

 
	
  

 	
 By: 

 	
  

 
	
  

 	
  

 	

 

 
	
  

 	
  

 	
 Name:

 
	
  

 	
  

 	
 Title:

 

EXHIBIT A

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO
EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

NOVADEL PHARMA INC.

          The
undersigned holder hereby exercises the right to purchase _________________ of
the shares of Common Stock (“Warrant Shares”)
of Novadel Pharma Inc., a Delaware corporation (the “Company”), evidenced by Series A Warrant No. _______ (the “Warrant”). Capitalized terms used herein
and not otherwise defined shall have the respective meanings set forth in the
Warrant.

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

	
  

 	
  

 	
  

 
	
 ________________

 	
  

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

 
	
  

 	
  

 	
  

 
	
 ________________

 	
  

 	
 a “Cashless
 Exercise” with respect to _________________ Warrant Shares.

 

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

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

          3.
Delivery of Warrant Shares. The Company shall deliver to Holder, or its
designee or agent as specified below, __________ Warrant Shares in accordance
with the terms of the Warrant. Delivery shall be made to Holder, or for its
benefit, to the following address:

Date:
_______________ __, ______

	
  

 	
  

 
	

 

 	
  

 
	
 Name of Registered Holder

 	
  

 

	
  

 	
  

 	
  

 
	
 By:

 	

 

 	
  

 
	
  

 	
 Name:

 	
  

 
	
  

 	
 Title:

 	
  

 

ACKNOWLEDGMENT

          The
Company hereby acknowledges this Exercise Notice and hereby directs
______________ to issue the above indicated number of shares of Common Stock in
accordance with the Transfer Agent Instructions dated March __, 2010, from the
Company and acknowledged and agreed to by _______________.

	
  

 	
  

 	
  

 
	
  

 	
 NOVADEL PHARMA INC.

 
	
  

 	
  

 
	
  

 	
 By:

 	
  

 
	
  

 	
  

 	

 

 
	
  

 	
  

 	
 Name:

 
	
  

 	
  

 	
 Title:

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