Document:

ex10-2.htm

    
      

    

    EXHIBIT
10.2

    

    TerraNova
Capital Partners Inc.

    European
American Equities, Inc.

    350
Madison Avenue, 8th Floor

    New
York, New York  10017

    

                                            February 4,
2008

    

    

    CONFIDENTIAL

    

    Sequiam
Corporation

    300
Sunport Lane

    Orlando,
Florida  32809

    

    Attention:             Mr.
Mark L. Mroczkowski

    Executive Vice President and Chief
Financial Officer

    

    

    

    Dear Mr.
Mroczkowski:

    

    This letter agreement (this
“Agreement”) confirms the engagement of TerraNova Capital Partners Inc. and its
subsidiary, European American Equities, Inc. (collectively, “TerraNova”), by
Sequiam Corporation (the “Company”) as placement agent to arrange the sale of
equity or equity-linked securities, including convertible debt or warrants (the
“Securities”), on behalf of the Company and its successors, subsidiaries and
affiliates.  The sale of Securities (a “Financing” or “Financings”)
may be completed under an effective shelf registration statement, if applicable,
or may occur through a series of one or more private placements pursuant to one
or more exemptions from registration under the Securities Act of 1933, as
amended (the “Securities Act”), and in compliance with applicable securities
laws of states and other jurisdictions (“Blue Sky Laws”).

    

    1.           Retention.  Subject
to the terms and conditions of this Agreement, the Company hereby engages
TerraNova to act on behalf of the Company and its successors, subsidiaries and
affiliates as its exclusive placement agent during the Authorization Period (as
defined below) to arrange the sale of Securities in an amount and on terms and
conditions satisfactory to the Company, and TerraNova hereby accepts such
engagement, subject to the terms and conditions hereof.

    

    2.           Authorization
Period.  The engagement of TerraNova shall become effective on the
date hereof and shall expire 60 days after the date of the Company’s acceptance
of this Agreement, which period shall be extended for an additional 45-day
period if the Company has not notified TerraNova in writing of the termination
of this Agreement, subject to Section 12 hereof, at least 10 days prior to the
expiration of the initial 60-day term.  The period from the date
hereof through the expiration of this Agreement is called the “Authorization
Period.”  If the Company fails to reorganize as a public company and
is taken private by its lender, then this agreement shall
terminate.

    

    3.           Compensation.   The
Company shall pay TerraNova the compensation set forth below:

    

    a.           Cash
Fee.  The Company shall pay TerraNova a cash placement fee equal to 8%
on any gross proceeds received by the Company in connection with each
Financing.  The cash placement fee shall be paid by wire transfer on
the closing date on which the Company receives such aggregate
consideration.  TerraNova shall act as solicitation agent on behalf of
the Company in connection with the exercise of any investor warrants issued in
connection with the Financings and the Company shall pay TerraNova a cash fee of
8% of the aggregate consideration received by the Company in connection with the
exercise of such warrants. The foregoing fees shall be reduced to 4% if such
proceeds received by the Company originate through the efforts of Crestview
Capital Partners, vFinance, Inc. or the Company. The foregoing fees shall also
be reduced to 4% for any bridge loan money that may be advanced to the Company
under this agreement.

    

    b.           Placement
Agent Warrants.  On each closing date of a Financing, the Company
shall issue to TerraNova or its permitted assigns, for an aggregate
consideration of $1.00, warrants (the “Warrants”) to purchase such number of
shares of the common stock of the Company (or units of Equity Securities if the
Financing involved the sale of units of Equity Securities) equal to 8% of the
aggregate number of shares of common stock of the Company issued and issuable by
the Company under and in connection with the Financings.  The number
of shares of common stock (or units of Equity Securities) issuable upon exercise
of the Warrants shall include all shares of common stock issuable under the
Securities, including, without limitation, shares issuable upon conversion or
exercise of the Securities.  The Warrants shall provide for cashless
exercise (even if the purchasers of the Securities (the “Purchasers”) do not
have such right).  The exercise price per share of the Warrants shall
be equal to the effective price per share (or unit) paid by the Purchasers for
the Securities (or in the event of a convertible security, the conversion price
or exercise price per share of common stock on the closing date). The Warrants
shall be exercisable after the date of issuance and shall expire seven years
after the date of issuance, unless otherwise extended by the
Company.    The Warrants shall not be callable or
redeemable. The Warrants shall also include one demand registration right
exercisable following the first anniversary of the closing, and piggyback
registration rights.  The Warrants shall be transferable within
TerraNova, at TerraNova’s discretion. The foregoing Placement Agent Warrants
shall be reduced to 4% of the aggregate number of shares of common stock of the
Company issued and issuable by the Company under and in connection with the
Financings if such proceeds received by the Company originate through the
efforts of Crestview Capital Partners, vFinance, Inc. or the Company. The
foregoing Placement Agent Warrants shall also be reduced to 4% for any bridge
loan money that may be advanced to the Company under this
agreement.

    

    

    

    c.           Tail
Period. The Company shall, and shall cause its affiliates to, pay to TerraNova
all compensation described in this Section 3 with respect to all Securities sold
to a Purchaser or Purchasers at any time during the 18-month period following
the date of expiration or termination of this Agreement (the “Tail Period”) if
(i) such Purchaser or Purchasers were identified to the Company directly or
indirectly by TerraNova during the Authorization Period (as evidenced by the
investor log maintained by TerraNova), (ii) TerraNova advised the Company with
respect to such Purchaser or Purchasers during the Authorization Period or (iii)
the Company or TerraNova had discussions with such Purchaser or Purchasers
during the Authorization Period (as evidenced by the investor log maintained by
TerraNova).  In addition, the Tail Period shall apply to all
affiliates or assigns of said Purchaser or Purchasers. The foregoing Tail Period
shall not apply if such proceeds received by the Company originate through the
efforts of Crestview Capital Partners, vFinance, Inc. or the
Company.

    

    4.           Reimbursements.
Regardless of whether a Financing or sales of Securities are consummated, the
Company shall reimburse TerraNova on a monthly basis for all of its reasonable
out-of-pocket expenses, including, but not limited to, travel, legal and
communication expenses incurred in connection with, or arising out of, our
activities under or contemplated by this Agreement, provided that any expense in
excess of $1,000 (other than our reasonable legal fees and expenses) shall
require the prior approval of the Company.  Such reimbursements shall
be made promptly upon submission by TerraNova of its statements
therefor.

    

    5.           Representations,
Warranties and Covenants of the Company.  The Company represents and
warrants to, and covenants with, TerraNova as follows:

    

    a.           Neither
the Company nor any person acting on its behalf has taken, and the Company shall
not and shall not permit its affiliates to take, directly or indirectly, any
action so as to cause any of the transactions contemplated by this Agreement to
fail to be entitled to exemption from registration or qualification under all
applicable securities laws or which constitutes general advertising or general
solicitation (as those terms are used in Regulation D under the Securities Act)
with respect to the Securities.

    

    b.           The
Company shall take and shall cause its affiliates to take such actions as may be
required to cause compliance with this Agreement.  If the Company
shall cause its affiliates to perform any of its obligations hereunder, the
Company shall not be relieved of its obligation to perform such obligations when
due.

    

    c.           The
Company will furnish, or cause to be furnished, to TerraNova such information as
TerraNova believes appropriate to its engagement hereunder (all such
information, the “Information”), and the Company represents that all such
Information will be accurate and complete in all material
respects.  The Company will promptly notify TerraNova of any change
that may be material in such Information.  It is understood that
TerraNova will be entitled to rely on and use the Information and other
information that is publicly available without independent verification, and
will not be responsible in any respect for the accuracy, completeness or
reasonableness of all such Information or to conduct any independent
verification or any appraisal or physical inspection of properties or
assets.

    

    d.           During
the Authorization Period, the Company will not negotiate with any other
placement agent or underwriter with respect to a private or public offering of
the Company’s Securities.

    

    e.           The
Company will diligently and expeditiously prepare, in
conjunction  with its legal counsel and accountants, the offering
documents required for any Financing. The offering documents shall substantially
conform in format, style and design models thereof provided to the Company by
TerraNova and shall have been completely reviewed as to substance by such
counsel and accountants based on substantially completed due diligence conducted
by them.

    

    f.           The
Company is not, and will not become, obligated to pay and has not obligated, and
will not obligate, TerraNova to pay any finder’s or brokerage fee in connection
with any Financing.

    

    g.           The
Company does not know of any facts adversely affecting its earnings or prospects
which have not been fully disclosed to TerraNova in writing and will promptly
advise TerraNova in writing of any material change in the business, operations,
assets or prospects of the Company which occurs subsequent to the date of this
Agreement.

    

    h.           All
provisions of each of the agreements specifically contemplated in this Agreement
will be in accordance with all applicable rules and regulations of the NASD and
all applicable laws.

    

    6.           Representations,
Warranties and Covenants of TerraNova.  TerraNova represents and
warrants to, and covenants with, the Company as follows:

    

    a.           None
of TerraNova, its affiliates or any person acting on behalf of TerraNova or any
of such affiliates has engaged or will engage in any general solicitation or
general advertising (as those terms are used in Regulation D under the
Securities Act) with respect to the Securities.

    

    b.           TerraNova
will use its best efforts to conduct the offering and sale of Securities so that
Securities are sold in a transaction or series of transactions exempt from
registration under the Securities Act.

    

    c.           TerraNova
will send written materials related to a Financing only to persons that the
TerraNova reasonably believes are “accredited investors” (as defined under Rule
501(a) of the Securities Act).

    

    d.           TerraNova
agrees that, except as otherwise required by law, regulation or court order or
as contemplated by its engagement hereunder, the non-public Information
furnished to TerraNova by the Company shall be held by TerraNova as
confidential.

    

    7.           Indemnification.  The
Company agrees to the indemnification and other agreements set forth in the
attached Indemnification Agreement, the provisions of which are incorporated
herein by reference.

    

    8.           Subsequent
Offerings. If a Financing in which the Company receives aggregate gross proceeds
of at least $7 million has been completed, then TerraNova shall have the right
for the 12-month period commencing on the date of the closing of such Financing,
to act as the managing placement agent in connection with the sale of equity or
equity-linked securities through a private placement.

    

    10.           Public
Offerings.  If a Financing in which the Company receives aggregate
gross proceeds of at least $7 million has been completed, then, in the event
that at any time prior to the second anniversary of the closing date of such
Financing, the Company shall consummate a public offering that is managed or
co-managed by an investment banker introduced, directly or indirectly, to the
Company by TerraNova, TerraNova will be paid a finder’s fee at the closing of
such offering, equal to one percent (1%) of the gross proceeds to the Company of
such offering.

    

    11.           Advertisements.  The
Company agrees that TerraNova has the right to place advertisements in financial
and other newspapers, journals, and websites at its own expense describing its
services to the Company hereunder.  The foregoing shall also include
placement of a tombstone on the TerraNova corporate
website.  Conversely, the Company agrees that it shall not use
TerraNova’s name, nor the name of any of its employees, representatives or
affiliates in any public manner without prior written consent from
TerraNova.

    

    12.           Survival
of Certain Provisions.  The expense, indemnification, reimbursement,
advertisements, and contribution obligations of the Company provided herein and
in the attached Indemnification Agreement and TerraNova’s rights to compensation
(which term includes all fees, amounts and Warrants due or which may become due)
shall remain operative and in full force and effect regardless of (i) any
withdrawal, termina­tion or consummation of or failure to initiate or
consummate any transaction described herein or (ii) any termination or the
completion or expiration of this Agreement.

    

    13.           Notices.  Notice
given pursuant to any of the provisions of this Agreement shall be given in
writing and shall be sent by certified mail, return receipt request or
recognized overnight courier or personally delivered (a) if to the Company, to
the address set forth above, Attention: Chief Executive Officer; and (b) if to
TerraNova, to its office at 350 Madison Avenue, 8th Floor, New York, New York
10017, Attention: John F. Steinmetz.

    

    14.           Confidentiality.
No financial advice rendered by TerraNova pursuant to this Agreement may be
disclosed publicly in any manner without TerraNova’s prior written consent,
except as may be required by law, regulation or court order but subject to the
limitation below.  If the Company is required or reasonably expects to
be so required to disclose any advice, the Company shall provide TerraNova with
prompt notice thereof so that TerraNova may seek a protective order or other
appropriate remedy and take reasonable efforts to assure that all of such advice
disclosed will be covered by such order or other remedy.  Whether or
not such a protective order or other remedy is obtained, the Company will and
will cause its affiliates to disclose only that portion of such advice which the
Company is so required to disclose.

    

    15.           Miscellaneous.  This
Agreement (including the attached Indemnification Agreement) sets forth the
entire agreement between the parties, supersedes and merges all prior written or
oral agreements with respect to the subject matter hereof, may only be amended
in writing and shall be governed by the laws of the State of New York applicable
to agreements made and to be performed entirely within such
State.  The parties shall make reasonable efforts to resolve any
dispute concerning this Agreement, its construction or its alleged breach by
face-to-face negotiations. If such negotiations fail to resolve the dispute, the
dispute shall be finally decided by arbitration in accordance with the rules
then in effect of the American Arbitration Association. Any arbitration will be
conducted in the New York City metropolitan area.  The Company (for
the Company, for anyone claiming through or in the name of the Company and on
behalf of the equity holders of the Company) and TerraNova each hereby
irrevocably waives any right it may have to trial by jury in respect of any
claim arising out of this Agreement or the transactions contem­plated
hereby.

    

    This Agreement may be assigned by
either party with the prior written consent of the other party.

    

    If any provision of this Agreement is
determined to be invalid or unenforceable in any respect, such determination
will not effect such provision in any other respect or any other provision of
this Agreement.

    

    TerraNova is delighted to accept this
engagement and looks forward to working with you on this
assignment.  Please confirm that the foregoing correctly sets forth
our agreement by signing and returning to TerraNova the enclosed duplicate copy
of this Agreement.

    

    Very truly yours,

    

    TerraNova Capital Partners
Inc.

    

    

    By:

           Name:   John
F. Steinmetz

           Title:     Chief
Executive Officer

    

    European American Equities,
Inc.

    

    

    By:

           Name:   John
F. Steinmetz

           Title:     Chief
Executive Officer

    

    ACCEPTED
AND AGREED TO

    this 4th
day of February, 2008.

    

    Sequiam
Corporation

    

    

    By:

    Name:  Mark
L. Mroczkowski

    Title:    Executive
Vice President and Chief

                    Financial
Officer

    
      
        
           

          

        

         

      

      
         

        
          

        

      

      
         

        
           

           

           

          

          

        

      

    

    TO:           TerraNova
Capital Partners Inc.

    European American Equities,
Inc.

    350 Madison Avenue

    New York, NY 10017

    

    

    In
connection with your engagement pursuant to our letter agreement of even date
herewith (the “Engagement”), we agree to indemnify and hold harmless TerraNova
Capital Partners Inc. (“TerraNova” or “you”) and its affiliates, the respective
directors, officers, partners, agents and employees of TerraNova and its
affiliates, and each other person, if any, controlling TerraNova or any of its
affiliates (collectively, “Indemnified Persons”), from and against, and we agree
that no Indemnified Person shall have any liability to us or our owners,
parents, affiliates, security holders or creditors for, any losses, claims,
damages or liabilities (including actions or proceedings in respect thereof)
(collectively “Losses”) (A) related to or arising out of (i) our actions or
failures to act (including statements or omissions made, or information
provided, by us or our agents) or (ii) actions or failures to act by an
Indemnified Person with our consent or in reliance on our actions or failures to
act, or (B) otherwise related to or arising out of the Engagement or your
performance thereof, except that this clause (B) shall not apply to any Losses
that are finally judicially determined to have resulted primarily from your bad
faith or gross negligence or breach of the letter agreement.  If such
indemnification is for any reason not available or insufficient to hold you
harmless, we agree to contribute to the Losses involved in such proportion as is
appropriate to reflect the relative benefits received (or anticipated to be
received) by us and by you with respect to the Engagement or, if such allocation
is judicially determined unavailable, in such proportion as is appropriate to
reflect other equitable considerations such as the relative fault of us on the
one hand and of you on the other hand; provided, however, that, in no event
shall the amount to be contributed by you exceed the fees actually received by
you under the Engagement.

    We will
reimburse each Indemnified Person for all expenses (including reasonable fees
and disbursements of counsel) as they are incurred by such Indemnified Person in
connection with investigating, preparing for or defending any action, claim,
investigation, inquiry, arbitration or other proceeding (“Action”) referred to
above (or enforcing this agreement or any related engagement agreement), whether
or not in connection with pending or threatened litigation in which any
Indemnified Person is a party, and whether or not such Action is initiated or
brought by you .  We further agree that we will not settle or
compromise or consent to the entry of any judgment in any pending or threatened
Action in respect of which indemnification may be sought hereunder (whether or
not an Indemnified Person is a party therein) unless we have given you
reasonable prior written notice thereof and used all reasonable efforts, after
consultation with you, to obtain an unconditional release of each Indemnified
Person from all liability arising therefrom.  In the event we are
considering entering into one or a series of transactions involving a merger or
other business combination or a dissolution or liquidation of all or a
significant portion of our assets, we shall promptly notify you in
writing.  If requested by TerraNova, we shall then establish
alternative means of providing for our obligations set forth herein on terms and
conditions reasonably satisfactory to TerraNova.

    If
multiple claims are brought against you in any Action with respect to at least
one of which indemnification is permitted under applicable law and provided for
under this agreement, we agree that any judgment, arbitration award or other
monetary award shall be conclusively deemed to be based on claims as to which
indemnification is permitted and provided for.  In the event that you
are called or subpoenaed to give testimony in a court of law, we agree to pay
your expenses related thereto and $5,000 per person per day for every day or
part thereof that we are required to be there or in preparation
thereof.  Our obligations hereunder shall be in addition to any rights
that any Indemnified Person may have at common law or
otherwise.  Solely for the purpose of enforcing this agreement, we
hereby consent to personal jurisdiction and to service and venue in any court in
which any claim which is subject to this agreement is brought by or against any
Indemnified Person.  We acknowledge that in connection with the
Engagement you are acting as an independent contractor with duties owing solely
to us.  YOU HEREBY AGREE, AND WE HEREBY AGREE ON OUR OWN BEHALF AND,
TO THE EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF OUR SECURITY HOLDERS, TO
WAIVE ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM, COUNTER-CLAIM OR
ACTION ARISING OUT OF THE ENGAGEMENT, YOUR PERFORMANCE THEREOF OR THIS
AGREEMENT.

    The
provisions of this agreement shall apply to the Engagement (including related
activities prior to the date hereof) and any modification thereof and shall
remain in full force and effect regardless of the completion or termination of
the Engagement.  This agreement and any other agreements relating to
the Engagement shall be governed by and construed in accordance with the laws of
the state of New York, without regard to conflicts of law principles
thereof.

    

    Very truly yours,

    

    Sequiam Corporation

    

    

    By:__________________________

          Name:  Mark
L. Mroczkowski

          Title:    Executive
Vice President and

               Chief
Financial Officer

    ACCEPTED
AND AGREED TO

    this 4th
day of February, 2008

    

    TerraNova
Capital Partners Inc.

    

    

    By:

           Name:   John
F. Steinmetz

           Title:     Chief
Executive Officerex4_1.htm

    
      

    

    
      	
              Exhibit
      4.1

            	
              Form of Warrant.

            

    

    

    

    

     

    FORM OF
WARRANT

     

    THE
SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN A FORM
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144
UNDER SAID ACT.

     

     

    HYPERDYNAMICS
CORPORATION

     

     

    Warrant
To Purchase Common Stock

     

    
      	
              Warrant
      No.: [_____]

            	
              Number
      of Shares:

            	 
      	
              [______]

            
	 
      	
              Warrant
      Exercise Price:

            	 
      	
              $[_____]

            
	 
      	
              Expiration
      Date:

            	 
      	
              [__________]

            
	 
      	 
      	 
      	 
      
	
              Date
      of Issuance: [________], 2008

            	 
      	 
      	 
      

    

    

    Hyperdynamics
Corporation, a Delaware corporation (the “Company”), hereby
certifies that, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, YA Global Investments, L.P. (the “Holder”), the
registered Holder hereof or its permitted assigns, is entitled, subject to the
terms set forth below, to purchase from the Company upon surrender of this
Warrant, at any time or times on or after the date hereof, but not after
11:59 P.M. Eastern Time on the Expiration Date (as defined herein) up to
[_____________ (______)] fully paid and nonassessable shares of Common Stock (as
defined herein) of the Company (the “Warrant Shares”) at
the exercise price per share provided in Section 1(b) below or as
subsequently adjusted; provided, however, that in no event shall the Holder be
entitled to exercise this Warrant for a number of Warrant Shares in excess of
that number of Warrant Shares which, upon giving effect to such exercise, would
cause the aggregate number of shares of Common Stock beneficially owned by the
Holder and its affiliates to exceed 4.99% of the outstanding shares of the
Common Stock following such exercise, except within sixty (60) days of the
Expiration Date (however, such restriction may be waived by Holder (but only as
to itself and not to any other Holder) upon not less than sixty-five (65) days
prior notice to the Company).  For purposes of the foregoing proviso,
the aggregate number of shares of Common Stock beneficially owned by the Holder
and its affiliates shall include the number of shares of Common Stock issuable
upon exercise of this Warrant with respect to which the determination of such
proviso is being made, but shall exclude shares of Common Stock which would be
issuable upon (i) exercise of the remaining, unexercised Warrants
beneficially owned by the Holder and its affiliates and (ii) exercise or
conversion of the unexercised or unconverted portion of any other securities of
the Company beneficially owned by the Holder and its affiliates (including,
without limitation, any convertible notes or preferred stock) subject to a
limitation on conversion or exercise analogous to the limitation contained
herein.  Except as set forth in the preceding sentence, for purposes
of this paragraph, beneficial ownership shall be calculated in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended.  For
purposes of this Warrant, in determining the number of outstanding shares of
Common Stock the Holder may rely on the number of outstanding shares of Common
Stock as reflected in (1) the Company’s most recent Form 10-Q or Form 10-K, as
the case may be, (2) a more recent public announcement by the Company or (3) any
other notice by the Company or its transfer agent setting forth the number of
shares of Common Stock outstanding.  Upon the written request of any
Holder, the Company shall promptly, but in no event later than one (1) Business
Day following the receipt of such notice, confirm in writing to the Holder the
number of shares of Common Stock then outstanding.  In any case, the
number of outstanding shares of Common Stock shall be determined after giving
effect to the exercise of Warrants (as defined below) by the Holder and its
affiliates since the date as of which such number of outstanding shares of
Common Stock was reported.

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    Section
1.

     

    (a) 
This Warrant is issued pursuant to the Securities Purchase Agreement (“Securities Purchase
Agreement”) dated the date hereof between the Company and the Buyers
listed on Schedule I thereto or issued in exchange or substitution thereafter or
replacement thereof.  Each Capitalized term used, and not otherwise
defined herein, shall have the meaning ascribed thereto in the Securities
Purchase Agreement.

     

    (b)  Definitions.  The
following words and terms as used in this Warrant shall have the following
meanings:

     

    (i)        
   “Approved Stock Plan”
means a stock option plan that has been approved by the Board of Directors of
the Company prior to the date of the Securities Purchase Agreement, pursuant to
which the Company’s securities may be issued only to any employee, officer,
director, attorney, consultant or vendor for services and/or goods provided to
the Company.

     

    (ii)           
“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.

     

    (iii)           “Closing Bid Price”
means the closing bid price of Common Stock as quoted on the Principal Market
(as reported by Bloomberg Financial Markets (“Bloomberg”) through
its “Volume at Price” function).

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

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

     

    (v)           “Event of Default”
means an event of default under the Securities Purchase Agreement or the
Convertible Debentures issued in connection therewith.

     

    (vi)           “Excluded Securities”
means, (a) shares issued or deemed to have been issued by the Company pursuant
to an Approved Stock Plan, (b) shares of Common Stock issued or deemed to be
issued by the Company upon the conversion, exchange or exercise of any right,
option, obligation or security outstanding on the date prior to date of the
Securities Purchase Agreement, provided that the terms of such right, option,
obligation or security are not amended or otherwise modified on or after the
date of the Securities Purchase Agreement, and provided that the conversion
price, exchange price, exercise price or other purchase price is not reduced,
adjusted or otherwise modified and the number of shares of Common Stock issued
or issuable is not increased (whether by operation of, or in accordance with,
the relevant governing documents or otherwise) on or after the date of the
Securities Purchase Agreement,  and (c) the shares of Common
Stock issued or deemed to be issued by the Company upon conversion of the
Convertible Debentures or exercise of the Warrants.

     

    (vii)           “Expiration Date”
means [________________].

     

    (viii)         “Issuance Date” means
the date hereof.

     

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

     

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

     

    (xi)           “Primary Market” means
on any of (a) the American Stock Exchange, (b) New York Stock Exchange, (c) the
Nasdaq Global Select Market, (d) the Nasdaq Global Market, (e) the Nasdaq
Capital Market, or (e) the Over-the-Counter Bulletin Board (“OTCBB”)

     

    (xii)           “Securities Act” means
the Securities Act of 1933, as amended.

     

    (xiii)          “Warrant” means this
Warrant and all Warrants issued in exchange, transfer or replacement
thereof.

     

    (xiv)         “Warrant Exercise
Price” shall be $[____] or as subsequently adjusted as provided in
Section 8 hereof.

     

    (c)   Other
Definitional Provisions.

     

    (i)           
 Except as otherwise specified herein, all references herein (A) to
the Company shall be deemed to include the Company’s successors and (B) to
any applicable law defined or referred to herein shall be deemed references to
such applicable law as the same may have been or may be amended or supplemented
from time to time.

     

    
      
         

      

      
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    (ii)           When
used in this Warrant, the words “herein”, “hereof”, and “hereunder” and words of similar import,
shall refer to this Warrant as a whole and not to any provision of this Warrant,
and the words “Section”, “Schedule”, and “Exhibit” shall refer
to Sections of, and Schedules and Exhibits to, this Warrant unless otherwise
specified.

     

    (iii)           Whenever
the context so requires, the neuter gender includes the masculine or feminine,
and the singular number includes the plural, and vice versa.

     

    Section
2.               Exercise of
Warrant.

     

    (a)  Subject
to the terms and conditions hereof, this Warrant may be exercised by the Holder
hereof then registered on the books of the Company, pro rata as hereinafter
provided, at any time on any Business Day on or after the opening of business on
such Business Day, commencing with the first day after the date hereof, and
prior to 11:59 P.M. Eastern Time on the Expiration Date (i) by delivery of
a written notice, in the form of the subscription notice attached as Exhibit A hereto (the
“Exercise
Notice”), of the Holder’s election to exercise this Warrant, which notice
shall specify the number of Warrant Shares to be purchased, payment to the
Company of an amount equal to the Warrant Exercise Price(s) applicable to the
Warrant Shares being purchased, multiplied by the number of Warrant
Shares (at the applicable Warrant Exercise Price) as to which this Warrant
is being exercised (plus any applicable issue or transfer taxes) (the
“Aggregate Exercise
Price”) in cash or wire transfer of immediately available funds and the
surrender of this Warrant (or an indemnification undertaking with respect to
this Warrant in the case of its loss, theft or destruction) to a common carrier
for overnight delivery to the Company as soon as practicable following such date
(“Cash Basis”)
or (ii) (x) if this Warrant is being exercised six months after the date hereof,
or (y) if at the time of exercise, the Warrant Shares are not subject to an
effective registration statement or (z) if an Event of Default has occurred, by
delivering an Exercise Notice and in lieu of making payment of the Aggregate
Exercise Price in cash or wire transfer, elect instead to receive upon such
exercise the “Net Number” of shares of Common Stock determined according to the
following formula (the “Cashless
Exercise”):

     

    
      	
              Net
      Number =

            	
              (A x B) – (A x C)

            
	 
      	
              B

            

    

    

    For
purposes of the foregoing formula:

    

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

    

    B = the
Closing Bid Price of the Common Stock on the date of exercise of the
Warrant.

    

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

    
      
         

      

      
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    In the
event of any exercise of the rights represented by this Warrant in compliance
with this Section 2, the Company shall on or before the fifth (5th)
Business Day following the date of receipt of the Exercise Notice, the Aggregate
Exercise Price and this Warrant (or an indemnification undertaking with respect
to this Warrant in the case of its loss, theft or destruction) and the receipt
of the representations of the Holder specified in Section 6 hereof, if requested
by the Company (the “Exercise Delivery
Documents”), and if the Common Stock is DTC eligible, credit such
aggregate number of shares of Common Stock to which the Holder shall be entitled
to the Holder’s or its designee’s balance account with The Depository Trust
Company; provided, however, if the Holder who submitted the Exercise Notice
requested physical delivery of any or all of the Warrant Shares, or, if the
Common Stock is not DTC eligible  then the Company shall, on or before
the fifth (5th)
Business Day following receipt of the Exercise Delivery Documents, issue and
surrender to a common carrier for overnight delivery to the address specified in
the Exercise Notice, a certificate, registered in the name of the Holder, for
the number of shares of Common Stock to which the Holder shall be entitled
pursuant to such request.  Upon delivery of the Exercise Notice and
Aggregate Exercise Price referred to in clause (i) or (ii) above 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.  In the case of a dispute as to the determination of the
Warrant Exercise Price, the Closing Bid Price or the arithmetic calculation of
the Warrant Shares, the Company shall promptly issue to the Holder the number of
Warrant Shares that is not disputed and shall submit the disputed determinations
or arithmetic calculations to the Holder via facsimile within one (1) Business
Day of receipt of the Holder’s Exercise Notice.

     

    (b)  If
the Holder and the Company are unable to agree upon the determination of the
Warrant Exercise Price or arithmetic calculation of the Warrant Shares within
one (1) day of such disputed determination or arithmetic calculation being
submitted to the Holder, then the Company shall immediately submit via facsimile
(i) the disputed determination of the Warrant Exercise Price or the Closing Bid
Price to an independent, reputable investment banking firm or (ii) the disputed
arithmetic calculation of the Warrant Shares to its independent, outside
accountant.  The Company shall cause the investment banking firm or
the accountant, as the case may be, to perform the determinations or
calculations and notify the Company and the Holder of the results no later than
forty-eight (48) hours from the time it receives the disputed determinations or
calculations.  Such investment banking firm’s or accountant’s
determination or calculation, as the case may be, shall be deemed conclusive
absent manifest error.

     

    (c)  Unless
the rights represented by this Warrant shall have expired or shall have been
fully exercised, the Company shall, as soon as practicable and in no event later
than five (5) Business Days after any exercise and at its own expense, issue a
new Warrant identical in all respects to this Warrant exercised except it shall
represent rights to purchase the number of Warrant Shares purchasable
immediately prior to such exercise under this Warrant exercised, less the number
of Warrant Shares with respect to which such Warrant is exercised.

     

    (d)  No
fractional Warrant Shares are to be issued upon any pro rata exercise of this
Warrant, but rather the number of Warrant Shares issued upon such exercise of
this Warrant shall be rounded up or down to the nearest whole
number.

     

    
      
         

      

      
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    (e)  If
the Company or its Transfer Agent shall fail for any reason or for no reason to
issue to the Holder within ten (10) days of receipt of the Exercise
Delivery Documents, a certificate for the number of Warrant Shares to which the
Holder is entitled or to credit the Holder’s balance account with The Depository
Trust Company for such number of Warrant Shares to which the Holder is entitled
upon the Holder’s exercise of this Warrant, the Company shall, in addition to
any other remedies under this Warrant or otherwise available to the Holder, pay
as additional damages in cash to the Holder on each day the issuance of such
certificate for Warrant Shares is not timely effected an amount equal to 0.025%
of the product of (A) the sum of the number of Warrant Shares not issued to the
Holder on a timely basis and to which the Holder is entitled, and (B) the
Closing Bid Price of the Common Stock for the trading day immediately preceding
the last possible date which the Company could have issued such Common Stock to
the Holder without violating this Section 2.

     

    (f)  If
within ten (10) days after the Company’s receipt of the Exercise Delivery
Documents, the Company fails to deliver a new Warrant to the Holder for the
number of Warrant Shares to which the Holder is entitled pursuant to Section 2
hereof, then, in addition to any other available remedies under this Warrant, or
otherwise available to the Holder, the Company shall pay as additional damages
in cash to the Holder on each day after such tenth (10th) day
that such delivery of such new Warrant is not timely effected in an amount equal
to 0.25% of the product of (A) the number of Warrant Shares represented by
the portion of this Warrant which is not being exercised and (B) the
Closing Bid Price of the Common Stock for the trading day immediately preceding
the last possible date which the Company could have issued such Warrant to the
Holder without violating this Section 2.

     

    (g)  The
Company may force the Holder to exercise this Warrant pursuant to this Section
2, by delivering a written notice (a “Redemption Notice”)
to the Holder if the following conditions have been met:

     

    (i)            A
registration statement on Form S-1 or S-3 covering the resale of the Warrant
Shares has been filed with the SEC and is in effect, and

     

    (ii)           The
closing bid price of the Common Stock has exceeded an amount equal to three (3)
times the Warrant Exercise Price for the ten (10) consecutive trading days prior
to the date the Redemption Notice was delivered;

     

    provided, however that the
Holder will not be required to exercise the Warrant pursuant to this Section
2(g) for a dollar amount that exceeds 1/5 of the dollar volume of the Common
Stock in the twenty (20) consecutive days prior to the date on which the
Redemption Notice was delivered.  Upon receipt of the Redemption
Notice, the Holder shall have five (5) days to exercise this
Warrant.  The number of Warrant Shares the Company is forcing the
Holder to purchase pursuant to this Section 2(g) shall be reduced, dollar for
dollar, by any amounts exercised by the Holder pursuant to any warrant for any
shares of capital stock of the Company.

    

    (h)  Principal Market
Regulation.  The Company shall not be obligated to issue any
shares of Common Stock upon conversion of the Notes or exercise of the Warrants
if the issuance of such shares of Common Stock would cause the Company to breach
its obligations under the rules or regulations of the American Stock Exchange
(the “Exchange
Cap”), except that such limitation shall not apply in the event that the
Company (A) obtains the approval of its stockholders as required by the
applicable rules of the American Stock Exchange for issuances of Common Stock in
excess of such amount or (B) obtains a written opinion from outside counsel to
the Company that such approval is not required, which opinion shall be
reasonably satisfactory to the Holder.  Until such approval or written
opinion is obtained, the Company shall not issue to the Holder in the aggregate,
upon conversion or exercise or otherwise, as applicable, of Notes or Warrants,
or Commitment Shares, shares of Common Stock in an amount greater than the
Exchange Cap.

    
      
         

      

      
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    Section
3.               Covenants as to Common
Stock.  The Company hereby covenants and agrees as
follows:

    

    (a)  This
Warrant is, and any Warrants issued in substitution for or replacement of this
Warrant will upon issuance be, duly authorized and validly issued.

     

    (b)  All
Warrant Shares which may be issued upon the exercise of the rights represented
by this Warrant will, upon issuance, be fully paid and nonassessable and free
from all taxes, liens and charges with respect to the issue thereof and to the
extent possible, in accordance with Section 3(g) hereof, validly
issued,.

     

    (c)  During
the period within which the rights represented by this Warrant may be exercised,
the Company will at all times have authorized and reserved at least one hundred
percent (100%) of the number of shares of Common Stock needed to provide for the
exercise of the rights then represented by this Warrant and the par value of
said shares will at all times be less than or equal to the applicable Warrant
Exercise Price.  If at any time the Company does not have a sufficient
number of shares of Common Stock authorized and available, then the Company
shall call and hold a special meeting of its stockholders within sixty (60)
days of that time for the sole purpose of increasing the number of authorized
shares of Common Stock.

     

    (d)  If
at any time after the date hereof the Company shall file a registration
statement, the Company shall include the Warrant Shares issuable to the Holder,
pursuant to the terms of this Warrant and shall maintain, so long as any other
shares of Common Stock shall be so listed, such listing of all Warrant Shares
from time to time issuable upon the exercise of this Warrant; and the Company
shall so list on each national securities exchange or automated quotation
system, as the case may be, and shall maintain such listing of, any other shares
of capital stock of the Company issuable upon the exercise of this Warrant if
and so long as any shares of the same class shall be listed on such national
securities exchange or automated quotation system.

     

    (e)  The
Company will not, by amendment of its Articles of Incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities, or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed by it
hereunder, but will at all times in good faith assist in the carrying out of all
the provisions of this Warrant and in the taking of all such action as may
reasonably be requested by the Holder in order to protect the exercise privilege
of the Holder against dilution or other impairment, consistent with the tenor
and purpose of this Warrant.  The Company will not increase the par
value of any shares of Common Stock receivable upon the exercise of this Warrant
above the Warrant Exercise Price then in effect, and (ii) will take all
such actions as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    (f)  This
Warrant will be binding upon any entity succeeding to the Company by merger,
consolidation or acquisition of all or substantially all of the Company’s
assets.

     

    (g)  As
promptly as possible, but in no event later than 5 p.m. New York City time on
February 12, 2008, the Company shall file an application for the listing on the
American Stock Exchange of five hundred and fifty thousand (550,000) shares of
Common Stock to be issuable upon exercise of this Warrant (such shares, the
“Listed Warrant
Shares”) and upon notification that such Listed Warrant Shares have been
listed will use its best efforts to secure and maintain such listing; provided, however, that any
Listed Warrant Shares that have not been issued may be issued to the Holder upon
conversion of the Notes (as defined in the Securities Purchase Agreement)
notwithstanding any designation in the listing application or this Section 3(g)
as Warrant Shares.  If upon exercise of the Warrants there are an
insufficient number of unissued Listed Shares (as defined in the Securities
Purchase Agreement) for the Company to satisfy such exercise, the Company shall
as promptly as possible secure the listing of an additional number of shares of
Common Stock necessary to satisfy such exercise.

     

    Section
4.               Taxes.  The
Company shall pay any and all taxes, except any applicable withholding, which
may be payable with respect to the issuance and delivery of Warrant Shares upon
exercise of this Warrant.

     

    Section
5.               Warrant Holder Not Deemed a
Stockholder.  Except as otherwise specifically provided herein,
no Holder, as such, of this Warrant shall be entitled to vote or receive
dividends or be deemed the holder of shares of capital stock of the Company for
any purpose, nor shall anything contained in this Warrant be construed to confer
upon the Holder hereof, as such, any of the rights of a stockholder of the
Company or any right to vote, give or withhold consent to any corporate action
(whether any reorganization, issue of stock, reclassification of stock,
consolidation, merger, conveyance or otherwise), receive notice of meetings,
receive dividends or subscription rights, or otherwise, prior to the issuance to
the Holder of the Warrant Shares which he or she is then entitled to receive
upon the due exercise of this Warrant.  In addition, nothing contained
in this Warrant shall be construed as imposing any liabilities on the Holder to
purchase any securities (upon exercise of this Warrant or otherwise) or as a
stockholder of the Company, whether such liabilities are asserted by the Company
or by creditors of the Company.  Notwithstanding this Section 5, the
Company will 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.

     

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

    
      
         

      

      
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    Section
7.               Ownership and
Transfer.

    

    (a)  The
Company shall maintain at its principal executive offices (or such other office
or agency of the Company as it may designate by notice to the Holder hereof), a
register for this Warrant, in which the Company shall record the name and
address of the person in whose name this Warrant has been issued, as well as the
name and address of each transferee.  The Company may treat the person
in whose name any Warrant is registered on the register as the owner and Holder
thereof for all purposes, notwithstanding any notice to the contrary, but in all
events recognizing any transfers made in accordance with the terms of this
Warrant.

     

    Section
8.               Adjustment of Warrant
Exercise Price and Number of Shares.  The Warrant Exercise
Price and the number of shares of Common Stock issuable upon exercise of this
Warrant shall be adjusted from time to time as follows:

     

    (a)  Adjustment of Warrant
Exercise Price and Number of Shares upon Issuance of Common
Stock.  If and whenever on or after the Issuance Date of this
Warrant, the Company issues or sells, or is deemed to have issued or sold, any
shares of Common Stock (other than Excluded Securities) for a per share
less than a price equal to the Warrant Exercise Price in effect immediately
prior to such issuance or sale, then immediately after such issue or sale the
Warrant Exercise Price then in effect shall be reduced.  Upon each
such adjustment of the Warrant Exercise Price hereunder, the number of Warrant
Shares issuable upon exercise of this Warrant shall be adjusted to the number of
shares determined by multiplying the Warrant Exercise Price in effect
immediately prior to such adjustment by the number of Warrant Shares issuable
upon exercise of this Warrant immediately prior to such adjustment and dividing
the product thereof by the Exercise Price.

     

    (b)  Effect on Warrant Exercise
Price of Certain Events.  For purposes of determining the
adjusted Warrant Exercise Price under Section 8(a) above, the following shall be
applicable:

    
      
         

      

      
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    (i)           Issuance of
Options.  If after the date hereof, the Company in any manner
grants 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 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 8(b)(i), the lowest price per
share for which one share of Common Stock is issuable upon exercise of such
Options or upon conversion or exchange of such Convertible Securities shall be
equal to 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 the Option, upon exercise of the Option or upon conversion
or exchange of any convertible security issuable upon exercise of such
Option.  No further adjustment of the Warrant Exercise Price shall be
made upon the actual issuance of such Common Stock or of such convertible
securities upon the exercise of such Options or upon the actual issuance of such
Common Stock upon conversion or exchange of such convertible
securities.

     

    (ii)           Issuance of Convertible
Securities.  If the Company in any manner issues or sells any
convertible securities and the lowest price per share for which one share of
Common Stock is issuable upon the conversion 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 8(b)(ii), the lowest
price per share for which one share of Common Stock is issuable upon such
conversion or exchange shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to one
share of Common Stock upon the issuance or sale of the convertible security and
upon conversion or exchange of such convertible security.  No further
adjustment of the Warrant Exercise Price shall be made upon the actual issuance
of such Common Stock upon conversion 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 the Warrant Exercise Price had
been or are to be made pursuant to other provisions of this Section 8(b), no
further adjustment of the Warrant Exercise Price shall be made by reason of such
issue or sale.

     

    (iii)           Change in Option Price or
Rate of Conversion.  If the purchase price provided for in any
Options, the additional consideration, if any, payable upon the issue,
conversion or exchange of any convertible securities, or the rate at which any
convertible securities are convertible into or exchangeable for Common Stock
changes at any time, the Warrant Exercise Price in effect at the time of such
change shall be adjusted to the Warrant Exercise Price which would have been in
effect at such time had such Options or convertible securities provided for such
changed purchase price, additional consideration or changed conversion rate, as
the case may be, at the time initially granted, issued or sold and the number of
Warrant Shares issuable upon exercise of this Warrant shall be correspondingly
readjusted.  For purposes of this Section 8(b)(iii), if the terms of
any Option or convertible security that was outstanding as of the Issuance Date
of this Warrant are changed in the manner described in the immediately preceding
sentence, then such Option or convertible security and the Common Stock deemed
issuable upon exercise, conversion or exchange thereof shall be deemed to have
been issued as of the date of such change.  No adjustment pursuant to
this Section 8(b) shall be made if such adjustment would result in an
increase of the Warrant Exercise Price then in effect.

    
      
         

      

      
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    (iv)           Calculation of Consideration
Received.  If any Common Stock, Options or convertible
securities are issued or sold or deemed to have been issued or sold for cash,
the consideration received therefore will be deemed to be the net amount
received by the Company therefore.  If any 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 marketable
securities, in which case the amount of consideration received by the Company
will be the market price of such securities on the date of receipt of such
securities.  If any 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
therefore 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 Common
Stock, Options or convertible securities, as the case may be.  The
fair value of any consideration other than cash or securities will be determined
jointly by the Company and the holders of Warrants representing at least
two-thirds (b) of the Warrant Shares issuable upon exercise of the Warrants then
outstanding.  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) Business Days after the tenth (10th) day
following the Valuation Event by an independent, reputable appraiser jointly
selected by the Company and the holders of Warrants representing at least
two-thirds (b) of the Warrant Shares issuable upon exercise of the Warrants then
outstanding.  The determination of such appraiser shall be final and
binding upon all parties and the fees and expenses of such appraiser shall be
borne jointly by the Company and the holders of Warrants.

     

    (v)           Integrated
Transactions.  In case any Option is issued in connection with
the issue or sale of other securities of the Company, together comprising one
integrated transaction in which no specific consideration is allocated to such
Options by the parties thereto, the Options will be deemed to have been issued
for a consideration of $.01.

     

    (vi)           Treasury
Shares.  The number of shares of Common Stock outstanding at
any given time does not include shares owned or held by or for the account of
the Company, and the disposition of any shares so owned or held will be
considered an issue or sale of Common Stock.

     

    (vii)           Record
Date.  If the Company takes a record of the holders of Common
Stock for the purpose of entitling them (1) to receive a dividend or other
distribution payable in Common Stock, Options or in convertible securities or
(2) to subscribe for or purchase 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)  Adjustment of Warrant
Exercise Price upon Subdivision or Combination of Common
Stock.  If the Company at any time after the date of issuance
of this Warrant subdivides (by any stock split, stock dividend, recapitalization
or otherwise) one or more classes of its outstanding shares of Common Stock into
a greater number of shares, any Warrant Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced and the number of
shares of Common Stock obtainable upon exercise of this Warrant will be
proportionately increased.  If the Company at any time after the date
of issuance of this Warrant combines (by combination, reverse stock split or
otherwise) one or more classes of its outstanding shares of Common Stock into a
smaller number of shares, any Warrant Exercise Price in effect immediately prior
to such combination will be proportionately increased and the number of Warrant
Shares issuable upon exercise of this Warrant will be proportionately
decreased.  Any adjustment under this Section 8(c) shall become
effective at the close of business on the date the subdivision or combination
becomes effective.

    
      
         

      

      
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    (d)  Distribution of
Assets.  If the Company shall declare or make any dividend or
other distribution of its assets (or rights to acquire its assets) to holders 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 or other similar transaction) (a “Distribution”), at
any time after the issuance of this Warrant, then, in each such
case:

     

    (i)           any
Warrant Exercise Price in effect immediately prior to the close of business on
the record date fixed for the determination of holders of Common Stock
entitled to receive the
Distribution shall be reduced, effective as of the close of business on such
record date, to a price determined by multiplying such Warrant Exercise Price by
a fraction of which (A) the numerator shall be the Closing Sale Price of the
Common Stock on the trading day immediately preceding such record date minus the
value of the Distribution (as determined in good faith by the Company’s Board of
Directors) applicable to one share of Common Stock, and (B) the denominator
shall be the Closing Sale Price of the Common Stock on the trading day
immediately preceding such record date; and

     

    (ii)           either
(A) the number of Warrant Shares obtainable upon exercise of this Warrant shall
be increased to a number of shares equal to the number of shares of Common Stock
obtainable immediately prior to the close of business on the record date fixed
for the determination of holders of Common Stock entitled to receive the
Distribution multiplied by the reciprocal of the fraction set forth in the
immediately preceding clause (i), or (B) in the event that the Distribution is
of common stock of a company whose common stock is traded on a national
securities exchange or a national automated quotation system, then the Holder
shall receive an additional warrant to purchase Common Stock, the terms of which
shall be identical to those of this Warrant, except that such warrant shall be
exercisable into the amount of the assets that would have been payable to the
Holder pursuant to the Distribution had the Holder exercised this Warrant
immediately prior to such record date and with an exercise price equal to the
amount by which the exercise price of this Warrant was decreased with respect to
the Distribution pursuant to the terms of the immediately preceding clause
(i).

     

    (e)  Certain
Events.  If any event occurs of the type contemplated by the
provisions of this Section 8 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 will make an appropriate adjustment in the Warrant
Exercise Price and the number of shares of Common Stock obtainable upon exercise
of this Warrant so as to protect the rights of the holders of the Warrants;
provided, except as set forth in section 8(c),that no such adjustment pursuant
to this Section 8(e) will increase the Warrant Exercise Price or decrease the
number of shares of Common Stock obtainable as otherwise determined pursuant to
this Section 8.

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    (f)  Voluntary Adjustments By
Company.  The Company may at any time during the term of this
Warrant reduce the then current Exercise Price to any amount and for any period
of time deemed appropriate by the Board of Directors of the
Company.

     

    (g)  Notices.

     

    (i)           
 Immediately upon any adjustment of the Warrant Exercise Price, the Company
will give written notice thereof to the Holder, setting forth in reasonable
detail, and certifying, the calculation of such adjustment.

     

    (ii)           The
Company will give written notice to the Holder at least ten (10) 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 Common Stock, (B) with
respect to any pro rata subscription offer to holders of Common Stock or
(C) for determining rights to vote with respect to any Organic Change (as
defined below), dissolution or liquidation, provided that such information shall
be made known to the public prior to or in conjunction with such notice being
provided to the Holder.

     

    (iii)           The
Company will also give written notice to the Holder at least ten (10) days prior
to the date on which any Organic Change, dissolution or liquidation will take
place, provided that such information shall be made known to the public prior to
or in conjunction with such notice being provided to the Holder.

     

    Section
9.               Purchase Rights;
Reorganization, Reclassification, Consolidation, Merger or
Sale.

     

    (a)  In
addition to any adjustments pursuant to Section 8 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 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 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 Common Stock
are to be determined for the grant, issue or sale of such Purchase
Rights.

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    (b)  Any
recapitalization, reorganization, reclassification, consolidation, merger, sale
of all or substantially all of the Company’s assets to another Person or other
transaction in each case which is effected in such a way that holders of Common
Stock are entitled to receive (either directly or upon subsequent liquidation)
stock, securities or assets with respect to or in exchange for Common Stock is
referred to herein as an “Organic
Change.”  Prior to the consummation of any (i) sale of all or
substantially all of the Company’s assets to an acquiring Person or (ii) other
Organic Change following which the Company is not a surviving entity, the
Company will secure from the Person purchasing such assets or the successor
resulting from such Organic Change (in each case, the “Acquiring Entity”) a
written agreement (in form and substance satisfactory to the Holders of Warrants
representing at least two-thirds (iii) of the Warrant Shares issuable upon
exercise of the Warrants then outstanding) to deliver to each Holder of Warrants
in exchange for such Warrants, a security of the Acquiring Entity evidenced by a
written instrument substantially similar in form and substance to this Warrant
and satisfactory to the Holders of the Warrants (including an adjusted warrant
exercise price equal to the value for the Common Stock reflected by the terms of
such consolidation, merger or sale, and exercisable for a corresponding number
of shares of Common Stock acquirable and receivable upon exercise of the
Warrants without regard to any limitations on exercise, if the value so
reflected is less than any Applicable Warrant Exercise Price immediately prior
to such consolidation, merger or sale).  Prior to the consummation of
any other Organic Change, the Company shall make appropriate provision (in form
and substance satisfactory to the Holders of Warrants representing a
majority of the
Warrant Shares issuable upon exercise of the Warrants then outstanding) to
insure that each of the holders of the Warrants will thereafter have the right
to acquire and receive in lieu of or in addition to (as the case may be) the
Warrant Shares immediately theretofore issuable and receivable upon the exercise
of the Holder’s Warrants (without regard to any limitations on exercise),
such shares of stock, securities or assets that would have been issued or
payable in such Organic Change with respect to or in exchange for the number of
Warrant Shares which would have been issuable and receivable upon the exercise
of the Holder’s Warrant as of the date of such Organic Change (without taking
into account any limitations or restrictions on the exercisability of this
Warrant).

     

    Section
10.             Lost, Stolen, Mutilated or
Destroyed Warrant.  If this Warrant is lost, stolen, mutilated
or destroyed, the Company shall promptly, on receipt of an indemnification
undertaking (or, in the case of a mutilated Warrant, the Warrant), issue a new
Warrant of like denomination and tenor as this Warrant so lost, stolen,
mutilated or destroyed.

     

    Section
11.           
 Notice.  Any
notices, consents, waivers or other communications required or permitted to be
given under the terms of this Warrant must be in writing and will be deemed to
have been delivered:  (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of receipt is received by the sending party transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one Business Day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same.  The addresses and facsimile numbers for such
communications shall be:

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

    
      	
              If
      to Holder:

            	
              YA
      Global Investments, L.P.

            
	 
      	
              101
      Hudson Street – Suite 3700

            
	 
      	
              Jersey
      City, NJ  07302

            
	 
      	
              Attention:                      Mark
      A. Angelo

            
	 
      	
              Telephone:                    (201)
      985-8300

            
	 
      	
              Facsimile:                   
         (201) 985-8266

            
	 
      	 
      
	
              With
      Copy to:

            	
              David
      Gonzalez, Esq.

            
	 
      	
              101
      Hudson Street – Suite 3700

            
	 
      	
              Jersey
      City, NJ 07302

            
	 
      	
              Telephone:                 
        (201) 985-8300

            
	 
      	
              Facsimile:                      (201)
      985-8266

            
	 
      	 
      
	
              If
      to the Company, to:

            	
              Hyperdynamics
      Corporation

            
	 
      	
              One
      Sugar Creek Center Boulevard, Suite 125

            
	 
      	
              Sugar
      Land, Texas 77478

            
	 
      	
              Attention:                      Kent
      P. Watts

            
	 
      	
              Telephone:                   (713)
      353-9400

            
	 
      	
              Facsimile:                      (713)
      353-9421

            
	 
      	 
      
	
              With
      a copy to:

            	
              Joel
      Seidner, Esq.

            
	 
      	
              880
      Tully Road #50

            
	 
      	
              Houston,
      TX 77079

            
	 
      	
              Telephone:                  
       (281) 493-1311

            
	 
      

    If to the
Holder, to it at the address and facsimile number set forth in this Section 11,
or at such other address and facsimile as shall be delivered to the Company upon
the issuance or transfer of this Warrant.  Each party shall provide
five days’ prior written notice to the other party of any change in address or
facsimile number.  Written confirmation of receipt (A) given by
the recipient of such notice, consent, facsimile, waiver or other communication,
(or (B) provided by a nationally recognized overnight delivery service
shall be rebuttable evidence of personal service, receipt by facsimile or
receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.

     

    Section
12.             Date.  The
date of this Warrant is set forth on page 1 hereof.  This Warrant,
in all events, shall be wholly void and of no effect after the close of
business on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of Section 8(b) shall continue in full
force and effect after such date as to any Warrant Shares or other securities
issued upon the exercise of this Warrant.

     

    Section
13.           
 Amendment and
Waiver.  Except as otherwise provided herein, the provisions of
the Warrants 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 holders of Warrants
representing at least two-thirds of the Warrant Shares issuable upon exercise of
the Warrants then outstanding; provided that, except for Section 8(d), no such
action may increase the Warrant Exercise Price or decrease the number of shares
or class of stock obtainable upon exercise of any Warrant without the written
consent of the Holder of such Warrant.

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    Section
14.            
Descriptive Headings;
Governing Law.  The descriptive headings of the several
sections and paragraphs of this Warrant are inserted for convenience only and do
not constitute a part of this Warrant.  The corporate laws of the
State of New Jersey shall govern all issues concerning the relative rights of
the Company and its stockholders.  All other questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of New Jersey, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New Jersey or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of New
Jersey.  Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in Hudson County and the
United States District Court for the District of New Jersey, for the
adjudication of any dispute hereunder or in connection herewith or therewith, or
with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is brought in an inconvenient forum
or that the venue of such suit, action or proceeding is
improper.  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 to such party at the address for such
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.

     

    Section
15.           Waiver of Jury
Trial.  AS A
MATERIAL INDUCEMENT FOR EACH PARTY HERETO TO ENTER INTO THIS WARRANT, THE
PARTIES HERETO HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
RELATED IN ANY WAY TO THIS WARRANT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS
ASSOCIATED WITH THIS TRANSACTION.

     

    

    REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, the
Company has caused this Warrant to be signed as of the date first set forth
above.

     

    
      	 
      	
              HYPERDYNAMICS
      CORPORATION

            
	 
      	 
      
	 
      	
              By:

            	 
      
	 
      	
              Name:

            
	 
      	
              Title:

            

    

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

     

    EXHIBIT A TO
WARRANT

     

    EXERCISE
NOTICE

     

    TO
BE EXECUTED

     

    BY
THE REGISTERED HOLDER TO EXERCISE THIS WARRANT

     

    The
undersigned Holder hereby exercises the right to purchase ______________ of the
shares of Common Stock (“Warrant Shares”) of
Hyperdynamics Corporation (the “Company”), evidenced
by the attached Warrant (the “Warrant”).  Capitalized
terms used herein and not otherwise defined shall have the respective meanings
set forth in the Warrant.

     

     (a)
Payment of Warrant
Exercise Price. The Holder shall pay the Aggregate Exercise Price of
$______________ to the Company in accordance with the terms of the
Warrant.

     

    (b) Delivery of Warrant
Shares.  The Company shall deliver to the Holder _________ Warrant Shares
in accordance with the terms of the Warrant.

     

    

    
      	
              Date:

            	
                    ,

            	
               

            
	 
      	 	 
      
	
              Name
      of Registered Holder

            
	 
      	 	 
      
	
              By:

            	 	 
      
	
              Name:

            	 	 
      
	
              Title:

            	 	 
      

    

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

     

    EXHIBIT B TO
WARRANT

     

     

    FORM OF WARRANT
POWER

     

    FOR VALUE RECEIVED, the
undersigned does hereby assign and transfer to ________________, Federal
Identification No. __________, a warrant to purchase ____________ shares of
the capital stock of Hyperdynamics Corporation represented by warrant
certificate no. _____, standing in the name of the undersigned on the books
of said corporation.  The undersigned does hereby irrevocably
constitute and appoint ______________, attorney to transfer the warrants of said
corporation, with full power of substitution in the premises.

     

    
      	
              Dated:

            	 	 
      	 
      
	 
      	 	 
      	 
      	 
      
	 
      	 	 
      	
              By:

            	 
      
	 
      	 	 
      	
              Name:

            	 
      
	 
      	 	 
      	
              Title:

            	 
      

    

     

     

    19

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