Document:

Exhibit
      10.1

    

    MIP
      SOLUTIONS, INC.

    

    2008
      STOCK PLAN

    

    1. Purposes
      of the Plan.
      Awards
      granted under the MIP Solutions, Inc. 2008 Stock Plan may be Incentive Stock
      Options, Nonstatutory Stock Options, Restricted Stock and Restricted Stock
      Units
      as determined by the Administrator at the time of the grant of Awards. The
      purposes of this 2008 Stock Plan are:

    

    (a) to
      attract and retain the best available personnel for positions of substantial
      responsibility,

     

    (b) to
      provide incentives to Employees and Consultants, and

     

    (c) to
      promote the success of the Company’s business.

    

    2. Definitions.
      As used
      herein, the following definitions shall apply: 

    

    (a) “Administrator”
means
      the Board or any of its Committees as shall be administering the Plan, in
      accordance with Section 4 of the Plan.

     

    (b) “Affiliate”
means
      any Parent or Subsidiary (as defined in Section 424(e) and (f) of the Code)
      of
      the Company.

     

    (c) “Applicable
      Laws”
means
      the requirements relating to the administration of equity compensation plans
      under U.S. state corporate laws, U.S. federal and state securities laws, the
      Code, any stock exchange or quotation system on which the Shares are listed
      or
      quoted and the applicable laws of any other country or jurisdiction where Awards
      are granted under the Plan.

     

    (d) “Award”
means,
      individually or collectively, a grant under the Plan of Incentive Stock Options,
      Nonqualified Stock Options, Restricted Stock or Restricted Stock
      Units.

     

    (e) “Award
      Agreement”
means
      the written agreement setting forth the terms and conditions applicable to
      each
      Award granted under the Plan.

     

    (f) “Board”
means
      the Board of Directors of the Company.

     

    (g) “Change
      of Control”
means
      the occurrence of any of the following events, in one or a series of related
      transactions: 

     

    (i) any
      “person,” as such term is used in Sections 13(d) and 14(d) of the Exchange Act,
      other than the Company, a subsidiary of the Company or a Company employee
      benefit plan, including any trustee of such plan acting as trustee, is or
      becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange
      Act), directly or indirectly, of securities of the Company representing fifty
      percent (50%) or more of the combined voting power of the Company’s then
      outstanding securities entitled to vote generally in the election of directors;
      or

     

    
      
         

      

      
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    (ii) a
      merger
      or consolidation of the Company or any direct or indirect subsidiary of the
      Company with any other corporation, other than a merger or consolidation which
      would result in the voting securities of the Company outstanding immediately
      prior thereto continuing to represent (either by remaining outstanding or by
      being converted into voting securities of the surviving entity) at least fifty
      percent (50%) of the total voting power represented by the voting
      securities of the Company or such surviving entity outstanding immediately
      after
      such merger or consolidation; or

     

    (iii) the
      sale
      or disposition by the Company of all or substantially all the Company’s assets;
      or

     

    (iv) a
      change
      in the composition of the Board, as a result of which fewer than a majority
      of
      the Directors are Incumbent Directors. “Incumbent Directors” shall mean
      Directors who either (A) are Directors as of the date this Plan is approved
      by the Board, or (B) are elected, or nominated for election, to the Board
      with the affirmative votes of at least a majority of the Directors and whose
      election or nomination was not in connection with any transaction described
      in
      (i) or (ii) above or in connection with an actual or threatened proxy
      contest relating to the election of directors of the Company. 

    

    (h) “Code”
means
      the Internal Revenue Code of 1986, as amended. Reference to a specific section
      of the Code or regulation thereunder shall include such section or regulation,
      any valid regulation promulgated under such section, and any comparable
      provision of any future legislation or regulation amending, supplementing or
      superseding such section or regulation.

     

    (i) “Committee”
means
      a
      Committee appointed by the Board in accordance with Section 4 of the
      Plan.

     

    (j) “Common
      Stock”
means
      the Common Stock of the Company.

     

    (k) “Company”
means
      MIP Solutions, Inc., a Nevada corporation, or any successor
      thereto.

     

    (l) “Consultant”
means
      any person other than an Employee who is engaged by the Company or any Affiliate
      to render consulting or advisory services and is compensated for such services,
      including a non-Employee director.

     

    (m) “Continuous
      Status as an Employee or Consultant”
means
      that the employment or consulting relationship with the Company or any Affiliate
      is not interrupted or terminated. For purposes of Awards of Incentive Stock
      Options, the term “Continuous Status as an Employee or Consultant” means that
      the employment relationship with the Company or any Affiliate is not interrupted
      or terminated. Continuous Status as an Employee or Consultant shall not be
      considered interrupted in the case of (i) any leave of absence approved by
      the
      Company or an Affiliate or (ii) transfers between locations of the Company
      and
      its Affiliates or between the Company and any Affiliate, or between Affiliates
      or (iii) transfer between Employee and Consultant Status. If reemployment upon
      expiration of a leave of absence approved by the Company or an Affiliate is
      not
      guaranteed by statute or contract, on the 181st
      day
      after such leave commences any Award which is an Incentive Stock Option held
      by
      the Participant shall cease to be treated as an Incentive Stock Option and
      shall
      be treated for tax purposes as a Nonstatutory Stock Option. In the event of
      a
      Participant’s change in status from Consultant to Employee or Employee to
      Consultant, a Participant’s Continuous Status as an Employee or Consultant shall
      not automatically terminate solely as a result of such change in status.
      However, in such event, an Award that is an Incentive Stock Option held by
      the
      Participant shall cease to be treated as an Incentive Stock Option and shall
      be
      treated for tax purposes as a Nonstatutory Stock Option three months and one
      day
      following such change of status.

     

    
      
         

      

      
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    (n) “Date
      of Grant”
means,
      with respect to an Award, the date that the Award is granted and its
      exercise price is set (if applicable), consistent with Applicable Laws and
      applicable financial accounting rules.

     

    (o) “Director”
means
      a
      member of the Board.

     

    (p) “Disability”
means
      total and permanent disability as defined in Section 22(e)(3) of the
      Code.

     

    (q) “Earnings
      Per Share”
means,
      as to any Performance Period, the Company’s or a business unit’s fully diluted
      earnings per share as defined by generally accepted accounting
      principles.

     

    (r) “Employee”
means
      any person employed by the Company or any Affiliate of the Company.

     

    (s) “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended. Reference to a specific section
      of the Exchange Act or regulation thereunder shall include such section or
      regulation, any valid regulation promulgated under such section, and any
      comparable provision of any future legislation or regulation amending,
      supplementing or superseding such section or regulation.

     

    (t) “Fair
      Market Value”
means,
      as of any date, the value of Common Stock determined as follows: 

     

    (i) If
      the
      Common Stock is listed on any established stock exchange or a national market
      system, including without limitation the Nasdaq National Market of the National
      Association of Securities Dealers, Inc. Automated Quotation
      (“Nasdaq”) System, or on any bulletin board or similar computer trading
      system, the Fair Market Value of a Share of Common Stock shall be the closing
      sales price for such stock (or the closing bid, if no sales were
      reported) as quoted on such system or exchange (or the exchange with the
      greatest volume of trading in Common Stock) on the day of determination, as
      reported in The Wall Street Journal or such other source as the Administrator
      deems reliable; or

     

    (ii) In
      the
      absence of an established market for the Common Stock, the Fair Market Value
      shall be determined in good faith by the Administrator. 

    

    (u) “Fiscal
      Year”
means
      a
      fiscal year of the Company.

     

    (v) “Incentive
      Stock Option”
means
      an Option intended to qualify as an incentive stock option within the meaning
      of
      Section 422 of the Code and the regulations promulgated
      thereunder.

     

    (w) “Net
      Income”
means,
      as to any Performance Period, the net income of the Company for the Performance
      Period determined in accordance with generally accepted accounting
      principles.

     

    
      
         

      

      
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    (x) “Nonstatutory
      Stock Option”
means
      an Option not intended to qualify as an Incentive Stock Option.

     

    (y) “Notice
      of Grant”
means
      a
      written or electronic notice evidencing certain terms and conditions of an
      individual Award. The Notice of Grant is part of the Award
      Agreement.

     

    (z) “Operating
      Margins”
means
      the ratio of Operating Income to Revenue.

     

    (aa) “Operating
      Income”
means
      the Company’s or a business unit’s income from operations determined in
      accordance with generally accepted accounting principles.

     

    (bb) “Option”
means
      a
      stock option granted pursuant to the Plan.

     

    (cc) “Option
      Agreement”
means
      a
      written or electronic agreement between the Company and a Participant evidencing
      the terms and conditions of an individual Option grant. The Option Agreement
      is
      subject to the terms and conditions of the Plan.

     

    (dd) “Parent”
means
      a
“parent corporation”, whether now or hereafter existing, as defined in
      Section 424(e) of the Code.

     

    (ee) “Participant”
means
      the holder of an outstanding Award granted under the Plan.

     

    (ff) “Performance
      Goals”
means
      the goal(s) (or combined goal(s)) determined by the Administrator (in its
      discretion) to be applicable to a Participant with respect to an Award. As
      determined by the Administrator, the Performance Goals applicable to an Award
      may provide for a targeted level or levels of achievement using one or more
      of
      the following measures: (a) Revenue, (b) Earnings Per Share,
      (c) Net Income, (d) Operating Margins, and (e) Total Stockholder
      Return. The Performance Goals may differ from Participant to Participant and
      from Award to Award. Any criteria used may be measured, as applicable,
      (i) on Pro Forma numbers, (ii) in absolute terms, (iii) in
      relative terms (including, but not limited, the passage of time and/or against
      other companies or financial metrics), (iv) on a per share and/or share per
      capita basis, (v) against the performance of the Company as a whole or
      against particular segments or products of the Company and/or (vi) on a
      pre-tax or after-tax basis. Prior to the Determination Date, the Administrator
      shall determine whether any element(s) (for example, but not by way of
      limitation, the effect of mergers or acquisitions) shall be included in or
      excluded from the calculation of any Performance Goal with respect to any
      Participants (whether or not such determinations result in any Performance
      Goal
      being measured on a basis other than generally accepted accounting
      principles).

     

    (gg) “Performance
      Period”
means
      any Fiscal Year or such longer period as determined by the Administrator in
      its
      sole discretion.

     

    (hh) “Period
      of Restriction”
means
      the period during which the transfer of Shares of Restricted Stock are subject
      to restrictions and therefore, the Shares are subject to a substantial risk
      of
      forfeiture. As provided in Section 9, such restrictions may be based on the
      passage of time, the achievement of target levels of performance, or the
      occurrence of other events as determined by the Administrator, in its
      discretion.

     

    (ii) “Plan”
means
      this 2008 Stock Plan, as set forth in this instrument and as hereafter amended
      from time to time.

     

    
      
         

      

      
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    (jj) “Pro
      Forma”
means
      calculation of a Performance Goal in a manner that excludes certain unusual
      or
      non-cash expenses or credits, such as restructuring expenses, extraordinary
      tax
      events, expenses or credits related to stock options, other equity compensation
      or the like, acquisition related expenses, extraordinary items, income or loss
      from discontinued operations, and/or gains or losses from early extinguishment
      of debt instead of conforming to generally accepted accounting
      principles.

     

    (kk) “Restricted
      Stock”
means
      an Award granted to a Participant pursuant to Section 9.

     

    (ll) “Restricted
      Stock Unit”
means
      an Award granted to a Participant pursuant to Section 10.

     

    (mm) “Revenue”
means
      the Company’s or a business unit’s net sales for the Performance Period,
      determined in accordance with generally accepted accounting
      principles.

     

    (nn) “Rule
      16b-3”
means
      Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect
      when
      discretion is being exercised with respect to the Plan.

     

    (oo) “Section 16(b)”
means
      Section 16(b) of the Securities Exchange Act of 1934, as
      amended.

     

    (pp) “Share”
means
      a
      share of the Common Stock, as adjusted in accordance with Section 13 of the
      Plan.

     

    (qq) “Subsidiary”
means
      a
“subsidiary corporation”, whether now or hereafter existing, as defined in
      Section 424(f) of the Code.

     

    (rr) “Total
      Stockholder Return”
means
      the total return (change in share price plus reinvestment of any dividends)
      of a
      share of the Company’s common stock. 

    

    3. Stock
      Subject to the Plan.
      

     

    (a) Subject
      to the provisions of Section 13 of the Plan, the maximum aggregate number
      of Shares which may be issued under the Plan is 5,000,000.

     

    (b) The
      Shares may be authorized, but unissued, or reacquired Common Stock. If an Award
      expires or becomes unexercisable without having been exercised in full, or
      with
      respect to Restricted Stock or Restricted Stock Units, is forfeited to or
      repurchased by the Company, the unpurchased Shares (or for Awards other than
      Options, the forfeited or repurchased Shares) which were subject thereto will
      become available for future grant or sale under the Plan (unless the Plan has
      terminated). Shares that have actually been issued under the Plan under any
      Award will not be returned to the Plan and will not become available for future
      distribution under the Plan; provided, however, that if unvested Shares of
      Restricted Stock or Restricted Stock Units are repurchased by the Company or
      are
      forfeited to the Company, such Shares will become available for future grant
      under the Plan. Shares used to pay the tax and exercise price of an Award will
      not become available for future grant or sale under the Plan. To the extent
      an
      Award under the Plan is paid out in cash rather than Shares, such cash payment
      will not result in reducing the number of Shares available for issuance under
      the Plan. Notwithstanding the foregoing and, subject to adjustment provided
      in
      Section 13, the maximum number of Shares that may be issued upon the
      exercise of Incentive Stock Options shall equal the aggregate Share number
      stated in this Section 3(a), plus, to the extent allowable under
      Section 422 of the Code, any Shares that become available for issuance
      under the Plan under this Section 3(b). 

    

    
      
         

      

      
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    4. Administration
      of the Plan.
      

     

    (a) Procedure.
      

     

    (i) Multiple
      Administrative Bodies. The Plan may be administered by different Administrators
      with respect to different groups of Employees or Consultants.

     

    (ii) Section 162(m).
      To the extent that the Administrator determines it to be desirable to qualify
      Awards granted hereunder as “performance-based compensation” within the meaning
      of Section 162(m) of the Code, the Plan shall be administered by a
      Committee of two or more “outside directors” within the meaning of
      Section 162(m) of the Code.

     

    (iii) Rule
      16b-3. To the extent desirable to qualify transactions hereunder as exempt
      under
      Rule 16b-3, the transactions contemplated hereunder shall be structured to
      satisfy the requirements for exemption under Rule 16b-3.

     

    (iv) Other
      Administration. Other than as provided above, the Plan shall be administered
      by
      (A) the Board or (B) a Committee, which committee shall be constituted
      to satisfy Applicable Laws. 

     

    (b) Powers
      of
      the Administrator. Subject to the provisions of the Plan, and in the case of
      a
      Committee, subject to the specific duties delegated by the Board to such
      Committee, the Administrator shall have the authority, in its discretion:

     

    (i) to
      determine the Fair Market Value of the Common Stock, in accordance with
      Section 2(r) of the Plan;

     

    (ii) to
      select
      the Employees and Consultants to whom Awards may be granted
      hereunder;

     

    (iii) to
      determine whether and to what extent Awards are granted hereunder;

     

    (iv) to
      determine the number of Shares to be covered by each Award granted
      hereunder;

     

    (v) to
      approve forms of agreement for use under the Plan;

     

    (vi) to
      determine the terms and conditions, not inconsistent with the terms of the
      Plan,
      of any Award granted hereunder. With respect to Options, such terms and
      conditions include, but are not limited to, the exercise price, the time or
      times when Options may be exercised, based in each case on such factors as
      the
      Administrator, in its sole discretion, shall determine;

     

    (vii) to
      construe and interpret the terms of the Plan and Awards granted
      hereunder;

     

    (viii) to
      prescribe, amend and rescind rules and regulations relating to the Plan,
      including rules and regulations relating to sub-plans established for the
      purpose of qualifying for preferred tax treatment under foreign tax
      laws;

     

    
      
         

      

      
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    (ix) to
      modify
      or amend each Award (not inconsistent with the terms of the Plan), including
      the
      discretionary authority to extend the post-termination exercisability period
      of
      Options longer than is otherwise provided for in the Plan;

     

    (x) to
      authorize any person to execute on behalf of the Company any instrument required
      to effect the grant of an Award previously granted by the
      Administrator;

     

    (xi) to
      allow
      Participants to satisfy withholding tax obligations by electing to have the
      Company withhold from the Shares to be issued upon exercise or vesting of an
      Award that number of Shares having a Fair Market Value equal to the minimum
      amount required to be withheld (but no more). The Fair Market Value of any
      Shares to be withheld shall be determined on the date that the amount of tax
      to
      be withheld is to be determined. All elections by a Participant to have Shares
      withheld for this purpose shall be made in such form and under such conditions
      as the Administrator may deem necessary or advisable;

     

    (xii) to
      determine the terms and restrictions applicable to Awards; and

     

    (xiii) to
      make
      all other determinations deemed necessary or advisable for administering the
      Plan. 

     

    (c) Effect
      of
      Administrator’s Decision. The Administrator’s decisions, determinations and
      interpretations shall be final and binding on all Participants and any other
      holders of Awards and shall be given the maximum deference permitted by law.
      

     

    5. Eligibility.
      Awards
      may be granted only to Employees and Consultants.

     

    6. No
      Employment Rights.
      Neither
      the Plan nor any Award shall confer upon a Participant any right with respect
      to
      continuing the Participant’s employment with the Company, or continued
      Contractor status with the Company, or its Affiliates, nor shall they interfere
      in any way with the Participant’s right or the Company’s or Subsidiary’s right,
      as the case may be, to terminate such employment or Contractor status at any
      time, with or without cause or notice.

     

    7. Term
      of Plan.
      The
      Plan shall become effective on August , 2008 and continue in effect, expiring
      at
      the close of business, pacific daylight time, on August , 2018.

     

    8. Stock
      Options.
      

     

    (a) Grant
      of
      Options. Subject to the terms and provisions of the Plan, Options may be granted
      to Employees and Consultants at any time and from time to time as determined
      by
      the Administrator in its sole discretion. The Administrator, in its sole
      discretion, shall determine the number of Shares subject to each Option. The
      Administrator may grant Incentive Stock Options, Nonstatutory Stock Options,
      or
      a combination thereof.

     

    (b) Term.
      The
      term of each Option shall be stated in the Notice of Grant; provided, however,
      that the term shall be no longer than ten (10) years from the Date of
      Grant. Moreover, in the case of an Incentive Stock Option granted to a
      Participant who, at the time the Incentive Stock Option is granted, owns stock
      representing more than ten percent (10%) of the voting power of all classes
      of stock of the Company or any Affiliate, the term of the Incentive Stock Option
      shall be no longer than five (5) years from the Date of Grant. Subject to
      the five (5) and ten (10) year limits set forth in the preceding
      sentence, the Administrator may, after an Option is granted, extend the maximum
      term of the Option. Unless otherwise determined by the Administrator, any
      extension of the term of an Option pursuant to this Section 8(b) shall
      comply with Code Section 409A.

     

    
      
         

      

      
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    (c) Option
      Exercise Price. The per share exercise price for the Shares to be issued
      pursuant to exercise of an Option shall be determined by the Administrator
      and
      shall be no less than 100% of the Fair Market Value per share on the Date of
      Grant; provided, however, that in the case of an Incentive Stock Option granted
      to an Employee who, at the time the Incentive Stock Option is granted, owns
      stock representing more than ten percent (10%) of the voting power of all
      classes of stock of the Company or any Affiliate, the per Share exercise price
      shall be no less than 110% of the Fair Market Value per Share on the Date of
      Grant. Notwithstanding the foregoing, in the event that the Company or a
      Subsidiary consummates a transaction described in Section 424(a) of the
      Code (e.g., the acquisition of property or stock from an unrelated corporation),
      persons who become Employees on account of such transaction may be granted
      Options in substitution for options granted by their former employer. If such
      substitute Options are granted, the Administrator, in its sole discretion and
      consistent with Section 424(a) of the Code, may determine that such
      substitute Options shall have an exercise price less than one hundred percent
      (100%) of the Fair Market Value of the Shares on the Date of
      Grant.

     

    (d) Waiting
      Period and Exercise Dates. At the time an Option is granted, the Administrator
      shall fix the period within which the Option may be exercised and shall
      determine any conditions which must be satisfied before the Option may be
      exercised. In so doing, the Administrator may specify that an Option may not
      be
      exercised until the completion of a service period or until performance
      milestones are satisfied.

     

    (e) Form
      of
      Consideration. The Administrator shall determine the acceptable form of
      consideration for exercising an Option, including the method of payment. In
      the
      case of an Incentive Stock Option, the Administrator shall determine the
      acceptable form of consideration at the time of grant. Subject to Applicable
      Laws, such consideration may consist entirely of: 

     

    (i) cash;

     

    (ii) check;

     

    (iii) other
      Shares which (A) in the case of Shares acquired upon exercise of an option,
      have been owned by the Participant for more than six months on the date of
      surrender, and (B) have a Fair Market Value on the date of surrender equal
      to the aggregate exercise price of the Shares as to which said Option shall
      be
      exercised;

     

    (iv) delivery
      to the Company of (A) a properly executed exercise notice together with
      such other documentation as the Administrator and the broker, if applicable,
      shall require to effect an exercise of the Option and (B) the sale proceeds
      required to pay the exercise price;

     

    (v) any
      combination of the foregoing methods of payment; or

     

    
      
         

      

      
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    (vi) such
      other consideration and method of payment for the issuance of Shares to the
      extent permitted by Applicable Laws.

     

    (f) Exercise
      of Option; Rights as a Stockholder. Any Option granted hereunder shall be
      exercisable according to the terms of the Plan and at such times and under
      such
      conditions as determined by the Administrator and set forth in the Option
      Agreement. An Option may not be exercised for a fraction of a Share. An Option
      shall be deemed exercised when the Company receives: (i) written or
      electronic notice of exercise (in accordance with the Option
      Agreement) from the person entitled to exercise the Option, and
      (ii) full payment for the Shares with respect to which the Option is
      exercised. Full payment may consist of any consideration and method of payment
      authorized by the Administrator and permitted by the Option Agreement and the
      Plan. Shares issued upon exercise of an Option shall be issued in the name
      of
      the Participant. Until the stock certificate evidencing such Shares is issued
      (as evidenced by the appropriate entry on the books of the Company or of a
      duly
      authorized transfer agent of the Company), no right to vote or receive dividends
      or any other rights as a stockholder shall exist with respect to the optioned
      stock, notwithstanding the exercise of the Option. The Company shall issue
      (or
      cause to be issued) such stock certificate promptly after the Option is
      exercised. No adjustment will be made for a dividend or other right for which
      the record date is prior to the date the stock certificate is issued, except
      as
      provided in Section 13 of the Plan. Exercising an Option in any manner
      shall decrease the number of Shares thereafter available for sale under the
      Option, by the number of Shares as to which the Option is
      exercised.

     

    (g) Termination
      of Continuous Status as an Employee or Consultant. If a Participant’s Continuous
      Status as an Employee or Consultant terminates, other than upon the
      Participant’s death or Disability, the Participant may exercise his or her
      Option within such period of time as is specified in the Option Agreement to
      the
      extent that the Option is vested on the date of termination (but in no event
      later than the expiration of the term of such Option as set forth in the Option
      Agreement). In the absence of a specified time in the Option Agreement, the
      Option shall remain exercisable for three (3) months following termination
      of the Participant’s Continuous Status as an Employee or Consultant. If, on the
      date of termination, the Participant is not vested as to his or her entire
      Option, the Shares covered by the unvested portion of the Option shall revert
      to
      the Plan. If, after termination, the Participant does not exercise his or her
      Option within the time specified by the Administrator, the Option shall
      terminate, and the Shares covered by such Option shall revert to the
      Plan.

     

    (h) Disability.
      If a Participant’s Continuous Status as an Employee or Consultant terminates as
      a result of the Participant’s Disability, the Participant may exercise his or
      her Option for twelve (12) months following the Participant’s termination
      (but in no event may the Option be exercised later than the expiration of the
      term of such Option as set forth in the Option Agreement). If, on the date
      of
      termination, the Participant is not vested as to his or her entire Option,
      the
      Shares covered by the unvested portion of the Option shall revert to the Plan.
      If, after termination, the Participant does not exercise his or her Option
      within the time specified herein, the Option shall terminate, and the Shares
      covered by such Option shall revert to the Plan.

     

    (i) Death
      of
      Participant. If a Participant dies while in Continuous Status as an Employee
      or
      Consultant, the Option may be exercised for twelve (12) months following
      Participant’s death (but in no event may the option be exercised later than the
      expiration of the term of such Option as set forth in the Option Agreement),
      by
      the Participant’s designated beneficiary, provided such beneficiary has been
      designated prior to Participant’s death in a form acceptable to the
      Administrator. If no such beneficiary has been designated by the Participant,
      then such Option may be exercised by the personal representative of the
      Participant’s estate or by the person(s) to whom the Option is transferred
      pursuant to the Participant’s will or in accordance with the laws of descent and
      distribution. If the Option is not so exercised within the time specified
      herein, the Option shall terminate, and the Shares covered by such Option shall
      revert to the Plan.

     

    
      
         

      

      
        -
          9 -

        
          

        

      

      
         

      

    

    (j) ISO
      $100,000 Rule. Each Option shall be designated in the Notice of Grant as either
      an Incentive Stock Option or a Nonstatutory Stock Option. However,
      notwithstanding such designations, to the extent that the aggregate Fair Market
      Value of Shares subject to a Participant’s Incentive Stock Options granted by
      the Company, any Affiliate, which become exercisable for the first time during
      any calendar year (under all plans of the Company or any Affiliate) exceeds
      $100,000, such excess Options shall be treated as Nonstatutory Stock Options.
      For purposes of this Section 8(j), Incentive Stock Options shall be taken
      into account in the order in which they were granted, and the Fair Market Value
      of the Shares shall be determined as of the time of grant.

     

    (k) Misconduct.
      In the event of termination of a Participant’s Continuous Status as an Employee
      or Consultant as a result of misconduct (including, but not limited to, any
      act
      of dishonesty, willful misconduct, fraud or embezzlement) or should the
      Participant make or attempt to make any unauthorized use or disclosure of
      material confidential information or trade secrets of the Company or any
      Affiliate, then in any such event his or her option shall terminate and cease
      to
      be exercisable immediately upon the termination of Participant’s Continuous
      Status as an Employee or Consultant Status or such unauthorized disclosure
      or
      use of confidential or secret information or attempt thereat.

     

    9. Restricted
      Stock.
      

     

    (a) Grant
      of
      Restricted Stock. Subject to the terms and provisions of the Plan, the
      Administrator, at any time and from time to time, may grant Shares of Restricted
      Stock to Employees or Consultants as the Administrator, in its sole discretion,
      shall determine. The Administrator, in its sole discretion, shall determine
      the
      number of Shares to be granted to each Participant.

     

    (b) Restricted
      Stock Agreement. Each Award of Restricted Stock shall be evidenced by an Award
      Agreement that shall specify the Period of Restriction, the number of Shares
      granted, and such other terms and conditions as the Administrator, in its sole
      discretion, shall determine. Unless the Administrator determines otherwise,
      Shares of Restricted Stock shall be held by the Company as escrow agent until
      the restrictions on such Shares have lapsed.

     

    (c) Transferability.
      Except as provided in this Section 9, Shares of Restricted Stock may not be
      sold, transferred, pledged, assigned, or otherwise alienated or hypothecated
      until the end of the applicable Period of Restriction.

     

    (d) Other
      Restrictions. The Administrator, in its sole discretion, may impose such other
      restrictions on Shares of Restricted Stock as it may deem advisable or
      appropriate, in accordance with this Section 9(d). 

     

    (i) General
      Restrictions. The Administrator may set restrictions based upon continued
      employment or service with the Company and its affiliates, the achievement
      of
      specific performance objectives (Company-wide, departmental, or individual),
      applicable federal or state securities laws, or any other basis determined
      by
      the Administrator in its discretion.

     

    
      
         

      

      
        -
          10 -

        
          

        

      

      
         

      

    

    (ii) Section 162(m)
      Performance Restrictions. For purposes of qualifying grants of Restricted Stock
      as “performance-based compensation” under Section 162(m) of the Code, the
      Administrator, in its discretion, may set restrictions based upon the
      achievement of Performance Goals. The Performance Goals shall be set by the
      Administrator on or before the latest date permissible to enable the Restricted
      Stock to qualify as “performance-based compensation” under Section 162(m)
      of the Code. In granting Restricted Stock which is intended to qualify under
      Section 162(m) of the Code, the Administrator shall follow any procedures
      determined by it from time to time to be necessary or appropriate to ensure
      qualification of the Restricted Stock under Section 162(m) of the Code
      (e.g., in determining the Performance Goals).

     

    (iii) Legend
      on
      Certificates. The Administrator, in its discretion, may legend the certificates
      representing Restricted Stock to give appropriate notice of such restrictions.
      

     

    (e) Removal
      of Restrictions. Except as otherwise provided in this Section 9, Shares of
      Restricted Stock covered by each Restricted Stock grant made under the Plan
      shall be released from escrow as soon as practicable after the last day of
      the
      Period of Restriction. The Administrator, in its discretion, may accelerate
      the
      time at which any restrictions shall lapse or be removed. After the restrictions
      have lapsed, the Participant shall be entitled to have any legend or legends
      under Section 9(d)(iii) removed from his or her Share certificate, and the
      Shares shall be freely transferable by the Participant. The Administrator (in
      its discretion) may establish procedures regarding the release of Shares from
      escrow and the removal of legends, as necessary or appropriate to minimize
      administrative burdens on the Company.

     

    (f) Voting
      Rights. During the Period of Restriction, Participants holding Shares of
      Restricted Stock granted hereunder may exercise full voting rights with respect
      to those Shares, unless the Administrator determines otherwise.

     

    (g) Dividends
      and Other Distributions. During the Period of Restriction, Participants holding
      Shares of Restricted Stock shall be entitled to receive all dividends and other
      distributions paid with respect to such Shares unless otherwise provided in
      the
      Award Agreement. Any such dividends or distribution shall be subject to the
      same
      restrictions on transferability and forfeitability as the Shares of Restricted
      Stock with respect to which they were paid, unless otherwise provided in the
      Award Agreement.

     

    (h) Return
      of
      Restricted Stock to the Company. On the date set forth in the Award Agreement,
      the Restricted Stock for which restrictions have not lapsed shall revert to
      the
      Company and again shall become available for grant under the Plan. 

     

    10. Restricted
      Stock Units.
      

     

    (a) Grant
      of
      Restricted Stock Units. Restricted Stock Units may be granted to Employees
      or
      Consultants at any time and from time to time, as shall be determined by the
      Administrator, in its sole discretion. The Administrator shall have complete
      discretion in determining the number of Restricted Stock Units granted to each
      Participant.

     

    (b) Value
      of
      Restricted Stock Units. Each Restricted Stock Unit shall have an initial value
      equal to the Fair Market Value of a Share on the Grant Date.

     

    (c) Restricted
      Stock Unit Agreement. Each Award of Restricted Stock Units shall be evidenced
      by
      an Award Agreement that shall specify any vesting conditions, the number of
      Restricted Stock Units granted, and such other terms and conditions as the
      Administrator, in its sole discretion, shall determine.

     

    
      
         

      

      
        -
          11 -

        
          

        

      

      
         

      

    

    (d) Performance
      Objectives and Other Terms. The Administrator, in its sole discretion, shall
      set
      performance objectives or other vesting criteria which, depending on the extent
      to which they are met, will determine the number or value of Restricted Stock
      Units that will be paid out to the Participants. Each Award of Restricted Stock
      Units shall be evidenced by an Award Agreement that shall specify the
      Performance Period, and such other terms and conditions as the Administrator,
      in
      its sole discretion, shall determine. 

     

    (i) General
      Performance Objectives or Vesting Criteria. The Administrator may set
      performance objectives or vesting criteria based upon the achievement of
      Company-wide, departmental, or individual goals, applicable federal or state
      securities laws, or any other basis determined by the Administrator in its
      discretion (for example, but not by way of limitation, Continuous Status as
      an
      Employee or Consultant).

     

    (ii) Section 162(m)
      Performance Objectives. For purposes of qualifying grants of Restricted Stock
      Units as “performance-based compensation” under Section 162(m) of the Code,
      the Administrator, in its discretion, may determine that the performance
      objectives applicable to Restricted Stock Units shall be based on the
      achievement of Performance Goals. The Performance Goals shall be set by the
      Administrator on or before the latest date permissible to enable the Restricted
      Stock Units to qualify as “performance-based compensation” under
      Section 162(m) of the Code. In granting Restricted Stock Units that are
      intended to qualify under Section 162(m) of the Code, the Administrator
      shall follow any procedures determined by it from time to time to be necessary
      or appropriate to ensure qualification of the Restricted Stock Units under
      Section 162(m) of the Code (e.g., in determining the Performance Goals).

     

    (e) Earning
      of Restricted Stock Units. After the applicable Performance Period has ended,
      the holder of Restricted Stock Units shall be entitled to receive a payout
      of
      the number of Restricted Stock Units earned by the Participant over the
      Performance Period, to be determined as a function of the extent to which the
      corresponding performance objectives have been achieved. After the grant of
      a
      Restricted Stock Unit, the Administrator, in its sole discretion, may reduce
      or
      waive any performance objectives for such Restricted Stock Unit.

     

    (f) Form
      and
      Timing of Payment of Restricted Stock Units. Payment of vested Restricted Stock
      Units shall be made as soon as practicable after vesting (subject to any
      deferral permitted under Section 18). The Administrator, in its sole
      discretion, may pay Restricted Stock Units in the form of cash, in Shares or
      in
      a combination thereof.

     

    (g) Cancellation
      of Restricted Stock Units. On the date set forth in the Award Agreement, all
      unvested Restricted Stock Units shall be forfeited to the Company and, except
      as
      otherwise determined by the Administrator, again shall be available for grant
      under the Plan. 

     

    11. Leaves
      of Absence.
      Unless
      the Administrator provides otherwise or except as otherwise required by
      Applicable Laws, vesting of Awards granted hereunder shall continue during
      any
      leave of absence approved by the Administrator.

     

    12. Non-Transferability
      of Awards.
      Unless
      determined otherwise by the Administrator, an Award may not be sold, pledged,
      assigned, hypothecated, transferred, or disposed of in any manner other than
      by
      will or by the laws of descent or distribution and may be exercised, during
      the
      lifetime of the recipient, only by the recipient. If the Administrator makes
      an
      Award transferable, such Award shall contain such additional terms and
      conditions as the Administrator deems appropriate; provided, however, that
      such
      Award shall in no event be transferable for value. Notwithstanding the
      foregoing, a Participant may, if the Administrator (in its discretion) so
      permits, transfer an Award to an individual or entity other than the Company.
      Any such transfer shall be made in accordance with such procedures as the
      Administrator may specify from time to time. 

     

    
      
         

      

      
        -
          12 -

        
          

        

      

      
         

      

    

    13. Adjustments
      Upon Changes in Capitalization.

     

    (a) Subject
      to any required action by the stockholders of the Company, the number of Shares
      covered by each outstanding Award, the number of Shares which have been
      authorized for issuance under the Plan but as to which no Awards have yet been
      granted or which have been returned to the Plan upon cancellation or expiration
      of an Award, as well as the price per Share of Common Stock covered by each
      such
      outstanding Award and the 162(m) Fiscal Year share issuance limits under
      Sections 8(a), 9(a) and 10(a) hereof, shall be proportionately adjusted for
      any
      increase or decrease in the number of issued Shares resulting from a stock
      split, reverse stock split, stock dividend, combination or reclassification
      of
      the Common Stock, or any other increase or decrease in the number of issued
      Shares effected without receipt of consideration by the Company; provided,
      however, that conversion of any convertible securities of the Company shall
      not
      be deemed to have been “effected without receipt of consideration.” Such
      adjustment shall be made by the Administrator, whose determination in that
      respect shall be final, binding and conclusive. Except as expressly provided
      herein, no issuance by the Company of shares of stock of any class, or
      securities convertible into shares of stock of any class, shall affect, and
      no
      adjustment by reason thereof shall be made with respect to, the number or price
      of Shares subject to an Award.

     

    (b) Dissolution
      or Liquidation. In the event of the proposed dissolution or liquidation of
      the
      Company, the Administrator shall notify each Participant as soon as practicable
      prior to the effective date of such proposed transaction. The Administrator
      in
      its sole discretion may provide for a Participant to have the right to exercise
      his or her Award until ten (10) days prior to such transaction as to all of
      the Shares covered thereby, including Shares as to which the Award would not
      otherwise be exercisable. In addition, the Administrator may provide that any
      Company repurchase option or forfeiture rights applicable to any Award shall
      lapse 100%, and that any Award vesting shall accelerate 100%, provided the
      proposed dissolution or liquidation takes place at the time and in the manner
      contemplated. To the extent it has not been previously exercised, an Award
      will
      terminate immediately prior to the consummation of such proposed
      action.

     

    (c) Change
      of
      Control. In the event of a Change of Control, each outstanding Award shall
      be
      assumed or an equivalent Award substituted by the successor corporation or
      a
      Parent or Subsidiary of the successor corporation. In the event that the
      successor corporation refuses to assume or substitute for the Award, the
      Participant shall fully vest in and have the right to exercise all of his or
      her
      outstanding Options, including Shares as to which such Awards would not
      otherwise be vested or exercisable, all restrictions on Restricted Stock will
      lapse, and, with respect to Awards with performance-based vesting, including
      but
      not limited to Restricted Stock and Restricted Stock Units, all performance
      goals or other vesting criteria will be deemed achieved at one hundred percent
      (100%) of target levels and all other terms and conditions met. In
      addition, if an Option is not assumed or substituted in the event of a Change
      of
      Control, the Administrator shall notify the Participant in writing or
      electronically that the Option shall be fully vested and exercisable for a
      period of fifteen (15) days from the date of such notice, and the Option
      shall terminate upon the expiration of such period. For the purposes of this
      paragraph, an Award shall be considered assumed if, following the Change of
      Control, the Award confers the right to purchase or receive, for each Share
      subject to the Award immediately prior to the Change of Control, the
      consideration (whether stock, cash, or other securities or property) received
      in
      the Change of Control by holders of Common Stock for each Share held on the
      effective date of the transaction (and if holders were offered a choice of
      consideration, the type of consideration chosen by the holders of a majority
      of
      the outstanding Shares); provided, however, that if such consideration received
      in the Change of Control is not solely common stock of the successor corporation
      or its Parent, the Administrator may, with the consent of the successor
      corporation, provide for the consideration to be received upon the exercise
      of
      an Option or upon the payout of the Restricted Stock Unit Award, for each Share
      subject to the Award, to be solely common stock of the successor corporation
      or
      its Parent equal in fair market value to the per share consideration received
      by
      holders of Common Stock in the Change of Control. Notwithstanding anything
      in
      this Section 13(c) to the contrary, an Award that vests, is earned or
      paid-out upon the satisfaction of one or more performance goals will not be
      considered assumed if the Company or its successor modifies any of such
      performance goals without the Participant’s consent; provided, however, a
      modification to such performance goals only to reflect the successor
      corporation’s post-Change of Control corporate structure will not be deemed to
      invalidate an otherwise valid Award assumption. 

     

    
      
         

      

      
        -
          13 -

        
          

        

      

      
         

      

    

    14. Amendment
      and Termination of the Plan.
      

     

    (a) Amendment
      and Termination. The Board may at any time amend, alter, suspend or terminate
      the Plan; provided, however, that the Board may not materially amend the Plan
      without obtaining stockholder approval. For this purpose, the following shall
      be
      considered material amendments requiring stockholder approval:
      (i) increasing the number of Shares that may be issued under the Plan
      (other than in accordance with Section 13(a) hereof), (ii) modifying
      the persons eligible for participation under the Plan or (iii) as otherwise
      may be required by Applicable Laws.

     

    (b) Stockholder
      Approval. The Company shall obtain stockholder approval of any Plan amendment
      to
      the extent necessary and desirable to comply with Applicable Laws. Such
      stockholder approval, if required, shall be obtained in such a manner and to
      such a degree as is required by the applicable law, rule or
      regulation.

     

    (c) Effect
      of
      Amendment or Termination. No amendment, alteration, suspension or termination
      of
      the Plan shall impair the rights of any Participant, unless mutually agreed
      otherwise between the Participant and the Administrator, which agreement must
      be
      in writing (or electronic format) and signed by the Participant and the Company.
      

     

    15. Conditions
      Upon Issuance of Shares.
      

     

    (a) Legal
      Compliance. Shares shall not be issued pursuant to the exercise of an Award
      unless the exercise of such Award and the issuance and delivery of such Shares
      shall comply with Applicable Laws and shall be further subject to the approval
      of counsel for the Company with respect to such compliance.

     

    (b) Investment
      Representations. As a condition to the exercise or receipt of Shares pursuant
      to
      an Award, the Company may require the person exercising or receiving Shares
      pursuant to an Award to represent and warrant at the time of any such exercise
      or receipt that the Shares are being purchased only for investment and without
      any present intention to sell or distribute such Shares if, in the opinion
      of
      counsel for the Company, such a representation is required. 

     

    
      
         

      

      
        -
          14 -

        
          

        

      

      
         

      

    

    16. Liability
      of Company.
      

     

    (a) Inability
      to Obtain Authority. The inability of the Company to obtain authority from
      any
      regulatory body having jurisdiction, which authority is deemed by the Company’s
      counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
      shall relieve the Company of any liability in respect of the failure to issue
      or
      sell such Shares as to which such requisite authority shall not have been
      obtained.

     

    (b) Grants
      Exceeding Allotted Shares. If the Shares covered by an Award exceed, as of
      the
      Date of Grant, the number of Shares which may be issued under the Plan without
      additional stockholder approval, such Award shall be void with respect to such
      excess Shares, unless stockholder approval of an amendment sufficiently
      increasing the number of Shares subject to the Plan is timely obtained in
      accordance with Section 14(b) of the Plan. 

     

    17. Reservation
      of Shares.
      The
      Company, during the term of this Plan, will at all times reserve and keep
      available such number of Shares as shall be sufficient to satisfy the
      requirements of the Plan.

     

    18. Deferrals.
      The
      Administrator, in its sole discretion, may permit a Participant to defer receipt
      of the payment of cash or the delivery of Shares that would otherwise be due
      to
      such Participant under an Award. Any such deferral elections shall be subject
      to
      such rules and procedures as shall be determined by the Administrator in its
      sole discretion.

     

    19. Participation.
      No
      Employee or Consultant shall have the right to be selected to receive an Award
      under this Plan, or, having been so selected, to be selected to receive a future
      Award.

     

    20. No
      Rights as Stockholder.
      Except
      to the limited extent provided in Section 9(f), no Participant (nor any
      beneficiary) shall have any of the rights or privileges of a stockholder of
      the
      Company with respect to any Shares issuable pursuant to an Award (or exercise
      thereof), unless and until certificates representing such Shares shall have
      been
      issued, recorded on the records of the Company or its transfer agents or
      registrars, and delivered to the Participant (or beneficiary).

     

    21. Withholding
      Requirements.
      Prior
      to the delivery of any Shares or cash pursuant to an Award (or exercise
      thereof), the Company shall have the power and the right to deduct or withhold,
      or require a Participant to remit to the Company, an amount sufficient to
      satisfy federal, state, local and foreign taxes (including the Participant’s
      FICA obligation) required to be withheld with respect to such Award (or exercise
      thereof). Notwithstanding any contrary provision of the Plan, if a Participant
      fails to remit to the Company such withholding amount within the time period
      specified by the Administrator (in its discretion), the Participant’s Award may,
      in the Administrator’s discretion, be forfeited and in such case the Participant
      shall not receive any of the Shares subject to such Award.

     

    22. Withholding
      Arrangements.
      The
      Administrator, in its sole discretion and pursuant to such procedures as it
      may
      specify from time to time, may permit or require a Participant to satisfy all
      or
      part of the tax withholding obligations in connection with an Award by
      (a) having the Company withhold otherwise deliverable Shares, or
      (b) delivering to the Company already-owned Shares having a Fair Market
      Value equal to the amount required to be withheld. The amount so withheld shall
      not exceed the amount determined by using the minimum federal, state, local
      or
      foreign jurisdiction statutory withholding rates applicable to the Participant
      with respect to the Award on the date that the amount of tax to be withheld
      is
      to be determined. The Fair Market Value of the Shares to be withheld or
      delivered shall be determined as of the date that the taxes are required to
      be
      withheld.

     

    
      
         

      

      
        -
          15 -

        
          

        

      

      
         

      

    

    23. Indemnification.
      Each
      person who is or shall have been a member of the Committee, or of the Board,
      shall be indemnified and held harmless by the Company against and from
      (a) any loss, cost, liability, or expense that may be imposed upon or
      reasonably incurred by him or her in connection with or resulting from any
      claim, action, suit, or proceeding to which he or she may be a party or in
      which
      he or she may be involved by reason of any action taken or failure to act under
      the Plan or any Award Agreement, and (b) from any and all amounts paid by
      him or her in settlement thereof, with the Company’s approval, or paid by him or
      her in satisfaction of any judgment in any such claim, action, suit, or
      proceeding against him or her, provided he or she shall give the Company an
      opportunity, at its own expense, to handle and defend the same before he or
      she
      undertakes to handle and defend it on his or her own behalf. The foregoing
      right
      of indemnification shall not be exclusive of any other rights of indemnification
      to which such persons may be entitled under the Company’s Certificate of
      Incorporation or Bylaws, by contract, as a matter of law, or otherwise, or
      under
      any power that the Company may have to indemnify them or hold them
      harmless.

     

    24. Successors.
      All
      obligations of the Company under the Plan, with respect to Awards granted
      hereunder, shall be binding on any successor to the Company, whether the
      existence of such successor is the result of a direct or indirect purchase,
      merger, consolidation, or otherwise, of all or substantially all of the business
      or assets of the Company.

     

    25. Gender
      and Number.
      Except
      where otherwise indicated by the context, any masculine term used herein also
      shall include the feminine; the plural shall include the singular and the
      singular shall include the plural.

     

    26. Severability.
      In the
      event any provision of the Plan shall be held illegal or invalid for any reason,
      the illegality or invalidity shall not affect the remaining parts of the Plan,
      and the Plan shall be construed and enforced as if the illegal or invalid
      provision had not been included.

     

    27. Governing
      Law.
      The
      Plan and all Award Agreements shall be construed in accordance with and governed
      by the laws of the State of California (with the exception of its conflict
      of
      laws provisions).

     

    28. Captions.
      Captions are provided herein for convenience of reference only and shall not
      serve as a basis for interpretation or construction of the Plan.

     

    29. No
      Rules of Construction.
      No
      rules of construction are intended to apply to the interpretation of this Plan
      and for all purposes this Plan shall be deemed to be jointly authored by the
      Administrator and the Participants.

     

    
      
         

      

      
        -
          16 -Exhibit
      4.1

     

    THIS
      COMMON STOCK PURCHASE WARRANT AND THE SECURITIES
      ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
      ACT
      OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN VIOLATION
      OF SUCH
      ACT, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS COMMON
      STOCK
      PURCHASE WARRANT.

     

    Number
      of
      Shares of Common Stock: _________

    Warrant
      No. _____

     

    COMMON
      STOCK PURCHASE WARRANT

     

    To
      Purchase Common Stock of

    ThermoEnergy
      Corporation

     

    This
      Is
      To Certify That ___________,
      or its
      registered assign, is entitled, at any time from the Issuance Date (as
      hereinafter defined) to the Expiration Date (as hereinafter defined), to
      purchase from ThermoEnergy Corporation, a Delaware corporation (the
“Company”),
      ________ (______) shares of Common Stock (as hereinafter defined and subject
      to
      adjustment as provided herein), in whole or in part, including fractional parts,
      at a purchase price of $1.25 per share (subject to adjustment as provided
      herein, the “Exercise
      Price”),
      all
      on the terms and conditions and pursuant to the provisions hereinafter set
      forth.

     

    This
      Warrant is issued pursuant, and the Holder is entitled to the benefits of,
      to
      that certain Securities Purchase Agreement dated as of September 15, 2008 by
      and
      between The Quercus Trust and the Company (the “Securities
      Purchase Agreement”).
      Capitalized terms used herein without definition are used with the definitions
      assigned thereto in such Securities purchase Agreement.

     

    
      	 	
              1.

            	
              
                DEFINITIONS

              

            

    

     

    As
      used
      in this Common Stock Purchase Warrant (this “Warrant”),
      the
      following terms shall have the respective meanings set forth below:

     

    “Business
      Day”
shall
      mean any day that is not a Saturday or Sunday or a day on which banks in New
      York City, New York are required or permitted to be closed in the City of New
      York.

     

    “Issuance
      Date”
shall
      mean September 15, 2008.

     

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

     

    “Common
      Stock”
shall
      mean (except where the context otherwise indicates) the Common Stock, par value
      $0.001 per share, of the Company as constituted on the Issuance Date, and any
      capital stock into which such Common Stock may thereafter be changed, and shall
      also include (i) capital stock of the Company of any other class (regardless
      of
      how denominated) issued to the holders of shares of Common Stock upon any
      reclassification thereof which is also not preferred as to dividends or assets
      over any other class of stock of the Company and which is not subject to
      redemption and (ii) shares of common stock of any successor or acquiring Company
      received by or distributed to the holders of Common Stock of the Company in
      the
      circumstances contemplated by Section 4.5.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    “Convertible
      Securities”
shall
      mean options, evidences of indebtedness, shares of stock or other securities
      which are convertible into or exchangeable, with or without payment of
      additional consideration in cash or property, for shares of Common Stock, either
      immediately or upon the occurrence of a specified date or a specified
      event.

     

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

     

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

     

    “Expiration
      Date”
shall
      mean September 30, 2013.

     

    “Fundamental
      Corporate Change”
shall
      have the meaning set forth in Section 4.5.

     

    “Holder”
shall
      mean the Person in whose name the Warrant or Warrant Shares set forth herein
      is
      registered on the books of the Company maintained for such purpose.

     

    “Market
      Price”
shall
      mean, on any date of determination, (i) the closing price of a share of Common
      Stock on such day as reported on the principal Trading Market on which the
      Common Stock is listed or traded, or (ii) if the Common Stock is not listed
      on a
      Trading Market, the closing bid price for a share of Common Stock on such day
      in
      the over-the-counter market, as reported by the OTC Bulletin Board, or (iii)
      if
      the Common Stock is not then
      listed or quoted on the OTC Bulletin Board,
      the
      closing bid price for a share of Common Stock on such day in the
      over-the-counter market as reported by the National Quotation Bureau
      Incorporated (or any similar organization or agency succeeding to its functions
      of reporting prices).

     

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

     

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

     

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

     

    “Trading
      Day”
      means
      (i) a day on which the Common Stock is traded on a Trading Market, or (ii)
      if
      the Common Stock is not listed on a Trading Market, a day on which the Common
      Stock is traded in the over-the-counter market, as reported by the OTC Bulletin
      Board, or (iii) if the Common Stock is not then
      quoted on the OTC Bulletin Board, a
      day on
      which the Common Stock is quoted in the over-the-counter market as reported
      by
      the National Quotation Bureau Incorporated (or any similar organization or
      agency succeeding to its functions of reporting prices); provided,
      that in
      the event that the Common Stock is not listed or quoted as set forth in (i),
      (ii) and (iii) hereof, then the term “Trading Day” shall mean a Business
      Day.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Trading
      Market”
      means
      whichever of the New York Stock Exchange, the American Stock Exchange, the
      Nasdaq National Market, or the Nasdaq Bulletin Board on which the Common Stock
      is listed or quoted for trading on the date in question.

     

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

     

    “Warrant
      Shares”
shall
      mean the shares of Common Stock issued or issuable to the Holder of this Warrant
      upon the exercise thereof.

     

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

     

    
      	 	
              2.

            	
              
                EXERCISE
                  OF WARRANT

              

            

    

     

    
      	 	
              2.1

            	
              Manner
                of Exercise

            

    

     

    From
      and
      after the Issuance Date and until 5:00 p.m., Little Rock time, on the Expiration
      Date, the Holder may exercise this Warrant, on any Business Day, for all or
      any
      part of the number of shares of Common Stock purchasable hereunder.

     

    In
      order
      to exercise this Warrant, in whole or in part, the Holder shall surrender this
      Warrant to the Company at its principal office at 124 West Capitol Avenue,
      Suite
      880, Little Rock, Arkansas 72201 or at the office or agency designated by the
      Company pursuant to Section 12, together with a written notice of the Holder’s
      election to exercise this Warrant, which notice shall specify the number of
      shares of Common Stock to be purchased, and shall be accompanied by payment
      of
      the Exercise Price in cash or wire transfer or cashier’s check drawn on a United
      States bank. Such notice shall be substantially in the form of the subscription
      form appearing at the end of this Warrant as Exhibit A, duly executed by the
      Holder or his agent or attorney. Upon receipt of the items referred to above,
      the Company shall, as promptly as practicable, execute or cause to be executed
      and deliver or cause to be delivered to the Holder a certificate or certificates
      representing the aggregate number of full shares of Common Stock issuable upon
      such exercise, together with cash in lieu of any fraction of a share, as
      hereinafter provided. The stock certificate or certificates so delivered shall
      be, to the extent possible, in such denomination or denominations as the Holder
      shall request in the notice and shall be registered in the name of the Holder
      or, subject to Section 9, such other name as shall be designated in the notice.
      This Warrant shall be deemed to have been exercised and such certificate or
      certificates shall be deemed to have been issued, and the Holder or any other
      Person so designated to be named therein shall be deemed to have become the
      holder of record of such shares for all purposes, as of the date the notice,
      together with the cash or check or wire transfer of funds and this Warrant
      is
      received by the Company as described above and all taxes required to be paid
      by
      the Holder, if any, pursuant to Section 2.2 prior to the issuance of such shares
      have been paid, provided that if the Warrant is exercised in connection with
      a
      merger, reorganization or other Fundamental Corporate Change, such exercise
      may
      be made conditional upon the consummation of such event. If this Warrant shall
      have been exercised in part, the Company shall, at the time of delivery of
      the
      certificate or certificates representing Warrant Shares, deliver to the Holder
      a
      new Warrant evidencing the rights of the Holder to purchase the unpurchased
      shares of Common Stock called for by this Warrant, which new Warrant shall
      in
      all other respects be identical with this Warrant, or, at the request of the
      Holder, appropriate notation may be made on this Warrant and the same returned
      to the Holder. Notwithstanding any provision herein to the contrary, the Company
      shall not be required to register shares in the name of any Person who acquired
      this Warrant (or part hereof) or any Warrant Shares otherwise than in accordance
      with this Warrant.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	
              2.2

            	
              Payment
                of Taxes and Charges

            

    

     

    All
      shares of Common Stock issuable upon the exercise of this Warrant pursuant
      to
      the terms hereof shall be validly issued, fully paid and nonassessable, freely
      tradable and without any preemptive rights. The Company shall pay all expenses
      in connection with, and all taxes and other governmental charges that may be
      imposed with respect to, the issuance or delivery thereof, unless such tax
      or
      charge is a tax on income imposed by law upon the Holder, in which case such
      taxes or charges shall be paid by the Holder. 

     

    
      	 	
              2.3

            	
              Fractional
                Shares

            

    

     

    The
      Company shall not be required to issue a fractional share of Common Stock upon
      exercise of any Warrant. As to any fraction of a share which the Holder would
      otherwise be entitled to purchase upon such exercise, the Company shall pay
      a
      cash adjustment in respect of such fraction in an amount equal to the same
      fraction of the Market Price per share of Common Stock as of the date of
      exercise of the Warrant giving rise to such fraction of a share. 

     

    
      	 	
              2.4

            	
              Cashless
                Exercise During Period of
                Default

            

    

    

    Notwithstanding
      any other provision contained herein to the contrary, from and after the first
      anniversary of the Closing Date and so long as the Company is required under
      the
      Registration Rights Agreement to have effected the registration of the Warrant
      Shares for resale to the public pursuant to a Registration Statement (as such
      term is defined in the Registration Rights Agreement), if the Warrant Shares
      may
      not be freely sold to the public due to the failure of the Company to have
      effected the registration of the Warrant Shares or to have a current prospectus
      available for delivery or otherwise, in each case as required by the Securities
      Purchase Agreement, the Holder may elect to receive, without the payment by
      the
      Holder of the aggregate Warrant Price in respect of the shares of Common Stock
      to be acquired, shares of Common Stock of equal value to the value of this
      Warrant, or any specified portion hereof, by the surrender of this Warrant
      (or
      such portion of this Warrant being so exercised) together with a Net Issue
      Election Notice, in the form annexed hereto as Appendix A with appropriate
      modification to reflect such Net Issue Election, duly executed, to the Company.
      Thereupon, the Company shall issue to the Holder such number of fully paid,
      validly issued and nonassessable shares of Common Stock as is computed using
      the
      following formula:

    

    X
      =
Y
      (A -
      B)

    A

    

    where 

    

    X
      = the
      number of shares of Common Stock to which the Holder is entitled upon such
      cashless exercise;

    

    Y
      = the
      total
      number of shares of Common Stock covered by this Warrant for which the Holder
      has surrendered purchase rights at such time for cashless exercise (including
      both shares to be issued to the Holder and shares as to which the purchase
      rights are to be canceled as payment therefor);

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    A
      = the
      Market Price of one share of Common Stock as at the date the net issue election
      is made; and

    

    B
      = the
      Warrant Price in effect under this Warrant at the time the net issue election
      is
      made.

     

    
      	 	
              2.5

            	
              Buy-In

            

    

    

    If
      at any
      time when a Registration Statement is in effect with respect to the Warrant
      Shares, as provided for by the Securities Purchase Agreement, (a) a certificate
      representing the Warrant Shares is not delivered to the Holder within three
      (3)
      Business Days of the due exercise of this Warrant by the Holder and (b) prior
      to
      the time such certificate is received by the Holder, the Holder, or any third
      party on behalf of the Holder or for the Holder’s account, purchases (in an open
      market transaction or otherwise) shares of Common Stock to deliver in
      satisfaction of a sale by the Holder of shares represented by such certificate
      (a “Buy-In”), then the Company shall pay in cash to the Holder (for costs
      incurred either directly by such Holder or on behalf of a third party) the
      amount by which the total purchase price paid for Common Stock as a result
      of
      the Buy-In (including brokerage commissions, if any) exceeds the proceeds
      received by such Holder as a result of the sale to which such Buy-In relates.
      The Holder shall provide the Company written notice indicating the amounts
      payable to the Holder in respect of the Buy-In.

     

    
      	 	
              3.

            	
              
                TRANSFER,
                  DIVISION AND
                  COMBINATION

              

            

    

     

    
      	 	
              3.1

            	
              Transfer

            

    

     

    Subject
      to compliance with Section 9, transfer of this Warrant and all rights hereunder,
      in whole or in part, shall be registered on the books of the Company to be
      maintained for such purpose, upon surrender of this Warrant at the principal
      office of the Company referred to in Section 2.1 or the office or agency
      designated by the Company pursuant to Section 12, together with a written
      assignment of this Warrant substantially in the form of Exhibit B hereto duly
      executed by the Holder or his agent or attorney and funds sufficient to pay
      any
      transfer taxes payable upon the making of such transfer. Upon such surrender
      and, if required, such payment, the Company shall, subject to Section 9, execute
      and deliver a new Warrant or Warrants in the name of the assignee or assignees
      and in the denomination specified in such instrument of assignment, and shall
      issue to the assignor a new Warrant evidencing the portion of this Warrant
      not
      so assigned, and this Warrant shall promptly be canceled. A Warrant, if properly
      assigned in compliance with Section 9, may be exercised by a new Holder for
      the
      purchase of shares of Common Stock without having a new warrant
      issued.

     

    
      	 	
              3.2

            	
              Division
                and Combination

            

    

     

    Subject
      to Section 9, this Warrant may be divided or combined with other Warrants upon
      presentation hereof at the aforesaid office or agency of the Company, together
      with a written notice specifying the names and denominations in which new
      Warrants are to be issued, signed by the Holder or his agent or attorney.
      Subject to compliance with Sections 3.1 and 9, as to any transfer which may
      be
      involved in such division or combination, the Company shall execute and deliver
      a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided
      or combined in accordance with such notice.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	
              3.3

            	
              Expenses

            

    

     

    The
      Company shall prepare, issue and deliver at its own expense (other than transfer
      taxes) the new Warrant or Warrants under this Section 3.

     

    
      	 	
              3.4

            	
              Maintenance
                of Books

            

    

     

    The
      Company agrees to maintain, at its aforesaid office or agency, books for the
      registration and the registration of transfers of the Warrants.

     

    
      	 	
              4.

            	
              
                ADJUSTMENTS

              

            

    

     

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

     

    
      	 	
              4.1

            	
              Stock
                Dividends, Subdivisions and
                Combinations

            

    

     

    If
      at any
      time the Company shall:

     

    (a) declare
      or pay to the holders of its Common Stock a dividend payable in, or other
      distribution of, shares of Common Stock or in Convertible
      Securities;

     

    (b) subdivide
      its outstanding shares of Common Stock into a larger number of shares of Common
      Stock; or

     

    (c) combine
      its outstanding shares of Common Stock into a smaller number of shares of Common
      Stock;

     

    then
      (i)
      the number of shares of Common Stock for which this Warrant is exercisable
      immediately after the occurrence of any such event shall be adjusted to equal
      the number of shares of Common Stock which a record holder of the same number
      of
      shares of Common Stock for which this Warrant is exercisable immediately prior
      to the occurrence of such event would own or be entitled to receive after the
      occurrence of such event, and (ii) the then-current Exercise Price shall be
      adjusted to equal (A) the then-current Exercise Price multiplied by the number
      of shares of Common Stock for which this Warrant is exercisable immediately
      prior to the adjustment divided by (B) the number of shares for which this
      Warrant is exercisable immediately after such adjustment.

     

    
      	 	
              4.2

            	
              Certain
                Other Distributions

            

    

     

    If
      at any
      time the Company shall declare or pay to the holders of its Common Stock any
      dividend or other distribution of:

     

    (a) cash;

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b) any
      evidences of its indebtedness, any shares of its stock or any other securities
      or property of any nature whatsoever (other than cash, Convertible Securities
      or
      additional shares of Common Stock); any warrants or other rights to subscribe
      for or purchase any evidences of its indebtedness, any shares of its stock
      or
      any other securities or property of any nature whatsoever (other than cash,
      Convertible Securities or additional shares of Common Stock);

     

    then,
      upon exercise of this Warrant, the Holder shall be entitled to receive such
      dividend or distribution as if the Holder had exercised this Warrant prior
      to
      the date of such dividend or distribution. A reclassification of the Common
      Stock (other than a change in par value, or from par value to no par value
      or
      from no par value to par value) into shares of Common Stock and shares of any
      other class of stock shall be deemed a distribution by the Company to the
      holders of its Common Stock of such shares of such other class of stock within
      the meaning of this Section 4.2 and, if the outstanding shares of Common Stock
      shall be changed into a larger or smaller number of shares of Common Stock
      as a
      part of such reclassification, such change shall be deemed a subdivision or
      combination, as the case may be, of the outstanding shares of Common Stock
      within the meaning of Section 4.1. 

     

    
      	 	
              4.3

            	
              Dilutive
                Issuances

            

    

     

    If
      at any
      time after the Issuance Date the Company shall issue
      or
      sell shares of Common Stock or Convertible Securities (other than (i) securities
      issued or issuable in Excluded Issuances or (ii) shares of Common Stock issued
      as a result of a dividend or other distribution on the Common Stock payable
      in
      Common Stock or (iii) a subdivision of outstanding shares of Common Stock),
      without consideration or for a consideration per share less than $0.83, the
      Exercise Price shall be reduced, concurrently with such issue, as provided
      herein. If such dilutive sale or issuance occurs prior to the date on which
      the
      Registration Statement covering the Warrant Shares is declared effective, the
      Exercise Price shall be reduced to a price equal to one hundred fifty percent
      (150%) of the price at which such shares of Common Stock are issued (or, in
      the
      case of Convertible Securities, the price at which the Common Stock issuable
      upon the exercise. conversion or exchange of such Convertible Securities is
      deemed issued as hereinafter provided). If such dilutive sale or issuance occurs
      on or after to the date on which the Registration Statement covering the Warrant
      Shares is declared effective, the Exercise Price shall be reduced to a price
      (calculated to the nearest cent) (i) determined in accordance with the following
      formula: 

     

                             
 P1
      Q1 + P2 Q2

    New
      Exercise Price =   ---------------------

                Q1
      + Q2

    where:

     

    
      	 	
              P1
                = 

            	
              Applicable
                Exercise Price in effect immediately prior to such new issue or
                sale.

            

    

    
      	 	
              Q1
                =

            	
              Number
                of shares of Common Stock outstanding plus the number of shares of
                Common
                Stock issuable upon conversion or exercise of Convertible Securities
                outstanding immediately prior to such new issue or
                sale.

            

    

    
      	 	
              P2
                =

            	
              150%
                of the weighted average price per share of Common Stock received
                or deemed
                by the Company upon such new issue or
                sale.

            

    

    
      	 	
              Q2
                =

            	
              Number
                of shares of Common Stock issued or sold, or deemed to have been
                issued,
                in the subject transaction.

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    For
      purposes of this Section 4.3, upon the sale or issuance of Convertible
      Securities, the maximum number of shares of Common Stock issuable upon the
      exercise, conversion or exchange of such Convertible Securities (as set forth
      in
      the instrument relating thereto without regard to any provisions contained
      therein for a subsequent adjustment of such number) shall be deemed to be issued
      as of the time of such issue or sale and the consideration deemed received
      for
      such shares of Common Stock shall be the consideration actually received by
      the
      Company for the issue of such Convertible Securities plus the minimum additional
      consideration to be received by the Company upon the full exercise, conversion
      or exchange of such Convertible Securities. Insofar as any consideration
      received, or to be received, by the Company consists of property other than
      cash, such consideration shall be computed at the fair value thereof at the
      time
      of such issue or sale, as determined in good faith by the Board.

     

    
      	 	
              4.4

            	
              Other
                Provisions Applicable to Adjustments under this
                Section

            

    

     

    The
      following provisions shall be applicable to the making of adjustments of the
      number of shares of Common Stock for which this Warrant is exercisable and
      the
      current Exercise Price provided for in this Section 4:

     

    (a) When
      Adjustments to be Made.
      The
      adjustments required by this Section 4 shall be made whenever and as often
      as
      any specified event requiring an adjustment shall occur. For the purpose of
      any
      adjustment, any specified event shall be deemed to have occurred at the close
      of
      business on the date of its occurrence.

     

    (b) Fractional
      Interests.
      In
      computing adjustments under this Section 4, fractional interests in Common
      Stock
      shall be taken into account to the nearest 1/10th of a share.

     

    (c) When
      Adjustment not Required.
      If the
      Company shall take a record of the holders of its Common Stock for the purpose
      of entitling them to receive a dividend or distribution or subscription or
      purchase rights and shall, thereafter and before the distribution to the holders
      thereof, legally abandon its plan to pay or deliver such dividend, distribution,
      subscription or purchase rights, then thereafter no adjustment shall be required
      by reason of the taking of such record and any such adjustment previously made
      in respect thereof shall be rescinded and annulled.

     

    
      	 	
              4.5

            	
              Reorganization,
                Reclassification, Merger, Consolidation or Disposition of
                Assets

            

    

     

    In
      case
      the Company shall reorganize its capital, reclassify its capital stock,
      consolidate or merge with or into another Person (where the Company is not
      the
      survivor or where there is a change in or distribution with respect to the
      Common Stock of the Company), or sell, convey, transfer or otherwise dispose
      of
      all or substantially all its property, assets or business to another Person,
      or
      effectuate a transaction or series of related transactions in which more than
      50% of the voting power of the Company is disposed of (each, a “Fundamental
      Corporate Change”)
      and,
      pursuant to the terms of such Fundamental Corporate Change, shares of common
      stock of the successor or acquiring Company, or any cash, shares of stock or
      other securities or property of any nature whatsoever (including warrants or
      other subscription or purchase rights) in addition to or in lieu of common
      stock
      of the successor or acquiring Company (“Other
      Property”),
      are
      to be received by or distributed to the holders of Common Stock, then the Holder
      shall have the right thereafter to receive, upon exercise of the Warrant, such
      number of shares of common stock of the successor or acquiring Company or of
      the
      Company, if it is the surviving Company, and Other Property as is receivable
      upon or as a result of such
      Fundamental Corporate Change by a holder of the number of shares of Common
      Stock
      for which this Warrant is exercisable immediately prior to such Fundamental
      Corporate Change. In case of any such Fundamental Corporate Change, the
      successor or acquiring company (if other than the Company) shall expressly
      assume the due and punctual observance and performance of each and every
      covenant and condition of this Warrant to be performed and observed by the
      Company and all the obligations and liabilities hereunder, subject to such
      modifications as may be deemed appropriate (as determined by resolution of
      the
      Board) in order to provide for adjustments of shares of Common Stock for which
      this Warrant is exercisable which shall be as nearly equivalent as practicable
      to the adjustments provided for in this Section 4. For purposes of this Section
      4.5, “common
      stock of the successor or acquiring company”
shall
      include stock of such company of any class which is not preferred as to
      dividends or assets over any other class of stock of such company and which
      is
      not subject to redemption and shall also include any evidences of indebtedness,
      shares of stock or other securities which are convertible into or exchangeable
      for any such stock, either immediately or upon a specified date or upon the
      happening of a specified event, and any warrants or other rights to subscribe
      for or purchase any such stock. The foregoing provisions of this Section 4.5
      shall similarly apply to any successive Fundamental Corporate Change of the
      successor company. 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	
              4.6

            	
              Sale
                of the Company for Cash

            

    

     

    Notwithstanding
      the provisions of Section 4.6, in the event of a Fundamental Corporate Change
      in
      which all of the holders of Common Stock of the Company receive cash in exchange
      for their shares of Common Stock, the Holder shall be entitled to receive,
      upon
      surrender and cancellation of this Warrant, (a) cash in an amount equal to
      fair
      market value of this Warrant (determined using Black-Scholes analytic methods)
      immediately prior to the effective time of such Fundamental Corporate Change,
      provided that such payment does not exceed the amount of the exercise price
      of
      the Warrant then in effect, and (b) if the payment contemplated by Subsection
      (a) would exceed the amount of the exercise price of the Warrant than in effect,
      then cash in an amount per share for the number of Shares subject to this
      Warrant equal to the fair market value of one share of Common Stock immediately
      prior to the effective time of such Fundamental Corporate Change, less the
      per
      share Exercise Price then in effect..

     

    
      	 	
              4.7

            	
              Other
                Action Affecting Common
                Stock

            

    

     

    In
      case
      at any time or from time to time the Company shall take any action in respect
      of
      its Common Stock, other than any action described in this Section 4, or any
      other event occurs, which would have a materially adverse effect upon the rights
      of the Holder, the number of shares of Common Stock and/or the purchase price
      thereof shall be adjusted in such manner as may be equitable in the
      circumstances, as determined in good faith by the Board of Directors of the
      Company.

     

    
      	 	
              4.8

            	
              Certain
                Limitations

            

    

     

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

     

    
      	 	
              5.

            	
              
                NOTICES
                  TO THE HOLDER

              

            

    

     

    
      	 	
              5.1

            	
              Notice
                of Adjustments

            

    

     

    Whenever
      the number of shares of Common Stock for which this Warrant is exercisable,
      or
      whenever the price at which a share of such Common Stock may be purchased upon
      exercise of the Warrants, shall be adjusted pursuant to Section 4, the Company
      shall forthwith prepare a certificate to be executed by the chief financial
      officer of the Company setting forth, in reasonable detail, the event requiring
      the adjustment and the method by which such adjustment was calculated (including
      a description of the basis on which the Board of Directors of the Company
      determined the fair value of any evidences of indebtedness, shares of stock,
      other securities or property or warrants or other subscription or purchase
      rights referred to in Section 4.2), specifying the number of shares of Common
      Stock for which this Warrant is exercisable and (if such adjustment was made
      pursuant to Section 4.2 or 4.5) describing the number and kind of any other
      shares of stock or Other Property for which this Warrant is exercisable, and
      any
      change in the purchase price or prices thereof, after giving effect to such
      adjustment or change. The Company shall promptly cause a signed copy of such
      certificate to be delivered to the Holder in accordance with Section 14.2.
      The
      Company shall keep, along with the transfer register maintained in accordance
      with Section 3.4, copies of all such certificates and cause the same to be
      available for inspection at said office during normal business hours by the
      Holder or any prospective purchaser of a Warrant designated by the
      Holder.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	
              5.2

            	
              Notice
                of Corporate Action

            

    

     

    If
      at any
      time:

     

    (a) the
      Company shall take a record of the holders of its Common Stock for the purpose
      of entitling them to receive a dividend or other distribution, or any right
      to
      subscribe for or purchase any evidences of its indebtedness, any shares of
      stock
      of any class or any other securities or property, or to receive any other right;
      or

     

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

     

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

     

    then,
      in
      any one or more of such cases, the Company shall give to Holder (i) at least
      10
      days’ prior written notice of the date on which a record date shall be selected
      for such dividend, distribution or right or for determining rights to vote
      in
      respect of any such reorganization, reclassification, merger, consolidation,
      sale, transfer, disposition, dissolution, liquidation or winding up, and (ii)
      in
      the case of any such reorganization, reclassification, merger, consolidation,
      sale, transfer, disposition, dissolution, liquidation or winding up, at least
      10
      days’ prior written notice of the date when the same shall take place. Such
      notice in accordance with the foregoing clause also shall specify (i) the date
      on which any such record is to be taken for the purpose of such dividend,
      distribution or right, the date on which the holders of Common Stock shall
      be
      entitled to any such dividend, distribution or right, and the amount and
      character thereof, and (ii) the date on which any such reorganization,
      reclassification, merger, consolidation, sale, transfer, disposition,
      dissolution, liquidation or winding up is to take place and the time, if any
      such time is to be fixed, as of which the holders of Common Stock shall be
      entitled to exchange their shares of Common Stock for securities or other
      property deliverable upon such reorganization, reclassification, merger,
      consolidation, sale, transfer, disposition, dissolution, liquidation or winding
      up. Each such written notice shall be sufficiently given if addressed to the
      Holder at the last address of the Holder appearing on the books of the Company
      and delivered in accordance with Section 14.2.

     

    
      	 	
              6.

            	
              
                
                  NO
                    IMPAIRMENT

                

              

            

    

     

    The
      Company shall not by any action, including, without limitation, amending its
      certificate of incorporation or through any reorganization, transfer of assets,
      consolidation, merger, dissolution, issuance or sale of securities or other
      voluntary action, avoid or seek to avoid the observance or performance of any
      of
      the terms of this Warrant, but will at all times in good faith assist in the
      carrying out of all such terms and in the taking of all such actions as may
      be
      necessary or appropriate to protect the rights of the Holder against impairment.
      Without limiting the generality of the foregoing, the Company will (a) not
      increase the par value of any shares of Common Stock receivable upon the
      exercise of this Warrant above the amount payable therefor upon such exercise
      immediately prior to such increase in par value, (b) take all such action as
      may
      be necessary or appropriate in order that the Company may validly and legally
      issue fully paid and nonassessable shares of Common Stock upon the exercise
      of
      this Warrant, and (c) use its best efforts to obtain all such authorizations,
      exemptions or consents from any public regulatory body having jurisdiction
      thereof as may be necessary to enable the Company to perform its obligations
      under this Warrant.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Upon
      the
      request of the Holder, the Company will at any time during the period this
      Warrant is outstanding acknowledge in writing, in form satisfactory to the
      Holder, the continuing validity of this Warrant and the obligations of the
      Company hereunder.

     

    
      	 	
              7.

            	
              
                RESERVATION
                  AND AUTHORIZATION OF COMMON
                  STOCK

              

            

    

     

    From
      and
      after the Issuance Date, the Company shall at all times reserve and keep
      available for issuance upon the exercise of Warrants such number of its
      authorized but unissued shares of Common Stock as will be sufficient to permit
      the exercise in full of all outstanding Warrants. All shares of Common Stock
      which shall be so issuable, when issued upon exercise of any Warrant and payment
      therefor in accordance with the terms of such Warrant, shall be duly and validly
      issued and fully paid and nonassessable and not subject to preemptive
      rights.

     

    Before
      taking any action which would cause an adjustment reducing the then-current
      Exercise Price below the then par value, if any, of the shares of Common Stock
      issuable upon exercise of the Warrants, the Company shall take any corporate
      action which may be necessary in order that the Company may validly and legally
      issue fully paid and nonassessable shares of such Common Stock at such adjusted
      Exercise Price.

     

    Before
      taking any action which would result in an adjustment in the number of shares
      of
      Common Stock for which this Warrant is exercisable or in the then-current
      Exercise Price, the Company shall obtain all such authorizations or exemptions
      thereof, or consents thereto, as may be necessary from any public regulatory
      body or bodies having jurisdiction thereof.

     

    
      	 	
              8.

            	
              
                TAKING
                  OF RECORD; STOCK AND WARRANT TRANSFER
                  BOOKS

              

            

    

     

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

     

    
      	 	
              9.

            	
              
                RESTRICTIONS
                  ON TRANSFERABILITY

              

            

    

     

    The
      Warrants and the Warrant Shares shall not be transferred, hypothecated or
      assigned before satisfaction of the conditions specified in the legend affixed
      to the first page of this Warrant, which conditions are intended, in part,
      to
      ensure compliance with the provisions of the Securities Act with respect to
      the
      Transfer of any Warrant or any Warrant Shares. The Holder, by acceptance of
      this
      Warrant, agrees to be bound by the provisions of this Section
      9.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	
              10.

            	
              
                SUPPLYING
                  INFORMATION

              

            

    

     

    The
      Company shall cooperate with the Holder in supplying such information as may
      be
      reasonably necessary for the Holder to complete and file any information
      reporting forms presently or hereafter required by the Commission as a condition
      to the availability of an exemption from the Securities Act for the sale of
      any
      Warrant or Warrant Shares.

     

    
      	 	
              11.

            	
              
                LOSS
                  OR MUTILATION

              

            

    

     

    Upon
      receipt by the Company from the Holder of evidence reasonably satisfactory
      to it
      of the ownership of and the loss, theft, destruction or mutilation of this
      Warrant and indemnity reasonably satisfactory to it (it being understood that
      the written agreement of the Holder shall be sufficient indemnity), and in
      case
      of mutilation upon surrender and cancellation hereof, the Company will execute
      and deliver in lieu hereof a new Warrant of like tenor to the Holder;
provided,
      in the
      case of mutilation no indemnity shall be required if this Warrant in
      identifiable form is surrendered to the Company for cancellation.

     

    
      	 	
              12.

            	
              
                OFFICE
                  OF THE COMPANY

              

            

    

     

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

     

    
      	 	
              13.

            	
              
                LIMITATION
                  OF LIABILITY

              

            

    

     

    No
      provision hereof, in the absence of affirmative action by the Holder to purchase
      shares of Common Stock, and no enumeration herein of the rights or privileges
      of
      the Holder hereof, shall give rise to any liability of the Holder for the
      purchase price of any Common Stock or as a stockholder of the Company, whether
      such liability is asserted by the Company or by creditors of the Company.
      Nothing in the foregoing shall be construed in any manner to limit or deny
      the
      liability of a Holder in any other capacity, including, without limitation,
      as a
      director of the Company. 

     

    
      	 	
              14.

            	
              
                MISCELLANEOUS

              

            

    

     

    
      	 	
              14.1

            	
              Nonwaiver
                

            

    

     

    No
      course
      of dealing or any delay or failure to exercise any right hereunder on the part
      of the Holder shall operate as a waiver of such right or otherwise prejudice
      the
      Holder’s rights, powers or remedies. No waiver by the Holder of any right
      hereunder on any one occasion shall operate as a waiver of such right on any
      other occasion.

     

    
      	 	
              14.2

            	
              Notice
                Generally

            

    

    

    Except
      as
      may be otherwise provided herein, any and all notices or other communications
      or
      deliveries required or permitted to be provided hereunder shall be in writing
      and shall be deemed given and effective on the earliest of (a) the date of
      transmission, if such notice or communication is delivered via facsimile
      (provided the sender receives a machine-generated confirmation of successful
      transmission) at the facsimile number specified in this Section prior to 6:30
      p.m. (Little Rock time) on a Business Day, (b) the next Business Day after
      the
      date of transmission, if such notice or communication is delivered via facsimile
      at the facsimile number specified in this Section on a day that is not a
      Business Day or later than 6:30 p.m. (Little Rock time) on any Business Day,
      (c)
      the Business Day following the date of transmission, if sent by a nationally
      recognized overnight courier service, or (d) upon actual receipt by the party
      to
      whom such notice is required to be given. The address for such notices and
      communications shall be the same as provided in the Securities Purchase
      Agreement; or such other address as may be designated in writing hereafter,
      in
      the same manner, by such addressee.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	
              14.3

            	
              Remedies

            

    

     

    The
      Holder in addition to being entitled to exercise all rights granted by law,
      including recovery of damages, will be entitled to specific performance of
      its
      rights under Section 2 of this Warrant. The Company agrees that monetary damages
      would not be adequate compensation for any loss incurred by reason of a breach
      by it of the provisions of Section 2 of this Warrant and hereby agrees to waive
      the defense in any action for specific performance that a remedy at law would
      be
      adequate.

     

    
      	 	
              14.4

            	
              Successors
                and Assigns

            

    

     

    Subject
      to the provisions of Sections 3.1 and 9, this Warrant and the rights evidenced
      hereby shall inure to the benefit of and be binding upon the successors of
      the
      Company and the successors and assigns of the Holder. The provisions of this
      Warrant are intended to be for the benefit of all Holders from time to time
      of
      this Warrant and, with respect to Section 9 hereof, the holders of Warrant
      Shares, and shall be enforceable by any such holder or the holder of Warrant
      Shares.

     

    
      	 	
              14.5

            	
              Amendment

            

    

     

    This
      Warrant may be modified or amended or the provisions hereof waived with the
      written consent of the Company and the Holder.

     

    
      	 	
              14.6

            	
              Severability

            

    

     

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

     

    
      	 	
              14.7

            	
              Headings

            

    

     

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

     

    
      	 	
              14.8

            	
              Governing
                Law

            

    

     

    This
      Warrant shall be governed by the laws of the State of Delaware, without regard
      to the provisions thereof relating to conflicts of law.

     

    
      	 	
              14.9

            	
              Disputes

            

    

     

    In
      the
      case of a dispute as to the determination of the Exercise Price or the
      arithmetic calculation of the securities or other property deliverable upon
      exercise of this Warrant, the Company shall promptly issue and deliver to the
      Holder the securities or other properties that are not in
      dispute..

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    In
      Witness Whereof,
      the
      Company has caused this Warrant to be duly executed by its duly authorized
      Chief
      Financial Officer.

     

    Dated:
      September 15, 2008

     

    
      	
              ThermoEnergy
                Corporation

            
	 	 
	
              By:

            	
               
                

            
	 	
              Andrew
                T. Melton

            
	 	
              Executive
                Vice President and

            
	 	
              Chief
                Financial Officer

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

     

    SUBSCRIPTION
      FORM

     

    [To
      be
      executed only upon exercise of Warrant]

     

    The
      undersigned registered owner of this Warrant irrevocably exercises this Warrant
      for the purchase of __________ shares of Common Stock of ThermoEnergy
      Corporation and herewith makes payment therefor, all at the price and on the
      terms and conditions specified in this Warrant and requests that certificates
      for the shares of Common Stock hereby purchased (and any securities or other
      property issuable upon such exercise) be issued in the name of and delivered
      to

     

      
        

      

    

    whose
      address is

     

      
        

      

    

    and,
      if
      such shares of Common Stock shall not include all of the shares of Common Stock
      issuable as provided in this Warrant, that a new Warrant of like tenor and
      date
      for the balance of the shares of Common Stock issuable hereunder be delivered
      to
      the undersigned.

     

    
      	 
              
	
              (Name
                of Registered Owner)

            
	  
	
              (Signature
                of Registered Owner)

            
	 
              
	
              (Street
                Address)

            
	 
              
	
              (City)
                           (State)
                           (Zip
                Code)

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

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      B

     

    ASSIGNMENT
      FORM

     

    For
      Value
      Received the
      undersigned registered owner of this Warrant hereby sells, assigns and transfers
      unto the Assignee named below all of the rights of the undersigned under this
      Warrant, with respect to the number of shares of Common Stock set forth
      below:

     

    
      	
              Name
                and Address of Assignee

            	 	
              No. of Shares of

              Common
                Stock

            	 
	 	 	 	 	 
	 	 	 	 	 

    

     

    and
      does
      hereby irrevocably constitute and appoint

     

     

      
        

      

    

    attorney-in-fact
      to register such transfer on the books of ThermoEnergy Corporation maintained
      for the purpose, with full power of substitution in the premises.

     

    Dated:
      ____________________

     

    
      	 
               
	
              (Name
                of Registered Owner)

            
	 
               
	
              (Signature
                of Registered Owner)

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

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