Document:

ex10_10.htm

    
      

    

    CHANGE
      IN CONTROL AGREEMENT

    

    

    This
      AGREEMENT
      (“Agreement”) is hereby entered into as of September
      30, 2004, by
      and
      between NAUGATUCK
      VALLEY SAVINGS AND LOAN
      (the
“Bank”), a federally chartered savings bank, with its principal offices at 333
      Church Street, Naugatuck, Connecticut 06770, Lee
      R. Schlesinger (“Executive”),
      and NAUGATUCK
      VALLEY FINANCIAL CORPORATION (the
      “Company”), a federally chartered corporation and the holding company of the
      Bank, as guarantor.

    

    WHEREAS,
      the
      Bank recognizes the importance of Executive to the Bank’s operations and wishes
      to protect his position with the Bank in the event of a change in control of
      the
      Bank or the Company for the period provided for in this Agreement;
      and

    

    WHEREAS,
      Executive and the Board of Directors of the Bank desire to enter into an
      agreement setting forth the terms and conditions of payments due to Executive
      in
      the event of a change in control and the related rights and obligations of
      each
      of the parties.

    

    NOW,
      THEREFORE,
      in
      consideration of the promises and mutual covenants herein contained, it is
      hereby agreed as follows:

    

    
      	
              1.

            	
              Term
                of Agreement.

            

    

    

    a.   The
      term
      of this Agreement shall be (i) the initial term, consisting of the period
      commencing on the date of this Agreement (the “Effective Date”) and ending on
      the second anniversary of the Effective Date, plus (ii) any and all extensions
      of the initial term made pursuant to this Section 1.

    

    b.   Commencing
      on the first anniversary of the Effective Date and continuing each anniversary
      date thereafter, the Board of Directors of the Bank (the “Board of Directors”)
      may extend the term of this Agreement for an additional one (1) year period
      beyond the then effective expiration date, provided that Executive shall not
      have given at least sixty (60) days’ written notice of his desire that the term
      not be extended.

    

    c.   Notwithstanding
      anything in this Section to the contrary, this Agreement shall terminate if
      Executive or the Bank terminates Executive’s employment prior to a Change in
      Control.

    

    
      	
              2.

            	
              Change
                in Control.

            

    

    

    a.   Upon
      the
      occurrence of a Change in Control of the Bank or the Company followed at any
      time during the term of this Agreement by the termination of Executive’s
      employment in accordance with the terms of this Agreement, other than for Cause,
      as defined in Section 2c. of this Agreement, the provisions of Section 3 of
      this
      Agreement shall apply. Upon the occurrence of a Change in Control, Executive
      shall have the right

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

    

    to
      elect
      to voluntarily terminate his employment at any time during the term of this
      Agreement following an event constituting “Good Reason.” 

     

    “Good
      Reason” means, unless Executive has consented in writing thereto, the occurrence
      following a Change in Control, of any of the following: 

    

    
      	 	
              i.

            	
              the
                assignment to Executive of any duties materially inconsistent with
                Executive’s
                position, including any material diminution in status, title, authority,
                duties or responsibilities, excluding for this purpose an isolated,
                insubstantial and inadvertent action not taken in bad faith and that
                is
                remedied by the Bank or Executive’s employer reasonably promptly after
                receipt of notice from Executive;

            

    

    

    
      	 	
              ii.

            	
              a
                reduction by the Bank or Executive’s employer of Executive’s base salary
                in effect immediately prior to the Change in
                Control;

            

    

    

    
      	 	
              iii.

            	
              the
                relocation of Executive’s office to a location more than twenty-five (25)
                miles from its location as of the date of this
                Agreement;

            

    

    

    
      	 	
              iv.

            	
              the
                taking of any action by the Bank or any of its affiliates or successors
                that would materially adversely affect Executive’s overall compensation
                and benefits package, unless such changes to the compensation and
                benefits
                package are made on a non-discriminatory basis and affect substantially
                all employees; or

            

    

    

    

    
      	 	
              v.

            	
              the
                failure of the Bank or the affiliate of the Bank by which Executive
                is
                employed, or any affiliate that directly or indirectly owns or controls
                any affiliate by which Executive is employed, to obtain the assumption
                in
                writing of the Bank’s obligation to perform this Agreement by any
                successor to all or substantially all of the assets of the Bank or
                such
                affiliate within thirty (30) days after a reorganization, merger,
                consolidation, sale or other disposition of assets of the Bank or
                such
                affiliate.

            

    

     

    b.    For
      purposes of this Agreement, a “Change in Control” shall be deemed to occur on
      the earliest of any of the following events: 

    

    i.   Merger:
      The
      Company merges into or consolidates with another corporation, or merges another
      corporation into the Company, and as a result less than a majority of the
      combined voting power of the resulting corporation immediately after the merger
      or consolidation is held by persons who were stockholders of the Company
      immediately before the merger or consolidation.

    

    ii.   Acquisition
      of Significant Share Ownership:
      There
      is filed, or is required to be filed, a report on Schedule 13D or another form
      or schedule (other than Schedule 13G) required under Sections 13(d) or 14(d)
      of
      the Securities Exchange

     

    
      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

    

    Act
      of
      1934, if the schedule discloses that the filing person or persons acting in
      concert has or have become the beneficial owner of 25% or more of a class of
      the
      Company’s voting securities, but this clause (b) shall not apply to beneficial
      ownership of Company voting shares held in a fiduciary capacity by an entity
      of
      which the Company directly or indirectly beneficially owns 50% or more of its
      outstanding voting securities.

     

    iii.   Change
      in Board Composition:
      During
      any period of two consecutive years, individuals who constitute the Company’s
      Board of Directors at the beginning of the two-year period cease for any reason
      to constitute at least a majority of the Company’s Board of Directors; provided,
      however, that for purposes of this clause (iii), each director who is first
      elected by the board (or first nominated by the board for election by the
      stockholders) by a vote of at least two-thirds (2/3) of the directors who were
      directors at the beginning of the two-year period shall be deemed to have also
      been a director at the beginning of such period; or

    

    iv.   Sale
      of Assets:
      The
      Company sells to a third party all or substantially all of its
      assets.

    

    Notwithstanding
      anything in this Agreement to the contrary, in no event shall the reorganization
      of the Bank from the mutual holding company form of organization to the full
      stock holding company form of organization (including the elimination of the
      mutual holding company) constitute a “Change in Control” for purposes of this
      Agreement.

    

    c.    Executive
      shall not have the right to receive termination benefits pursuant to Section
      3
      hereof upon termination for “Cause.” Termination for Cause shall mean
      termination of employment because of Executive’s personal dishonesty,
      incompetence, willful misconduct, any breach of fiduciary duty involving
      personal profit, intentional failure to perform stated duties, willful violation
      of any law, rule, regulation (other than traffic violations or similar
      offenses), final cease and desist order, or any material breach of any provision
      of this Agreement. Notwithstanding the foregoing, Executive shall not be deemed
      to have been terminated for Cause unless and until there shall have been
      delivered to him a copy of a resolution duly adopted by the affirmative vote
      of
      a majority of the entire membership of the Board of Directors at a meeting
      of
      the Board of Directors called and held for that purpose (after reasonable notice
      to Executive and an opportunity for him, together with counsel, to be heard
      before the Board of Directors), finding that, in the good faith opinion of
      the
      Board of Directors, Executive was guilty of conduct justifying termination
      for
      Cause and specifying the particulars thereof in detail. Executive shall not
      have
      the right to receive compensation or other benefits for any period after
      termination for Cause. During the period beginning on the date of the Notice
      of
      Termination for Cause pursuant to Section 4 hereof through the Date of
      Termination (as defined in Section 4), stock options granted to Executive under
      any stock option plan shall not be exercisable nor shall any unvested stock
      awards granted to Executive under any stock benefit plan of the Bank, the
      Company or any

     

    
      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      subsidiary
        or affiliate thereof, vest. At the Date of Termination, such stock options
        and
        any such unvested stock awards shall become null and void and shall not be
        exercisable by or delivered to Executive at any time subsequent to such
        termination for Cause.

       

    

    
      	
              3.

            	
              Termination
                Benefits.

            

    

    

    a.    If
      Executive’s employment is voluntarily (in accordance with Section 2a. of this
      Agreement) or involuntarily terminated within two (2) years of a Change in
      Control, Executive shall receive:

    

    
      	 	
              i.

            	
              a
                lump sum cash payment equal to two (2) times the Executive’s “base
                amount,” within the meaning of Section 280G(b)(3) of the Internal Revenue
                Code of 1986, as amended (the “Code”). Such payment shall be made not
                later than five (5) days following Executive’s termination of employment
                under this Section 3.

            

    

    

    
      	 	
              ii.

            	
              Continued
                benefit coverage under all Bank health and welfare plans (as defined
                in
                accordance with Section (3)(1) of the Employee Retirement Income
                Security
                Act of 1974 (“ERISA”), 29 U.S.C. Sec. 1002(1), and applicable regulations
                thereunder) which Executive participated in as of the date of the
                Change
                in Control (collectively, the “Employee Benefit Plans”) for a period of
                twenty-four (24) months following Executive’s termination of employment.
                Said coverage shall be provided under the same terms and conditions
                in
                effect on the date of Executive’s termination of employment. Solely for
                purposes of benefits continuation under the Employee Benefit Plans,
                Executive shall be deemed to be an active employee. To the extent
                that
                benefits required under this Section 3a. cannot be provided under
                the
                terms of any Employee Benefit Plan, the Bank shall enter into alternative
                arrangements that will provide Executive with comparable
                benefits.

            

    

    

    b.    Notwithstanding
      the preceding provisions of this Section 3, in no event shall the aggregate
      payments or benefits to be made or afforded to Executive under said paragraphs
      (the “Termination Benefits”) constitute an “excess parachute payment” under
      Section 280G of the Code or any successor thereto, and to avoid such a result,
      Termination Benefits will be reduced, if necessary, to an amount (the
“Non-Triggering Amount”), the value of which is one dollar ($1.00) less than an
      amount equal to three (3) times Executive’s “base amount,” as determined in
      accordance with said Section 280G. The allocation of the reduction required
      hereby among the Termination Benefits provided by this Section 3 shall be
      determined by Executive.

     

    
      	
              4.

            	
              Notice
                of Termination.

            

    

    

    a.    Any
      purported termination by the Bank or by Executive shall be communicated by
      Notice of Termination to the other party hereto. For purposes of this Agreement,
      a “Notice of Termination” shall mean a written notice which shall indicate the
      specific termination provision in this Agreement relied upon and shall set
      forth
      in detail the facts and circumstances claimed to

     

    
      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      provide
        a
        basis for termination of Executive’s employment under the provision so
        indicated.

    

    

    b.    “Date
      of
      Termination” shall mean the date specified in the Notice of Termination (which,
      in the case of a termination for Cause, shall not be less than thirty (30)
      days
      from the date such Notice of Termination is given).

     

    
      	
              5.

            	
              Source
                of Payments.

            

    

    

    All
      payments provided in this Agreement shall be timely paid in cash or check from
      the general funds of the Bank. The Company, however, unconditionally guarantees
      payment and provision of all amounts and benefits due hereunder to Executive
      and, if such amounts and benefits due from the Bank are not timely paid or
      provided by the Bank, such amounts and benefits shall be paid or provided by
      the
      Company. 

    

    
      	
              6.

            	
              Effect
                on Prior Agreements and Existing Benefit Plans.

            

    

    

    This
      Agreement contains the entire understanding between the parties hereto and
      supersedes any prior agreement between the Bank and Executive, except that
      this
      Agreement shall not affect or operate to reduce any benefit or compensation
      inuring to Executive of a kind elsewhere provided. No provision of this
      Agreement shall be interpreted to mean that Executive is subject to receiving
      fewer benefits than those available to him without reference to this Agreement.
      Nothing in this Agreement shall confer upon Executive the right to continue
      in
      the employ of the Bank or shall impose on the Bank any obligation to employ
      or
      retain Executive in its employ for any period.

    

    
      	
              7.

            	
              No
                Attachment.

            

    

    

    a.    Except
      as
      required by law, no right to receive payments under this Agreement shall be
      subject to anticipation, commutation, alienation, sale, assignment, encumbrance,
      charge, pledge, or hypothecation or to execution, attachment, levy or similar
      process or assignment by operation of law, and any attempt, voluntary or
      involuntary, to affect any such action shall be null, void and of no
      effect.

    

    b.    This
      Agreement shall be binding upon, and inure to the benefit of, Executive, the
      Bank and their respective successors and assigns.

    

    
      	
              8.

            	
              Modification
                and Waiver.

            

    

    

    a.    This
      Agreement may not be modified or amended except by an instrument in writing
      signed by the parties hereto.

    

    b.    No
      term
      or condition of this Agreement shall be deemed to have been waived, nor shall
      there be any estoppel against the enforcement of any provision of this
      Agreement, except by written instrument of the party charged with such waiver
      or
      estoppel. No such written waiver shall be deemed a continuing waiver unless
      specifically stated therein, and each such waiver shall operate only as to
      the
      specific term or condition waived and shall not constitute a waiver
      of

     

    
      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      such
        term
        or condition for the future or as to any act other than that specifically
        waived.

       

    

    
      	
              9.

            	
              Severability.

            

    

    

    If,
      for
      any reason, any provision of this Agreement, or any part of any provision,
      is
      held invalid, such invalidity shall not affect any other provision of this
      Agreement or any part of such provision not held so invalid, and each such
      other
      provision and part thereof shall to the full extent consistent with law continue
      in full force and effect.

    

    
      	
              10.

            	
              Headings
                for Reference Only.

            

    

    

    The
      headings of sections and paragraphs herein are included solely for convenience
      of reference and shall not control the meaning or interpretation of any of
      the
      provisions of this Agreement. In addition, references herein to the masculine
      shall apply to both the masculine and the feminine.

    

    
      	
              11.

            	
              Governing
                Law.

            

    

    

    Except
      to
      the extent preempted by federal law, the validity, interpretation, performance,
      and enforcement of this Agreement shall be governed by the laws of the State
      of
      Connecticut, without regard to principles of conflicts of law of that State.
      

    

    
      	
              12.

            	
              Arbitration.

            

    

    

    Any
      dispute or controversy arising under or in connection with this Agreement shall
      be settled exclusively by arbitration, conducted before a panel of three
      arbitrators sitting in a location selected by Executive within fifty (50) miles
      from the location of the Bank, in accordance with the rules of the American
      Arbitration Association then in effect. Judgment may be entered on the
      arbitrator’s award in any court having jurisdiction; provided, however, that
      Executive shall be entitled to seek specific performance of his right to be
      paid
      until the Date of Termination during the pendency of any dispute or controversy
      arising under or in connection with this Agreement.

    

    
      	
              13.

            	
              Payment
                of Legal Fees.

            

    

    

    All
      reasonable legal fees and expenses paid or incurred by Executive pursuant to
      any
      dispute or question of interpretation relating to this Agreement shall be paid
      or reimbursed by the Bank, only if Executive is successful pursuant to a legal
      judgment, arbitration or settlement.

    

    
      	
              14.

            	
              Indemnification.

            

    

    

    The
      Company or the Bank shall provide Executive (including his heirs, executors
      and
      administrators) with coverage under a standard directors’ and officers’
liability insurance policy at its expense and shall indemnify Executive (and
      his
      heirs, executors and administrators) to the fullest extent permitted under
      applicable law against all expenses and liabilities reasonably incurred by
      him
      in connection with or arising out of any action, suit or proceeding in which
      he

     

    
      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      may
        be
        involved by reason of his having been a director or officer of the Company
        or
        the Bank (whether or not he continues to be a director or officer at the
        time of
        incurring such expenses or liabilities), such expenses and liabilities to
        include, but not be limited to, judgments, court costs, attorneys’ fees and the
        costs of reasonable settlements.

       

    

    
      	
              15.

            	
              Successors
                to the Bank and the Company.

            

    

    

    The
      Bank
      and the Company shall require any successor or assignee, whether direct or
      indirect, by purchase, merger, consolidation or otherwise, to all or
      substantially all of the business or assets of the Bank or the Company,
      expressly and unconditionally to assume and agree to perform the Bank’s and the
      Company’s obligations under this Agreement, in the same manner and to the same
      extent that the Bank and the Company would be required to perform if no such
      succession or assignment had taken place.

    

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    

    SIGNATURES

    

    IN
      WITNESS WHEREOF, Naugatuck Valley Savings and Loan and Naugatuck Valley
      Financial Corporation have caused this Agreement to be executed and their seals
      to be affixed hereunto by their duly authorized officers, and Executive has
      signed this Agreement, on the 30th day of September, 2004.

    

    

    
      	
              ATTEST:

            	 	
              NAUGATUCK
                VALLEY SAVINGS AND LOAN

            
	 	 	 	 
	 	 	 	 
	
              /s/
                Bernadette A. Mole

            	 	
              By:

            	
              /s/
                John C. Roman

            
	
              Corporate
                Secretary

            	 	 	
              For
                the Entire Board of Directors

            
	 	 	 	 
	 	 	 	 
	
              ATTEST:

            	 	
              NAUGATUCK
                VALLEY FINANCIAL CORPORATION

            
	 	 	
              (Guarantor)

            
	 	 	 	 
	 	 	 	 
	
              /s/
                Bernadette A. Mole

            	 	
              By:

            	
              /s/
                John C. Roman

            
	
              Corporate
                Secretary

            	 	 	
              For
                the Entire Board of Directors

            

    

    

    

    [SEAL]

    

    

    
      	
              WITNESS:

            	 	
              EXECUTIVE

            
	 	 	 
	 	 	 
	
              /s/
                Bernadette A. Mole

            	 	
              /s/
                Lee R. Schlesinger

            
	
              Corporate
                Secretary

            	 	
              Lee
                R. Schlesinger

            

    

     

     

    8Exhibit 4.1

         THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT
         HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
         EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN A SECURITIES PURCHASE
         AGREEMENT DATED AS OF APRIL 4, 2006, NEITHER THIS WARRANT NOR ANY OF
         SUCH SHARES MAY BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
         EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER SAID ACT OR,
         AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE, CUSTOMARY FOR
         OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION IS
         NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 OR
         REGULATION S UNDER SUCH ACT.

                                                                   Right to
                                                                   Purchase
                                                                   [______]
                                                                   Shares of
                                                                   Common
                                                                   Stock, par
                                                                   value $.00005
                                                                   per share

                             STOCK PURCHASE WARRANT

         THIS CERTIFIES THAT, for value received, [______] or its registered
assigns, is entitled to purchase from MIDNIGHT HOLDINGS GROUP, INC., a Delaware
corporation (the "Company"), at any time or from time to time during the period
specified in Paragraph 2 hereof, [______] fully paid and nonassessable shares of
the Company's Common Stock, par value $.00005 per share (the "Common Stock"), at
an exercise price per share equal to $.08 (the "Exercise Price"). The term
"Warrant Shares," as used herein, refers to the shares of Common Stock
purchasable hereunder. The Warrant Shares and the Exercise Price are subject to
adjustment as provided in Paragraph 4 hereof. The term "Warrants" means this
Warrant and the other warrants issued pursuant to that certain Securities
Purchase Agreement, dated April 4, 2006, by and among the Company and the Buyers
listed on the execution page thereof (the "Securities Purchase Agreement").

         This Warrant is subject to the following terms, provisions, and
conditions:

         1.  MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
Subject to the provisions hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the

<PAGE>

Company as it may designate by notice to the holder hereof), and upon (i)
payment to the Company in cash, by certified or official bank check or by wire
transfer for the account of the Company of the Exercise Price for the Warrant
Shares specified in the Exercise Agreement or (ii) if the resale of the Warrant
Shares by the holder is not then registered pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), delivery to the Company of a written notice of an election to
effect a "Cashless Exercise" (as defined in Section 11(c) below) for the Warrant
Shares specified in the Exercise Agreement. The Warrant Shares so purchased
shall be deemed to be issued to the holder hereof or such holder's designee, as
the record owner of such shares, as of the close of business on the date on
which this Warrant shall have been surrendered, the completed Exercise Agreement
shall have been delivered, and payment shall have been made for such shares as
set forth above. Certificates for the Warrant Shares so purchased, representing
the aggregate number of shares specified in the Exercise Agreement, shall be
delivered to the holder hereof within a reasonable time, not exceeding five (5)
business days, after this Warrant shall have been so exercised. The certificates
so delivered shall be in such denominations as may be requested by the holder
hereof and shall be registered in the name of such holder or such other name as
shall be designated by such holder. If this Warrant shall have been exercised
only in part, then, unless this Warrant has expired, the Company shall, at its
expense, at the time of delivery of such certificates, deliver to the holder a
new Warrant representing the number of shares with respect to which this Warrant
shall not then have been exercised. In addition to all other available remedies
at law or in equity, if the Company fails to deliver certificates for the
Warrant Shares within five (5) business days after this Warrant is exercised,
then the Company shall pay to the holder in cash a penalty (the "Penalty") equal
to 2% of the number of Warrant Shares that the holder is entitled to multiplied
by the Market Price (as hereinafter defined) for each day that the Company fails
to deliver certificates for the Warrant Shares. For example, if the holder is
entitled to 100,000 Warrant Shares and the Market Price is $2.00, then the
Company shall pay to the holder $4,000 for each day that the Company fails to
deliver certificates for the Warrant Shares. The Penalty shall be paid to the
holder by the fifth day of the month following the month in which it has
accrued.

         Notwithstanding anything in this Warrant to the contrary, in no event
shall the holder of this Warrant be entitled to exercise a number of Warrants
(or portions thereof) in excess of the number of Warrants (or portions thereof)
upon exercise of which the sum of (i) the number of shares of Common Stock
beneficially owned by the holder and its affiliates (other than shares of Common
Stock which may be deemed beneficially owned through the ownership of the
unexercised Warrants and the unexercised or unconverted portion of any other
securities of the Company (including the Notes (as defined in the Securities
Purchase Agreement)) subject to a limitation on conversion or exercise analogous
to the limitation contained herein) and (ii) the number of shares of Common
Stock issuable upon exercise of the Warrants (or portions thereof) with respect
to which the determination described herein is being made, would result in
beneficial ownership by the holder and its affiliates of more than 4.9% of the
outstanding shares of Common Stock. For purposes of the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13D-G
thereunder, except as otherwise provided in clause (i) of the preceding
sentence. Notwithstanding anything to the contrary contained herein, the
limitation on exercise of this Warrant set forth herein may not be amended
without (i) the written consent of the holder hereof and the Company and (ii)
the approval of a majority of shareholders of the Company.

                                      -2-

<PAGE>

             2.  PERIOD OF EXERCISE. This Warrant is exercisable at any time or
from time to time on or after the date on which this Warrant is issued and
delivered pursuant to the terms of the Securities Purchase Agreement and before
6:00 p.m., New York, New York time on the fifth (5th) anniversary of the date of
issuance (the "Exercise Period").

             3.  CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants
and agrees as follows:

             (A)  SHARES TO BE FULLY PAID. Subject to the completion of the
Charter Amendment Actions (as such term is defined in the Securities Purchase
Agreement), all Warrant Shares will, upon issuance in accordance with the terms
of this Warrant, be validly issued, fully paid, and nonassessable and free from
all taxes, liens, and charges with respect to the issue thereof.

             (B)  RESERVATION OF SHARES. Subject to the completion of the
Charter Amendment Actions, during the Exercise Period, the Company shall at all
times have authorized, and reserved for the purpose of issuance upon exercise of
this Warrant, a sufficient number of shares of Common Stock to provide for the
exercise of this Warrant.

             (C) LISTING. The Company shall use it best efforts to secure the
listing of the shares of Common Stock issuable upon exercise of the Warrant upon
each national securities exchange or automated quotation system, if any, upon
which shares of Common Stock are then listed (subject to official notice of
issuance upon exercise of this Warrant) and shall maintain, so long as any other
shares of Common Stock shall be so listed, such listing of all shares of Common
Stock 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.

             (D) CERTAIN ACTIONS PROHIBITED. The Company will not, by amendment
of its charter 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 of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. Without limiting the generality of the foregoing, the Company (i)
will 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, 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.

         (E) SUCCESSORS AND ASSIGNS. This Warrant will be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all the Company's assets.

                                      -3-

<PAGE>

         4.  ANTIDILUTION PROVISIONS. During the Exercise Period, the Exercise
Price and the number of Warrant Shares shall be subject to adjustment from time
to time as provided in this Paragraph 4.

         In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
to the nearest cent.

             (A) ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON ISSUANCE
OF COMMON STOCK. Except as otherwise provided in Paragraphs 4(c) and 4(e)
hereof, if and whenever on or after the date of issuance of this Warrant, the
Company issues or sells, or in accordance with Paragraph 4(b) hereof is deemed
to have issued or sold, any shares of Common Stock for no consideration or for a
consideration per share (before deduction of reasonable expenses or commissions
or underwriting discounts or allowances in connection therewith) less than the
Market Price on the date of issuance (a "Dilutive Issuance"), then immediately
upon the Dilutive Issuance, the Exercise Price will be reduced to a price
determined by multiplying the Exercise Price in effect immediately prior to the
Dilutive Issuance by a fraction, (i) the numerator of which is an amount equal
to the sum of (x) the number of shares of Common Stock actually outstanding
immediately prior to the Dilutive Issuance, plus (y) the quotient of the
aggregate consideration, calculated as set forth in Paragraph 4(b) hereof,
received by the Company upon such Dilutive Issuance divided by the Market Price
in effect immediately prior to the Dilutive Issuance, and (ii) the denominator
of which is the total number of shares of Common Stock Deemed Outstanding (as
defined below) immediately after the Dilutive Issuance.

             (B) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes of
determining the adjusted Exercise Price under Paragraph 4(a) hereof, the
following will be applicable:

                 (I) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any manner
issues or grants any warrants, rights or options, whether or not immediately
exercisable, to subscribe for or to purchase Common Stock or other securities
convertible into or exchangeable for Common Stock ("Convertible Securities")
(such warrants, rights and options to purchase Common Stock or Convertible
Securities are hereinafter referred to as "Options") and the price per share for
which Common Stock is issuable upon the exercise of such Options is less than
the Market Price on the date of issuance or grant of such Options, then the
maximum total number of shares of Common Stock issuable upon the exercise of all
such Options will, as of the date of the issuance or grant of such Options, be
deemed to be outstanding and to have been issued and sold by the Company for
such price per share. For purposes of the preceding sentence, the "price per
share for which Common Stock is issuable upon the exercise of such Options" is
determined by dividing (i) the total amount, if any, received or receivable by
the Company as consideration for the issuance or granting of all such Options,
plus the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the exercise of all such Options, plus, in the case of
Convertible Securities issuable upon the exercise of such Options, the minimum
aggregate amount of additional consideration payable upon the conversion or
exchange thereof at the time such Convertible Securities first become
convertible or exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the exercise of all such Options (assuming full
conversion of Convertible Securities, if applicable). No further adjustment to
the Exercise Price will be made upon the actual issuance of such Common Stock
upon the exercise of such Options or upon the conversion or exchange of
Convertible Securities issuable upon exercise of such Options.

                                      -4-

<PAGE>

                 (II) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
manner issues or sells any Convertible Securities, whether or not immediately
convertible (other than where the same are issuable upon the exercise of
Options) and the price per share for which Common Stock is issuable upon such
conversion or exchange is less than the Market Price on the date of issuance,
then the maximum total number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities will, as of the date
of the issuance of such Convertible Securities, be deemed to be outstanding and
to have been issued and sold by the Company for such price per share. For the
purposes of the preceding sentence, the "price per share for which Common Stock
is issuable upon such conversion or exchange" is determined by dividing (i) the
total amount, if any, received or receivable by the Company as consideration for
the issuance or sale of all such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the conversion or exchange thereof at the time such Convertible Securities
first become convertible or exchangeable, by (ii) the maximum total number of
shares of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities. No further adjustment to the Exercise Price will be made
upon the actual issuance of such Common Stock upon conversion or exchange of
such Convertible Securities.

                 (III) CHANGE IN OPTION PRICE OR CONVERSION RATE. If there is a
change at any time in (i) the amount of additional consideration payable to the
Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the conversion or exchange of
any Convertible Securities; or (iii) the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock (other than
under or by reason of provisions designed to protect against dilution), the
Exercise Price in effect at the time of such change will be readjusted to the
Exercise Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold.

                 (IV) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. If, in any case, the total number of shares of Common Stock issuable
upon exercise of any Option or upon conversion or exchange of any Convertible
Securities is not, in fact, issued and the rights to exercise such Option or to
convert or exchange such Convertible Securities shall have expired or
terminated, the Exercise Price then in effect will be readjusted to the Exercise
Price which would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination (other than in respect of
the actual number of shares of Common Stock issued upon exercise or conversion
thereof), never been issued.

                 (V) CALCULATION OF CONSIDERATION RECEIVED. If any Common Stock,
Options or Convertible Securities are issued, granted or sold for cash, the
consideration received therefor for purposes of this Warrant will be the amount
received by the Company therefor, before deduction of reasonable commissions,
underwriting discounts or allowances or other reasonable expenses paid or
incurred by the Company in connection with such issuance, grant or sale. In case
any Common Stock, Options or Convertible Securities are issued or sold for a
consideration part or all of which shall be other than cash, the amount of the
consideration other than cash received by the Company will be the fair value of
such consideration, except where such consideration consists of securities, in
which case the amount of consideration received by

                                      -5-

<PAGE>

the Company will be the Market Price thereof as of the date of receipt. In case
any Common Stock, Options or Convertible Securities are issued in connection
with any acquisition, merger or consolidation in which the Company is the
surviving corporation, 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 corporation 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 in good faith by the Board of
Directors of the Company.

                 (VI) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. No adjustment
to the Exercise Price will be made (i) upon the exercise of any warrants,
options or convertible securities granted, issued and outstanding on the date of
issuance of this Warrant; (ii) upon the grant or exercise of any stock or
options which may hereafter be granted or exercised under any employee benefit
plan, stock option plan or restricted stock plan of the Company now existing or
to be implemented in the future, so long as the issuance of such stock or
options is approved by a majority of the independent members of the Board of
Directors of the Company or a majority of the members of a committee of
independent directors established for such purpose; or (iii) upon the exercise
of the Warrants.

             (C) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company at
any time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company at any
time combines (by reverse stock split, recapitalization, reorganization,
reclassification or otherwise) the shares of Common Stock acquirable hereunder
into a smaller number of shares, then, after the date of record for effecting
such combination, the Exercise Price in effect immediately prior to such
combination will be proportionately increased.

             (D) ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Paragraph 4, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be adjusted
by multiplying a number equal to the Exercise Price in effect immediately prior
to such adjustment by the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.

             (E) CONSOLIDATION, MERGER OR SALE. In case of any consolidation of
the Company with, or merger of the Company into any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company, then as a condition of such consolidation, merger or sale or
conveyance, adequate provision will be made whereby the holder of this Warrant
will have the right to acquire and receive upon exercise of this Warrant in lieu
of the shares of Common Stock immediately theretofore acquirable upon the
exercise of this Warrant, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for the number of shares of
Common Stock immediately theretofore acquirable and receivable upon exercise of
this Warrant had such consolidation, merger or sale or conveyance not taken
place. In any such case, the Company will make appropriate provision to insure
that the provisions of this Paragraph 4 hereof will thereafter be applicable as
nearly as may be in relation to any shares of stock or securities thereafter
deliverable upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the

                                      -6-

<PAGE>

consummation thereof, the successor corporation (if other than the Company)
assumes by written instrument the obligations under this Paragraph 4 and the
obligations to deliver to the holder of this Warrant such shares of stock,
securities or assets as, in accordance with the foregoing provisions, the holder
may be entitled to acquire.

             (F) DISTRIBUTION OF ASSETS. In case the Company shall declare or
make any distribution of its assets (including cash) to holders of Common Stock
as a partial liquidating dividend, by way of return of capital or otherwise,
then, after the date of record for determining shareholders entitled to such
distribution, but prior to the date of distribution, the holder of this Warrant
shall be entitled upon exercise of this Warrant for the purchase of any or all
of the shares of Common Stock subject hereto, to receive the amount of such
assets which would have been payable to the holder had such holder been the
holder of such shares of Common Stock on the record date for the determination
of shareholders entitled to such distribution.

             (G) NOTICE OF ADJUSTMENT. Upon the occurrence of any event which
requires any adjustment of the Exercise Price, then, and in each such case, the
Company shall give notice thereof to the holder of this Warrant, which notice
shall state the Exercise Price resulting from such adjustment and the increase
or decrease in the number of Warrant Shares purchasable at such price upon
exercise, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based. Such calculation shall be certified
by the Chief Financial Officer of the Company.

             (H) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.

             (I) NO FRACTIONAL SHARES. No fractional shares of Common Stock are
to be issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the Market Price of a share of Common
Stock on the date of such exercise.

             (J) OTHER NOTICES. In case at any time:

                 (I) the Company shall declare any dividend upon the Common
Stock payable in shares of stock of any class or make any other distribution
(including dividends or distributions payable in cash out of retained earnings)
to the holders of the Common Stock;

                 (II) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class or other
rights;

                 (III) there shall be any capital reorganization of the Company,
or reclassification of the Common Stock, or consolidation or merger of the
Company with or into, or sale of all or substantially all its assets to, another
corporation or entity; or

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

                                      -7-

<PAGE>

then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also specify the date
on which the holders of Common Stock shall be entitled to receive such dividend,
distribution, or subscription rights or to exchange their Common Stock for stock
or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are closed in
respect thereto. Failure to give any such notice or any defect therein shall not
affect the validity of the proceedings referred to in clauses (i), (ii), (iii)
and (iv) above.

             (K) CERTAIN EVENTS. If any event occurs of the type contemplated by
the adjustment provisions of this Paragraph 4 but not expressly provided for by
such provisions, the Company will give notice of such event as provided in
Paragraph 4(g) hereof, and the Company's Board of Directors will make an
appropriate adjustment in the Exercise Price and the number of shares of Common
Stock acquirable upon exercise of this Warrant so that the rights of the holder
shall be neither enhanced nor diminished by such event.

             (L) CERTAIN DEFINITIONS.

                 (I) "COMMON STOCK DEEMED OUTSTANDING" shall mean the number of
shares of Common Stock actually outstanding (not including shares of Common
Stock held in the treasury of the Company), plus (x) pursuant to Paragraph
4(b)(i) hereof, the maximum total number of shares of Common Stock issuable upon
the exercise of Options, as of the date of such issuance or grant of such
Options, if any, and (y) pursuant to Paragraph 4(b)(ii) hereof, the maximum
total number of shares of Common Stock issuable upon conversion or exchange of
Convertible Securities, as of the date of issuance of such Convertible
Securities, if any.

                 (II) "MARKET PRICE," as of any date, (i) means the average of
the last reported sale prices for the shares of Common Stock on the OTCBB for
the five (5) Trading Days immediately preceding such date as reported by
Bloomberg, or (ii) if the OTCBB is not the principal trading market for the
shares of Common Stock, the average of the last reported sale prices on the
principal trading market for the Common Stock during the same period as reported
by Bloomberg, or (iii) if market value cannot be calculated as of such date on
any of the foregoing bases, the Market Price shall be the fair market value as
reasonably determined in good faith by (a) the Board of Directors of the Company
or, at the option of a majority-in-interest of the holders of the outstanding
Warrants by (b) an independent investment bank of nationally recognized standing
in the valuation of businesses similar to the business of the corporation. The
manner of determining the Market Price of the Common Stock set forth in the
foregoing definition shall apply with respect to any other security in respect
of which a determination as to market value must be made hereunder.

                 (III) "COMMON STOCK," for purposes of this Paragraph 4,
includes the Common Stock, par value $.00005 per share, and any additional class
of stock of the Company

                                      -8-

<PAGE>

having no preference as to dividends or distributions on liquidation, provided
that the shares purchasable pursuant to this Warrant shall include only shares
of Common Stock, par value $.00005 per share, in respect of which this Warrant
is exercisable, or shares resulting from any subdivision or combination of such
Common Stock, or in the case of any reorganization, reclassification,
consolidation, merger, or sale of the character referred to in Paragraph 4(e)
hereof, the stock or other securities or property provided for in such
Paragraph.

         5.  ISSUE TAX. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant 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 of this Warrant.

         6.  NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.

         7.  TRANSFER, EXCHANGE, AND REPLACEMENT OF WARRANT.

             (A) RESTRICTION ON TRANSFER. This Warrant and the rights granted to
the holder hereof are transferable, in whole or in part, upon surrender of this
Warrant, together with a properly executed assignment in the form attached
hereto, at the office or agency of the Company referred to in Paragraph 7(e)
below, provided, however, that any transfer or assignment shall be subject to
the conditions set forth in Paragraph 7(f) hereof and to the applicable
provisions of the Securities Purchase Agreement. Until due presentment for
registration of transfer on the books of the Company, the Company may treat the
registered holder hereof as the owner and holder hereof for all purposes, and
the Company shall not be affected by any notice to the contrary. Notwithstanding
anything to the contrary contained herein, the registration rights described in
Paragraph 8 are assignable only in accordance with the provisions of that
certain Registration Rights Agreement, dated April 4, 2006, by and among the
Company and the other signatories thereto (the "Registration Rights Agreement").

             (B) WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This Warrant
is exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Paragraph 7(e) below, for new Warrants of
like tenor representing in the aggregate the right to purchase the number of
shares of Common Stock which may be purchased hereunder, each of such new
Warrants to represent the right to purchase such number of shares as shall be
designated by the holder hereof at the time of such surrender.

             (C) REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.

                                      -9-

<PAGE>

             (D) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of this
Warrant in connection with any transfer, exchange, or replacement as provided in
this Paragraph 7, this Warrant shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and all other
expenses (other than legal expenses, if any, incurred by the holder or
transferees) and charges payable in connection with the preparation, execution,
and delivery of Warrants pursuant to this Paragraph 7.

             (E) REGISTER. 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 and
each prior owner of this Warrant.

             (F) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the time of
the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act of 1933, as amended (the "Securities Act") and under applicable state
securities or blue sky laws, the Company may require, as a condition of allowing
such exercise, transfer, or exchange, (i) that the holder or transferee of this
Warrant, as the case may be, furnish to the Company a written opinion of
counsel, which opinion and counsel are acceptable to the Company, to the effect
that such exercise, transfer, or exchange may be made without registration under
said Act and under applicable state securities or blue sky laws, (ii) that the
holder or transferee execute and deliver to the Company an investment letter in
form and substance acceptable to the Company and (iii) that the transferee be an
"accredited investor" as defined in Rule 501(a) promulgated under the Securities
Act; provided that no such opinion, letter or status as an "accredited investor"
shall be required in connection with a transfer pursuant to Rule 144 under the
Securities Act. The first holder of this Warrant, by taking and holding the
same, represents to the Company that such holder is acquiring this Warrant for
investment and not with a view to the distribution thereof.

         8.  REGISTRATION RIGHTS. The initial holder of this Warrant (and
certain assignees thereof) is entitled to the benefit of such registration
rights in respect of the Warrant Shares as are set forth in Section 2 of the
Registration Rights Agreement.

         9.  NOTICES. All notices, requests, and other communications required
or permitted to be given or delivered hereunder to the holder of this Warrant
shall be in writing, and shall be personally delivered, or shall be sent by
certified or registered mail or by recognized overnight mail courier, postage
prepaid and addressed, to such holder at the address shown for such holder on
the books of the Company, or at such other address as shall have been furnished
to the Company by notice from such holder. All notices, requests, and other
communications required or permitted to be given or delivered hereunder to the
Company shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail or by recognized overnight mail courier, postage
prepaid and addressed, to the office of the Company at 3872 Rochester Road,
Troy, MI 48083, Attention: Chief Executive Officer, or at such other address as
shall have been furnished to the holder of this Warrant by notice from the
Company. Any such notice, request, or other communication may be sent by
facsimile, but shall in such case be subsequently confirmed by a writing
personally delivered or sent by certified or registered mail or by recognized
overnight mail courier as provided above. All notices, requests, and other
communications shall be deemed to have been given either at the time of the
receipt thereof by

                                      -10-

<PAGE>

the person entitled to receive such notice at the address of such person for
purposes of this Paragraph 9, or, if mailed by registered or certified mail or
with a recognized overnight mail courier upon deposit with the United States
Post Office or such overnight mail courier, if postage is prepaid and the
mailing is properly addressed, as the case may be.

         10. GOVERNING LAW. THIS WARRANT SHALL BE ENFORCED, GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK,
NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS WARRANT, THE AGREEMENTS
ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO
THE MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT
SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN
EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL
NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER
THIS WARRANT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING
ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH
DISPUTE.

         11. MISCELLANEOUS.

             (A) AMENDMENTS. This Warrant and any provision hereof may only be
amended by an instrument in writing signed by the Company and the holder hereof.

             (B) DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Warrant are inserted for purposes of reference only, and
shall not affect the meaning or construction of any of the provisions hereof.

             (C) CASHLESS EXERCISE. Notwithstanding anything to the contrary
contained in this Warrant, if the resale of the Warrant Shares by the holder is
not then registered pursuant to an effective registration statement under the
Securities Act, this Warrant may be exercised by presentation and surrender of
this Warrant to the Company at its principal executive offices with a written
notice of the holder's intention to effect a cashless exercise, including a
calculation of the number of shares of Common Stock to be issued upon such
exercise in accordance with the terms hereof (a "Cashless Exercise"). In the
event of a Cashless Exercise, in lieu of paying the Exercise Price in cash, the
holder shall surrender this Warrant for that number of shares of Common Stock
determined by multiplying the number of Warrant Shares to which it would
otherwise be entitled by a fraction, the numerator of which shall be the
difference between the then current Market Price per share of the Common Stock
and the Exercise Price, and the denominator of which shall be the then current
Market Price per share of Common Stock. For

                                      -11-

<PAGE>

example, if the holder is exercising 100,000 Warrants with a per Warrant
exercise price of $0.75 per share through a cashless exercise when the Common
Stock's current Market Price per share is $2.00 per share, then upon such
Cashless Exercise the holder will receive 62,500 shares of Common Stock.

             (D) REMEDIES. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the holder, by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Warrant will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Warrant, that the
holder shall be entitled, in addition to all other available remedies at law or
in equity, and in addition to the penalties assessable herein, to an injunction
or injunctions restraining, preventing or curing any breach of this Warrant and
to enforce specifically the terms and provisions thereof, without the necessity
of showing economic loss and without any bond or other security being required.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                      -12-

<PAGE>

         IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.

                                                MIDNIGHT HOLDINGS GROUP, INC.

                                                By: ____________________________
                                                    Nicholas Cocco
                                                    Chief Executive Officer

Dated as of April 4, 2006

<PAGE>

                           FORM OF EXERCISE AGREEMENT

                                                       Dated:  ________ __, 200_

To:      ______________________

         The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase ________ shares of Common Stock covered by
such Warrant, and makes payment herewith in full therefor at the price per share
provided by such Warrant in cash or by certified or official bank check in the
amount of, or, if the resale of such Common Stock by the undersigned is not
currently registered pursuant to an effective registration statement under the
Securities Act of 1933, as amended, by surrender of securities issued by the
Company (including a portion of the Warrant) having a market value (in the case
of a portion of this Warrant, determined in accordance with Section 11(c) of the
Warrant) equal to $_________. Please issue a certificate or certificates for
such shares of Common Stock in the name of and pay any cash for any fractional
share to:

                                   Name:    ______________________________

                                   Signature:
                                   Address:____________________________

                                          _____________________________

                                       Note:    The above signature should
                                                correspond exactly with the
                                                name on the face of the
                                                within Warrant, if applicable.

and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned covering the balance of the shares purchasable thereunder
less any fraction of a share paid in cash.

<PAGE>

                               FORM OF ASSIGNMENT

         FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered thereby set forth
hereinbelow, to:

NAME OF ASSIGNEE                    ADDRESS                         NO OF SHARES

, and hereby irrevocably constitutes and appoints ______________________________
_____ as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.

Dated:   ________ __, 200_

In the presence of:                     ______________________________

                                   Name:______________________________

                                   Signature:_________________________
                                   Title of Signing Officer or Agent (if any):

                                            ______________________________
                                   Address: ______________________________
                                            ______________________________

                                       Note:    The above signature should
                                                correspond exactly with the
                                                name on the face of the
                                                within Warrant, if applicable.

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