Document:

Unassociated Document

    FORM
OF ADVISORY AGREEMENT

     

    This
ADVISORY AGREEMENT, dated as of _________, 2010 (this “Agreement”), is between
American Realty Capital – Retail Centers of America, Inc., a Maryland
corporation (the “Company”), and American Realty
Capital Retail Advisor, LLC, a Delaware limited liability company (the “Advisor”).

     

    WITNESSETH

     

    WHEREAS, the Company desires
to avail itself of the knowledge, experience, sources of information, advice,
assistance and certain facilities available to the Advisor and to have the
Advisor undertake the duties and responsibilities hereinafter set forth, on
behalf of, and subject to the supervision of, the Board of Directors of the
Company, all as provided herein; and

     

    WHEREAS, the Advisor is
willing to undertake to render such services, subject to the supervision of the
Board of Directors of the Company, on the terms and subject to the conditions
hereinafter set forth.

     

    NOW, THEREFORE, in
consideration of the foregoing and of the mutual covenants and agreements
contained herein, the parties hereto agree as follows:

     

    Article
1

    Definitions

     

    The
following defined terms used in this Agreement shall have the meanings specified
below:

     

    “Acquisition Expenses” means
any and all expenses, excluding the Acquisition Fees, incurred by the Company,
the Advisor or any Affiliate of either in connection with the consideration,
investigation, selection, evaluation, acquisition or development of any
Investment, whether or not acquired or originated, as applicable, including
legal fees and expenses, travel and communications expenses, brokerage fees,
costs of appraisals, nonrefundable option payments on Investments not acquired,
accounting fees and expenses, title insurance premiums and the costs of
performing due diligence.

     

    “Acquisition Fees” means the
fee payable to the Advisor pursuant to Section 8.1 plus all other fees and
commissions, excluding Acquisition Expenses, paid by any Person to any Person in
connection with making or investing in any Investment or the purchase,
development or construction of any Property by the Company.  Included
in the computation thereof shall be any real estate commission, selection fee,
Development Fee, Construction Fee, nonrecurring management fee, loan fees or
points or any fee of a similar nature, however designated.  Excluded
in the computation thereof shall be Development Fees and Construction Fees paid
to Persons not Affiliated with the Advisor in connection with the actual
development and construction of a Property.

     

    “Advisor” has the meaning set
forth at the head of this Agreement.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    “Affiliate” means, with respect
to any Person, any of the following: (i) any other Person directly or indirectly
controlling, controlled by, or under common control with such Person;
(ii) any other Person directly or indirectly owning, controlling, or
holding with the power to vote 10% or more of the outstanding voting securities
of such Person; (iii) any legal entity for which such Person acts as an
executive officer, director, trustee, or general partner; (iv) any other Person
10% or more of whose outstanding voting securities are directly or indirectly
owned, controlled, or held, with power to vote, by such Person; and (v) any
executive officer, director, trustee, or general partner of such Person. An
entity shall not be deemed to control or be under common control with an
Advisor-sponsored program unless (A) the entity owns 10% or more of the voting
equity interests of such program or (B) a majority of the board of directors (or
equivalent governing body) of such program is composed of Affiliates of the
entity.  The term “Affiliated” shall have a
meaning correlative thereto.

     

    “Articles of Incorporation”
means the Articles of Incorporation of the Company under Title 2 of the
Corporations and Associations Article of the Annotated Code of Maryland, as
amended from time to time.

     

    “Average Invested Assets”
means, for a specified period, the average of the aggregate book value of the
assets of the Company invested, directly or indirectly, in Properties, Loans and
other Permitted Investments secured by real estate before reserves for
depreciation or bad debts or other similar non-cash reserves, computed by taking
the average of such values at the end of each month during such specified
period.

     

    “Asset Management Fee” shall
have the meaning set forth in Section 8.2.

     

    “Board of Directors” or “Board” means the persons
holding such office, as of any particular time, under the Articles of
Incorporation, whether they be the Directors named therein or additional or
successor Directors.

     

    “Bylaws” means the bylaws of
the Company, as amended from time to time.

     

    “Code” means the Internal
Revenue Code of 1986, as amended from time to time, or any successor statute
thereto.  Reference to any provision of the Code shall mean such
provision as in effect from time to time, as the same may be amended, and any
successor provision thereto, as interpreted by any applicable regulations as in
effect from time to time.

     

    “Company” means American Realty
Capital – Retail Centers of America, Inc.

     

    “Construction Fee” means a fee
or other remuneration for acting as general contractor and/or construction
manager to construct improvements, supervise and coordinate projects or to
provide major repairs or rehabilitation on a Property.

     

    “Competitive Real Estate
Commission” means a real estate or brokerage commission for the purchase
or sale of a Property which is reasonable, customary and competitive in light of
the size, type and location of the Property.

     

    
      “Contract Purchase Price” means amount
actually paid or allocated to fund the acquisition, origination, development,
construction or improvement of
an Investment, inclusive of the expenses
associated with such Investment and the amount of any debt associated with, or
used to fund the investment in, such
Investment.

       

    

    “Contract Sales Price” means
the total consideration received by the Company for the sale of an
Investment.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    “Dealer Manager” means (i)
Realty Capital Securities, LLC, a Delaware limited liability company, or (ii)
any successor dealer manager to the Company.

     

    “Development Fee” means a fee
for the packaging of a Property, including negotiating and approving plans, and
undertaking to assist in obtaining zoning and necessary variances and necessary
financing for the Property, either initially or at a later date.

     

    “Director” means a member of
the Board of Directors of the Company.

     

     “Distributions” means any
distributions of money or other property by the Company to Stockholders,
including distributions that may constitute a return of capital for U.S. federal
income tax purposes.

     

    “Effective Date” means the
date upon which the Registration Statement for the Company’s initial public
offering is declared effective by the Securities and Exchange
Commission.

     

    “Excess Amount” has the meaning
set forth in Section 9.2(A).

     

    “Expense Year” has the meaning
set forth in Section 9.2(A).

     

    “Financing Coordination Fee”
shall have the meaning set forth in Section 8.5.

     

    “FINRA” means the Financial
Industry Regulatory Authority Inc.

     

    “GAAP” means accounting
principles generally accepted in the United States as currently in
effect.

     

    “Gross Proceeds” means the
aggregate purchase price of all Shares sold for the account of the Company
through an Offering, without deduction for Organization and Offering Expenses.
For the purpose of computing Gross Proceeds, the purchase price of any Share for
which reduced Selling Commissions are paid to the Dealer Manager or a Soliciting
Dealer (where net proceeds to the Company are not reduced) shall be deemed to be
the full amount of the offering price per Share pursuant to the Prospectus for
such Offering without reduction.

     

    “include,” “included,” “including” and “such as” are to be construed
as if followed by the phrase “without limitation.”

     

    “Independent Director” shall
have the meaning set forth in the Articles of Incorporation.

     

    “Investment” or “Investments” means any
investment or investments by the Company or the Partnership, directly or
indirectly, in Properties, Loans or other Permitted Investments.

     

    “Joint Venture” means any joint
venture, limited liability company or other entity through which the Company
directly or indirectly owns, in whole or in part, any Investments.

     

    “Lincoln” shall have the
meaning set forth in Article 3.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    “Listing” means (i) the
listing of the Shares on a national securities exchange, or (ii) the
receipt by the Stockholders of securities that are listed on a national
securities exchange in exchange for Shares in a merger or any other type of
transaction.

     

    “Loans” means mortgage loans
and other types of debt financing investments made by the Company, either
directly or indirectly, including through ownership interests in a Joint Venture
or other entity, and including mezzanine loans, B-notes, bridge loans,
convertible mortgages, wraparound mortgage loans, construction mortgage loans,
loans on leasehold interests, and participations in such loans.

     

    “MGCL” means the Maryland
General Corporation Law, as amended from time to time.

     

    “NASAA Guidelines” means the
NASAA Statement of Policy Regarding Real Estate Investment Trusts as in effect
on the date hereof.

     

    “Net Income” means, for any
period, the total revenues of the Company applicable to such period, less the
total expenses applicable to such period excluding additions to reserves for
depreciation, bad debts or other similar non-cash reserves; provided, however, that Net
Income for purposes of calculating total allowable Operating Expenses shall
exclude the gain from the sale of the Company’s assets.

     

    “Notice” has the meaning set
forth in Section 15.1.

     

    “Offering” means the public
offering of Shares pursuant to a Prospectus.

     

    “Operating Expenses” means all
costs and expenses incurred by the Company, as determined under GAAP, that in
any way are related to the operation of the Company or to Company business,
including fees paid to the Advisor, but excluding (i) the expenses of raising
capital such as Organization and Offering Expenses, legal, audit, accounting,
underwriting, brokerage, listing, registration, and other fees, printing and
other such expenses and taxes incurred in connection with the issuance,
distribution, transfer, registration and Listing of the Shares, (ii) interest
payments, (iii) taxes, (iv) non-cash expenditures such as depreciation,
amortization, bad loan reserves, impairments of value, and mark-to-market
losses, (v) incentive fees paid in compliance with Section IV.F. of the NASAA
Guidelines and (vi) Acquisition Fees and Acquisition Expenses (including
Financing Coordination Fees), real estate commissions on resale of property,
property management fees, and other expenses connected with the acquisition,
disposition, management and ownership of real estate interests, loans or other
property (other than commissions on the sale of assets other than real
property), such as the costs of foreclosure, insurance premiums, legal services,
maintenance, repair and improvement of property.

     

    “Organization and Offering
Expenses” means all expenses incurred by or on behalf of the Company in
connection with or in preparing the Company for registration of and subsequently
offering and distributing its Shares to the public, whether incurred before, on
or after the date of this Agreement, which may include total underwriting and
brokerage discounts and commissions (including fees of the underwriters’
attorneys); any expense allowance granted by the Company to the underwriter or
any reimbursement of expenses of the underwriter by the Company; expenses for
printing, engraving and mailing; compensation of employees while engaged in
sales activity; charges of transfer agents, registrars, trustees, escrow
holders, depositaries and experts; and expenses of qualification of the sale of
the securities under Federal and state laws, including taxes and fees,
accountants’ and attorneys’ fees.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    “Oversight Fee” shall have the
meaning set forth in Section 8.3.

     

    “Partnership” means American
Realty Capital Retail Operating Partnership, L.P., a Delaware limited
partnership formed to own and operate Investments on behalf of the
Company.

     

    “Permitted Investments” means
all investments (other than Properties and Loans) in which the Company acquires
an interest, either directly or indirectly, including through ownership
interests in a Joint Venture or other entity, pursuant to the Articles of
Incorporation, Bylaws and the investment objectives and policies adopted by the
Board from time to time, other than short-term investments acquired for purposes
of cash management.

     

    “Person” or “person” means an individual,
corporation, partnership, estate, trust (including a trust qualified under
Section 401(a) or 501(c) (17) of the Code), a portion of a trust permanently set
aside for or to be used exclusively for the purposes described in Section 642(c)
of the Code, association, private foundation within the meaning of Section
509(a) of the Code, joint stock company or other entity, or any government or
any agency or political subdivision thereof, and also includes a group as that
term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of
1934, as amended.

     

    “Property” or “Properties” means any real
property or properties transferred or conveyed to the Company or any subsidiary
of the Company or the Partnership, either directly or indirectly, and/or any
real property or properties transferred or conveyed to a Joint Venture or
partnership in which the Company is, directly or indirectly, a co-venturer or
partner.

     

    “Property Manager” means an
entity that has been retained to perform and carry out at one or more of the
Properties property management services, excluding Persons retained or hired to
perform facility management or other services or tasks at a particular Property,
the costs for which are passed through to and ultimately paid by the tenant at
such Property.

     

    “Prospectus” means a final
prospectus of the Company filed pursuant to Rule 424(b) of the Securities Act,
as the same may be amended or supplemented from time to time.

     

    “Registration Statement” means
the registration statement filed by the Company with the SEC pursuant to the
Securities Act on Form S-11, as amended from time to time, in connection with an
Offering.

     

    “Real Estate Commission” shall
have the meaning set forth in Section 8.4.

     

    “REIT” means a “real estate
investment trust” under Sections 856 through 860 of the Code.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    “Sale” or “Sales” means (i) any
transaction or series of transactions whereby: (A) the Company sells, grants,
transfers, conveys, or relinquishes its direct or indirect ownership of any
Investment or portion thereof, including the transfer of any Property that is
the subject of a ground lease, and including any event with respect to any
Investment that gives rise to a significant amount of insurance proceeds or
condemnation awards; (B) the Company sells, grants, transfers, conveys, or
relinquishes its ownership of all or substantially all of the direct or indirect
interest of the Company in any Joint Venture or other entity in which it,
directly or indirectly, has an interest; or (C) any Joint Venture or other
entity (in which the Company, directly or indirectly, has an interest) sells,
grants, transfers, conveys, or relinquishes its direct or indirect ownership of
any Investment or portion thereof, including any event with respect to any
Investment that gives rise to insurance claims or condemnation awards, but (ii)
not including any transaction or series of transactions specified in clause (i)
(A), (i) (B), or (i) (C) above in which the proceeds of such transaction or
series of transactions are reinvested by the Company, directly or indirectly, in
one or more Investments within 180 days thereafter.

     

    “SEC” means the United States
Securities and Exchange Commission.

     

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

     

    “Shares” means the shares of
common stock of the Company, par value $.01 per share.

     

    “Soliciting Dealers” means
broker-dealers who are members of FINRA or that are exempt from broker-dealer
registration, and who, in either case, have executed soliciting dealer or other
agreements with the Dealer Manager to sell Shares.

     

    “Stockholders” means the
registered holders of the Shares.

     

     “Targeted Assets” means a
portfolio consisting of: (i) existing anchored, stabilized core retail
properties, including power centers, lifestyle centers, grocery-anchored
shopping centers with a purchase price in excess of twenty million dollars
($20,000,000) and other need-based shopping centers (not less than sixty-five
percent (65%) by value) which are located in the United States and at least
eighty percent (80%) leased at the time of acquisition; (ii) existing
grocery-anchored shopping centers (up to twenty percent (20%) by value), the
purchase price of which is twenty million dollars ($20,000,000) or less; (iii)
existing enclosed mall opportunities for de-malling and reconfiguration into an
open air format (up to twenty percent (20%) by value) which are located in the
United States; and (iv) real estate-related debt and investments (up to fifteen
percent (15%) by value) secured by, or which represent a direct or indirect
interest in, the assets described in clauses (i) - (iii).

     

    “Termination” means the
termination of this Agreement in accordance with Articles 13
hereof.

     

    “Termination Date” means the
date of termination of the Agreement determined in accordance with Article 13
hereof.

     

    “2%/25% Guidelines” has the
meaning set forth in Section 9.2(B).

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    Article
2

    Appointment

     

    The
Company hereby appoints the Advisor to serve as its advisor to perform the
services set forth herein on the terms and subject to the conditions set forth
in this Agreement and subject to the supervision of the Board, and the Advisor
hereby accepts such appointment.

     

    Article
3

    Duties
of the Advisor

     

    The
Advisor is responsible for managing, operating, directing and supervising the
operations and administration of the Company and its assets.  The
Advisor undertakes to use its commercially reasonable efforts to present to the
Company potential investment opportunities in Targeted Assets and to provide the
Company with a continuing and suitable investment program in Targeted Assets
consistent with the investment objectives and policies of the Company as
determined and adopted from time to time by the Board.  Subject to the
limitations set forth in this Agreement, including Article 4 hereof, consistent
with the provisions of the Articles of Incorporation and Bylaws and the
continuing and exclusive authority of the Board over the supervision of the
Company, the Advisor shall, either directly or by engaging Lincoln Retail REIT
Services, LLC, a Delaware limited liability company (“Lincoln”), or another third
party, perform the following duties:

     

    
      	
              3.1

            	
              Organizational and Offering
      Services.  The Advisor shall perform all services related
      to the organization of the Company or any Offering or private sale of the
      Company’s securities, other than services that (i) are to be performed by
      the Dealer Manager, (ii) the Company elects to perform directly or (iii)
      would require the Advisor to register as a broker-dealer with FINRA, the
      SEC or any state.

            

    

     

    
      	
              3.2

            	
              Acquisition and Disposition
      Services.  The Advisor shall (or shall retain other
      Persons to (but shall remain responsible to the
  Company)):

            

    

     

    
      	
               
      

            	
              (A)

            	
              Serve
      as the Company’s investment and financial advisor and provide relevant
      market research and economic and statistical data in connection with the
      Properties, investment objectives and
policies;

            

    

     

    
      	
               
      

            	
              (B)

            	
              Subject
      to the investment objectives and policies of the Company: (a) locate,
      analyze and select potential Investments; (b) structure and negotiate the
      terms and conditions of transactions pursuant to which investments in
      Targeted Assets and other Investments will be made; (c) acquire, originate
      and dispose of Targeted Assets and other Investments on behalf of the
      Company (including through Joint Ventures); (d) arrange for financing and
      refinancing and make other changes in the asset or capital structure of
      investments in Targeted Assets and other Investments; (e) select Joint
      Venture partners and structure corresponding agreements; and (f) enter
      into leases, service contracts and other agreements for Targeted Assets
      and other Investments;

            

    

     

    
      	
               
      

            	
              (C)

            	
              Perform
      due diligence on prospective investments and create due diligence reports
      summarizing the results of such
work;

            

    

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    
      	
               
      

            	
              (D)

            	
              Prepare
      reports regarding prospective investments that include recommendations and
      supporting documentation necessary for the Board of the Company to
      evaluate the proposed investments;

            

    

     

    
      	
               
      

            	
              (E)

            	
              Obtain
      reports, where appropriate, concerning the value of the
      Properties;

            

    

     

    
      	
               
      

            	
              (F)

            	
              Deliver
      to, or maintain on behalf of the Company, copies of all appraisals
      obtained in connection with the
Properties;

            

    

     

    
      	
               
      

            	
              (G)

            	
              Negotiate
      and execute approved investments and other transactions, including
      acquisitions of Targeted Assets and other Investments;
  and

            

    

     

    
      	
               
      

            	
              (H)

            	
              Consult
      with the Company’s officers and the Board and provide assistance with the
      evaluation and approval of potential Investment dispositions, sales and
      refinancing, including reports to the Board regarding the
      foregoing.

            

    

     

    
      	
              3.3

            	
              Asset Management
      Services.  The Advisor shall (or shall retain other
      Persons to (but shall remain responsible to the
  Company)):

            

    

     

    
      	
               
      

            	
              (A)

            	
              Investigate,
      select and, on behalf of the Company, engage and conduct business with
      (including enter contracts with) and supervise the performance of such
      Persons as the Advisor deems necessary to the proper performance of its
      obligations as set forth in this Agreement, including consultants,
      accountants, lenders, technical advisors, attorneys, brokers,
      underwriters, corporate fiduciaries, escrow agents, depositaries,
      custodians, agents for collection, insurers, insurance agents, banks,
      builders, developers, property owners, security investment advisors,
      mortgagors, the registrar and the transfer agent, construction companies,
      Property Managers and any and all Persons acting in any other capacity
      deemed by the Advisor necessary or desirable for the performance of any of
      the foregoing services;

            

    

     

    
      	
               
      

            	
              (B)

            	
              Monitor
      applicable markets and obtain reports where appropriate, concerning the
      value of the Properties;

            

    

     

    
      	
               
      

            	
              (C)

            	
              Monitor
      and evaluate the performance of each of the Properties and the Company’s
      overall portfolio of Properties and perform and supervise the various
      management and operational functions related to the
      Properties;

            

    

     

    
      	
               
      

            	
              (D)

            	
              Formulate
      and oversee the implementation of strategies for the administration,
      promotion, management, operation, maintenance, investment, improvement,
      financing and refinancing, marketing, leasing and disposition of
      Investments on an overall portfolio
basis;

            

    

     

    
      	
               
      

            	
              (E)

            	
              Consult
      with the Company’s officers and the Board and assist the Board in the
      formulation and implementation of the Company’s financial policies, and,
      as necessary, furnish the Board with advice and recommendations with
      respect to the making of investments consistent with the investment
      objectives and policies of the
Company;

            

    

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    
      	
               
      

            	
              (F)

            	
              Engage
      a Property Manager for each of the
Properties;

            

    

     

    
      	
               
      

            	
              (G)

            	
              Coordinate
      and manage relationships between the Company and any co-venturers or
      partners; and

            

    

     

    
      	
               
      

            	
              (H)

            	
              Negotiate
      and service the Company’s debt facilities and other financings and
      negotiate on behalf of the Company with banks or other lenders for debt
      facilities to be made to the Company and its subsidiaries; provided, however, that
      any fees and costs payable to third parties incurred by the Advisor in
      connection with the foregoing shall be the responsibility of the
      Company.

            

    

     

    
      	
              3.4

            	
              Accounting and Other
      Administrative Services.  The Advisor shall (or shall
      retain other Persons to (but shall remain responsible to the
      Company)):

            

    

     

    
      	
               
      

            	
              (A)

            	
              Provide
      the day-to-day management of the Company and perform and supervise the
      various administrative functions reasonably necessary for the management
      of the Company;

            

    

     

    
      	
               
      

            	
              (B)

            	
              From
      time to time, or at any time reasonably requested by the Board, make
      reports to the Board on the Advisor’s performance of services to the
      Company under this Agreement;

            

    

     

    
      	
               
      

            	
              (C)

            	
              Make
      reports to the Company each quarter of the investments that have been made
      by other programs sponsored by the Advisor or any of its Affiliates, as
      well as any investments that have been made by the Advisor or any of its
      Affiliates directly;

            

    

     

    
      	
               
      

            	
              (D)

            	
              Provide
      or arrange for any administrative services and items, legal and other
      services, office space, office furnishings, personnel and other overhead
      items necessary and incidental to the Company’s business and
      operations;

            

    

     

    
      	
               
      

            	
              (E)

            	
              Provide
      financial and operational planning
services;

            

    

     

    
      	
               
      

            	
              (F)

            	
              Maintain
      accounting and other record-keeping functions at the Company and
      investment levels, including information concerning the activities of the
      Company as shall be required to prepare and to file all periodic financial
      reports, tax returns and any other information required to be filed with
      the SEC, the Internal Revenue Service and any other regulatory
      agency;

            

    

     

    
      	
               
      

            	
              (G)

            	
              Maintain
      and preserve all appropriate books and records of the
    Company;

            

    

     

    
      	
               
      

            	
              (H)

            	
              Provide
      tax and compliance services and coordinate with appropriate third parties,
      including the Company’s independent auditors and other consultants, on
      related tax matters;

            

    

     

    
      	
               
      

            	
              (I)

            	
              Provide
      the Company with all necessary cash management
  services;

            

    

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    
      	
               
      

            	
              (J)

            	
              Deliver
      to, or maintain on behalf of, the Company copies of all appraisals
      obtained in connection with
Investments;

            

    

     

    
      	
               
      

            	
              (K)

            	
              Manage
      and coordinate with the transfer agent the monthly dividend process and
      payments to Stockholders;

            

    

     

    
      	
               
      

            	
              (L)

            	
              Consult
      with the Company’s officers and the Board and assist the Board in
      evaluating and obtaining adequate insurance coverage based upon risk
      management determinations;

            

    

     

    
      	
               
      

            	
              (M)

            	
              Consult
      with the Company’s officers and the Board and assist the Board in
      evaluating various liquidity events when
  appropriate;

            

    

     

    
      	
               
      

            	
              (N)

            	
              Provide
      the Company’s officers and the Board with timely updates related to the
      overall regulatory environment affecting the Company, as well as managing
      compliance with such matters, including compliance with the Sarbanes-Oxley
      Act of 2002;

            

    

     

    
      	
               
      

            	
              (O)

            	
              Consult
      with the Company’s officers and the Board relating to the corporate
      governance structure and appropriate policies and procedures related
      thereto;

            

    

     

    
      	
               
      

            	
              (P)

            	
              Perform
      all reporting, record keeping, internal controls and similar matters in a
      manner to allow the Company to comply with applicable law, including
      federal and state securities laws and the Sarbanes-Oxley Act of
      2002;

            

    

     

    
      	
               
      

            	
              (Q)

            	
              Notify
      the Board of all proposed material transactions before they are completed;
      and

            

    

     

    
      	
               
      

            	
              (R)

            	
              Do
      all things necessary to assure its ability to render the services
      described in this Agreement.

            

    

     

    
      	
              3.5

            	
              Stockholder
      Services.  The Advisor shall (or shall retain other
      Persons to (but shall remain responsible to the
  Company)):

            

    

     

    
      	
               
      

            	
              (A)

            	
              Manage
      services for and communications with Stockholders, including answering
      phone calls, preparing and sending written and electronic reports and
      other communications;

            

    

     

    
      	
               
      

            	
              (B)

            	
              Oversee
      the performance of the transfer agent and
  registrar;

            

    

     

    
      	
               
      

            	
              (C)

            	
              Establish
      technology infrastructure to assist in providing Stockholder support and
      service; and

            

    

     

    
      	
               
      

            	
              (D)

            	
              Consistent
      with Section 3.1, perform the various subscription processing services
      reasonably necessary for the admission of new
  Stockholders.

            

    

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    
    

    
      	
              3.6

            	
              Other
      Services.  Except as provided in Article 7, the Advisor
      shall perform any other services reasonably requested by the Company (with
      the consent of a majority of the Independent
  Directors).

            

    

     

    Article
4

    Authority
of the Advisor

     

    
      	
              4.1

            	
              General.  All
      rights and powers to manage and control the day-to-day business and
      affairs of the Company shall be vested in the Advisor.  The
      Advisor shall have the power to delegate all or any part of its rights and
      powers to manage and control the business and affairs of the Company to
      such officers, employees, Affiliates, agents and representatives of the
      Advisor or the Company or a third party as it may deem
      appropriate.  Any authority delegated by the Advisor to any
      other Person shall be subject to the limitations on the rights and powers
      of the Advisor specifically set forth in this Agreement or the Articles of
      Incorporation.

            

    

     

    
      
        	
                4.2

              	
                Powers of the
      Advisor.  Subject to the express limitations set forth in
      this Agreement, to the continuing and exclusive authority of the Board
      over the supervision of the Company, and to the right of the Advisor to
      delegate its responsibilities pursuant to Section 4.1, the power to direct
      the management, operation and policies of the Company shall be vested in
      the Advisor, which shall have the power by itself and shall be authorized
      and empowered on behalf and in the name of the Company to carry out any
      and all of the objectives and purposes of the Company and to perform all
      acts and enter into and perform all contracts and other undertakings that
      it may in its sole discretion deem necessary, advisable or incidental
      thereto to perform its obligations under this
  Agreement.

              

      

       

      
        	
                4.3

              	
                Approval by the
      Board.  Notwithstanding the foregoing, the Advisor may
      not take any action on behalf of the Company without the prior approval of
      the Board or duly authorized committees thereof if the Articles of
      Incorporation or the MGCL require the prior approval of the
      Board.  The Advisor will deliver to the Board all documents
      required by it to evaluate a proposed investment (and any related
      financing).

              

      

       

      
        	
                4.4

              	
                Modification or Revocation of
      Authority of Advisor.  The Board may, at any time upon
      the giving of notice to the Advisor, modify or revoke the authority or
      approvals set forth in Article 3 and this Article 4 hereof; provided, however, that
      such modification or revocation shall be effective upon receipt by the
      Advisor and shall not be applicable to investment transactions to which
      the Advisor has committed the Company prior to the date of receipt by the
      Advisor of such notification.

              

      

       

      Article
5

      Bank
Accounts

       

      The
Advisor may establish and maintain one or more bank accounts in its own name for
the account of the Company or in the name of the Company and may collect and
deposit into any such account or accounts, and disburse from any such account or
accounts, any money on behalf of the Company, under such terms and conditions as
the Board may approve; provided, that no
funds shall be commingled with the funds of the Advisor.  The Advisor
shall upon request render appropriate accountings of such collections and
payments to the Board and the independent auditors of the Company.

       

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

       

      Article
6

      Records
and Financial Statements

       

      The
Advisor, in the conduct of its responsibilities to the Company, shall maintain
adequate and separate books and records for the Company’s operations in
accordance with GAAP, which shall be supported by sufficient documentation to
ascertain that such books and records are properly and accurately
recorded.  Such books and records shall be the property of the Company
and shall be available for inspection by the Board and by counsel, auditors and
other authorized agents of the Company, at any time or from time to time during
normal business hours. Such books and records shall include all information
necessary to calculate and audit the fees or reimbursements paid under this
Agreement.  The Advisor shall utilize procedures to attempt to ensure
such control over accounting and financial transactions as is reasonably
required to protect the Company’s assets from theft, error or fraudulent
activity.  All financial statements that the Advisor delivers to the
Company shall be prepared on an accrual basis in accordance with GAAP, except
for special financial reports that by their nature require a deviation from
GAAP. The Advisor shall liaise with the Company’s officers and independent
auditors and shall provide such officers and auditors with the reports and other
information that the Company so requests.

       

      Article
7

      Limitation
on Activities

       

      Notwithstanding
any provision in this Agreement to the contrary, the Advisor shall not take any
action that, in its sole judgment made in good faith, would (i) adversely affect
the ability of the Company to qualify or continue to qualify as a REIT under the
Code (unless the Board has determined that REIT qualification is not in the best
interests of the Company and its Stockholders), (ii) subject the Company to
regulation under the Investment Company Act of 1940, as amended, (iii) violate
any law, rule, regulation or statement of policy of any governmental body or
agency having jurisdiction over the Company, its Shares or its other securities,
(iv) require the Advisor to register as a broker-dealer with the SEC or any
state, or (v) violate the Articles of Incorporation or
Bylaws.  In the event an action that would violate (i) through (v) of
the preceding sentence but such action has been ordered by the Board, the
Advisor shall notify the Board of the Advisor’s judgment of the potential impact
of such action and shall refrain from taking such action until it receives
further clarification or instructions from the Board.  In such event,
the Advisor shall have no liability for acting in accordance with the specific
instructions of the Board so given.

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      Article
8

      Fees

       

      
        	
                8.1

              	
                Acquisition
      Fees.

              

      

       

      
        	
                 
      

              	
                (A)

              	
                The
      Company shall pay an Acquisition Fee to the Advisor as compensation for
      services rendered in connection with the investigation, selection and
      acquisition (by purchase, investment or exchange) of
      Investments.  The total Acquisition Fee payable to the Advisor
      shall equal one percent (1.0%) of the Contract Purchase Price of the
      Investment.  The amount actually paid or allocated for an
      Investment held through a Joint Venture shall equal the sum of (x) the
      product of (i) the amount actually paid or allocated to fund, or the
      amount advanced for, the acquisition, origination, development,
      construction or improvement of the Investment, as applicable, by the Joint
      Venture and (ii) the direct or indirect ownership percentage of the Joint
      Venture held directly or indirectly by the Company or the Partnership and
      (y) any expense of the Company associated with such
      Investment.  For purposes of this section, “ownership
      percentage” shall be the percentage of capital stock, membership
      interests, partnership interests or other equity interests held by the
      Company or the Partnership, without regard to classification of such
      equity interests.  The Advisor shall submit an invoice to the
      Company, accompanied by a computation of the Acquisition Fee at or prior
      to the closing of the acquisition.  The Company shall pay to the
      Advisor the Acquisition Fee at the closing of the
      acquisition.  An Acquisition Fee shall only be payable on the
      reinvestment of proceeds from the sale of an investment, if, during the
      period ending two years after the final closing of the initial Offering,
      the Company sells an Investment and then reinvests in other
      Investments.

              

      

       

      
        	
                 
      

              	
                (B)

              	
                Pursuant
      to the NASAA Guidelines, the total of all Acquisition Fees, Financing
      Coordination Fees and Acquisition Expenses payable in connection with any
      Investment or any reinvestment shall not exceed four and one half percent
      (4.5%) of the “contract purchase price”, as defined in the Articles of
      Incorporation, of the Investment acquired or four and one half percent
      (4.5%) of the amount advanced for an Investment, unless a majority of the
      Board of Directors (including a majority of the Independent Directors) not
      otherwise interested in the transaction approves the Acquisition Fees and
      Acquisition Expenses and determines the transaction to be commercially
      competitive, fair and reasonable to the
Company.

              

      

       

      
        	
                8.2

              	
                Asset Management
      Fee.  The Company shall pay an Asset Management Fee to
      the Advisor as compensation for services rendered in connection with the
      management of the Company’s assets in an amount equal to 0.75% per annum
      of the Average Invested Assets; provided, however, that
      the Asset Management Fee shall be reduced by any Oversight Fee payable to
      the Advisor, such that the aggregate Asset Management Fee and Oversight
      Fee do not exceed 0.75% per annum of the Average Invested
      Assets.  The Asset Management Fee is payable quarterly in
      advance, on January 1, April 1, July 1 and October 1, in the amount of
      0.1875% of Average Invested Assets for the preceding
      quarter.  The Advisor shall submit an invoice to the Company,
      accompanied by a computation of the Asset Management Fee for the
      applicable quarter.

              

      

       

      
        
           

        

        
          13

          
            

          

        

        
           

        

      

       

      
        	
                8.3

              	
                Oversight
      Fee.  The Company shall pay the Advisor an Oversight Fee
      equal to one percent (1.0%) of the gross revenues from Properties managed
      by any Person that is not an Affiliate of the Advisor.  The
      Oversight Fee is payable quarterly in advance, on January 1, April 1, July
      1 and October 1.  The Advisor shall submit an invoice to the
      Company, accompanied by a computation of the Oversight Fee for the
      applicable quarter.

              

      

       

      
        	
                8.4

              	
                Real Estate
      Commission.  In connection with a Sale of a Property in
      which the Advisor or any Affiliate or agent of the Advisor provides a
      substantial amount of services, as determined by the Independent
      Directors, the Company shall pay to the Advisor a Real Estate Commission
      equal to two percent (2.0%) of the Contract Sales Price of such Property,
      but in no event shall the Real Estate Commission exceed one-half of the
      total brokerage commission paid by the Company if it pays a brokerage
      commission in addition to the Real Estate Commission; provided, however, that
      in no event may the sum of the Real Estate Commission and such brokerage
      commissions exceed the lesser of six percent (6.0%) of the Contract Sales
      Price and a Competitive Real Estate Commission.  The Advisor
      shall submit an invoice to the Company, accompanied by a computation of
      the Real Estate Commission at or prior to the closing of the
      Sale.  The Company shall pay to the Advisor the Real Estate
      Commission at the closing of the
Sale.

              

      

       

      
        	
                8.5

              	
                Financing Coordination
      Fee.  The Company shall pay a Financing Coordination Fee
      to the Advisor in connection with the financing of any Investment,
      assumption of any loans with respect to any Investment or refinancing of
      any loan in an amount equal to one percent (1.0%) of the amount made
      available and/or outstanding under any such loan, including any assumed
      loan.  In no event will the aggregate Acquisition Fees
      and Financing Coordination Fees, at the time that the net proceeds of the
      Offering are fully invested or at any time thereafter, exceed, in the
      aggregate, one and a half percent (1.5%) of the aggregate Contract
      Purchase Price of all of the Properties acquired by the
      Company.  The Advisor shall submit an invoice to
      the Company, accompanied by a computation of the Financing Coordination
      Fee at or prior to the closing of the financing.  The Company
      shall pay to the Advisor the Financing Coordination Fee at the closing of
      the financing.

              

      

       

      
        	
                8.6

              	
                Payment of
      Fees.  In connection with the Acquisition Fee, Real
      Estate Commission, Asset Management Fee and Financing Coordination Fee,
      the Company shall pay such fees to the Advisor in cash or in Shares, or a
      combination of both, the form of payment to be determined in the sole
      discretion of the Advisor. For the purposes of the payment of such fees in
      Shares, each Share shall be valued at the per share offering price of the
      Shares in the initial Offering minus the maximum selling commissions and
      dealer manager fee allowed in the initial
  Offering.

              

      

       

      
        	
                8.7

              	
                Exclusion of Certain
      Transactions.

              

      

       

      
        	
                 
      

              	
                (A)

              	
                If
      the Company or the Partnership shall propose to enter into any transaction
      in which the Advisor, any Affiliate of the Advisor or any of the Advisor’s
      directors or officers has a direct or indirect interest, then such
      transaction shall be approved by a majority of disinterested Directors,
      including a majority of disinterested Independent
    Directors.

              

      

       

      
        	
                 
      

              	
                (B)

              	
                If
      the Board elects to internalize any management services provided by
      the Advisor, neither the Company nor the Partnership shall pay any
      compensation or other remuneration to the Advisor or its Affiliates
      in connection with the internalization
  transaction.

              

      

       

      
        
           

        

        
          14

          
            

          

        

        
           

        

      

       

      
        	
                8.8

              	
                Other
      Services.  Should the Board request that the Advisor or
      any Affiliate, or any director, officer or employee of any of the
      foregoing, render services for the Company other than as set forth in this
      Agreement, such services shall be separately compensated at such rates and
      in such amounts as are agreed upon by the Advisor or such Affiliate or
      other Person, on the one hand, and the Board, including a majority of the
      Independent Directors, on the other hand, subject to the limitations
      contained in the Articles of Incorporation, and shall not be deemed to be
      services pursuant to the terms of this
  Agreement.

              

      

       

      
        	
                8.9

              	
                Changes to Fee
      Structure.  In the event of Listing, the Company and the
      Advisor shall negotiate in good faith to establish a fee structure
      appropriate for a perpetual-life
entity.

              

      

       

      Article
9

      Expenses

       

      
        	
                9.1

              	
                General.  In
      addition to the compensation paid to the Advisor pursuant to Article 8
      hereof, the Company shall pay directly or reimburse the Advisor, as the
      case may be, for all of the expenses paid or incurred by the Advisor or
      its Affiliates on behalf of the Company or in connection with the services
      provided to the Company (including any expenses paid or incurred by third
      parties engaged by the Advisor to render any portion of such services)
      pursuant to this Agreement, including, but not limited
  to:

              

      

       

      
        	
                 
      

              	
                (A)

              	
                All
      Organization and Offering Expenses; provided, however,
      that:

              

      

       

      
        	
                 
      

              	
                (1)

              	
                the
      Company shall not reimburse the Advisor to the extent such reimbursement
      would cause the total amount spent by the Company on Organization and
      Offering Expenses (excluding underwriting and brokerage discounts and
      commissions) to exceed 1.5% of Gross Proceeds raised in an Offering as of
      the termination of such Offering;
and

              

      

       

      
        	
                 
      

              	
                (2)

              	
                within
      60 days after the end of the month in which an Offering terminates, the
      Advisor shall reimburse the Company to the extent the Company incurred
      Organization and Offering Expenses (excluding underwriting and brokerage
      discounts and commissions) exceeding 1.5% of Gross Proceeds raised in such
      Offering;

              

      

       

      
        	
                 
      

              	
                (B)

              	
                Acquisition
      Fees and Acquisition Expenses incurred in connection with the selection
      and acquisition of Investments, including such expenses incurred related
      to assets pursued or considered but not ultimately acquired by the
      Company, provided that,
      notwithstanding anything herein to the contrary, the payment of
      Acquisition Fees and Acquisition Expenses by the Company shall be subject
      to the limitations contained in the Articles of
    Incorporation;

              

      

       

      
        	
                 
      

              	
                (C)

              	
                Third-party
      due diligence fees of up to 0.5% of the Gross Proceeds as set forth in a
      detailed and itemized invoice;

              

      

       

      
        
           

        

        
          15

          
            

          

        

        
           

        

      

    

    
      	
               
      

            	
              (D)

            	
              The
      actual out-of-pocket cost of goods and services used by the Company and
      obtained from entities not Affiliated with the Advisor, including travel,
      meals and lodging expenses incurred by the Advisor in performing duties
      associated with the acquisition or origination of
    Investments;

            

    

     

    
      	
               
      

            	
              (E)

            	
              Interest
      and other costs for borrowed money, including discounts, points and other
      similar fees;

            

    

     

    
      	
               
      

            	
              (F)

            	
              Taxes
      and assessments on income or Properties, taxes as an expense of doing
      business and any other taxes otherwise imposed on the Company and its
      business, assets or income;

            

    

     

    
      	
               
      

            	
              (G)

            	
              Out-of-pocket
      costs associated with insurance required in connection with the business
      of the Company or by its officers and
Directors;

            

    

     

    
      	
               
      

            	
              (H)

            	
              Expenses
      of managing, improving, developing, operating and selling Investments
      owned, directly or indirectly, by the Company, as well as expenses of
      other transactions relating to such Investments, including prepayments,
      maturities and workouts of Loans and other Permitted
      Investments;

            

    

     

    
      	
               
      

            	
              (I)

            	
              All
      out-of-pocket expenses in connection with payments to the Board and
      meetings of the Board and
Stockholders;

            

    

     

    
      	
               
      

            	
              (J)

            	
              All
      out-of-pocket expenses associated with a Listing, if applicable, or with
      the issuance and distribution of Shares, such as selling commissions and
      fees, advertising expenses, taxes, legal and accounting fees, listing and
      registration fees, and other Organization and Offering
      Expenses;

            

    

     

    
      	
               
      

            	
              (K)

            	
              Personnel
      and related employment costs incurred by the Advisor or its Affiliates in
      performing the services described in Article 3 hereof, including
      reasonable salaries and wages, benefits and overhead of all employees
      directly involved in the performance of such services, provided that
      no reimbursement shall be made for costs of such employees of the Advisor
      or its Affiliates to the extent that such employees perform services for
      which the Advisor receives Acquisition Fees or Real Estate
      Commissions;

            

    

     

    
      	
               
      

            	
              (L)

            	
              Out-of-pocket
      expenses of providing services for and maintaining communications with
      Stockholders, including the cost of preparation, printing, and mailing
      annual reports and other Stockholder reports, proxy statements and other
      reports required by governmental
entities;

            

    

     

    
      	
               
      

            	
              (M)

            	
              Audit,
      accounting and legal fees, and other fees for professional services
      relating to the operations of the Company and all such fees incurred at
      the request, or on behalf of, the Board or any committee of the
      Board;

            

    

     

    
      	
               
      

            	
              (N)

            	
              Out-of-pocket
      costs for the Company to comply with all applicable laws, regulations and
      ordinances;

            

    

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              (O)

            	
              Expenses
      connected with payments of Distributions made or caused to be made by the
      Company to the Stockholders;

            

    

     

    
      	
               
      

            	
              (P)

            	
              Expenses
      of organizing, redomesticating, merging, liquidating or dissolving the
      Company or of amending the Articles of Incorporation or the Bylaws;
      and

            

    

     

    
      	
               
      

            	
              (Q)

            	
              All
      other out-of-pocket costs incurred by the Advisor in performing the
      Advisor’s duties hereunder.

            

    

     

    
      	
              9.2

            	
              Timing of and Additional
      Limitations on Reimbursements.  Commencing upon the
      earlier to occur of (i) the fifth fiscal quarter after the Company makes
      its first Investment or (ii) six (6) months after the commencement of the
      Company’s initial Offering, expenses incurred by the Advisor on behalf of
      the Company or in connection with the services provided to the Company
      (including any expenses paid or incurred by third parties engaged by the
      Advisor to render any portion of such services) and reimbursable pursuant
      to this Article 9 shall be reimbursed, no less than monthly, to the
      Advisor in the manner and proportion directed by the
      Advisor.  The Advisor shall prepare a statement documenting the
      expenses of the Company during each month and shall deliver such statement
      to the Company within three (3) business days after the end of each
      month.

            

    

     

    
      	
               
      

            	
              (A)

            	
              The
      Company shall not reimburse the Advisor at the end of any fiscal quarter
      for Operating Expenses that in the four consecutive fiscal quarters then
      ended (the “Expense
      Year”) exceed (the “Excess Amount”) the
      greater of 2% of Average Invested Assets or 25% of Net Income (the “2%/25% Guidelines”) for
      such year unless the Independent Directors determine that such excess was
      justified, based on unusual and nonrecurring factors that the Independent
      Directors deem sufficient.  If the Independent Directors do not
      approve such excess as being so justified, the Advisor shall repay to the
      Company any Excess Amount paid to the Advisor during a fiscal
      quarter.  If the Independent Directors determine such excess was
      justified, then, within 60 days after the end of any fiscal quarter of the
      Company for which total reimbursed Operating Expenses for the Expense Year
      exceed the 2%/25% Guidelines, the Advisor, at the direction of the
      Independent Directors, shall cause such fact to be disclosed to the
      Stockholders in writing (or the Company shall disclose such fact to the
      Stockholders in the next quarterly report of the Company or by filing a
      Current Report on Form 8-K with the SEC within 60 days of such quarter
      end), together with an explanation of the factors the Independent
      Directors considered in determining that such excess expenses were
      justified.  The Company will ensure that such determination will
      be reflected in the minutes of the meetings of the Board.  All
      figures used in the foregoing computation shall be determined in
      accordance with GAAP applied on a consistent
  basis.

            

    

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              (B)

            	
              Notwithstanding
      this Article 9, or any other provision in this Agreement seemingly to the
      contrary, Advisor, its Affiliates and agents shall not be required to
      advance for reimbursement (i) any earnest money deposits required in
      connection with any Investments, (ii) any fees, deposits or other amounts
      due to any lender or other Person in order to secure and close any
      financings, (iii) any commissions, fees or other amounts due to any
      brokers or other Persons in connection with any Investments or to any
      third parties retained to help source any financings or (iv) any other
      out-of-pocket pursuit costs incurred to secure, assess and close each
      Investment, such as legal fees and consultant fees for due diligence
      activities including, but not limited to building condition and
      environmental assessments and reports.  Any such amounts shall
      be funded when due by the Company directly in accordance with the
      agreement or agreements requiring the payment of such
      amounts.  The Company’s obligation to fund all such amounts
      shall apply whether the agreements requiring the payment of such amounts
      are executed in the name of the Company, the Advisor or any of its
      Affiliates or agents.

            

    

     

    Article
10

    Relationship
of the Advisor and the Company; Other Activities of the Advisor

     

    
      	
              10.1

            	
              Relationship.  The
      Company and the Advisor are not partners or joint venturers with each
      other, and nothing in this Agreement shall be construed to make them such
      partners or joint venturers. Nothing herein contained shall prevent the
      Advisor or any of its Affiliates from engaging in or earning fees from
      other activities, including the rendering of advice to other Persons
      (including other REITs) and the management of other programs advised,
      sponsored or organized by the Advisor or any of its Affiliates; nor shall
      this Agreement limit or restrict the right of any manager, director,
      officer, member, partner, employee or equity holder of the Advisor or any
      of its Affiliates to engage in or earn fees from any other business or to
      render services of any kind to any other Person.  The Advisor
      may, with respect to any investment in which the Company is a participant,
      also render advice and service to each and every other participant
      therein, and earn fees for rendering such advice and
      service.  Specifically, it is contemplated that the Company may
      enter into Joint Ventures or other similar co-investment arrangements with
      certain Persons, and pursuant to the agreements governing such Joint
      Ventures or other similar co-investment arrangements, the Advisor may be
      engaged to provide advice and service to such Persons, in which case the
      Advisor will earn fees for rendering such advice and service. The Advisor
      shall promptly disclose to the Board the existence of any condition or
      circumstance, existing or anticipated, of which it has knowledge that
      creates or could create a conflict of interest between the Advisor’s
      obligations to the Company and its obligations to or its interest in any
      other Person.

            

    

     

    
      	
              10.2

            	
              Time
      Commitment.  The Advisor shall, and shall cause its
      Affiliates and their respective employees, officers and agents to, devote
      to the Company such time as shall be reasonably necessary to conduct the
      business and affairs of the Company in an appropriate manner consistent
      with the terms of this Agreement.  The Company acknowledges that
      the Advisor and its Affiliates and their respective employees, officers
      and agents may also engage in activities unrelated to the Company and may
      provide services to Persons other than the Company or any of its
      Affiliates.

            

    

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    
      	
              10.3

            	
              Investment
      Opportunities.  The Advisor shall be required to use
      commercially reasonable efforts to present a continuing and suitable
      investment program in Targeted Assets to the Company that is consistent
      with the investment policies and objectives of the Company.  So
      long as the Advisor acts in its capacity under this Agreement, nothing
      herein contained shall prevent the Advisor or any of its Affiliates from
      engaging in or earning fees from other activities, including the
      acquisition of any investment that is directly competitive with the
      Company’s strategy, the rendering of advice to other Persons (including
      other REITs) and the management of other programs advised, sponsored or
      organized by the Advisor or its Affiliates; nor shall this Agreement limit
      or restrict the right of any director, officer, member, partner, employee
      or stockholder of the Advisor or any of its Affiliates to engage in or
      earn fees from any other business or to render services of any kind to any
      other Person and earn fees for rendering such services; provided, however, that
      the Advisor must devote sufficient resources (directly or through third
      parties retained for such purposes) to the Company’s business to discharge
      its obligations to the Company under this Agreement.  The
      Advisor may, with respect to any Investment in which the Company is a
      participant, also render advice and service to each and every other
      participant therein, and earn fees for rendering such advice and
      service.

            

    

     

    The
Advisor shall report to the Board the existence of any condition or
circumstance, existing or anticipated, of which it has knowledge, which creates
or could create a conflict of interest between the Advisor’s obligations to the
Company and its obligations to or its interest in any other
Person.  If the Advisor, Director or Affiliates thereof have sponsored
other investment programs with similar investment objectives which have
investment funds available at the same time as the Company, the Advisor shall
inform the Board of the method to be applied by the Advisor in allocating
investment opportunities among the Company and competing investment entities and
shall provide regular updates to the Board of the investment opportunities
provided by the Advisor to competing programs in order for the Board (including
the Independent Directors) to fulfill its duty to ensure that the Advisor and
its Affiliates use their reasonable best efforts to apply such method fairly to
the Company.

     

    Article
11

    The
American Realty Capital and ARC Names

     

    
      	
              11.1

            	
              The American Realty Capital and
      ARC Names.  The Advisor and its Affiliates have or may
      have a proprietary interest in the names “American Realty Capital” and
      “ARC.”  The Advisor hereby grants to the Company, to the extent
      of any proprietary interest the Advisor may have in any of the names
      “American Realty Capital” and “ARC,” a non-transferable, non-assignable,
      non-exclusive royalty-free right and license to use the names “American
      Realty Capital” and “ARC” during the term of this
      Agreement.  The Company agrees that the Advisor and its
      Affiliates will have the right to approve of any use by the Company of the
      names “American Realty Capital” or “ARC,” such approval not to be
      unreasonably withheld or delayed.  Accordingly, and in
      recognition of this right, if at any time the Company ceases to retain the
      Advisor or one of its Affiliates to perform advisory services for the
      Company, the Company will, promptly after receipt of written request from
      the Advisor, cease to conduct business under or use the names “American
      Realty Capital” and “ARC” or any derivative thereof and the Company shall
      change its name and the names of any of its subsidiaries to a name that
      does not contain the names “American Realty Capital” or “ARC” or any other
      word or words that might, in the reasonable discretion of the Advisor, be
      susceptible of indication of some form of relationship between the Company
      and the Advisor or any its Affiliates.  At such time, the
      Company will also make any changes to any trademarks, service marks or
      other marks necessary to remove any references to any of the names
      “American Realty Capital” or “ARC.”  Consistent with the
      foregoing, it is specifically recognized that the Advisor or one or more
      of its Affiliates has in the past and may in the future organize, sponsor
      or otherwise permit to exist other investment vehicles (including vehicles
      for investment in real estate) and financial and service organizations
      having any of the names “American Realty Capital” or “ARC” as a part of
      their name, all without the need for any consent (and without the right to
      object thereto) by the Company.  Neither the Advisor nor any of
      its Affiliates makes any representation or warranty, express or implied,
      with respect to the names “American Realty Capital” or “ARC” licensed
      hereunder or the use thereof (including without limitation as to whether
      the use of the name “American Realty Capital” or “ARC” will be free from
      infringement of the intellectual property rights of third
      parties).  Notwithstanding the preceding, the Advisor represents
      and warrants that it is not aware of any pending claims or litigation or
      of any claims threatened in writing regarding the use or ownership of the
      names “American Realty Capital” or
“ARC.”

            

    

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    Article
12

    Term
and Termination of the Agreement

     

    
      	
              12.1

            	
              Term.  This
      Agreement shall have an initial term of one year from the date hereof and
      may be renewed for an unlimited number of successive one-year terms upon
      mutual consent of the parties.  The Company (acting through the
      Independent Directors) will evaluate the performance of the Advisor
      annually before renewing this Agreement, and each such renewal shall be
      for a term of no more than one year.  Any such renewal must be
      approved by a majority of the Independent
  Directors.

            

    

     

    
      	
              12.2

            	
              Termination by Either
      Party.  This Agreement may be terminated upon 60 days’
      written notice without cause or penalty by either the Company (with the
      consent of a majority of the Independent Directors) or the
      Advisor.  The provisions of Articles 1, 11, 12, 14 and 15 shall
      survive termination of this Agreement.  Notwithstanding anything
      else that may be to the contrary herein, the expiration or earlier
      termination of this Agreement shall not relieve a party for liability for
      any breach occurring prior to such expiration or earlier
      termination.

            

    

     

    
      	
              12.3

            	
              Payments to and Duties of the
      Advisor Upon Termination.

            

    

     

    
      	
               
      

            	
              (A)

            	
              Amounts
      Owed.  After the Termination Date, the Advisor shall be
      entitled to receive from the Company or the Partnership within thirty
      (30) days after the effective date of such termination all amounts
      then accrued and owing to the Advisor, including all its interest, if any,
      in the Company’s income, losses, distributions and capital by payment of
      an amount equal to the then-present fair market value of the Advisor’s
      interest, if any, subject to the 2%/25% Guidelines to the extent
      applicable.

            

    

     

    
      	
               
      

            	
              (B)

            	
              Advisor’s
      Duties.  The Advisor shall promptly upon termination of
      this Agreement:

            

    

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              (i)

            	
              pay
      over to the Company all money collected and held for the account of the
      Company pursuant to this Agreement, after deducting any accrued
      compensation and reimbursement for its expenses to which it is then
      entitled;

            

    

     

    
      	
               
      

            	
              (ii)

            	
              deliver
      to the Board a full accounting, including a statement showing all payments
      collected by it and a statement of all money held by it, covering the
      period following the date of the last accounting furnished to the
      Board;

            

    

     

    
      	
               
      

            	
              (iii)

            	
              deliver
      to the Board all assets, including all Investments, and documents of the
      Company and the Partnership then in the custody of the Advisor;
      and

            

    

     

    
      	
               
      

            	
              (iv)

            	
              cooperate
      with the Company and the Partnership to provide an orderly management
      transition.

            

    

     

    Article
13

    Assignment

     

    This
Agreement may be assigned by the Advisor to an Affiliate with the consent of the
Independent Directors.  This Agreement shall not be assigned by the
Company without the consent of the Advisor, except in the case of an assignment
by the Company to a corporation or other organization that is a successor to all
of the assets, rights and obligations of the Company, in which case such
successor organization shall be bound hereunder and by the terms of said
assignment in the same manner as the Company is bound by this Agreement. The
Advisor may assign any rights to receive fees or other payments under this
Agreement to any Person without obtaining the approval of the
Board.

     

    Article
14

    Indemnification
and Limitation of Liability

     

    
      	
              14.1

            	
              Indemnification.  Except
      as prohibited by the restrictions provided in this Section 14.1, Section
      14.2 and Section 14.3, the Company shall indemnify, defend and hold
      harmless the Advisor, Lincoln and their respective Affiliates, as well as
      their respective officers, directors, equity holders, members, partners,
      managers and employees, from all liability, claims, damages or losses
      arising in the performance of their duties hereunder or under any services
      agreement and related expenses, including reasonable attorneys’ fees, to
      the extent such liability, claims, damages or losses and related expenses
      are not fully reimbursed by insurance.  Any indemnification of
      the Advisor or Lincoln may be made only out of the net assets of the
      Company and not from Stockholders.

            

    

     

    Notwithstanding
the foregoing, the Company shall not indemnify the Advisor, Lincoln or their
respective Affiliates, or their respective officers, directors, equity holders,
members, partners, managers and employees, for any loss, liability or expense
arising from or out of an alleged violation of federal or state securities laws
by such party unless one or more of the following conditions are met: (i) there
has been a successful adjudication on the merits of each count involving alleged
material securities law violations as to the particular indemnitee; (ii) such
claims have been dismissed with prejudice on the merits by a court of competent
jurisdiction as to the particular indemnitee; or (iii) a court of competent
jurisdiction approves a settlement of the claims against a particular indemnitee
and finds that indemnification of the settlement and the related costs should be
made, and the court considering the request for indemnification has been advised
of the position of the SEC and of the published position of any state securities
regulatory authority in which securities of the Company were offered or sold as
to indemnification for violations of securities laws.

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    
      	
              14.2

            	
              Limitation on
      Indemnification.  Notwithstanding the foregoing, the
      Company shall not provide for indemnification of the Advisor, Lincoln or
      their respective Affiliates or of their respective officers, directors,
      equity holders, members, partners, managers and employees, for any
      liability or loss suffered by any of them, nor shall any of them be held
      harmless for any loss or liability suffered by the Company, unless all of
      the following conditions are met:

            

    

     

    
      	
               
      

            	
              (A)

            	
              The
      Advisor or one of its Affiliates or Lincoln or one of its Affiliates, as
      applicable, has determined, in good faith that the course of conduct that
      caused the loss or liability was in the best interests of the
      Company.

            

    

     

    
      	
               
      

            	
              (B)

            	
              The
      Advisor or one of Affiliates or Lincoln or one of its Affiliates, as
      applicable, was acting on behalf of or performing services for the
      Company.

            

    

     

    
      	
               
      

            	
              (C)

            	
              Such
      liability or loss was not the result of negligence or misconduct by the
      Advisor or one of its Affiliates or Lincoln or one of its Affiliates, as
      applicable.

            

    

     

    
      	
              14.3

            	
              Limitation on Payment of
      Expenses.  The Company shall pay or reimburse reasonable
      legal expenses and other costs incurred by any of the Advisor or its
      Affiliates or Lincoln or its Affiliates, as applicable, or by any of their
      respective officers, directors, equity holders, members, partners,
      managers and employees, in advance of the final disposition of a
      proceeding.  Such expenses shall be paid with respect to the
      Advisor or its Affiliates or Lincoln or its Affiliates, as applicable, or
      any of their respective officers, directors, equity holders, members,
      partners, managers and employees only if (in addition to any applicable
      procedures required by the MGCL) all of the following are satisfied: (a)
      the proceeding relates to acts or omissions with respect to the
      performance of duties or services on behalf of the Company, (b) the legal
      proceeding was initiated by a third party who is not a stockholder or, if
      by a stockholder acting in his or her capacity as such, a court of
      competent jurisdiction approves such advancement and (c) such Person
      undertakes to repay the amount paid or reimbursed by the Company, together
      with the applicable legal rate of interest thereon, if it is ultimately
      determined that such Person is not entitled to
      indemnification.

            

    

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    Article
15

    Miscellaneous

     

    
      	
              15.1

            	
              Notices.  Any
      notice, request, demand, approval, consent, waiver or other communication
      required or permitted to be given hereunder or to be served upon any of
      the parties hereto (each a “Notice”) shall be in
      writing and shall be (a) delivered in person, (b) sent by facsimile
      transmission (with the original thereof also contemporaneously given by
      another method specified in this Section 15.1), (c) sent by a
      nationally-recognized overnight courier service, or (d) sent by certified
      or registered mail (postage prepaid, return receipt requested), to the
      address of such party set forth
herein.

            

    

     

    
      	
               
      

            	
              To
      the Company:

            	
              American
      Realty Capital – Retail Centers of America,
Inc.

            

    

    405 Park
Avenue

    New York,
New York 10022

    Attention:
William Kahane, President

    Facsimile:
(212) 421-5799

    

    With a
copy to:

    

    Proskauer
Rose LLP

    1585
Broadway

    New York,
New York 10036

    Attention:  Peter
Fass, Esq.

    Attention:  James
Gerkis, Esq.

    Facsimile:  (212)
969-2900

    

    To the
Advisor:                                 American
Realty Capital Retail Advisor, LLC

    405 Park
Avenue

    New York,
New York 10022

    Attention:
William Kahane, President

    Facsimile:
(212) 421-5799

    

    With a
copy to:

    

    Proskauer
Rose LLP

    1585
Broadway

    New York,
New York 10036

    Attention:  Peter
Fass, Esq.

    Attention:  James
Gerkis, Esq.

    Facsimile:
(212) 969-2900

    

    Any party
may at any time give Notice in writing to the other parties of a change in its
address for the purposes of this Section 15.1.

     

    
      	
              15.2

            	
              Modification.  This
      Agreement shall not be amended, supplemented, changed, modified,
      terminated or discharged, in whole or in part, except by an instrument in
      writing signed by the Company and the Advisor, or their respective
      successors or permitted assigns.

            

    

     

    
      	
              15.3

            	
              Severability.  The
      provisions of this Agreement are independent of and severable from each
      other, and no provision shall be affected or rendered invalid or
      unenforceable by virtue of the fact that for any reason any other or
      others of them may be invalid or unenforceable in whole or in
      part.

            

    

     

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

    
      	
              15.4

            	
              Third Party
      Beneficiary.  The terms and provisions of this Agreement
      are intended solely for the benefit of each party hereto, their Affiliates
      and their respective successors and permitted assigns, and it is not the
      intention of the parties to confer third-party beneficiary rights upon any
      other Person; except with respect to the benefits conferred upon or
      derived by Lincoln and its Affiliates and their respective successors and
      assigns under Articles 9, 13 and 14. Lincoln, its
      Affiliates and their respective successors and assigns shall have all
      rights, remedies, powers and privileges provided in such Articles and
      shall have the right to directly seek enforcement of such rights,
      remedies, powers and privileges under this Agreement. Neither the
      failure nor any delay on the part of Lincoln, its Affiliates or their
      respective successors and assigns to exercise any right, remedy, power or
      privilege under this Agreement shall operate as a waiver thereof, nor
      shall any single or partial exercise of any right, remedy, power or
      privilege preclude any other or further exercise of the same or of any
      other right, remedy, power or privilege, nor shall any waiver of any
      right, remedy, power or privilege with respect to any occurrence be
      construed as a waiver of such right, remedy, power or privilege with
      respect to any other occurrence.  No waiver shall be effective
      unless it is in writing and is signed by the party asserted to have
      granted such waiver.  Copies of any Notice delivered in
      accordance with Section 15.1 of this Agreement shall be (a) delivered in
      person, (b) sent by facsimile transmission, (c) sent by a
      nationally-recognized overnight courier service, or (d) sent by certified
      or registered mail (postage prepaid, return receipt requested), to Lincoln
      at the following address:

            

    

     

    Lincoln
Retail REIT Services, LLC

    2000
McKinney Avenue

    Suite
1000

    Dallas,
Texas 75201

    Facsimile:  (214)
740-3313

    Attention:  Mr.
Robert Dozier

    Attention:  Mr.
Gregory S. Courtwright

     

    with a
copy to:

    

    Greenburg
Traurig, LLP

    200 Park
Avenue

    New York,
NY 10166

    Telephone:
(212) 801-9330

    Facsimile:
(212) 805-9330

    Attention:  Judith
D. Fryer, Esq.

     

    
      	
              15.5

            	
              Construction.  The
      provisions of this Agreement shall be construed and interpreted in
      accordance with the laws of the State of New York as at the time in
      effect, without regard to the principles of conflicts of laws
      thereof.

            

    

     

    
      	
              15.6

            	
              Entire
      Agreement.  This Agreement contains the entire agreement
      and understanding among the parties hereto with respect to the subject
      matter hereof, and supersedes all prior and contemporaneous agreements,
      understandings, inducements and conditions, express or implied, oral or
      written, of any nature whatsoever with respect to the subject matter
      hereof. The express terms hereof control and supersede any course of
      performance and/or usage of the trade inconsistent with any of the terms
      hereof.

            

    

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

     

    
      	
              15.7

            	
              Waiver.  Neither
      the failure nor any delay on the part of a party to exercise any right,
      remedy, power or privilege under this Agreement shall operate as a waiver
      thereof, nor shall any single or partial exercise of any right, remedy,
      power or privilege preclude any other or further exercise of the same or
      of any other right, remedy, power or privilege, nor shall any waiver of
      any right, remedy, power or privilege with respect to any occurrence be
      construed as a waiver of such right, remedy, power or privilege with
      respect to any other occurrence.  No waiver shall be effective
      unless it is in writing and is signed by the party asserted to have
      granted such waiver.

            

    

     

    
      	
              15.8

            	
              Gender.  Words
      used herein regardless of the number and gender specifically used, shall
      be deemed and construed to include any other number, singular or plural,
      and any other gender, masculine, feminine or neuter, as the context
      requires.

            

    

     

    
      	
              15.9

            	
              Titles Not to Affect
      Interpretation.  The titles of Articles and Sections
      contained in this Agreement are for convenience only, and they neither
      form a part of this Agreement nor are they to be used in the construction
      or interpretation hereof.

            

    

     

    
      	
              15.10

            	
              Counterparts.  This
      Agreement may be executed with counterpart signature pages or in any
      number of counterparts, each of which shall be deemed to be an original as
      against any party whose signature appears thereon, and all of which shall
      together constitute one and the same instrument. This Agreement shall
      become binding when one or more counterpart signatures pages or
      counterparts hereof, individually or taken together, shall bear the
      signatures of all of the parties reflected hereon as the
      signatories.

            

    

    

    [The
remainder of this page is intentionally left blank.

    Signature
page follows.]

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, the parties hereto
have executed this Agreement as of the date and year first above
written.

    

    
      
        
          
            
              	 
      	
                      AMERICAN
      REALTY CAPITAL – RETAIL

                      CENTERS
      OF AMERICA, INC.

                    
	 
      	 
      	 
      
	 
      	
                      By:
      

                    	
                       

                    	
                       

                    
	 
      	
                      Name:
      William Kahane

                    
	 
      	
                      Title:
      President

                    

            

          

        

      

    

    

    
      
        
          
            
              	 
      	
                      AMERICAN
      REALTY CAPITAL RETAIL

                      ADVISOR,
      LLC

                    
	 
      	 
      	 
      
	 
      	
                      By:

                    	
                      American
      Realty Capital Retail Special Limited Partnership, LLC, Its
      Member

                    
	 
      	 
      	 
      
	 
      	
                      By:

                    	
                      American
      Realty Capital IV, LLC,

                    
	 
      	 
      	
                      Its
      Managing Member

                    
	 
      	 
      	 
      
	 
      	
                      By:
      

                    	
                       

                    	  
      
	 
      	
                      Name:
      Nicholas S. Schorsch

                    
	 
      	
                      Title:
      Authorized
Signatory[FORM
OF WARRANT]

       

      KANDI
TECHNOLOGIES, CORP.

       

      Warrant
To Purchase Common Stock

       

      Warrant
No.: __________

      Date of
Issuance: December [___], 2010 (“Issuance Date”)

       

      Kandi
Technologies, Corp., a Delaware corporation (the “Company”), hereby certifies
that, for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, [CRANSHIRE CAPITAL, L.P.], [OTHER BUYERS], the
registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject
to the terms set forth below, to purchase from the Company, at the Exercise
Price (as defined below) then in effect, upon exercise of this Warrant to
Purchase Common Stock (including any Warrants to Purchase Common Stock issued in
exchange, transfer or replacement hereof, the “Warrant”), at any time or
times on or after the Issuance Date, but not after 11:59 p.m., New York time, on
the Expiration Date (as defined below), [______________]1
(subject to adjustment as provided herein) fully paid and non-assessable shares
of Common Stock (as defined below) (the “Warrant Shares”). Except as
otherwise defined herein, capitalized terms in this Warrant shall have the
meanings set forth in Section 17. This Warrant is one of the Warrants to
Purchase Common Stock (the “SPA
Warrants”) issued pursuant to Section 1 of that certain Securities
Purchase Agreement, dated as of December 21, 2010, by and among the Company and
the investors (the “Buyers”) referred to therein
(the “Securities Purchase
Agreement”).

         

      
        
          

        

        
          
            1 40%
warrant coverage.

          

        

      

       

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

       

      
        	
                1.

              	
                EXERCISE OF
      WARRANT.

              

      

       

      (a)           Mechanics of
Exercise. Subject
to the terms and conditions hereof (including, without limitation, the
limitations set forth in Section 1(f)), this Warrant may be exercised by the
Holder on any day on or after the Issuance Date, in whole or in part, by
delivery (whether via facsimile or otherwise) of a written notice, in the form
attached hereto as Exhibit
A (the “Exercise
Notice”), of the Holder’s election to exercise this Warrant. Within one
(1) Trading Day following an exercise of this Warrant as aforesaid, the Holder
shall deliver payment to the Company of an amount equal to the Exercise Price in
effect on the date of such exercise multiplied by the number of Warrant Shares
as to which this Warrant was so exercised (the “Aggregate Exercise Price”) in
cash or via wire transfer of immediately available funds if, subject to the
provisions of Section 1(d), the Holder did not notify the Company in such
Exercise Notice that such exercise was made pursuant to a Cashless Exercise (as
defined in Section 1(d)). The Holder shall not be required to deliver the
original of this Warrant in order to effect an exercise hereunder. Execution and
delivery of an Exercise Notice with respect to less than all of the Warrant
Shares shall have the same effect as cancellation of the original of this
Warrant and issuance of a new Warrant evidencing the right to purchase the
remaining number of Warrant Shares. Execution and delivery of an Exercise Notice
for all of the then-remaining Warrant Shares shall have the same effect as
cancellation of the original of this Warrant after delivery of the Warrant
Shares in accordance with the terms hereof. On or before the first (1st)
Trading Day following the date on which the Company has received an Exercise
Notice, the Company shall transmit by facsimile an acknowledgment of
confirmation of receipt of such Exercise Notice, in the form attached hereto as
Exhibit
B, to the Holder and the Company’s transfer agent (the “Transfer Agent”). On or before
the third (3rd)
Trading Day following the date on which the Company has received such Exercise
Notice, the Company shall (X) provided that the Transfer Agent is participating
in The Depository Trust Company (“DTC”) Fast Automated
Securities Transfer Program, upon the request of the Holder, credit such
aggregate number of shares of Common Stock to which the Holder is entitled
pursuant to such exercise to the Holder’s or its designee’s balance account with
DTC through its Deposit/ Withdrawal at Custodian system, or (Y) if the Transfer
Agent is not participating in the DTC Fast Automated Securities Transfer
Program, issue and deliver to the Holder or, at the Holder’s instruction
pursuant to the Exercise Notice, the Holder’s agent or designee, in each case,
sent by reputable overnight courier to the address as specified in the
applicable Exercise Notice, a certificate, registered in the Company’s share
register in the name of the Holder or its designee (as indicated in the
applicable Exercise Notice), for the number of shares of Common Stock to which
the Holder is entitled pursuant to such exercise. Upon delivery of an Exercise
Notice, the Holder shall be deemed for all corporate purposes to have become the
holder of record of the Warrant Shares with respect to which this Warrant has
been exercised, irrespective of the date such Warrant Shares are credited to the
Holder’s DTC account or the date of delivery of the certificates evidencing such
Warrant Shares (as the case may be). If this Warrant is submitted in connection
with any exercise pursuant to this Section 1(a) and the number of Warrant
Shares represented by this Warrant submitted for exercise is greater than the
number of Warrant Shares being acquired upon an exercise, then, at the request
of the Holder, the Company shall as soon as practicable and in no event later
than three (3) Business Days after any exercise and at its own expense, issue
and deliver to the Holder (or its designee) a new Warrant (in accordance with
Section 7(d)) representing the right to purchase the number of Warrant Shares
purchasable immediately prior to such exercise under this Warrant, less the
number of Warrant Shares with respect to which this Warrant is exercised. No
fractional shares of Common Stock are to be issued upon the exercise of this
Warrant, but rather the number of shares of Common Stock to be issued shall be
rounded up to the nearest whole number. The Company shall pay any and all taxes
and fees which may be payable with respect to the issuance and delivery of
Warrant Shares upon exercise of this Warrant.

       

      (b)           Exercise
Price. For
purposes of this Warrant, “Exercise Price” means $6.30,
subject to adjustment as provided herein.

           

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

       

      (c)           Company’s Failure to Timely
Deliver Securities. If the
Company shall fail, for any reason or for no reason, to issue to the Holder
within three (3) Trading Days after receipt of the applicable Exercise Notice, a
certificate for the number of shares of Common Stock to which the Holder is
entitled and register such shares of Common Stock on the Company’s share
register or to credit the Holder’s balance account with DTC for such number of
shares of Common Stock to which the Holder is entitled upon the Holder’s
exercise of this Warrant (as the case may be) and if on or after such third
(3rd)
Trading Day the Holder (or any other Person in respect, or on behalf, of the
Holder) purchases (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by the Holder of all or any portion
of the number of shares of Common Stock, or a sale of a number of shares of
Common Stock equal to all or any portion of the number of shares of Common
Stock, issuable upon such exercise that the Holder so anticipated receiving from
the Company, then, in addition to all other remedies available to the Holder,
the Company shall, within three (3) Business Days after the Holder’s request and
in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal
to the Holder’s total purchase price (including reasonable brokerage commissions
and other reasonable out-of-pocket expenses, if any) for the shares of Common
Stock so purchased (including, without limitation, by any other Person in
respect, or on behalf, of the Holder) (the “Buy-In Price”), at which point
the Company’s obligation to so issue and deliver such certificate or credit the
Holder’s balance account with DTC for the number of shares of Common Stock to
which the Holder is entitled upon the Holder’s exercise hereunder (as the case
may be) (and to issue such shares of Common Stock) shall terminate, or (ii)
promptly honor its obligation to so issue and deliver to the Holder a
certificate or certificates representing such shares of Common Stock or credit
the Holder’s balance account with DTC for the number of shares of Common Stock
to which the Holder is entitled upon the Holder’s exercise hereunder (as the
case may be) and pay cash to the Holder in an amount equal to the excess (if
any) of the Buy-In Price over the product of (A) such number of shares of Common
Stock multiplied by (B) the lowest Closing Sale Price of the Common Stock on any
Trading Day during the period commencing on the date of the applicable Exercise
Notice and ending on the date of such issuance and payment under this clause
(ii).

       

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

        

      
        Net
Number = (A x B) - (A
x C)

                                     

                                             B

      

         

      For purposes of the foregoing
formula:

       

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

       

      B= as
applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day
immediately preceding the date of the applicable Exercise Notice if such
Exercise Notice is (1) both executed and delivered pursuant to Section 1(a)
hereof on a day that is not a Trading Day or (2) both executed and delivered
pursuant to Section 1(a) hereof on a Trading Day prior to the opening of
“regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMS
promulgated under the federal securities laws) on such Trading Day, (ii) the Bid
Price of the Common Stock as of the time of the Holder’s execution of the
applicable Exercise Notice if such Exercise Notice is executed during “regular
trading hours” on a Trading Day and is delivered within two (2) hours thereafter
pursuant to Section 1(a) hereof or (iii) the Closing Sale Price of the Common
Stock on the date of the applicable Exercise Notice if the date of such Exercise
Notice is a Trading Day and such Exercise Notice is both executed and delivered
pursuant to Section 1(a) hereof after the close of “regular trading hours” on
such Trading Day.

       

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

       

      
        	
                 
      

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

              

      

       

      (e)           Disputes.  In
the case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the number of Warrant Shares to be issued pursuant to
the terms hereof, the Company shall promptly issue to the Holder the number of
Warrant Shares that are not disputed and resolve such dispute in accordance with
Section 14.

       

      (f)           Limitations on
Exercises. Notwithstanding anything to the contrary contained in this
Warrant, this Warrant shall not be exercisable by the Holder hereof to the
extent (but only to the extent) that the Holder or any of its affiliates would
beneficially own in excess of  4.9% (the “Maximum Percentage”) of the
Common Stock. To the extent the above limitation applies, the determination
of whether this Warrant shall be exercisable (vis-à-vis other convertible,
exercisable or exchangeable securities owned by the Holder or any of its
affiliates) and of which such securities shall be exercisable (as among all such
securities owned by the Holder) shall, subject to such Maximum Percentage
limitation, be determined on the basis of the first submission to the Company
for conversion, exercise or exchange (as the case may be). No prior inability to
exercise this Warrant pursuant to this paragraph shall have any effect on the
applicability of the provisions of this paragraph with respect to any
subsequent determination of exercisability. For the purposes of this paragraph,
beneficial ownership and all determinations and calculations (including, without
limitation, with respect to calculations of percentage ownership) shall be
determined in accordance with Section 13(d) of the 1934 Act (as defined in the
Securities Purchase Agreement) and the rules and regulations promulgated
thereunder. The provisions of this paragraph shall be implemented in a manner
otherwise than in strict conformity with the terms of this paragraph to correct
this paragraph (or any portion hereof) which may be defective or inconsistent
with the intended Maximum Percentage beneficial ownership limitation herein
contained or to make changes or supplements necessary or desirable to properly
give effect to such Maximum Percentage limitation. The limitations contained in
this paragraph shall apply to a successor Holder of this Warrant. The holders of
Common Stock shall be third party beneficiaries of this paragraph and the
Company may not waive this paragraph without the consent of holders of a
majority of its Common Stock. For any reason at any time, upon the written or
oral request of the Holder, the Company shall within one (1) Business Day
confirm orally and in writing to the Holder the number of shares of Common Stock
then outstanding, including by virtue of any prior conversion or exercise of
convertible or exercisable securities into Common Stock, including, without
limitation, pursuant to this Warrant or securities issued pursuant to the
Securities Purchase Agreement. 

       

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

        

      (g)           Insufficient Authorized
Shares. The
Company shall at all times keep reserved for issuance under this Warrant a
number of shares of Common Stock as shall be necessary to satisfy the Company’s
obligation to issue shares of Common Stock hereunder (without regard to any
limitation otherwise contained herein with respect to the number of shares of
Common Stock that may be acquirable upon exercise of this Warrant). If,
notwithstanding the foregoing, and not in limitation thereof, at any time while
any of the SPA Warrants remain outstanding the Company does not have a
sufficient number of authorized and unreserved shares of Common Stock to satisfy
its obligation to reserve for issuance upon exercise of the SPA Warrants at
least a number of shares of Common Stock equal to the number of shares of Common
Stock as shall from time to time be necessary to effect the exercise of all of
the SPA Warrants then outstanding (the “Required Reserve Amount”) (an
“Authorized Share
Failure”), then the Company shall immediately take all action necessary
to increase the Company’s authorized shares of Common Stock to an amount
sufficient to allow the Company to reserve the Required Reserve Amount for all
the SPA Warrants then outstanding. Without limiting the generality of the
foregoing sentence, as soon as practicable after the date of the occurrence of
an Authorized Share Failure, but in no event later than sixty (60) days after
the occurrence of such Authorized Share Failure, the Company shall hold a
meeting of its stockholders for the approval of an increase in the number of
authorized shares of Common Stock. In connection with such meeting, the Company
shall provide each stockholder with a proxy statement and shall use its best
efforts to solicit its stockholders’ approval of such increase in authorized
shares of Common Stock and to cause its board of directors to recommend to the
stockholders that they approve such proposal.

       

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

       

      (a)           Stock Dividends and
Splits. Without
limiting any provision of Section 2(b) or Section 4, if the Company, at any time
on or after the date of the Securities Purchase Agreement, (i) pays a stock
dividend on one or more classes of its then outstanding shares of Common Stock
or otherwise makes a distribution on any class of capital stock that is payable
in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its then outstanding
shares of Common Stock into a larger number of shares or (iii) combines (by
combination, reverse stock split or otherwise) one or more classes of its then
outstanding shares of Common Stock into a smaller number of shares, then in each
such case the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding immediately
before such event and of which the denominator shall be the number of shares of
Common Stock outstanding immediately after such event.  Any adjustment
made pursuant to clause (i) of this paragraph shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution, and any adjustment pursuant to clause (ii) or
(iii) of this paragraph shall become effective immediately after the effective
date of such subdivision or combination. If any event requiring an adjustment
under this paragraph occurs during the period that an Exercise Price is
calculated hereunder, then the calculation of such Exercise Price shall be
adjusted appropriately to reflect such event.

       

      (b)           Adjustment Upon Issuance of
Shares of Common Stock. If and
whenever on or after the date of the Securities Purchase Agreement, the Company
issues or sells, or in accordance with this Section 2 is deemed to have
issued or sold, any shares of Common Stock (including the issuance or sale of
shares of Common Stock owned or held by or for the account of the Company, but
excluding any Excluded Securities (as defined in the Securities Purchase
Agreement) issued or sold or deemed to have been issued or sold) for a
consideration per share (the “New Issuance Price”) less than
a price equal to the Exercise Price in effect immediately prior to such issue or
sale or deemed issuance or sale (such Exercise Price then in effect is referred
to as the “Applicable
Price”) (the foregoing a “Dilutive Issuance”), then
immediately after such Dilutive Issuance, the Exercise Price then in effect
shall be reduced to an amount equal to the New Issuance Price. For all purposes
of the foregoing (including, without limitation, determining the adjusted
Exercise Price and consideration per share under this Section 2(b)), the
following shall be applicable:

       

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

       

      
        (i)           Issuance of Options.
If the Company in any manner grants or sells any Options and the lowest price
per share for which one share of Common Stock is issuable upon the exercise of
any such Option or upon conversion, exercise or exchange of any Convertible
Securities issuable upon exercise of any such Option is less than the Applicable
Price, then such share of Common Stock shall be deemed to be outstanding and to
have been issued and sold by the Company at the time of the granting or sale of
such Option for such price per share. For purposes of this Section 2(b)(i), the
“lowest price per share for which one share of Common Stock is issuable upon the
exercise of any such Options or upon conversion, exercise or exchange of any
Convertible Securities issuable upon exercise of any such Option” shall be equal
to (1) the lower of (x) the sum of the lowest amounts of consideration (if any)
received or receivable by the Company with respect to any one share of Common
Stock upon the granting or sale of such Option, upon exercise of such Option and
upon conversion, exercise or exchange of any Convertible Security issuable upon
exercise of such Option and (y) the lowest exercise price set forth in such
Option for which one share of Common Stock is issuable upon the exercise of any
such Options or upon conversion, exercise or exchange of any Convertible
Securities issuable upon exercise of any such Option minus (2) the sum of all
amounts paid or payable to the holder of such Option (or any other Person) upon
the granting or sale of such Option, upon exercise of such Option and upon
conversion, exercise or exchange of any Convertible Security issuable upon
exercise of such Option plus the value of any other consideration received or
receivable by, or benefit conferred on, the holder of such Option (or any other
Person). Except as contemplated below, no further adjustment of the Exercise
Price shall be made upon the actual issuance of such shares of Common Stock or
of such Convertible Securities upon the exercise of such Options or upon the
actual issuance of such shares of Common Stock upon conversion, exercise or
exchange of such Convertible Securities.

         

        (ii)           Issuance of Convertible
Securities. If the Company in any manner issues or sells any Convertible
Securities and the lowest price per share for which one share of Common Stock is
issuable upon the conversion, exercise or exchange thereof is less than the
Applicable Price, then such share of Common Stock shall be deemed to be
outstanding and to have been issued and sold by the Company at the time of the
issuance or sale of such Convertible Securities for such price per share. For
the purposes of this Section 2(b)(ii), the “lowest price per share for which one
share of Common Stock is issuable upon the conversion, exercise or exchange
thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to one
share of Common Stock upon the issuance or sale of the Convertible Security and
upon conversion, exercise or exchange of such Convertible Security and (y) the
lowest conversion price set forth in such Convertible Security for which one
share of Common Stock is issuable upon conversion, exercise or exchange thereof
minus (2) the sum of all amounts paid or payable to the holder of such
Convertible Security (or any other Person) upon the issuance or sale of such
Convertible Security plus the value of any other consideration received or
receivable by, or benefit conferred on, the holder of such Convertible Security
(or any other Person). Except as contemplated below, no further adjustment of
the Exercise Price shall be made upon the actual issuance of such shares of
Common Stock upon conversion, exercise or exchange of such Convertible
Securities, and if any such issue or sale of such Convertible Securities is made
upon exercise of any Options for which adjustment of this Warrant has been or is
to be made pursuant to other provisions of this Section 2(b), except as
contemplated below, no further adjustment of the Exercise Price shall be made by
reason of such issue or sale.

         

        
          
             

          

          
            6

            
              

            

          

          
             

          

        

          

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

         

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

         

        
          
             

          

          
            7

            
              

            

          

          
             

          

        

         

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

         

        (vi)           January Warrants.
Notwithstanding anything contained in this Section 2(b), no adjustment shall be
made to the Exercise Price pursuant to this Section 2(b) if a downward
adjustment to the exercise price of the warrants issued pursuant to the January
Purchase Agreement (as defined in the Securities Purchase Agreement) (the “January Warrants”) is made
pursuant to Section 2(b) of the January Warrants solely as a result of the
issuance and sale of the Common Shares (as defined in the Securities Purchase
Agreement) and the SPA Warrants on the Closing Date (as defined in the
Securities Purchase Agreement).

         

        (c)           Number of Warrant
Shares.
Simultaneously with any adjustment to the Exercise Price pursuant to only
paragraph (a) of this Section 2, the number of Warrant Shares that may be
purchased upon exercise of this Warrant shall be increased or decreased
proportionately, so that after such adjustment the aggregate Exercise Price
payable hereunder for the adjusted number of Warrant Shares shall be the same as
the aggregate Exercise Price in effect immediately prior to such adjustment
(without regard to any limitations on exercise contained herein).

         

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

         

        
          
             

          

          
            8

            
              

            

          

          
             

          

        

         

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

         

        3.           RIGHTS UPON DISTRIBUTION OF
ASSETS. In addition to any adjustments pursuant to Section 2 above, if
the Company shall declare or make any dividend or other distribution of its
assets (or rights to acquire its assets) to holders of shares of Common Stock,
by way of return of capital or otherwise (including, without limitation, any
distribution of cash, stock or other securities, property or options by way of a
dividend, spin off, reclassification, corporate rearrangement, scheme of
arrangement or other similar transaction) (a “Distribution”), at any time
after the issuance of this Warrant, then, in each such case, the Holder shall be
entitled to participate in such Distribution to the same extent that the Holder
would have participated therein if the Holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant (without regard
to any limitations on exercise hereof, including without limitation, the Maximum
Percentage) immediately before the date on which a record is taken for such
Distribution, or, if no such record is taken, the date as of which the record
holders of shares of Common Stock are to be determined for the participation in
such Distribution (provided, however, to the extent that the Holder’s right to
participate in any such Distributions would result in the Holder exceeding the
Maximum Percentage, then the Holder shall not be entitled to participate in such
Distribution to such extent (or the beneficial ownership of any such shares of
Common Stock as a result of such Distribution to such extent) and such
Distribution to such extent shall be held in abeyance for the benefit of the
Holder until such time, if ever, as its right thereto would not result in the
Holder exceeding the Maximum Percentage).

         

        
          	
                  4.

                	
                  PURCHASE RIGHTS;
      FUNDAMENTAL TRANSACTIONS.

                

        

         

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

         

        
          
             

          

          
            9

            
              

            

          

          
             

          

        

         

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

         

        
          
             

          

          
            10

            
              

            

          

          
             

          

        

          

        (c)           Black Scholes
Value.
Notwithstanding the foregoing and the provisions of Section 4(b) above, at the
request of the Holder delivered at any time commencing on the earliest to occur
of (x) the public disclosure of any Fundamental Transaction, (y) the
consummation of any Fundamental Transaction and (z) the Holder first becoming
aware of any Fundamental Transaction through the date that is ninety (90) days
after the public disclosure of the consummation of such Fundamental Transaction
by the Company pursuant to a Current Report on Form 8-K filed with the SEC, the
Company or the Successor Entity (as the case may be) shall purchase this Warrant
from the Holder on the date of such request by paying to the Holder cash in an
amount equal to the Black Scholes Value.

         

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

         

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

         

        
          
             

          

          
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        6.           WARRANT HOLDER NOT DEEMED A
STOCKHOLDER. Except as otherwise specifically provided herein, the
Holder, solely in its capacity as a holder of this Warrant, shall not be
entitled to vote or receive dividends or be deemed the holder of share capital
of the Company for any purpose, nor shall anything contained in this Warrant be
construed to confer upon the Holder, solely in its capacity as the Holder of
this Warrant, any of the rights of a stockholder of the Company or any right to
vote, give or withhold consent to any corporate action (whether any
reorganization, issue of stock, reclassification of stock, consolidation,
merger, conveyance or otherwise), receive notice of meetings, receive dividends
or subscription rights, or otherwise, prior to the issuance to the Holder of the
Warrant Shares which it is then entitled to receive upon the due exercise of
this Warrant.  In addition, nothing contained in this Warrant shall be
construed as imposing any liabilities on the Holder to purchase any securities
(upon exercise of this Warrant or otherwise) or as a stockholder of the Company,
whether such liabilities are asserted by the Company or by creditors of the
Company. Notwithstanding this Section 6, the Company shall provide the Holder
with copies of the same notices and other information given to the stockholders
of the Company generally, contemporaneously with the giving thereof to the
stockholders.

         

        7.           REISSUANCE OF
WARRANTS.

         

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

         

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

         

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

         

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

         

        
          
             

          

          
            12

            
              

            

          

          
             

          

        

         

        8.           NOTICES; CURRENCY;
PAYMENTS.

         

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

         

        (b)           Currency.  All
amounts owing under this Warrant that, in accordance with their terms, are paid
in cash shall be paid in United States dollars (“U.S. Dollars”). All amounts
denominated in other currencies (if any) shall be converted into the U.S. Dollar
equivalent amount in accordance with the Exchange Rate on the date of
calculation. “Exchange
Rate” means, in relation to any amount of currency to be converted into
U.S. Dollars pursuant to this Warrant, the U.S. Dollar exchange rate as
published in the Wall Street Journal on the relevant date of calculation (it
being understood and agreed that where an amount is calculated with reference
to, or over, a period of time, the date of calculation shall be the final date
of such period of time).

         

        (c)           Payments. Whenever
any payment is to be made by the Company to any Person pursuant to this Warrant,
such payment shall be made in lawful money of the United States of America via
wire transfer of U.S. Dollars in immediately available funds in accordance with
the Holder’s wire transfer instructions delivered to the Company on or prior to
such payment date or, in the absence of such instructions, by a certified check
drawn on the account of the Company and sent via overnight courier service to
such Person at such address as previously provided to the Company in writing
(which address, in the case of each of the Buyers, shall initially be as set
forth on the Schedule of Buyers attached to the Securities Purchase
Agreement).

         

        
          
             

          

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

         

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

         

        11.           GOVERNING LAW. This
Warrant shall be governed by and construed and enforced in accordance with, and
all questions concerning the construction, validity, interpretation and
performance of this Warrant shall be governed by, the internal laws of the State
of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdiction other than the
State of New York. The Company hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in The City of New York,
Borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Nothing contained herein shall
be deemed or operate to preclude the Holder from bringing suit or taking other
legal action against the Company in any other jurisdiction to collect on the
Company’s obligations to the Holder or to enforce a judgment or other court
ruling in favor of the Holder. The Company hereby appoints CT Corporation
System, with offices at 111 Eighth Avenue, New York, New York 10011 as its agent
for service of process in the United States. If service of process is effected
pursuant to the above sentence, such service will be deemed sufficient under New
York law and the Company shall not assert otherwise. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. THE COMPANY
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A
JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH
OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED
HEREBY.

         

        
          
             

          

          
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        12.           JUDGMENT
CURRENCY.

         

        (a)           If
for the purpose of obtaining or enforcing judgment against the Company in any
court in any jurisdiction it becomes necessary to convert into any other
currency (such other currency being hereinafter in this Section 12 referred to
as the “Judgment
Currency”) an amount due in U.S. Dollars under this Warrant, the
conversion shall be made at the Exchange Rate prevailing on the Trading Day
immediately preceding:

         

        (i)           the
date actual payment of the amount due, in the case of any proceeding in the
courts of New York or in the courts of any other jurisdiction that will give
effect to such conversion being made on such date: or

         

        (ii)           the
date on which the foreign court determines, in the case of any proceeding in the
courts of any other jurisdiction (the date as of which such conversion is made
pursuant to this Section 12(a)(ii) being hereinafter referred to as the “Judgment Conversion
Date”).

         

        (b)           If
in the case of any proceeding in the court of any jurisdiction referred to in
Section 12(a)(ii) above, there is a change in the Exchange Rate prevailing
between the Judgment Conversion Date and the date of actual payment of the
amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment, will produce
the amount of U.S. Dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.

         

        (c)           Any
amount due from the Company under this provision shall be due as a separate debt
and shall not be affected by judgment being obtained for any other amounts due
under or in respect of this Warrant.

         

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

         

        
          
             

          

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

         

        15.           REMEDIES, CHARACTERIZATION,
OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided
in this Warrant shall be cumulative and in addition to all other remedies
available under this Warrant and the other Transaction Documents, at law or in
equity (including a decree of specific performance and/or other injunctive
relief), and nothing herein shall limit the right of the Holder to pursue actual
damages for any failure by the Company to comply with the terms of this Warrant.
The Company covenants to the Holder that there shall be no characterization
concerning this instrument other than as expressly provided herein. Amounts set
forth or provided for herein with respect to payments, exercises and the like
(and the computation thereof) shall be the amounts to be received by the Holder
and shall not, except as expressly provided herein, be subject to any other
obligation of the Company (or the performance thereof). The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to
the Holder and that the remedy at law for any such breach may be inadequate. The
Company therefore agrees that, in the event of any such breach or threatened
breach, the holder of this Warrant shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required. The Company shall provide all information and documentation to the
Holder that is requested by the Holder to enable the Holder to confirm the
Company’s compliance with the terms and conditions of this Warrant (including,
without limitation, compliance with Section 2 hereof). The issuance of shares
and certificates for shares as contemplated hereby upon the exercise of this
Warrant shall be made without charge to the Holder or such shares for any
issuance tax or other costs in respect thereof, provided that the Company shall
not be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in a name other than
the Holder or its agent on its behalf.

         

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

         

        
          
             

          

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

         

        (a)           “Bid Price” means, for any
security as of the particular time of determination, the bid price for such
security on the Principal Market as reported by Bloomberg as of such time of
determination, or, if the Principal Market is not the principal securities
exchange or trading market for such security, the bid price of such security on
the principal securities exchange or trading market where such security is
listed or traded as reported by Bloomberg as of such time of determination, or
if the foregoing does not apply, the bid price of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg as of such time of determination, or, if no bid price is
reported for such security by Bloomberg as of such time of determination, the
average of the bid prices of any market makers for such security as reported in
the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau,
Inc.) as of such time of determination. If the Bid Price cannot be calculated
for a security as of the particular time of determination on any of the
foregoing bases, the Bid Price of such security as of such time of determination
shall be the fair market value as mutually determined by the Company and the
Holder. If the Company and the Holder are unable to agree upon the fair market
value of such security, then such dispute shall be resolved in accordance with
the procedures in Section 14. All such determinations shall be
appropriately adjusted for any stock dividend, stock split, stock combination or
other similar transaction during such period.

         

        (b)           “Black Scholes Value” means the
value of the unexercised portion of this Warrant remaining on the date of the
Holder’s request pursuant to Section 4(c), which value is calculated using the
Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg
utilizing (i) an underlying price per share equal to the greater of (A) the
highest Closing Sale Price of the Common Stock during the period beginning on
the Trading Day immediately preceding the earliest to occur of (1) the public
disclosure of the applicable Fundamental Transaction, (2) the consummation of
the applicable Fundamental Transaction and (3) the date on which the Holder
first became aware of the applicable Fundamental Transaction and ending on the
Trading Day of the Holder’s request pursuant to Section 4(c) and (B) the sum of
the price per share being offered in cash in the applicable Fundamental
Transaction (if any) plus the value of the non-cash consideration being offered
in the applicable Fundamental Transaction (if any), (ii) a strike price equal to
the Exercise Price in effect on the date of the Holder’s request pursuant to
Section 4(c), (iii) a risk-free interest rate corresponding to the U.S. Treasury
rate for a period equal to the greater of (A) the remaining term of this Warrant
as of the date of the Holder’s request pursuant to Section 4(c) and (B) the
remaining term of this Warrant as of the date of consummation of the applicable
Fundamental Transaction or as of the date of the Holder’s request pursuant to
Section 4(c) if such request is prior to the date of the consummation of the
applicable Fundamental Transaction and (iv) an expected volatility equal to the
greater of 90% and the 100 day volatility obtained from the HVT function on
Bloomberg (determined utilizing a 365 day annualization factor) as of the
Trading Day immediately following the earliest to occur of (A) the public
disclosure of the applicable Fundamental Transaction, (B) the consummation of
the applicable Fundamental Transaction and (C) the date on which the Holder
first became aware of the applicable Fundamental Transaction.

         

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

         

        
          
             

          

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

         

        (e)           “Closing Sale Price” means, for
any security as of any date, the last closing trade price for such security on
the Principal Market, as reported by Bloomberg, or, if the Principal Market
begins to operate on an extended hours basis and does not designate the closing
trade price, then the last trade price of such security prior to 4:00 p.m., New
York time, as reported by Bloomberg, or, if the Principal Market is not the
principal securities exchange or trading market for such security, the last
trade price of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if
the foregoing does not apply, the last trade price of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no last trade price is reported for such security
by Bloomberg, the average of the ask prices of any market makers for such
security as reported in the “pink sheets” by Pink Sheets LLC (formerly the
National Quotation Bureau, Inc.). If the Closing Sale Price cannot be calculated
for a security on a particular date on any of the foregoing bases, the Closing
Sale Price of such security on such date shall be the fair market value as
mutually determined by the Company and the Holder. If the Company and the Holder
are unable to agree upon the fair market value of such security, then such
dispute shall be resolved in accordance with the procedures in Section 14.
All such determinations shall be appropriately adjusted for any stock dividend,
stock split, stock combination or other similar transaction during such
period.

         

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

         

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

         

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

         

        
          
             

          

          
            18

            
              

            

          

          
             

          

        

         

        (i)           “Equity Conditions” means: (i)
on each day during the period beginning one month prior to the applicable date
of determination and ending on and including the applicable date of
determination the Registration Statement is effective and the prospectus
contained therein shall be available for the issuance by the Company to the
Holder of all of the Warrant Shares (disregarding any limitation on exercise of
this Warrant); (ii) on each day during the period beginning three months prior
to the applicable date of determination and ending on and including the
applicable date of determination (the “Equity Conditions Measuring
Period”), the Common Stock (including all of the Warrant Shares) is
listed or designated for quotation (as applicable) on an Eligible Market and
shall not have been suspended from trading on an Eligible Market (other than
suspensions of not more than two (2) days and occurring prior to the applicable
date of determination due to business announcements by the Company) nor shall
delisting or suspension by an Eligible Market have been threatened (with a
reasonable prospect of delisting occurring) or pending either (A) in writing by
such Eligible Market or (B) by falling below the minimum listing maintenance
requirements of the Eligible Market on which the Common Stock is then listed or
designated for quotation (as applicable); (iii) on each day during the Equity
Conditions Measuring Period, the Company shall have delivered all shares of
Common Stock issuable upon exercise of this Warrant on a timely basis as set
forth in Section 1(a) hereof and all other shares of capital stock required to
be delivered by the Company on a timely basis as set forth in the other
Transaction Documents; (iv) any shares of Common Stock to be issued in
connection with the event requiring determination may be issued in full without
violating Section 1(f) hereof; (v) any shares of Common Stock to be issued in
connection with the event requiring determination may be issued in full without
violating the rules or regulations of the Eligible Market on which the Common
Stock is then listed or designated for quotation (as applicable); (vi) on each
day during the Equity Conditions Measuring Period, no public announcement of a
pending, proposed or intended Fundamental Transaction shall have occurred which
has not been abandoned, terminated or consummated; (vii) the Company shall have
no knowledge of any fact that would reasonably be expected to cause the
Registration Statement to not be effective or the prospectus contained therein
to not be available for the issuance by the Company to the Holder of all of the
Warrant Shares (disregarding any limitation on exercise of this Warrant); (viii)
the Holder shall not be in (and no other Buyer shall be in) possession of any
material, non-public information provided to any of them by the Company, any of
its Subsidiaries or any of their respective affiliates, employees, officers,
representatives, agents or the like; and (ix) on each day during the Equity
Conditions Measuring Period, the Company otherwise shall have been in compliance
with each provision, covenant, representation or warranty of any of the
Transaction Documents and shall not have breached any, provision, covenant,
representation or warranty of any of the Transaction Documents.

         

        (j)           “Equity Conditions Failure”
means, with respect to a particular date of determination, that on any day
during the period commencing twenty (20) Trading Days immediately prior to such
date of determination, the Equity Conditions have not been satisfied (or waived
in writing by the Holder).

         

        (k)           “Expiration Date” means the
date that is the third (3rd)
anniversary of the Issuance Date or, if such date falls on a day other than a
Business Day or on which trading does not take place on the Principal Market (a
“Holiday”), the next
date that is not a Holiday.

         

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

         

        
          
             

          

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

         

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

         

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

         

        (p)           “Principal Market” means the
Nasdaq Capital Market.

         

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

         

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

         

        
          
             

          

          
            20

            
              

            

          

          
             

          

        

         

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

         

        (t)           “VWAP” means, for any security
as of any date, the dollar volume-weighted average price for such security on
the Principal Market (or, if the Principal Market is not the principal trading
market for such security, then on the principal securities exchange or
securities market on which such security is then traded) during the period
beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York
time, as reported by Bloomberg through its “Volume at Price” function or, if the
foregoing does not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the electronic bulletin board for
such security during the period beginning at 9:30:01 a.m., New York time, and
ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no
dollar volume-weighted average price is reported for such security by Bloomberg
for such hours, the average of the highest closing bid price and the lowest
closing ask price of any of the market makers for such security as reported in
the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau,
Inc.). If VWAP cannot be calculated for such security on such date on any of the
foregoing bases, the VWAP of such security on such date shall be the fair market
value as mutually determined by the Company and the Holder. If the Company and
the Holder are unable to agree upon the fair market value of such security, then
such dispute shall be resolved in accordance with the procedures in Section 14.
All such determinations shall be appropriately adjusted for any stock dividend,
stock split, stock combination or other similar transaction during such
period.

         

        
          
             

          

          
            21

            
              

            

          

          
             

          

        

         

        18.           MANDATORY EXERCISE.
If at any time after the Issuance Date (the “Mandatory Exercise Eligibility
Date”), (i) the daily VWAP of the Common Stock is equal to or greater
than $12.60 (as adjusted for any stock dividend, stock split, stock combination
or other similar transaction occurring after the date of the Securities Purchase
Agreement) (the “Trigger
Price”) for a period of fifteen (15) consecutive Trading Days following
the Mandatory Exercise Eligibility Date (the fifteen (15) consecutive Trading
Days on which the condition in this clause (i) is satisfied are referred to
herein as the “Mandatory
Exercise Measuring Period”), (ii) the aggregate dollar trading volume (as
reported on Bloomberg) of the Common Stock on the applicable Eligible Market for
each Trading Day during the Mandatory Exercise Measuring Period exceeds $3,000,000 per
day and (iii) no Equity Conditions Failure shall have occurred, then the
Company shall have the right to require the Holder to exercise all, but not less
than all, of this Warrant for all of the then-remaining Warrant Shares in
accordance with Section 1 hereof (a “Mandatory Exercise”). The
Company may exercise its right to require exercise under this Section 18 on one
occasion by delivering (provided that all of the conditions set forth in clauses
(i) through (iii) above are then satisfied), on the first (1st)
Trading Day immediately following the end of the Mandatory Exercise Measuring
Period, a written notice thereof by facsimile and overnight courier to the
Holder (the “Mandatory Exercise
Notice” and the date the Holder receives such notice by facsimile is
referred to as the “Mandatory
Exercise Notice Date”). The Mandatory Exercise Notice shall be
irrevocable. The Mandatory Exercise Notice shall (1) state the Trading Day
selected for the Mandatory Exercise in accordance with this Section 18, which
Trading Day shall be at least five (5) Trading Days but not more than sixty (60)
Trading Days following the Mandatory Exercise Notice Date (the “Mandatory Exercise Date”), (2)
state the number of shares of Common Stock to be issued to the Holder on the
Mandatory Exercise Date (subject to any adjustments thereto pursuant to Section
2 that may occur prior to the Mandatory Exercise Date), (3) contain a
certification from the Chief Executive Officer of the Company that there is then
no Equity Conditions Failure and (4) contain a certification from the Chief
Executive Officer of the Company that the Company has simultaneously taken the
same action with respect to all of the SPA Warrants. Any portion of this Warrant
exercised by the Holder after the Mandatory Exercise Notice Date shall reduce
the number of Warrant Shares for which this Warrant is required to be exercised
on the Mandatory Exercise Date. If the Company has elected a Mandatory Exercise,
the mechanics of exercise set forth in Section 1 shall apply, to the extent
applicable, as if the Company had received from the Holder on the Mandatory
Exercise Date an Exercise Notice with respect to all of the then-remaining
Warrant Shares. Notwithstanding anything contained in this Section 18 to the
contrary, if (I) any daily VWAP of the Common Stock is less than the Trigger
Price on any day during the period commencing on the Mandatory Exercise Notice
Date and ending on the Trading Day immediately preceding the Mandatory Exercise
Date; (II) the aggregate dollar trading volume (as reported on Bloomberg) of the
Common Stock on the applicable Eligible Market on any Trading Day during the
period commencing on the Mandatory Exercise Notice Date and ending on the
Trading Day immediately preceding the Mandatory Exercise Date is less than
$3,000,000 per day; or (III) an Equity Conditions Failure occurs on any day
during the period commencing on the Mandatory Exercise Notice Date and ending on
the Mandatory Exercise Date which has not been waived in writing by the Holder,
then, in either case, the Mandatory Exercise Notice delivered to the Holder
shall be null and void ab initio and the Mandatory Exercise shall not occur. If
the Company elects to cause a Mandatory Exercise of this Warrant pursuant to
this Section 18, then it must simultaneously take the same action with respect
to all of the other SPA Warrants.

         

        [signature page
follows]

         

        
          
             

          

          
            22

            
              

            

          

          
             

          

        

         

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

         

        
          
            
              
                
                  
                    	
                            KANDI
      TECHNOLOGIES, CORP.

                          	 
	 
      	 
      	 
	
                            By:

                          	 
      	 
	
                            Name:

                          	 
      	 
	
                            Title:

                          	 
      	 

                  

                

              

            

          

        

         

        
          
             

          

          
            
            

            
              

            

          

          
             

          

        

         

        EXHIBIT
A

         

        EXERCISE
NOTICE

           

        TO
BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

        WARRANT
TO PURCHASE COMMON STOCK

         

        KANDI
TECHNOLOGIES, CORP.

         

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

         

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

         

        
          	
                   
      

                	
                  ____________

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

                

        

         

        
          	
                   
      

                	
                  ____________

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

                

        

         

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

         

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

         

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

         

        _______________________

        _______________________

        _______________________

        _______________________

         

        Date:
_______________ __, ______

         

         

        
          
            
              
                
                  	 
      
	
                          Name
      of Registered Holder

                        
	 
      	 
      
	
                          By:

                        	 
      
	 
      	
                          Name:

                        
	 
      	
                          Title:

                        

                

              

            

          

        

         

        
          
             

          

          
            
            

            
              

            

          

          
             

          

        

         

        EXHIBIT
B

         

        ACKNOWLEDGMENT

         

        The
Company hereby acknowledges this Exercise Notice and hereby directs
______________ to issue the above indicated number of shares of Common Stock in
accordance with the Transfer Agent Instructions dated _________, 20__, from the
Company and acknowledged and agreed to by _______________.

         

        
          
            
              
                
                  
                    	
                            KANDI
      TECHNOLOGIES, CORP.

                          	 
	 
      	 
      	 
	
                            By:

                          	 
      	 
	
                            Name:

                          	 
      	 
	
                            Title:

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